Investment Highlights

• We maintain our BUY recommendation on Mah Sing Group (Mah Sing) with a revised fair value of RM1.25 (from RM1.24), based on a 40% discount to its RNAV (Exhibit 3). We made no changes to our FY19–21 earnings forecasts.

• Mah Sing has proposed to acquire a 4.515-acre leasehold land in Wangsa Melawati, Mukim Setapak, KL for RM62mil. The land comes with approved development order (DO) for residential development.

• Mah Sing plans to develop 2 blocks of condominiums under the name “M Adora” with an estimated GDV of RM378mil. M Adora is targeted to be under its affordable segment with prices starting from RM468K per unit and built-up from 850 sq ft. The project is expected to commence in 1Q2020 and developed over a span of 4 years. Meanwhile, registration of interest is scheduled to begin in 4Q2019.

• We believe the acquisition price of RM62mil (RM314psf) is fair given its cost-to-GDV ratio of 16.4%, which is within the range of 10%–20% for high-rise residential developments in Klang Valley. The current asking price for residential land surrounding its neighbourhood with a land area larger than 2 acres ranges from RM300psf to RM400psf.

• In March and July 2019, Mah Sing acquired 2 pieces of land for similar development at Kuchai Lama and Kepong for RM77.5mil (RM383psf) and RM61.3mil (RM257psf) respectively.

• We expect M Adora to be well received given its affordability and close proximity to KL city centre (9km) and is surrounded by established neighbourhoods such as Lembah Keramat, Wangsa Maju, Desa Setapak, Setapak Jaya, Setiawangsa, Ukay Perdana, and KL East. The land is accessible via major highways such as the MRR2, DUKE and EKVE. In terms of public transportation, it is about 0.9km from the Wangsa Maju Mall’s covered walkway to Sri Rampai LRT 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 RM25mil to our RNAV calculations and will increase our FV to RM1.25 from RM1.24 based on SOP valuations (Exhibit 3).

• We believe the outlook on Mah Sing remains positive with the company’s clear direction towards quick turnaround projects and affordable housing at strategic locations where the real demand is. Maintain BUY recommendation.

Source: AmInvest Research - 7 Aug 2019