MAHSING: Property-Centric Group Posts Strong Earnings on Cost Efficiencies

Performance Overview

A prominent property-centric group reported a core net profit of RM130.6 million for the first half of FY25 (1H25), aligning with both the investment bank’s and consensus full-year expectations, representing 50% and 54% respectively. This performance reflects a 13% year-on-year increase in core net profit, underpinned by a 7% rise in revenue. On a sequential basis, the second quarter of FY25 saw core net profit grow 6% to RM67.1 million, despite a 13% revenue decline, primarily driven by improved margins from the finalization of construction costs for projects nearing completion.

Divisional Performance and Challenges

The property development division remained the primary growth engine, achieving a 17% year-on-year increase in operating profit due to stronger progressive billings. In contrast, the manufacturing division recorded a wider operating loss of RM3.7 million in 1H25, a deterioration from RM3.0 million in 1H24. This was largely attributed to soft average selling prices (ASPs) for gloves and global oversupply, which limited fixed-cost absorption with a 42% utilisation rate. Management is implementing cost-tightening measures and efficiency improvements, though a broader industry recovery is crucial for a significant turnaround. The company aims to leverage its FDA-approved Kinoko Hydrogel glove to tap into niche healthcare demand, although customer onboarding cycles are lengthy.

Future Outlook and Strategic Initiatives

New property sales demonstrated robust growth, climbing 12% year-on-year to RM1.15 billion in 1H25, with M Tiara, a landed township in Johor Bahru, contributing 22% of total sales. The group’s unbilled sales stand at a healthy RM2.91 billion as of end-June, providing over 12 months of earnings visibility, equivalent to 1.4x FY24 property development revenue. With approximately RM400 million in bookings in hand and RM1.85 billion in launches planned for 2H25, management is confident of achieving its sales target of at least RM2.65 billion. Upcoming projects in established growth corridors are expected to further drive sales momentum. The group maintains a strong balance sheet with a low net gearing of 0.23x and RM1.12 billion in cash, continuing to pursue selective land acquisitions in key regions to sustain its residential and industrial pipeline.

Data Centre Venture and Investment View

Negotiations for the proposed data centre venture, encompassing both outright land sales and build-to-lease structures, are ongoing. While tariff uncertainties have extended due diligence, discussions remain active, with hopes of securing an agreement by year-end, potentially serving as a medium-term re-rating catalyst.

Investment bank TA SECURITIES has maintained its earnings forecasts for FY25-27 for the group. The bank holds a “BUY” recommendation for the stock, with a target price of RM0.25, representing a 25.0% upside from the last traded price of RM0.20. The recommendation factors in the company’s strong performance, strategic initiatives, and potential upside from new ventures.