Investment Highlights

• We upgrade our call to BUY (from HOLD) with a higher fair value of RM1.68, based on a 30% discount to its RNAV, due to the expected positive contribution from the proposed development from FY18 onwards.

• Mah Sing’s subsidiary Nova Land Development Sdn Bhd had entered into a share sale agreement to acquire a 78% equity interest in Cosmowealth Housing Development Sdn Bhd for a total purchase consideration of RM54.96mil. Cosmowealth had on 25 May 2017, entered into a sale and purchase agreement to acquire three pieces of adjoining freehold land in Sentul measuring 8.50 acres for a total purchase consideration of RM95.1mil.

• The piece of land is located in the matured neighbourhood of Sentul fronting Jalan Sentul Pasar, and surrounded by matured townships such as Kepong, Taman Seri Gombak, Setapak, Segambut and Batu Caves.

• Mah Sing plans to develop a residential development named M-Centura on the land comprising serviced apartments, with an estimated GDV of RM1.3bil. The development is planned to be affordably priced, with indicative built-ups of 650 sq ft, 850 sq ft and 1000 sq ft, priced from RM326K per unit. The development is expected to commence in the second half of 2017 and continue over a span of 4-5 years.

• We are positive on the acquisition. It allows Mah Sing to gain access to 8.5 acres of strategic land which is only 8.3km from Kuala Lumpur City Centre and located in the matured location of Sentul. We are also positive that the development is targeted towards the affordable segment of the market, which we believe is the relatively more resilient segment of the market, due to the widening gap between supply and demand in this segment.

• The purchase price of the land translates into RM257 psf. Based on our check, the current offering prices of commercial lands for development in the Sentul area vary between RM250psf and RM500psf. As such, we believe the land purchase price for this development is fair, towards the low end of the price range for the area. We are also encouraged that the land costs will make up only 7.3% of the project’s GDV, which we expect to contribute towards a relatively better project profitability.

• The proposed development is located close (4.4km) to one of Mah Sing’s similar ongoing development project, namely Lakeville Residence in Taman Wahyu, Jalan Kuching. Lakeville Residence has registered good takeup rate of more than 80% to date, and we expect the proposed development to be similarly successful, given the similar characteristics of both the projects.

Source: AmInvest Research - 29 May 2017