AmResearch started property developer Mah Sing Group Bhd with a "buy" rating and fair value of RM3.60 per share, citing its strong balance sheet and bright earnings outlook.
“Mah Sing is set to capitalise on the imminent return of pent-up residential demand; the impact of the responsible lending guidelines has normalised,” AmResearch said in a note on Tuesday.
The research house said 90 percent of Mah Sing’s development projects are at the early stages of their life cycles which would boost annual pre-sales from RM2.8 billion this year to RM3.3 billion in 2013 and RM4.0 billion in 2014.
“Despite its status as the sixth largest property stock by market capitalisation, Mah Sing is very undervalued from both the earnings and assets standpoint,” the research house added.
Read more: Mah Sing a 'buy': AmResearchhttp://www.btimes.com.my/Current_News/BTIMES/articles/20120807101338/Article/index_html#ixzz22sMQTmWo
Mah Sing earnings forecast to hit RM209m
The forecast also includes RM260 million earnings in financial year 2013 and RM320 million in financial year 2014.
The research house said the estimation comes along with a three-year earnings compound 24 per cent annual growth rate, anchored by in-demand landed residential developments namely, M Residence 1&2 and Southville City.
"The group's earnings are very much secured with current RM2.5 billion unbilled sales," said the research house.
AmResearch said the annual pre-sales are expected to rise to RM3.5 billion in financial year 2013 and to RM4 billion in financial year 2014.
"The net gearing is expected to rise to 0.5 with one or two more land acquisitions by year end, but this is still within a comfortable level and should be pared down by its solid cashflows," it said in a research note.
AmResearch said Mah Sing has a 40 per cent dividend payout policy now and it expects the group to pay 11 sen to 15 sen dividend per share for financial year 2012 until 2014, translating to decent yields of four to six per cent.
The research house has put a "buy" rating, with RM3.60 fair value for the initiating coverage on Mah Sing based on a mid-cycle discount to its estimated RM4.80 per share net asset value. Bernama