Credit Suisse initiates coverage on Mah Sing

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KUALA LUMPUR (Nov 28): Credit Suisse (M) Sdn Bhd initiated coverage on Mah Sing Group Bhd, with an “outperform” rating and target price of RM2.90.

Credit Suisse said in its research note today that property developer Mah Sing shares were undervalued, in price-earnings ratio (PER) terms. Credit Suisses said
Mah Sing shares were traded at a 2015 PER of 10.1 times

According to Bloomberg data, the property sector's average PER is about 14 times.

Credit Suisse said "Mah Sing is our top pick in the Malaysia property sector, and the cheapest developer under our coverage."
“We believe it (Mah Sing) is in the most stable and resilient markets, in terms of pricing points and locations, and provides one of the strongest earnings visibility,” Credit Suisse said.

According to Credit Suisse, Mah Sing and SP Setia Bhd provide the strongest earnings visibility among Malaysian property developers. This is because Mah Sing and SP Setia's unbilled sales made up over two times their latest full-year revenues.

Credit Suisse mentioned Mah Sing had positioned itself in the right market, within the affordable segment.

According to Credit Suisse, 81% of Mah Sing's property launches are priced below RM700,000, while 60% of its land bank (by gross development value) is located in the Klang Valley.

Mah Sing is also well known for its quick turnaround business model, where it usually unlocks the value from its land-bank quickly, Credit Suisse said.

“The company usually targets to launch projects within nine months of land acquisition; and has been able to achieve higher property sales, despite having a much smaller land-bank versus peers,” Credit Suisse noted.

As such, the Mah Sing’s five-year average return on equity of 16% is 60% higher than sector average.