Nomura has 'buy' tag on Mah Sing
NOMURA Research says Mah Sing Group Bhd deserves premium valuations, given its industry-leading sales performance.
“Mah Sing compares favourably with much larger capitalised Malaysian developers, with its management’s new property sales target of RM3.6 billion for financial year (FY) 2014 and sales of RM3 billion in FY2013.
“Its revenue visibility of more than four years is one of the highest in the sector. By end of FY2014, we expect Mah Sing’s unbilled sales to help it ride out the short-term down-cycle with steady earnings,” Nomura said.
The research house said first-half new sales were at RM1.5 billion, 42 per cent of the full-year target, suggesting that the company is on track to meet its full-year goals.
“In addition, as of the first half, Mah Sing’s unbilled sales stood at RM4.8 billion, three times its annual revenue.”
Nomura noted that Mah Sing’s price/book multiples should approach a historical peak of two times, given the sector’s leading earnings growth return on equity of about 17 per cent.
“Mah Sing is geographically diversified, with only a small exposure to the Iskandar Malaysia region and that too in the Medini zone, which is performing much better in the current slowdown compared with the rest of the Johor state.”
The research house said Mah Sing’s strategy of a quick landbank-to-house development cycle and the ability to adapt product offering of high rise, landed, commercial or price points to suit market demand will help it ride out boom-and-bust cycles relatively better.
“Accordingly, we value Mah Sing at a 25 per cent discount to revalued net asset value, which is narrower than the sector’s 40 per cent.
“We initiate a ‘buy’ rating on Mah Sing. It is our top pick, with a target price of RM3,” Nomura said.