Investment Highlights

• We maintain BUY on Mah Sing Group (Mah Sing) with a higher SOP-based fair value of RM0.87/share from RM0.85/share, which incorporates a neutral 3-star ESG rating (Exhibits 2 & 3).

• While maintaining our FY22F numbers, we raise FY23F– 24F core net profit by 3%–6% to factor in the earnings contribution from the new project, M Minori.

• The higher earnings is based on the assumption that the acquisition will be mainly funded internally with Mah Sing having a cash of RM1bil sitting on their balance sheet as at 31 March 2022. Hence, we anticipate the impact on the gearing ratio from the acquisition to be minimal.

• Mah Sing kicked off its first land deal in 2022 with the proposed acquisition of a 6.9-acre freehold land in Mukim Tebrau, Johor Bahru, from Dynasty View (a wholly-owned subsidiary of United Malayan Land) for RM39.3mil. The acquisition will be funded by a combination of borrowings, internal funds and proceeds from the recent disposal of a small piece of land in Permatang Tinggi. The purchase consideration is expected to be fully settled by 1QFY23.

• The acquisition price of RM39.3mil (RM130 psf) implies a cost-to-GDV ratio of 8.4%, which is lower than its average land cost-to-GDV ratio of 12%–15% for its overall projects. While there were not many identical transactions within the area recently, the asking price for commercial lands surrounding the neighbourhood with similar land size (5.2 to 6.5 acres) ranges from RM120 psf to RM150 psf. Hence, we deem the acquisition price as fair.

• Mah Sing plans to develop a mixed development comprising 3 blocks of serviced suites (1,500 units) and some retail lots, under the project M Minori with an indicative gross development value (GDV) of RM469mil. The serviced suites come with 3 types of layout (1- bedroom, 2-bedroom and 3-bedroom), with indicative built-up ranging from 550 sq ft to 880 sq ft.

• M Minori with prices starting from RM260K (RM472 psf) is targeted at younger buyers, particularly first-time home buyers. The project is scheduled for registration of interest in 4QFY22. We anticipate the official launch date to occur in 1QFY23.

Source: AmInvest Research - 29 Jun 2022