Mah Sing’s first nine months’ (9MFY22) core net earnings of RM97.7m deemed within expectations despite it made up 61% and 64% of the Street’s full year estimates as core net income in 3QFY22 were distorted by higher tax rate which includes provision for prosperity tax.
MIDF expects stronger earnings in 4QFY22 as tax rate normalises. Note that the research house has included distribution for holders of perpetual securities in its core net income calculations.
Resilient earnings. Sequentially, 3QFY22 core net income was higher at RM39.7 million (+130% qoq) as earnings in the previous quarter were dragged by distribution paid to holders of perpetual securities. Nevertheless, the earnings growth was partly negated by higher tax rate of 37% in 3QFY22 against tax rate of 28% in 2QFY22 mainly due to provision for prosperity tax.
On yearly basis, 3QFY22 core net income was flattish, bringing 9MFY22 cumulative core net income to RM97.7m (+6.1% yoy). The higher earnings were in line with higher topline
(+35.3% yoy) due to higher recognition from its ongoing projects namely M Vertica in Cheras, M Arisa in Setapak, M Luna in Kepong and M Aruna in Rawang.
Meanwhile, unbilled sales increased from RM2.16b in 2QFY22 to RM2.29b in 3QFY22, providing more than one-year earnings visibility.
9MFY22 new sales at RM1.69 billion. Mah Sing chalked up new property sales of RM640 million in 3QFY22 which includes land sales of RM66 million, higher than new sales of RM550 million in 2QFY22. That brought total new sales to RM1.69 billion in 9MFY22 which is within management new sales target of RM2 bilion for FY22.
Going forward, the research house expects new sales outlook to remain positive with upcoming new launches namely M Astra in Setapak, M Nova in Kepong, M Panora in Rawang, Erica Phase 3 in Meridin East and M Senyum Phase 3 in Salak Tinggi.
MIDF has reiterated BUY with an unchanged target price (TP) of RM0.74. It makes no changes to its earnings forecast for FY22/23F. The target price is derived based on 65% discount to RNAV.
The BUY rating given by the research house is based on Mah Sing’s strategy to build affordable housing mainly in Klang Valley as demand for affordable housing remains supported by genuine home buyers.
Besides, earnings outlook is expected to be better due to pick up in progress billing of its ongoing projects.
