Investment Highlights

• We maintain our BUY call on Mah Sing with an unchanged SOP-based fair value of RM1.28/share and a neutral ESG rating of 3 stars (Exhibits 2 & 3). Our SOP remains unchanged as Mah Sing’s latest land acquisition will only add a slight RM9.8mil, which incorporates a 40% discount to RNAV. We make no changes to our FY21F numbers but raise FY22–23F earnings slightly by 1%–2% from the new project.

• In its second land deal of the year, Mah Sing will acquire a 5- acre parcel of leasehold land in Jalan Genting Kelang, Setapak, Kuala Lumpur from Teratai Constructors Sdn Bhd for RM89mil cash, which will be settled within 6 months from June 2021. The land has 3 frontages facing Jalan Usahawan 5, Jalan Kilang and Jalan Usahawan 6, and is predominantly flat. It currently houses the Sri Utama International School Kuala Lumpur (Exhibit 1).

• The acquisition price translates to RM409 psf and implies a cost-to-gross development value (GDV) ratio of 14%, which is within the 10%–20% range for mixed development in Klang Valley. While there are few recent identical transactions within the immediate area, the asking prices surrounding the neighborhood with land area smaller than 5 acres (217,800 sq ft) have a wide range of RM230 psf to RM938 psf.

• Mah Sing plans to develop 2 blocks of serviced suites with retail lots. Called M Astra, with an indicative GDV of RM618mil, it is targeted at the medium-income segment with selling prices starting from RM399K (RM469 psf). The project is scheduled for a quick launch by 3Q2021 and targeted for completion by 2025.

• We are positive on the development given its strategic location in established neighborhoods such as Danau Kota and Wangsa Maju. It is a 20-minute drive to KLCC and well connected via major highways such as the MRR2 and Duke Expressway. With the amenities nearby including hypermarkets, shopping malls, hospitals and education institutions, we believe this project will garner strong residential and retail interest from the convergence of convenience and accessibility.

• We expect the group’s 1QFY21 results, scheduled to be announced 31 May 2021, to be within our expectations, supported by the encouraging sales of RM250mil (in January and February) vs. RM247mil in 1Q2020 and savvy execution. We continue to like Mah Sing for its: (i) quick turnaround business model that launches new projects; (ii) strength in offering affordable properties at strategic locations; and (iii) strong contribution from its new glove manufacturing business from 2QFY21’s earnings onwards.

Source: AmInvest Research - 5 May 2021