RHB Research maintained its buy call for Mah Sing Group Bhd (MSGB) with a target price of 91 sen, a 20% upside with a 3% FY20F yield.
For its second quarter ended June 30, 2020 (2Q20), MSGB experienced a drop in earnings to RM15.1 mil from last year’s RM50.3 mil and the group’s revenue declined to RM298.6 mil in 2Q20 against 2Q19’s RM481.2 mil.
Regardless, MSGB has bookings worth RM1.6 bil, reflecting improved buyer sentiment.
RHB Research analyst Loong Kok Wen said that they are not letting their guard down regarding the matter.
She said that management is cautious on the timing required to convert those bookings into contractual sales as banks are adopting a more stringent approach when approving mortgage loans.
“Despite having RM1.6 bil in bookings, we’re cutting MSGB’s FY20 sales target to RM1.1 bil, as the conversion of bookings to sales is taking longer than expected,” Loong said in a Sept 1, 2020 note.
She partly attributed the reduced sales target to the weak property sales in 1H20, but makes no changes to the earnings forecasts.
According to Loong, the drop in revenue and earnings was largely due to the impact of lockdown measures imposed, as construction works were halted and sales galleries were closed.
Due to the lockdown, MSGB’s new property sales amounted to only RM171.6 mil in 2Q20 versus RM247 mil in 2Q19.
Its key contributors were mainly the recently-launched mid-range products including M Centura/Arisa in Sentul (RM135.3 mil), M Vertica in Cheras (RM71.6 mil), Meridin East (RM51.6 mil) and M Oscar in Happy Garden (RM51 mil).
“Additionally, the headline net profit was further dampened by a RM9.9 mil impairment on a hotel in Medini as well as a RM4.5 mil write-down on inventories and property, plant and equipment related to the plastics division, due to a fire that occurred during the quarter,” she said.
“2H20 earnings should come in stronger, as the developer expedites the construction progress on its projects,” she added. “Unbilled sales remained relatively steady at RM1.64 mil compared to RM1.69 bil in 1Q20.”
Loong further indicated that MSGB is still exploring new opportunities in healthcare-related products via the plastics division.
As of 12.36pm on Sept 3, 2020, MSBG’s share price dropped 1.28% to 77 sen with a market capitalisation of RM1.87 bil. – Sept 3, 2020
