• Mah Sing Group (Mahsing), through its wholly-owned subsidiary Fusion Heights Development Sdn Bhd (FHDSB), entered into a conditional sale and purchase agreement (SPA) with Premier Land Resources Sdn Bhd (PLRSB) on 31st January 2024. This agreement involves a total of approximately 561.65 acres of prime land in Mukim Labu, Daerah Sepang, Negeri Selangor.

• The initial 185-acre parcel is to be acquired for a total purchase consideration of RM100,732,500, or RM12.50 psf, with an option for a further approximately 376.65 acres of adjacent land (Option Land) that may be acquired at the FHDSB’s discretion within 4 years from the date of the SPA at the rate of RM12.50 psf.

• We are optimistic about the deal, as it will expedite the group's strategic efforts to leverage the country’s industrial growth potential and align with Malaysia’s New Industrial Master Plan (NIMP) 2030, aimed at enhancing Malaysia’s industrial capacity and resilience for long-term sustainable growth.

• We are upgrading our recommendation on Mahsing to a BUY, with a revised TP of RM1.11 from RM0.87. This adjustment is attributed to a reduction in the discount to RNAV from 65% to 55%, driven by the company's strong fundamentals and active ongoing land acquisitions which contribute to a quick turnaround and provide visibility for sustainable long-term earnings.

Strategic partnership via Shareholder’s Agreement

MSSSID, a subsidiary of Mah Sing (70% owned), and PLRSB plan to establish a shareholders’ agreement (SHA) related to PLRSB's subscription of 500,002 ordinary shares in FHDSB, representing 20% of the shareholding in FHDSB; while MSSSID holds the remaining 80% in order to govern their relationship as shareholders. Sun Jian Wei, the chairman of MSSSID, also serves as the President of the Malaysia Jiangsu Entrepreneurs Business Association has established good connections with potential investors from JiangSu Province and neighbouring Shanghai. JiangSu Province has a well-established and diverse industrial landscape, encompassing key sectors ranging from manufacturing to technology and services. Mah Sing intends to leverage Mr. Sun’s vast experience and network to engage with potential investors, as well as collaborate with the PLRSB for cost and risk sharing, exploring potential future collaborations on other lands.

Building World Class Mah Sing Business Park

Mah Sing plans to develop the world-class Mah Sing Business Park, offering customized factories, industrial lots, clusters, semi-D, and detached factories. With 30 years of successful property development experience, over 40 years of manufacturing expertise, and partnerships with numerous Fortune 500 clients, the company is well-equipped to provide a comprehensive solution for investors seeking to establis

manufacturing facilities in Malaysia, thus contributing to the group’s future growth and earnings prospects. In addition, the company anticipates the potential for long-term leases for warehouses, logistics distribution centres, data centres, and other high-tech, high-value manufacturing facilities, which could generate recurring income for the group.

In addition to its primarily Malaysian clientele, Mah Sing has drawn interest from international investors in China, Singapore, Australia, Indonesia, and other countries for their properties. The acquisition of the new land will expand Mah Sing’s prime landbanks to 2,471 acres, with a total remaining GDV and unbilled sales of RM27.56bn. To date, Mah Sing has successfully completed and delivered 5 industrial parks, including the Mah Sing Integrated Industrial Park in Mutiara Subang, iParc in Bukit Jelutong, iParc 2 in Shah Alam, iParc 3 in Bukit Jelutong, and iParc Tanjung Pelepas.

Fueling Mah Sing’s Industrial Property Development Growth

We are optimistic on the deal as it will expedite the group's strategic efforts to leverage the country’s industrial growth potential and align with Malaysia’s New Industrial Master Plan (NIMP) 2030, aimed at enhancing Malaysia’s industrial capacity and resilience for long-term sustainable growth. The Mah Sing Business Park in Sepang will be developed by FHDSB, with an initial GDV of approximately RM728mn to develop the first parcel of land, which spans 185 acres. Apart from the initial 10% downpayment, the remaining 90% of the total purchase price of RM100,732,500, or RM12.50 psf for 185 acres, is payable 3 months after the completion of conditions precedent. Furthermore, the landowner PLRSB has given FHDSB the right to acquire an additional approximately 376.65 acres (Option Land) for RM12.50 psf within 4 years of the SPA. The potential GDV for the entire 561.65 acres is up to RM2bn, covering similar development components. Alternatively, an estimated GDV of approximately RM1.5bn is anticipated, focusing solely on the sale of industrial lots for the Option Land.

Mah Sing aims to finance the costs and expenses associated with these acquisitions and developments by utilizing a blend of internally generated funds and bank borrowing. The precise funding mix will be determined by the management at a later stage, taking into consideration factors such as the company's gearing level and internal cash requirements for its business operations. As of 3QFY2023, the company's total cash position stands at RM865mn, with a net gearing ratio of 0.13x. With a strong liquidity position and solid balance sheet, the Group is dedicated to disciplined land banking, maintaining an ongoing focus on acquiring lands with the potential for quick and efficient returns. Aligned with the Group’s quick turnaround strategy and subject to authorities’ approval, the Proposed Development is anticipated to commence in the second half of 2024 and to be developed over a span of 3-4 year.

Upgrade to BUY with a revised TP of RM1.11

We are upgrading our recommendation on Mahsing to a BUY, with a revised TP of RM1.11 from RM0.87 previously, as we reduced the discount to RNAV from 65% to 55%. This adjustment is justifiable due to the company's strong fundamentals and ongoing land acquisitions, which contribute to a quick turnaround and provide visibility for sustainable long-term earnings.

Source: BIMB Securities Research - 2 Feb 2024