News

MSGB has acquired 85.43 acres of leasehold land in Shah Alam for RM327m, or RM88 psf. The land is located in Section 13 of Shah Alam, and forms a portion of the Sultan Salahuddin Abdul Aziz Shah (SSAAS) Golf Course.

The project’s most direct access is through Persiaran Sukan and the nearest highways are the Guthrie Corridor, the NKVE and the ELITE Highway.

MSGB intends to build an enclave of gated guarded landed and high-rise residences, including super link, linked semidetached, semi-detached, bungalows and serviced apartments, with an estimated overall GDV of RM2.5bn. The development project is targeted to be launched in 2016 and expected to be developed over a span of 5 years.

Financial impact

Minimal FY16 earnings contribution. Unlike MSGB’s other quick turnaround projects, this project will be launched only in FY16, and we expect earnings impact to be minimal in the early initial stages.

Easy on the balance sheet. MSGB only needs to come up with the 90% bullet payment in circa 30 months’ time, affording it more time and flexibility to manage its cashflow. We like that MSGB has been able to strike deals with deferred payment terms, which has helped to keep its net gearing low at 0.15x

Pros / Cons

Reasonable land cost. Recall that Tropicana acquired an 88 acre site for Tropicana Metropark in Subang Jaya for RM385.5m in 2012, which works out to RM100psf. Therefore, we consider the RM88psf that Mah Sing paid for this land to be fair.

In a popular location. We note that this project is located just 7km away from Tropicana’s Metropark development, which has enjoyed strong response from property purchasers. Given the comparable location, good access to multiple highways and abundant amenities close by, we are positive on the prospects of this development.

We expect up-market product mix. Given the success that Tropicana has enjoyed with Paloma @ Tropicana Metropark, we believe MSGB will likely follow a similar pricing scheme, although we expect it to be higher come the eventual launch in 2016. Paloma @ Tropicana Metropark is being priced around RM850 psf.

Risks

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

Forecasts

Maintained.

Rating

HOLD

Given macro and sector headwinds, we are keeping our HOLD call on Mah Sing at this point in time.

Valuation

TP raised from RM2.12 to RM2.22 (maintain 55% discount to RNAV) to factor in this project.

Source: Hong Leong Investment Bank Research - 14 Mar 2014