Investment Highlights

• We maintain our BUY recommendation on Mah Sing with a revised fair value of RM1.22 (previously RM1.21), based on a 40% discount to its RNAV (Exhibit 2). We made no changes to our FY19-21 numbers. Our fair value upgrade is to reflect the additional RNAV following the proposed land acquisition.

• Mah Sing proposed to acquire six (6) pieces of adjoining freehold land in Mukim Petaling, Kuala Lumpur measuring approximately 4.63 acres for RM90.3mil. The company is still in net cash position following the acquisition, hence we do not expect any fund raising exercise in the near future.

• The Land is situated within the neighbourhoods of Old Klang Road, Sri Petaling, Bukit Jalil and Salak South, and is within a 10km radius of KLCC, Cheras, Ampang, Petaling Jaya and Seri Kembangan.

• Mah Sing plans to develop a residential condominium on the land with an estimated GDV of approximately RM500mil. The development is targeted towards the affordable segment with indicative price starting from RM428K per unit and built-up from 700 sq ft, comprising two to four bedrooms. The project is expected to commence in the second half of 2019 and to be developed over a span of 4-5 years.

• Excluding development charges of RM12.8mil, the land cost is RM77.5mil (RM383psf), implying cost to GDV ratio of 15.4%. We believe this is slightly higher as compared to the company’s average of 10%-15%. There are not many identical transactions within the area recently; however, asking price of freehold residential land surrounding its neighbourhoods with land area larger than 1 acre ranges from RM95-850psf (Old Klang Road @ RM550-RM850psf, Sri Petaling @ RM150-RM220 psf, Puchong @ RM260- RM350psf and Serdang @ RM95-250psf).

• Access into the Land is available via Jalan 2/149 and the company will build a direct access from the existing road to the Proposed Development. In addition, access to the New Pantai Expressway (NPE) and Kajang Dispersal Link Expressway (SILK highway) are just 1.1 km from the Land, KESAS Highway, KL Seremban Highway, Maju Expressway (MEX) and Smart Tunnel are all within 4.8 km from the Land.

• We made no changes to our FY19-21 earnings forecasts as the project is still in planning stage. Despite higher than average cost to GDV ratio, this development will provide additional RM33mil into our RNAV calculations and will increase our FV from RM1.21 to RM1.22 based on SOP valuation (Exhibit 2).

Source: AmInvest Research - 29 Mar 2019