News

MSGB has acquired 1,051 acres (gross, 960 acres net) of freehold land in Mukim Rantau, Daerah Seremban, Negeri Sembilan for RM359.6m (RM8.60 psf net).

MSGB is planning a mixed development similar to its successful Southville City @ Bangi, which is located 30 minutes away, with an indicative GDV of RM7.5bn. We understand the initial phase will include DST (double-storey terrace) units priced from RM350k, and subsequent phases will include other landed offerings, office, retail shops and a future mall. The map location is shown in Figure #3.

The new land shares similar characteristics with the Southville site as it also straddles the North South Highway, with 2.5km of direct frontage to the highway, and MSGB will propose an interchange for direct access from the highway.

Financial impact

This will be a significant project as it will be the group’s largest project by GDV, and boosts its balance GDV by 26% to RM36.4bn.

However, earnings impact is unclear at this juncture as MSGB has yet to firm up the GDV for the inaugural phase, which it targets to launch by mid-2015.

Pros / cons

We are positive on this move as it gives MSGB exposure to the growth corridor of Seremban, where Matrix Concepts has done well. Moreover, we view the RM8.60 psf land cost as fair as it is less than half of the RM18.55 psf MSGB paid for its land in Southville in 2012, and makes up less than 5% of overall GDV.

MSGB is indicatively launching DST priced from RM350k (20x65), which is comparable to Matrix’s Hijauan 3A (RM430k/unit, 20x80). We believe its competitive pricing should help Phase 1 see healthy takeup rates.

Risks

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

Forecasts

Maintained.

Rating

BUY

This is a sizeable acquisition which we estimate to add 26 sen/share to our RNAV estimate.

MSGB currently trades at 8.7x FY15E P/E vs its historical 5- year P/E average of 11.1x

Valuation

TP increased from RM2.45 to RM2.65 (maintain 20% discount to RNAV), after factoring the Seremban land acquisition into its RNAV computation. Our new TP values MSGB at 9.7x P/E which remains below its historical 5-year P/E average of 11.1x

Source: Hong Leong Investment Bank Research - 12 Aug 2014