PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su lt s N o te
27 May 2010
MARKET DATELINE

Mah Sing Share Price

Fair Value
:
:
RM1.56
RM2.09
1QFY12/10 Net Profit Grows 23% YoY Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (MAHSING; Code: 8583) Bloomberg: MSGB MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009 701.6 94.3 11.3 (8.5) 13.8 - 7.4 1.5 11.1 Net cash 4.2
2010F 817.6 109.2 13.1 15.8 11.9 14 8.5 1.4 12.0 Net cash 4.5
2011F 981.8 152.0 18.3 39.3 8.5 17 2.8 1.3 15.2 Net cash 6.3
2012F 1,335.3 204.0 24.5 34.2 6.4 22 1.5 1.2 18.1 Net cash 8.4
Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC * Consensus Based On IBES Estimates

♦ In line. 1QFY12/10 net profit came in within expectations at 25-26% of RHBRI Vs. Consensus
Above
our full-year forecast and the full-year market consensus. 1QFY12/10 net
In Line
profit grew +23.2% yoy driven by progress billings from Southgate
Below
(commercial project with GDV of RM458m) as well as landed property
projects such as Hijauan Residence (GDV of RM315m), Kemuning Issued Capital (m shares) 831.6
Residence (RM136m) and Aman Perdana (RM858m) in Klang Valley, Market Cap(RMm) 1,297.2
Residence @ Southbay (RM234m) in Penang island as well as Sierra Daily Trading Vol (m shs) 0.6
52wk Price Range (RM) 1.40-1.83
Perdana (RM526m) and Sri Pulai Perdana 2 (RM225m) in Johor Bahru. For
Major Shareholders: (%)
1QFY12/10, the company chalked up impressive sales of RM600.9m (vs.
Tan Sri Leong Hoy Kum 34.2
RM170.2m in 1Q09 and RM727m in FY09), already accounting for 59.6% of PNB 25.0
its FY10 sales target of RM1bn. Meanwhile, the company’s unbilled sales Koperasi Permodalan Felda 7.7
stood at RM1.1bn as at end-1QFY12/10, or 1.6x of our FY12/10 property
revenue forecast. FYE Dec FY09 FY10 FY11
EPS chg (%) - - -
♦ To secure more tenants for The Icon @ Tun Razak. We understand
Var to Cons (%) (6.2) 7.5 11.5
that Mah Sing is in the final stages of negotiation with several potential
tenants from the financial services, telco and oil & gas sectors for office PE Band Chart
space in The Icon @ Tun Razak. These potential tenants that could come in
by 2H10, could substantially raise the occupancy rate from less than 5%
PER = 14x
currently, easing Mah Sing’s burden in honouring the 7% annual PER = 12x
PER = 10x
guaranteed rental yield under sale-and-lease-back agreements signed with
certain investors of The Icon @ Tun Razak in 2009 (see Table 3). Note that
honouring the guaranteed rental yield as well as maintenance & service
charges contributed to a 3.6%-point decline in EBIT margin from 21.3% in
1QFY12/09 to 17.7% in 1QFY12/10. Nevertheless, we are not overly
concerned over the negative impact from the guaranteed rental yield Relative Performance To FBMKLCI
scheme as it will slowly go away as and when the occupany rate raises, and
Mah Sing, to a certain extent, already priced this in via a premium to the
FBM KLCI
selling prices previously.
♦ Forecasts. Maintained. Mah Sing

♦ Risks and concerns. The risks include: 1) potential cancellation of

purchase agreements by buyers; 2) competition from peers; 3) delays in
launches and approvals; and 4) country risk.
♦ Maintain Outperform. We continue to like Mah Sing given: a) The
generally short turnaround time for its property projects that means lower
holding costs and strong cash flow; b) Its strong net profit CAGR of 29%
between FY12/09-12; and c) It being a proxy to the upturn in the local Joshua CY Ng
property market. Indicative fair value is RM2.09 based on RNAV (see Table (603) 92802237
6). joshuang@rhb.com.my
Please read important disclosures at the end of this report.

