Investment Highlights

• We maintain BUY on Mah Sing Group (Mah Sing) with a high SOP-based fair value (FV) of RM2.11/share (from RM2.09/sh previously) to account for the new quick turnaround mix development project called M Aspira, which will carry substantive GDV of RM1.01bil.

• Our FV is based on a 30% discount to our SOP-based valuat without any changes to a neutral 3-star ESG rat . The FV implies a FY25F PE of 19x, near its 4-y peak.

• We have also raised FY25F-FY26F earnings by 4%-6% account for the rapid contribution from M Aspira, scheduled be open for registration of interest within the next 2 mon even though the acquisition of the 6.2-acre leasehold land Taman Desa from Datuk Bandar Ku Lumpur is expected to be completed in 1H2025.

• The acquisition land cost of RM108mil at RM400 psf is fair giv that bungalow land in the township is being offered at RM3 RM450 psf currently. This also translates to a reasonable la cost reaching only 11% of GDV, at the low end of industr 10%-25%.

• M Aspira’s mixed-use development, envisioned over 4-5 yea will feature 1,600 residential units on 3.7 acres and 800 units Residensi Madani on a 2.47-acre site with a bumi quota of 40 The indicative sizes of the units are 708 sq ft, 858 sq ft, a 1,008-1,011 sq ft, indicatively priced at the mid-range afforda M-series segment starting from RM448,800 at an attract RM600-RM630 psf. For comparison, the RM700 psf for recently launched The Atas condominium, also on leaseh land in Taman Desa by Exim Global, registered a remarka 70% booking during its soft launch in May this year.

• The project is located at the largely vacant Taman Desa Wa Theme park land, which still has a non-operational theme p building. As the leasehold land expires within 72 years on June 2096, the group will be applying to extend the tenure to years before the launch with the extension cost included in development budget.

• We expect strong pent-up interest in this project given its m range affordability and high accessibility via multi expressways, ie. Federal Highway, KL-Seremban Highway, N Pantai Expressway, MEX Highway, Setiawangsa-Pan Expressway (SPE), SPRINT Highway and SMART Tunnel.

• This is a highly sought-after and matured township since development back in the 1970s given easy access to the c centre, Mid Valley Megamall, KL Sentral and Bangsar, as well major suburbs like Petaling Jaya and Cheras. M Aspira is a near the Bandar Malaysia project in Sungei Besi, which will connected to the proposed KL-Singapore High Speed Railw project.

• This development reinforces Mah Sing as the quick turnaround champion to emulate, being the group’s third land acquisition this year following:
  
  i) 562-acre agricultural land in Sepang for RM101mil on 31 Jan 2024, to be converted into industrial use under Mah Sing Business Park, and
  
  ii) 100-acre freehold land in Pulai, Johor for RM104mil on 5 April 2024, for M Tiara 2 township development near the group’s existing project, M Tiara.
  
  After these acquisitions, we expect the group’s net gearing of 6% as at end-1QFY24, to remain below 0.2x by end- FY24, which remains comfortable given that the group has gross cash of RM966mil and RM506mil potential free cashflow from unsold inventories currently.

• The stock currently trades at a bargain FY25F P/E of 16x vs. a 4-year peak of 19x and a fair dividend yield of 3%. We believe the mid-to-long term outlook for Mah Sing remains positive, backed by its:
  
  i) Rapid execution and quick turnaround business model;
  
  ii) Strong focus on affordable properties at strategic locations which have strong demand, and
  
  iii) Market-savvy entrepreneurship, demonstrated by management’s venture into Malaysia’s booming data centre industry with Bridge Data Centres Malaysia (Bain Capital) in Southville City, Dengkil, Selangor.

Source: AmInvest Research - 4 Jul 2024