PETALING JAYA: Mah Sing Group Bhd’s glove manufacturing may fall short of expectations but its core business of property development will continue to drive earnings.

       This is because the tide has shifted against Mah Sing’s new venture into the gloves manufacturing business as declining average selling price (ASP) and the softening demand may weigh on near-term performance in the months ahead.

       TA Research said the ASP of nitrile gloves has decreased to approximately US$26-US$30 (RM108-RM126) per 1000 gloves as of December this year.

       It is likely to continue its downtrend into the first quarter of 2022, falling by about 5% month-on-month.

       During pre-Covid-19 pandemic days, it said nitrile gloves ASP was at US$22-US$25 (RM92-RM104) per 1000 gloves.

       On a brighter note, TA Research said Mah Sing has recently obtained the Certificate of European Union Medical Device Regulation, Medical Device Licence from Health Canada as well as the US Food and Drug Administration (FDA)510(k) Pre-market Notification.

       This will permit the export of medical gloves to a wider range of markets including major markets such as Europe, Canada, and the United States.

       Mah Sing's gloves factory in Klang.

       TA believes higher production volume will help reduce per-unit operating expenses and overheads in the future.

       TA also believes that Mah Sing’s about 40 years of manufacturing experience should offer a solid foundation to support the expansion of the new glove manufacturing business in the future.

       Its property development business continues to thrive well, TA said.

       This is supported by the government-initiated nationwide Home Ownership Campaign and Mah Sing’s in-house marketing programmes and the group’s property sales performance has been encouraging.

       The group’s property sales for the first nine months of 2021 surged 51% year-on-year (y-o-y) to RM1.28bil.

       It said the recent launches such as M Oscar @ Kuchai Lama, M Luna @ Kepong, and M Adora @ Wangsa Melawati have garnered a strong take-up rate of about 80%.

       These projects offer affordable price points. It believes Mah Sing is on track to meet both its and management sales target of RM1.6bil, given that the group has recorded RM1.28bil sales in the first nine months of 2021.

       This accounted for 80% of its sales assumption and management sales target.

       Looking ahead, the house expects new sales to be anchored by bookings conversion (RM772mil as of Nov 28), and new launches lined up worth RM400mil.

       It anticipates that the property business, which will enter a new growth cycle next year, will continue to be a major contributor to the group’s future profit growth.

       Even without a significant contribution from the glove division, it forecast robust earnings per share growth of 45%/38% for financial year 2022 and 2023, backed by solid unbilled sales of RM2bil, which represents 1.7 times the financial year 2020 property revenue.

       It maintains its “buy’’ call on Mah Sing with a target price of 82 sen per share.