- We maintain our BUY call on Mah Sing Group with an unchanged fair value of RM2.38/share. This pegs the stock at a 15% discount to its NAV/share.

- In an announcement to Bursa Malaysia, Mah Sing disclosed that its wholly-owned unit, Grand Prestige Sdn Bhd, intends to rescind the proposed acquisition of a piece of freehold land in Seremban.

- Via its solicitors, Mah Sing had sent a letter to the vendors of the land, seeking a refund of the 10% deposit it paid amounting to RM36mil.

- To recap, Mah Sing had proposed to acquire a 1,051-acre tract of land in Rantau, Seremban for RM360mil last August.

- Excluding 91 acres that are subject to acquisitions by the authorities, the net area is ~960 acres. This was to have translated into an implied land cost of ~RM8.60/share.

- The Seremban land was to have an indicative GDV of RM7.5bil. This was to be developed into a freehold township project over a period of seven to eight years.

- Based on its announcement, Mah Sing stated that the SPA is “void and/or rescinded, due to, amongst others, misrepresentation and/or the breach of terms and conditions of the agreement by the vendors and/or events that are unlawful have occurred”.

- We understand that RM107mil of the estimated RM630mil that Mah Sing had successfully raised in February was supposed to be utilised as part-payment for the acquisition of the Seremban land.

- With the rescission, we expect Mah Sing to redeploy the amount for other landbanking opportunities and/or accelerate its ongoing developments.

- We are neutral on this latest development as the Seremban land is not included in our current NAV for Mah Sing.

- While we estimate the exclusion of the Seremban land to reduce Mah Sing’s GDV pipeline line by 15% to ~RM41bil, earnings visibility remains intact, backed by solid unbilled sales of ~RM5.1bil.

- Hence, we retain our earnings forecast and recommendation for Mah Sing. The stock is trading at a deep 47% discount to its NAV.

Source: AmeSecurities Research - 17 Aug 2015