KUALA LUMPUR: Mah Sing Group Bhd's venture into healthcare business, higher take up rate for recent property launches and the potential property policy easing measures in the Budget 2021 could fuel future growth for the developer.
Although Mah Sing will continue remain on its property business, Maybank Investment Bank Bhd (Maybank IB Research) said the property developer would explore growth opportunity in the healthcare sector via its plastic division.
"However, no details (product types, timeline, capital expenditure) were given for now but we understand that the plastic division has its own team and is separately operated," said Maybank IB Research analyst Wong Wei Sum.
He said Mah Sing's plastic division contributed 18 per cent to its total revenue in the year ended December 31, 2019.
Mah Sing's recent new property launches in particular Adora at Wanagsa Melawati and M Luna at Kepong, had also received good responses with average booking rate of 90 per cent.
"Year-to-date, Mah Sing has total bookings of about RM1 billion pending the conversion into sales and purchase agreement (SPA). Mah Sing also keeps its financial year ending December 31, 2020 (FY20) sales target of RM1.6 billion," said Wong.
Thus, the research house has maintained its earnings forecast for Mah Sing with a "Buy" recommendation and raised its target price of 64 sen per share, backed by 6.0 per cent dividend yield.
Hong Leong Investment Bank Bhd (HLIB) remained positive on Mah Sing's take up outcomes as the affordable products still garner strong demands despite the economic uncertainty brought about by Covid-19.
"We expect FY20 to be a bottomed year and remain upbeat on the longer-term prospects as FY21 will see better earnings contributions from key projects such as M Vertica and M Centura which are currently in its early stages of construction," said HLIB analyst Andrew Lim Ken-Wern.
He said Mah Sing remained cautions its initial gross development value launch target of RM2.1 billion this year, despite strong bookings towards the recent launches.
However, he said the sales outcome will be largely dependent on the conversion rate of bookings to SPA which may be affected by buyers being more cautious on following through with the purchase.
With regards to progressive billing recognition for FY20, he said construction works have normalised for all projects and hence it remained upbeat on the longer-term prospects.
He said FY21 will see better earnings contributions from key projects such as M Vertica and M Centura which are currently in its early stages of construction.
"Mah Sing's unbilled sales stood at RM1.8 billion in the first-quarter of 2020, representing a healthy cover ratio of 1.3 times."
HLIB had also maintained a "Buy" call with an unchanged target price of 64 sen based on an unchanged discount of 70 per cent to revalued net asset value of RM2.14.
"The focus on affordable products should garner strong responses (as seen in its recent launches) and dividend with a minimum payout ratio of 40 per cent with (FY20 yield: 3.9 per cent, FY21 yield 5.4 per cent) would hopefully serve as a support to share price."