Highlights

We attended a briefing hosted by the management of MSGB, and came away feeling upbeat about its vision for its newly announced Puchong integrated development

Manhattan in Puchong. We learnt that MSGB intends to brand the development as Manhattan Puchong, with a highly integrated design for people to live, work and play within a fully integrated development.

Enhancing road access. Mr. John Stamper, the traffic consultant for MBSJ, was also present to share the City Council’s plans to enhance road access to the site, which is well connected to Bukit Jalil, LDP and KESAS highways. We understand the City Council has plans to widen the existing dual carriageways and to build new interchanges to enable effective traffic dispersal in the vicinity.

Well served by public transport. The site is located close to 4 LRT stations along the Ampang and Kelana Jaya extension lines, and there will be feeder bus services from Manhattan Puchong for added convenience.

Upmarket concept. From the artist’s impressions we believe that the development will cater to the high end segment of the market, and will attract buyers with a fully integrated offering, including office, residential, hotel and mall elements. Given its central location by the waterfront, it is expected to tap into the affluent crowd from nearby neighbourhoods such as Puchong, Subang and Sunway.

Major player in Puchong. During the briefing, we were given the impression MSGB is highly confident of securing the 170-acre MOU Land (refer to our 29th Aug report), which would bring its Puchong landbank up to 250 acres, surpassing IOPG (90-100 acres) and Glomac (200 acres). We view this positively as we estimate the MOU Land could boost our RNAV estimate by a further 9.3% to RM3.96.

Net gearing well under control. We also learnt that MSGB was able to secure the generous deferred payment terms from the Puchong landowner thanks to its track record of quick turnaround time and sales generation. We view this positively as deferred land payment terms would allow MSGB to maintain its growth trajectory, whilst keeping its gearing at manageable levels. Net gearing remains at a very comfortable 0.21x currently.

Risks

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

Forecasts

Maintained.

Rating

BUY

MSGB currently trades at 9.5x FY15E P/E vs its historical 5- year P/E average of 11.1x

Valuation

TP maintained at RM2.90 (maintain 20% discount to RNAV), which values MSGB at 10.6x FY15E P/E, vs. its historical 5- year P/E average of 11.1x

Source: Hong Leong Investment Bank Research - 8 Sep 2014