PETALING JAYA: A rise in building material prices is unlikely to have a significant impact on Mah Sing Bhd’s profitability as it has already locked in construction costs for ongoing projects, and is likely to raise house prices for new projects.

       AmInvestment Bank Research expects that Mah Sing to increase house prices to preserve its profit before tax margins of 18% for its affordable housing projects.

       “Mah Sing has locked in construction costs of ongoing projects when the contracts were awarded,” it said in a report yesterday.

       According to the research house, Mah Sing is adopting a new approach on construction management called the e-model to reduce costs.

       “This covers the ownership of design and managing the bulk purchase of construction materials. Hence, the impact of higher building material costs will be mitigated to ensure that house prices remain affordable for its new projects,” AmInvest said.

       Nonetheless, the research house has reduced its financial year 2022 (FY22), FY23, and FY24 net profit forecast on Mah Sing by 23%, 22% and 26%, respectively to reflect earnings after accounting for distributions to be paid to the holders of perpetual securities.

       It said the perpetual securities were classified as equity in the balance sheet, which carried a coupon rate ranging from 6.55% to 6.9% per annum.

       On Monday, Mah Sing announced that it has fully redeemed RM650mil of unrated senior perpetual securities on its first call date of April 4.

       The property developer said the proceeds from the issuance would primarily be used to accelerate the construction of projects with good take-up rates, landbanking and working capital.

       AmInvest pointed out that over the past 1？ years, Mah Sing has completed the issuance of three-tranches of sukuk totalling RM1bil at a fixed profit rate ranging from 3% to 4.9% per annum with repayment periods of five to seven years.

       “With the refinancing of financial instruments under the current low interest rate environment, Mah Sing will reduce the interest expense on its existing borrowings for the next five to seven years,” it said.

       Mah Sing is planning to launch RM2.4bil worth of property projects this year. It has aimed for a sales growth of RM2bil this year – 25% higher compared with 2021.

       AmInvest said it has recently met up with Mah Sing’s management and the group is confident of meeting its FY22 sales target, on the back of strong bookings.

       “Despite the expiry of the Home Ownership Campaign on Dec 31, 2021, the sales momentum for first quarter of FY22 remained strong with higher average weekly bookings of RM100mil compared with RM70mil to RM80mil in FY21.

       The key contributors to the sales will be the company’s existing projects in the Klang Valley as well as new projects to be launched later this year comprising M Senyum, M Astra and M Nova, according to the research house.