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Table 2. Mah Sing Quarterly Results
QoQ YoY
FYE Dec (RMm) 1Q09 4Q09 1Q10 3M09 3M10 YoY (%) Comments
(%) (%)
Turnover 150.3 248.9 238.3 (4.2) 58.5 150.3 238.3 58.5 Yoy increase due to new launches
and improved property demand as
well as construction works that
were on track. Main revenue
contributors included Southgate,
Hijauan Residence and Aman
Perdana in Klang Valley, Residence
@ Southbay in Penang island as
well as Sierra Perdana and Sri
Pulai Perdana 2 in Johor Bahru. In
1QFY12/10, the company
registered RM601m sales or 59.6%
of its FY10 internal sales target of
RM1bn.
EBIT 31.9 48.7 42.1 (13.5) 31.8 31.9 42.1 31.8 Decline in EBIT margin due to full-
year impact of RM8.6m additional
costs arising from guaranteed
rental as well as maintenance and
service fees for Icon Tun Razak.
Net interest (0.8) (0.2) (0.4) 72.9 (52.7) (0.8) (0.4) (52.7) The company had a net gearing of
0.05x as at end-1QFY12/10, from
net cash of RM176.5m as at
end4QFY12/09.
Pretax profit 31.1 48.5 41.7 (13.9) 34.0 31.1 41.7 34.0
Taxation (8.9) (22.1) (10.1) (54.3) 12.7 (8.9) (10.1) 12.7
Minority interest 0.5 (1.3) (3.7) >+100 >-100 0.5 (3.7) >-100
Net profit 22.6 25.1 27.9 11.1 23.2 22.6 27.9 23.2 Within our and consensus
estimates.
EPS (sen) 3.6 3.9 4.0 3.6 11.7 3.6 4.0 11.7
Gross DPS (sen) 0.0 6.5 0.0 Na Na 0.0 0.0 Na
NTA/share (RM) 1.1 1.2 1.3 1.1 1.3
EBIT margin (%) 21.3 19.6 17.7 21.3 17.7 Declined yoy, having to honour
guaranteed rental yield of The Icon
@ Tun Razak to certain investors.
Pretax margin (%) 20.7 19.5 17.5 20.7 17.5
Tax rate (%) 28.7 45.6 24.2 28.7 24.2

Table 3: Sale and lease back office transactions

Selling price Rental guarantee yield
Office/location Buyer (RMm) (%) NLA (sq.ft.) Tenure (years)
1. 8-storey retail and office block - Koperasi 185.8 8% 232,351 2
Southgate Commercial Centre Permodalan Felda
Bhd
2. 20-storey Grade A commercial T.S. Law Realty 226.5 7% 278,182 3
building - The Icon @ Tun Razak - S/B
East Wing
3. 20-storey Grade A commercial Koperasi 174.4 7% 243,830 3
building - The Icon @ Tun Razak - Permodalan Felda
West Wing Bhd
4. Additional floor area - The Icon @ Koperasi 8.6 7% 12,846 3
Tun Razak -West Wing Permodalan Felda
Bhd
Source: Mah Sing

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Table 4. Earnings Forecasts
Table 5: WACC assumption
FYE Dec (RMm) FY09a FY10F FY11F FY12F
(%)
Revenue 701.6 817.6 981.8 1,335.3
Risk free rate 4.2
Operating profit 146.4 169.2 217.5 300.3
Equity risk 6.5
premium
Interest expenses (2.2) (8.7) (7.9) (5.2)
Beta 0.625
PBT 144.2 160.5 209.6 295.1
WACC 6.2
Tax 95.8 120.4 157.2 221.3
Minority interest (1.6) (11.2) (5.2) (17.4)
Net profit 94.3 109.2 152.0 204.0
EPS (sen) 11.3 13.1 18.3 24.5
GDPS (sen) 6.5 7.0 9.8 13.1

Source: Company data, RHBRI estimates

Table 6: RNAV
Project DCF (RMm) *
On going projects
1. Aman Perdana, Meru-Shah Alam 23.2
2. Sri Pulai Perdana, Skudai 9.1
3. Sri Pulai Perdana 2, Skudai 26.2
4. Austin Perdana, Tebrau 8.5
5. Sierra Perdana, Tebrau 48.9
6. Southgate Commercial Centre, KL 67.1
7. StarParc Point, Setapak 24.9
8. Hijauan Residence, cheras 36.0
9. Kemuning Residence, Shah Alam 3.4
10. Residence @ Southbay, Penang 22.1

Future projects
11. Legenda @ Southbay, Penang 36.4
12. Southbay City, Penang 106.3
13. Icon Residence, Mont Kiara 50.6
14. One Legenda, Cheras 16.1
15. Bayu Sekamat, Hulu Langat (2.0)
16. Garden Residence, Cyberjaya 94.6
17. iParc, Bukit Jelutong 19.6
18. Perdana Residence 2, Selayang 32.6
19. Petaling Jaya Commercial Hub 133.5
20. Icon Residence, Georgetown 28.3
21. iParc 2 @ Shah Alam 22.4
22. Commercial project in Cyberjaya 43.0
23. M Suites @ Jalan Ampang 38.9
Total 889.6
Shareholders fund as at Dec 09 845.7
Total RNAV 1,735.2
Number of shares 831.6
RNAV per share (RM) 2.09
* WACC of 6.2%

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
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“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
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This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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securities, subject to the duties of confidentiality, will be made available upon request.

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