Hong Leong Investment Bank has maintained a “Buy” recommendation to Mah Sing Group Bhd with an unchanged TP of RM0.98 based on an SOP derived valuation.
It said that its “BUY call is premised upon its commendable take-up of recent launches, the cover ratio of 1.7x to provide earnings visibility coupled with a dividend payout ratio of 40%.
It said that Mah Sing achieved encouraging bookings of RM772m currently, on track to meet full-year sales target of RM1.6bn. We are expecting resilient showing for 4Q21 backed by normalisation of construction activities as well as gloves contribution.
It said that Mah Sing recently made an early redemption of its RM145m in nominal value of perpetual securities, hence the coupon payment will also be reduced to RM22m annually (starting next year) from RM54.2m.
On its glove business, the investment bank said that its glove business is still loss-making as of 9M21 mainly attributed to the plant’s pre-operating expenses and lower absorption of overhead costs as a result of low production volume in the first 2 quarters of operation (2Q and 3Q) due to restrictions during EMCO and Phase 1.
It said that management expects higher production efficiency going forward as all 12 production lines are expected to complete commissioning by early Dec 2021.
“Furthermore, Mah Sing Healthcare recently received the Health Canada Medical Device License and is in the final stages to obtain the US FDA 510(k) Premarket Notification as well as EU Medical Device Regulation (MDR) which will facilitate the export of medical gloves to more global markets,” it said.
