Highlights

MSGB announced an increase in gross development value (GDV) for Southville City@KL South, from the preliminary RM5.13bn to RM8.3bn. The developer attributed the increased of GDV to the recently approved township masterplan. The key difference is the commercial component. Previously it was to comprise low rise shop offices, but will now feature high rise commercial blocks comprising office towers, a shopping centre, SOHO, Service Apartments, and possibly hotels (subject to market demand). The commercial zone occupies a stretch of land 2km long (about 60.21 acres) fronting the North-South Expressway).

The takeup for its latest phase in Southville was also encouraging, with a takeup rate of 80% for the 80 units of Avens Residence released last weekend, which are priced from RM892k-1.11m. The success of Avens Residence comes from its appeal to the upgrader’s market for midmarket suburban landed housing.

Southville has been a success for MSGB, having generated RM600m sales to-date. The first four towers of the high-rise Savanna Suites are already more than 90% sold while the shop offices are 40% sold. One of the key selling points is the approved interchange which will provide residents with direct access into Southville from the North-South Highway. The interchange is expected to complete simultaneously with the completion of Savanna high-rise suites.

The increase in Southville’s GDV adds 6 sen per share to the share price and raises our RNAV to RM3.09.

Risks

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

Forecasts

Raised by 1.4-1.9% after updating GDV of Southville.

Rating

HOLD

We still believe it is premature to turn aggressive on property developers at this point in time, given the uncertain outlook arising from macro and sector headwinds. More monitoring is needed for its projects sales this year.

Valuation

Raise TP from RM2.40 to RM2.47 (maintain 20% discount to RNAV).

Source: Hong Leong Investment Bank Research - 4 Jun 2014