Mah Sing revises sales target to RM2.3bn for 2015

PETALING JAYA (Aug 26): Mah Sing Group Bhd has revised its sales target for the year to RM2.3 billion from RM3.4 billion amid a softer market.

The group has also scaled back its launches to RM2 billion from RMM3.4 billion, it said in a statement today.

“While underlying demand remains strong for the affordable residential segment supported by the fundamentals driving property growth (household formations from a young population, urban migration to cities, healthy GDP growth of 4.5% - 5.5% and household income growth), the confidence level of consumers has been dampened and buyers are taking the wait and see approach. 

“Hence the group expects the temporary weak sentiment to last more than the originally expected six to nine months,” it said.

Mah Sing cited the Malaysian Institute of Economic Research (MIER)’s statistics for 2Q2015, which pointed to consumer sentiment at its lowest since 1Q2009, the cost of living rising due to factors such as the Goods and Services Tax, higher unemployment, sluggish retail performance and lower confidence in the tourism industry.

The group said it will take steps to better meet market demand such as continuing to offer assistance to home buyers with low entry schemes as well as focusing on delivery through good customer service and quality homes to reach more buyers.

“This will be supported by its attractive pricing points, with 84% of 2015 planned residential launches priced below RM1million, 71% priced below RM700,000 and 44% priced below RM500,000. 

“The group’s focus on the target market segment of Malaysians aged 40 and below represents approximately 70% of the current 30 million population, which also represent 70% of the group’s current purchasers comprising first time home buyers and also upgraders,” it said.

Mah Sing will also strengthen its cash flow management and cost control for leaner operations and better productivity and continue to adopt prudent financial management and enhanced capital structure, it said.

The eveloper noted that it is in a net cash position, with cash and bank balances amounting to RM1.54 billion.

“This favourably positions the group for any future opportunities as they arise and will enhance our operating capacity to deal with unforeseen market changes,” it said.

The group posted a net profit of RM90.5 million for the second quarter ended June 30 2015 (2Q2015), up 3.9% from RM87.05 million a year ago on higher revenue.

The group’s revenue rose 10.7% from the last quarter to RM780.5 million, the group said in a Bursa Malaysia announcement today.

For the first six months ended June 30, the group’s net profit grew by 10.8% to RM189.4 million from a year ago while revenue rose by 16.1% to RM1.6 billion.

Property development revenue also improved by 18.7% to RM1.4 billion from a year ago, due to higher work progress and sales from ongoing projects such as Icon City in Petaling Jaya, M City along Jalan Ampang and Southville City @ KL South in Bangi.

The group also announced that it had rescinded the purchase of a 88.7-acre parcel in Puchong for RM656.9 million.

“As the development would be developed over a period of 10 years, with revenue contribution estimated to commence only in 2016, the rescission of the sale and purchase agreement is not expected to have a material effect on the earnings of Mah Sing in the near term. Any medium to long term impact would be mitigated through the development of its existing landbanks and/or new lands acquired in the future,” it said.

Mah Sing did not explain why it aborted the sale.

However, the group noted that it had a “strong portfolio of projects” within its landbank with a remaining gross development value (GDV) of RM26.4 billion, most of which are at the planning and introductory stage.

“This, coupled with unbilled sales of RM4.8billion, represents remaining total remaining GDV and unbilled sales of RM31.2 billion, providing growth and earnings visibility for at least the next six to eight years,” it said.