Highlights

Site visit… We recently organised a site visit for fund managers to D’sara Sentral (DS) and Icon City @ Petaling Jaya (PJIC). We came away feeling reassured about the prospects of both projects, thanks to the strong access enjoyed by both projects.

MRT storyline… We expect strong takeup rates and price appreciation for DS thanks to its MRT storyline, similar to Dijaya’s Tropicana Gardens (DTG) which has seen 50% price appreciation in between its two launches.

The next wave…We believe DS and DTG will be the first of more such “rail plus” type of high-rise developments, which will be the next thematic play for developers in Greater KL.

Rising values… Nearby, MSGB’s Star Avenue is also set to benefit from the MRT story, and MSGB is capitalizing on the expected rise in capital values by tenanting out the strip mall portion before selling to investors.

PJIC… The rollout sequence for Phase 1 (RM1.3bn GDV) is proceeding as planned, while our findings suggest that the planned product mix for Phase 2 remains largely intact.

Catalysts

Strategic land acquisitions; favourable land payment terms; sizable land allocation for the Rubber Research Institute redevelopment in Sg Buloh.

Risks

Slower than expected sales; execution risks for projects; inability to replenish landbank.

Forecasts

Maintained.

Rating

HOLD

• Positives: One of the fastest-moving developers in Malaysia, thanks to rapid turnaround times and aggressive land banking; strong proxy to Iskandar Malaysia; remains ahead of the curve in the property sector.
• Negatives: Pressure to maintain sales for its numerous project launches, in order to maintain cash flow and capital working requirements.

Valuation

Given that the above positives have been factored into our forecasts, we maintain our TP at RM2.40 (maintain discount to RNAV at 40%).

We await the announcement of its upcoming land acquisitions in mid-2013, post-GE. We are likely to upgrade the TP should the payment terms prove favourable to MSGB i.e. minimal balance sheet stress via deferred payment terms. We estimate that MSGB’s net gearing currently stands at 0.25x.

Source: Hong Leong Investment Bank Research - 22 Apr 2013