MAHSING (8583) - Mah Sing Group - Ex for rights and free warrants
Target RM2.49 (Stock Rating: ADD)
Mah Sing's share price went ex today for the 3-for-10 rights issue and the 3-free-warrants-for-10-rights shares. The 1-for-4 bonus issue is expected to go ex later in 3Q. Proceeds from the rights issue amount to ~RM630m; RM530m will be used for land and property development, RM92m for working capital and RM8m for proposal-related expenses. We cut our EPS and RNAV for the rights with free warrants but keep our Add call and target basis of 10% discount to RNAV. The lower RNAV also dilutes our target price. Mah Sing remains one of our top sector picks and the rights issue will allow the group to continue with its aggressive landbanking. Potential re-rating catalysts include robust earnings growth, strong sales and further landbanking.
What Happened
The share price of Mah Sing today adjusted for the rights and free warrants. The 3-for-10 rights issue is priced at RM1.42 while the 3-free-warrants-for-10-rights shares have an exercise price of RM2.63 and will expire in 2020. Details of the proposed 1-for-4 bonus issue should be announced in 2Q while the stock is expected to go ex in 3Q.
What We Think
We are relatively neutral on the cash-raising exercise as the dilutive effect from the rights issue should be offset by stronger longer-term growth prospects due to the group’s sustainable aggressive landbanking efforts. With the RM630m proceeds, Mah Sing has leeway to gear up its balance sheet by another RM1bn while maintaining a net-debt-to-equity ratio of around 0.5x. This will help the group maintain its position as one of the leading developers in Malaysia. Also, the free warrants and upcoming bonus issues should act as sweeteners to shareholders.
What You Should Do
Investors should continue accumulating Mah Sing shares. The group chalked up new sales of RM3.43bn in 2014, a 14% yoy increase. This is very commendable considering that most other developers suffered sales declines during the year as a result of dampened demand due to measures by the government to cool property speculation. For 2015, Mah Sing is targeting to achieve new sales of at least RM3.43bn but we will not be surprised if the group manages to register sales growth despite the challenging outlook on the back of the implementation of GST starting 1 Apr. The timing of landbanking could also be good as landowners may be more reasonable in their asking price.
Source: CIMB Daybreak - 23 January 2015
Target RM2.49 (Stock Rating: ADD)
Mah Sing's share price went ex today for the 3-for-10 rights issue and the 3-free-warrants-for-10-rights shares. The 1-for-4 bonus issue is expected to go ex later in 3Q. Proceeds from the rights issue amount to ~RM630m; RM530m will be used for land and property development, RM92m for working capital and RM8m for proposal-related expenses. We cut our EPS and RNAV for the rights with free warrants but keep our Add call and target basis of 10% discount to RNAV. The lower RNAV also dilutes our target price. Mah Sing remains one of our top sector picks and the rights issue will allow the group to continue with its aggressive landbanking. Potential re-rating catalysts include robust earnings growth, strong sales and further landbanking.
What Happened
The share price of Mah Sing today adjusted for the rights and free warrants. The 3-for-10 rights issue is priced at RM1.42 while the 3-free-warrants-for-10-rights shares have an exercise price of RM2.63 and will expire in 2020. Details of the proposed 1-for-4 bonus issue should be announced in 2Q while the stock is expected to go ex in 3Q.
What We Think
We are relatively neutral on the cash-raising exercise as the dilutive effect from the rights issue should be offset by stronger longer-term growth prospects due to the group’s sustainable aggressive landbanking efforts. With the RM630m proceeds, Mah Sing has leeway to gear up its balance sheet by another RM1bn while maintaining a net-debt-to-equity ratio of around 0.5x. This will help the group maintain its position as one of the leading developers in Malaysia. Also, the free warrants and upcoming bonus issues should act as sweeteners to shareholders.
What You Should Do
Investors should continue accumulating Mah Sing shares. The group chalked up new sales of RM3.43bn in 2014, a 14% yoy increase. This is very commendable considering that most other developers suffered sales declines during the year as a result of dampened demand due to measures by the government to cool property speculation. For 2015, Mah Sing is targeting to achieve new sales of at least RM3.43bn but we will not be surprised if the group manages to register sales growth despite the challenging outlook on the back of the implementation of GST starting 1 Apr. The timing of landbanking could also be good as landowners may be more reasonable in their asking price.
Source: CIMB Daybreak - 23 January 2015
