• Mah Sing has entered into a conditional sale and purchase agreement (SPA) with Datuk Bandar Kuala Lumpur (DBKL) to purchase a prime 6.169-acre land in Taman Desa, Mukim Kuala Lumpur, Daerah Kuala Lumpur, for RM108mn.

• This will feature M Aspira, a mixed-use development with estimated GDV of RM1.01bn. We view it favorably as it strengthens the company's M Series offerings in Klang Valley.

• We raised our FY25/FY26F earnings forecasts by 8%/12% to RM299.5mn/RM338.4mn to reflect earnings contribution from M Aspira project.

• Maintain a BUY call on Mah Sing with a higher SOP-derived TP of RM2.07 (from RM2.03). Our TP implies 16.8x FY25F P/E. This is justified by its active land acquisitions that enable a quick turnaround and establish a recurring income stream, ensuring visibility for sustainable long-term earning.

The Last Piece of Land Area

The development, which is set to open for registration in 3QCY24, will feature a mixed-use project with approximately 1,600 residential units on 3.7 acres and around 800 units of Residensi Madani on a 2.47-acre site. Unit sizes range from 708 sqft to 1,011 sqft, with prices starting at RM448,800. Located in Taman Desa, Kuala Lumpur, this project is in a highly accessible area near multiple expressways, including the MEX Highway, Federal Highway, and New Pantai Expressway. M Aspira is also close to Bandar Malaysia. The development targets first-time homebuyers, working professionals, young investors, small families, and the M40 income group, including foreign buyers attracted by updates to Malaysia's MM2H program.

Exceptional Deals, Fair Prices

This expansion is expected to boost its remaining total Gross Development Value (GDV) to RM26.69bn, offering long-term earnings growth potential. The acquisition price reflects a fair costto-GDV ratio of 11%, consistent with the company's average cost for past acquisition. With this acquisition, Mah Sing's prime land bank now stands at 2,439 acres. Mah Sing plans to finance these acquisitions and development costs through a combination of internally generated funds and bank borrowings. The precise funding mix will be determined later, considering factors like gearing level, interest costs, and internal cash needs. As of March 31, Mah Sing had a net gearing ratio of 0.06 times and RM966 million in cash and bank balances. The project is expected to be developed over four to five years.

Earnings Revision

In light of the company's new land acquisition with a GDV of RM1.01bn poised to be recognized in revenue starting from 2025, we have revised our FY25/FY26F earnings forecasts upwards by 8%/12%, resulting in projected profits after tax (PAT) of RM299.5mn/RM338.4mn for FY25F/FY26F (Table 2).

Maintain BUY with a Higher TP of RM2.07

We maintain our BUY recommendation on Mah Sing, increasing the target price (TP) to RM2.07 from RM2.03, using the sum-of-parts (SOP) valuation method. The higher TP is supported by an upward revision of our FY25F/FY26F earnings forecast. We maintain discount to the RNAV at 35% and included the data center (DC) value at 19x EV/EBITDA (based on Chindata multiple). This is justifiable due to 1) the company's strong fundamentals and ongoing land acquisitions, which contribute to a quick turnaround and provide visibility for sustainable long-term earnings, and 2) the diversification of its revenue streams by leveraging its landbank to establish recurring income from data centers.

Source: BIMB Securities Research - 4 Jul 2024