Highlights

We  attended  Mah  Sing’s Southville City’s Direct Interchange ground  breaking  ceremony  yesterday,  and  we  managed  to obtain  several  key  updates  on  the  development  in  Bangi. Key takeaways from  the event  are:

1.  Average  take-up  rate  of  more  than  80%  for  the  first  5 blocks  (tower  A1-C1)  of  Savanna  (high-rise  executive suites;  total  2,000+  units),  while  average  take-up  rate for  Avens  Residence  (2  ½  -  3 storey link homes) stand at approx. 60%.

2.  Concurrently,  Mah  Sing  also  launched  its  6 th block (tower  C2)  of   Savanna  yesterday  and  is  now  open  for booking.  We  understand  that  the  starting  price  would be  at RM350,000 onwards. Each unit will be at the size of 956 sf to slightly above  1,000 sf.

3.  The  entire  development  for  Savanna  would  consists  of 2  storeys  of  retail,  3  storeys  of  carparks  and  28-30 storeys  of  residential.  Construction  works  have  already commenced  early this year  and  is expected to  complete by 2018.

4.  The  developments  of  Avens   (197  units)  have  also started  and  will  complete  by  2017  (2  years). Management  is  not  concerned  that  Avens  would  be completed before the direct interchange as it is likely for home-owners  to  carry  out  renovation  works  upon handover.

5.  The  construction  period  of  the  direct  interchange  would take about 3 years and would complete by 2018 as well to cater to residents of Savanna  and Avens.

6.  The  costs  of the interchange totaled  RM200m which we have  already  factored  in  previously.  There will also be a toll  plaza  at  the  interchange,  which  would  be  built  by PLUS.

We  understand  that  the  group’s Southville City would be the biggest  contributor  for  FY14.  Going  into  FY15,  major contributor  to  earnings  would  be  its  development  in  Sg Buloh, Puchong, and Johor.

Risks

• Slower  than expected sales
• Execution risks for projects
• I nability to replenish  landbank.

Forecasts

• Maintained.   

Rating

BUY

• MSGB  currently   trades  at  8.6x  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. 7x  FY15E  P/E, vs.  its historic al 5-year P/E average  of 11.1x . Maintain  BUY.

Source: Hong Leong Investment Bank Research - 13 Nov 2014