KUALA LUMPUR (March 30): RHB Research Institute has maintained “buy” on Mah Sing Group Bhd at 82 sen with a higher target price (TP) of RM1.02 (from 97 sen) as it foresees the group’s maiden glove manufacturing business to boost its earnings.
Its analyst Loong Kok Wen in a note today said she recently hosted a virtual meeting with Mah Sing, and the management confirmed that its first two glove production lines will start in mid-April after performance testing was successfully done on March 17.
“Thus far, the company has already received orders up to June at an average selling price (ASP) of up to US$115 (or RM476.62 per 1,000 pieces). The first batch of shipment will be sent to Canada, the US and the Middle East, followed by Europe, Japan, China and South America,” she said.
According to her, management had also secured supply of nitrile butadiene (NBR) at US$2,700 to US$3,000 per ton, but had yet to commit on the price in the second half of 2021 (2H21).
Based on the new guidance on ASPs, Loong raised her earnings forecast for the financial year ending Dec 31, 2021 (FY21) by 6% for Mah Sing and estimated that the glove business will contribute around RM119 million to the group’s FY21 earnings, making up 43% of total earnings.
She opined that the contribution from glove manufacturing could possibly boost the group’s FY21 earnings by 70% to 80%.
“Given the earnings boost and its 40% dividend payout policy, we expect the dividend per share to amount to 4.6 sen and 6.3 sen for FY21 to FY22, suggesting an attractive yield of 6% to 8%, among the highest in the property sector,” she said, adding that investors should turn more confident in the group’s glove manufacturing business.
The group’s property development segment, meanwhile, is seeing demand recover.
According to Loong, Mah Sing’s management is confident in achieving its RM1.6 billion sales target by year end as property sales momentum continues in March after raking in RM250 million sales in January-February 2021.
She said about RM2.4 billion worth of projects will be launched, including M Senyum (the newly acquired land in Sepang) in the fourth quarter, as well as new phases of existing mid-range high-rise and landed products.
The group’s unbilled sales stood at RM1.64 billion, she added.
At 10.32am today, Mah Sing was unchanged at 82 sen, valuing the group at RM1.99 billion.
