MahSing ... Feb10

S&P Results Review & Earnings Outlook

• MS’s 2009 results were broadly within our expectations. Net profit rose a marginal 1.2% to MYR94.3 mln from MYR93.2 mln the year before. Other income jumped to MYR48.0 mln from MYR2.9 mln in 2008, due to a forfeited deposit of MYR42.7 mln from the abandoned sale of ICON@Tun Razak.

• MS managed to book in total sales of MYR727 mln in 2009 compared with its original sales target of MYR453 mln, and now aims to achieve total sales of MYR1 bln in 2010. Separately, MS announced the acquisition of 6.32 acres of commercial land adjacent to the 115.25-acre residential project in Cyberjaya for MYR21.7 mln or MYR79.0 psf
(including MYR1.80 psf for infrastructure). MS plans to develop MYR288 mln worth of commercial properties on the new landbank.

• MS has unbilled sales of MYR690.4 mln, a remaining gross development value of MYR1.1 bln for its existing projects, and MYR4.1 bln worth of new projects in hand. We adjust our 2010 forecast net profit slightly and introduce our 2011 net profit estimate of MYR113.5 mln.

• MS has proposed a first and final dividend of 6 sen based on its enlarged share capital (after its proposed 1-for-5 bonus issue of up to 151.3 mln shares), which is equivalent to 7.8 sen before the proposed bonus issue. The proposed bonus issue is pending the necessary approvals and has not gone ex yet.

Recommendation & Investment Risks
• We maintain our Buy recommendation and our 12-month target price of MYR2.20. MS is one of the leading developers in the country with a balance GDV of MYR5.3 bln (including new projects) for its undeveloped land bank of 720 acres, which will be developed over the next nine to ten years. Going forward, MS is looking to expand into high-growth regional countries such as Vietnam, India, China and Indonesia.

• Our target price is based on ascribing an 11x PER (unchanged) to our 2010 EPS estimate and includes a prospective net DPS. Our ascribed PER is within our usual PER valuation assigned to small- to mid-cap property companies with niche projects. Its target multiple reflects its consistent track record in achieving high take-up rates, track record in sourcing for reasonably prime landbank, and improved earnings
visibility.

• Risks to our recommendation and target price include an unexpected slowdown in property demand in Malaysia. Delays in launches and/or poor take-up rates will also jeopardize its premium valuation, in our view.