CIMB Research said MAH SING GROUP BHD []’s proposed issuance of RM325 million convertible bonds was not entirely a surprise given the group’s aggressive landbanking activities.
“Nonetheless, the cash-raising exercise is a slight negative as it comes on the heels of a recent private placement and before actual land acquisitions,” it said on Monday, Sept 13.
CIMB Research said although the exercise could dilute FY11-12 fully diluted EPS by 12%, it was keeping its forecasts for now as the proceeds will be channelled to the purchase of more “quick turnaround” land which should help offset the dilution.
“But we are trimming our target price from RM2.40 to RM2.35 as we now roll it over to 2012 and apply a wider 20% discount to our target market P/E of 13 times instead of 10% to factor in the potential dilution.
“We continue to rate Mah Sing a BUY, with the potential re-rating catalysts being 1) continued strong newsflow on landbanking exercises, and 2) robust sales and accelerating earnings growth,” it said. - Written by CIMB Research
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