KUALA LUMPUR: Mah Sing Group Bhd remained the top pick due to its asset-light and agile business model, which allows it to adapt and pivot its launching strategy in response to changing industry dynamics.
Hong Leong Investment Bank (HLIB) Research in a note today said the Mah Sing's exposure in the affordable housing segment should continue to do well as home buyers are likely to opt for lower-priced properties due to the ending of the Home Ownership Campaign (HOC) and the rising cost of living.
"The reason Mah Sing was able to adapt and pivot its launching strategy quickly is due to its asset-light balance sheet and its swift time to market.
"As a result, the company was able to mitigate the risk of acquiring a large parcel of land that becomes obsolete over time due to external factors while also mitigating the risk of a mismatch in its supply and market demand from the fast-changing and dynamic property market.
"Furthermore, as its cash is not tied up in large land assets and due to its swift turnaround time from land acquisition to completing construction, Mah Sing will be able to continuously generate free cash flow to scale and grow its business.
"As a result of this agile business model, Mah Sing should be able to pivot back to higher-end products with better margin should the property market return to an upcycle," it said.
HLIB Research said Mah Sing's healthy net gearing level of 0.33x and the positive cash flow from projects completion also allow plenty of room for further land banking exercises to anchor its future growth.
Besides that, HLIB Research also noted that Mah Sing remains committed to its 40 per cent dividend payout policy, which gives a decent projected financial year ending December 31, 2022 (FY22) dividend yield of 4.0 per cent.
HLIB Research has maintained its 'Buy' call on Mah Sing with an unchanged target price of 87 sen.