Mah Sing liked for quick ‘turnaround’ strategy
PETALING JAYA: Property group Mah Sing Group Bhd’s fast “turnaround” strategy coupled with expectations that its financial year ended Dec 31,2020 (FY20) will be a “bottomed” year are two factors that it has going for it, according to one research house.
In a report to clients, Hong Leong Investment Bank analyst Ng Jun Sheng said he liked Mah Sing due to its “fast turnaround” strategy that enables it to crystalise on land value, generate strong cash flows within a short period and generate lower upfront costs.
“As Mah Sing offers exposures to property and the glove manufacturing businesses, the group is expected to ride on an earnings rebound from its property division and a new stream of glove earnings amid sustainable demand from the permanent structural shift in hygiene awareness, ” Ng said.
He said he expected FY20 to be a bottomed year and remained upbeat on the longer-term prospects from Mah Sing’s key projects such as M Vertica and M Centura which were currently in their early stages of construction.
Notably, some property analysts are expecting the property market to stage some kind of rebound this year after suffering a turbulent year last year due to economic uncertainties.
“Meanwhile, the commencement of the group’s glove venture starting in April this year will provide a ‘meaningful boost’ to FY21/22 earnings, “ Ng added.
The Mah Sing stock is trading at 10.9 times its FY21 price to earnings which is 16% below its five-year mean, supported by a strong FY19-FY22 earnings compounded annual growth rate of 26% and a decent FY21-FY22 dividend yield of 4.6% to 5.7%, he said.
Earlier, another research house Am Investment Bank wasn’t as bullish although it did maintain its “buy” call on the stock but with a lower fair value of RM1.27 per share from an earlier RM1.50.
On Mah Sing’s new glove venture, AmInvestment Bank said it reckoned that average selling prices or ASP would decline after 2021 as “there is no longer a rush for gloves” compared to what had happened at the beginning of the Covid-19 pandemic.
“However, we expect ASP to stabilise at a higher level than the pre-pandemic level due to the broader usage of gloves.
It is cutting its FY22 net profit forecast by 34% to reflect the lower ASP of gloves to US$30 per 1,000 pcs from US$40 per 1,000 pcs while making no changes to its FY20–FY21 numbers.