Investment Highlights

• We maintain our BUY recommendation on Mah Sing Group (Mah Sing) with a revised fair value of RM1.24 (from RM1.22), based on a 40% discount to its RNAV (Exhibit 2). We made no changes to our FY19–21 earnings forecasts.

• Mah Sing has proposed to acquire a 5.47-acre leasehold land in Mukim Batu, Taman Metropolitan, Kepong for RM94.8mil (inclusive of development order charges of approximately RM33.5mil which has been paid by the vendor). The land is located 200 metres from the Kepong Metropolitan Park (Exhibit 1) and is ready for development.

• The company plans to develop 2 blocks of serviced apartments under the name “M Luna” with an estimated GDV of approximately RM705mil. M Luna is targeted to be under its affordable segment with prices starting from RM385K per unit and built-up from 700 sq ft. The project is expected to commence in 4Q2019 and to be developed over a span of 4 years.

• We believe the net acquisition price (after deducting development order charges of approximately RM33.5mil) of RM61.3mil (RM257 psf) is fair given its cost-to-GDV ratio of 8.7%, which is below the range of 10%–20% for highrise residential developments in Klang Valley. While there are not many identical transactions within the area recently; the current asking price for residential land surrounding its neighbourhood with land area larger than 10,000 sq ft ranges from RM250 psf to RM350 psf. For example, UEM Sunrise acquired a 72-acre piece of land within a 5km radius for RM416mil (RM133 psf) back in 2017 albeit at a size that was over 10 times larger.

• We expect the project to be well received given its strategic location along the MRR2 (within 5km from DUKE, NKVE and LDP) and a growing young population in that area. In terms of public transportation, the land is located about 3.3km from the upcoming Metro Prima MRT2 station and 4km from the Taman Wahyu KTM station.

• Mah Sing is still in net cash position post-acquisition, hence we do not expect any fund-raising exercise in the near future.

• We are positive on the latest development as it will help sustain Mah Sing’s earnings over the medium term. However, we made no changes to our FY19–21 earnings forecasts as the project is still in the planning stage. Nonetheless, this development will add RM45.8mil to our RNAV calculations and will increase our FV to RM1.24 from RM1.22 based on SOP valuations (Exhibit 2). Maintain BUY recommendation.

Source: AmInvest Research - 24 Jul 2019