- We maintain our BUY call on Mah Sing Group with an unchanged fair value of RM2.12/share. This pegs the stock at a 15% discount to its NAV. According to The Edge Malaysia, Mah Sing is set to launch the second phase of its Feringghi Residence project in Penang by year-end.

- Feringghi Residence is a freehold development that comprises low-rise condo villas and high-rise resort condos on 61 acres of elevated land in Batu Feringghi. The gated development is to be developed in three phases. The parcel of land was bought in 2010, and is strategically located along the famed Batu Feringghi tourist belt and ~1km away from Hard Rock Hotel Penang.

- Phase 1 of Feringghi Residence (~11 acres) was launched in 4Q12. It consists of 210 apartments with built-ups of 1,510sf to 1,752sf in a five-storey block and priced between RM870k and RM1.4mil a unit. To-date, more than 90% of these units have been sold.

- As for the upcoming Feringghi Residence 2, a total of 632 units will be on offer in three blocks of four, 10 and 32-storey high. The average built-ups will be smaller than that of the first phase, ranging from 1,208sf to 1,565sf. The third phase (launch date yet to be confirmed) will comprise 410 resort condos, 80 town villas and 32 hillside villas.

- The GDV for Feringghi Residence 2 is approximately RM700mil or RM700psf-RM750psf. Apart from having a view of the sea, the units under this new phase will enjoy facilities such as a multi-purpose hall, gym, tennis court, infinity pool, barbeque area, playground and a man-made pool.

- We expect Feringghi Residence 2 to be one of only two new launches for Mah Sing in Penang this year, given the soft market conditions. The Penang market accounts for c.6% of the group’s revised pre-sales target of RM2bil for FY15F.

- We understand that Feringghi Residence 2 received 600 registrations within two weeks during a preview held last July. Given its smaller built-ups, we believe the average pricing per unit could be lower than that of Phase 1.

- While we expect Feringghi Residence 2 to be similarly well received given its strategic location and low-density features, we expect the conversion into sales to take longer compared to Phase 1. Furthermore, the former has total units that is 3x that of the latter (632 vs. 210).

- We maintain our BUY call on Mah Sing. While presales momentum will likely be muted in the near term, earnings visibility remains solid with a remaining GDV of RM26bil and unbilled sales of RM4.8bil (~2x its FY14 property revenue). Plus, the stock trading at a steep 49% discount to its NAV.

Source: AmeSecurities Research - 5 Oct 2015