• Mah Sing Group (Mahsing) has on 8 December 2023 entered into a conditional sale and purchase agreement with Tekun Juara Sdn Bhd to acquire a parcel of prime land in Mukim Setapak, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan Kuala Lumpur measuring approximately 4.036 acres. The total purchase consideration is RM74.3mn with an estimated gross development value (GDV) of approximately RM508mn.

• We are positive with the deal as it would accelerate the group's strategic objectives of expanding its footprint in the thriving growth corridors of Greater Kuala Lumpur/Klang Valley, resulting in a total remaining GDV of RM24.4bn.

• Maintain our HOLD recommendation on Mahsing with a TP of RM0.87, based on 65% discount to RNAV. In light of strong price rally recently, we prefer investors to accumulate the stock on dip.

Unveiling M Azura Project in Setapak

Close to the planned Rejang Station of the Mass Rapid Transit 3 (MRT 3), as well as the LRT Sri Rampai and LRT Wangsa Maju, M Azura is the company’s third project in Setapak after the complete sell-out of M Astra and M Adora. Hence, it is anticipated that M Azura will benefit from the overflow of demand from previous developments. According to initial plans, M Azura will consist of two blocks of serviced apartments offering 2-bedroom, 3-bedroom, and 4-bedroom units with approximate built-up areas ranging from 700sqft to 1,000sqft, and an estimated starting price of RM396,800. The registration of interest in M Azura is set for 1Q2024. The project aims to attract buyers from the mass market segment, particularly first-time homebuyers, upgraders, and working professionals seeking a city lifestyle and proximity to the city center with convenient access to amenities and infrastructure. This acquisition represents the company's fifth land deal in 2023, with a combined GDV of approximately RM5.5bn. With robust liquidity and a strong balance sheet, we believe the company will continue its strategic land acquisition approach, prioritising parcels that offer favourable returns and efficient turnaround.

Building a Stronger Presence in the Prime Location of Klang Valley

Nestled among well-established neighbourhoods such as Wangsa Maju, Setapak Jaya, Kementah, Setiawangsa, Danau Kota, and Titiwangsa, we believe M Azura is poised to replicate the success of M Adora and M Astra. Its proximity to the Kuala Lumpur City Centre and a mere 250m walking distance to the proposed MRT 3 Rejang station presents yet another opportunity for the company to bolster its competitive edge in the affordable segment through this TransitOriented Development (TOD). The acquisition of M Azura in Setapak, Kuala Lumpur is well-aligned with the company’s strategy of focusing on affordable high-rise properties in central business (CBD) areas and

affordable landed homes in suburban areas. This strategy is driven by the resilient demand for property due to Malaysia’s young demographic, ongoing urbanisation, and population growth. The new development will further cater to the demand for affordable homes in desirable locations in the Klang Valley, akin to the company's other projects like M Vertica in Cheras, M Arisa in Sentul, M Luna in Kepong, M Oscar in Sri Petaling, and M Adora in Wangsa Melawati. These projects have seen high take-up rates primarily because of their strategic locations in well-connected, established neighbourhoods and their proximity to the city centre. The well-established area of Setapak, near the centre of Kuala Lumpur, attracts a significant portion of the city's professional community, along with various residential and commercial projects, making it an attractive location for younger residents.

The Price Tag is not Excessive

We have a positive outlook on the transaction as it aligns with the group's strategic objectives of expanding its presence in the high-growth areas of Greater Kuala Lumpur/Klang Valley. This expansion is expected to contribute to a remaining total Gross Development Value (GDV) of RM24.4bn for the company, providing long-term earnings growth potential. The acquisition price for the new land reflects a fair cost-to-GDV ratio of 14.6%, which is consistent with the company's average ratio for their overall projects. With these recent acquisitions, Mahsing's prime land bank now stands impressively at 2,286 acres.

Mahsing intends to finance the costs and expenses related to these acquisitions and development by utilising a combination of internally generated funds and bank borrowing. The management will determine the precise funding mix at a later stage, considering factors such as the company's gearing level and internal cash needs for its business operations. As guided by the company, the gearing level is estimated to be maintained at a below 30% level. As of 3Q2023, the company's total cash stands at RM865mn.

Maintain HOLD with a TP of RM0.87

We maintain a HOLD recommendation on Mahsing with a TP of RM0.87 based on 65% discount to RNAV. Despite the recent price rally prompting a HOLD call, our stance on the stock remains positive, considering the company's ongoing land acquisitions, which contribute to quick turnaround and provide visibility for sustainable earnings in the long term.

Source: BIMB Securities Research - 11 Dec 2023