Mah Sing entered into a SPA for a proposed acquisition of 4.52 acres of land in Mukim Melawati, Kuala Lumpur for a purchase consideration of RM62m. The proposed development will generate approximately RM378m worth of GDV. We are neutral on the news given that earnings contribution will spread over its development period of 4 years and contribute only from late-FY20 at earliest, in our opinion. We maintain our forecast and HOLD call with an unchanged TP of RM1.00 based on 55% discount to RNAV of RM2.23.

NEWSBREAK

Mah Sing has entered into a SPA with KLFA Properties Sdn Bhd for the proposed acquisition of land in Wangsa Melawati, Kuala Lumpur measuring 4.52 acres (197k sqft) for a purchase consideration of RM62m. The proposed development will consist of 2 blocks of residential condominium and generate approximately RM378m worth of GDV. The development order for the project has been obtained, therefore expediting the development process.

HLIB’s VIEW

Neutral on the news. We are neutral on the news given that earnings contribution will spread over its development period of 4 years and contribute only from late-FY20 at earliest, in our opinion. Based on a guided PBT margin of 18%, the effective NPV (WACC: 10%) of the project is estimated at RM41m or 0.7% of estimated RNAV.

The land. The land acquisition price of RM378psf is fair given its ability to garner a PBT margin of 18%. The land is surrounded by populated and established neighbourhoods nearby which include Lembah Keramat, Wangsa Maju, Desa Setapak, Setapak Jaya, Setiawangsa, Ukay Perdana and KL East. The land is located 800m from MRR2, 3km from EKVE, 2.3km from Wangsa Maju LRT and 2.5km from Sri Rampai LRT. The project will also enjoy an unblocked view of KLCC and Genting Highlands. Mah Sing is expected to maintain its net cash position post acquisition of the said land.

FY19 targets. Management has set a flat sales target of RM1.5bn, with 50% of products priced RM500k-RM700k and 31% of products priced RM701k-RM1m. Over 70% of sales target are located in the Greater KL region, followed by 19% in Johor and 11% in Penang. With regards to GDV launches, a target of RM2.2bn has been set which includes projects such as M Vertica, Sensory, Meridin East and Southbay City (1QFY19 launches: RM388m). Tentative 2Q19 results release date is set on 30 Aug 19.

Forecast. Unchanged as the expected GDV and sales contribution from this project is within our GDV launch and sales assumption over our forecast horizon.

Maintain HOLD with unchanged TP of RM1.00 based on an unchanged 55% discount to RNAV of RM2.23. We do not see any strong catalyst in the short term with flat new sales coupled with subdued earnings trend despite the deep discount to our estimated RNAV. On the other hand, the focus on affordable products has garnered strong response and consistent dividend with a minimum payout ratio of 40% should continue to serve as support to the share price.

Source: Hong Leong Investment Bank Research - 7 Aug 2019