Mah Sing acquired 2 parcels of lands in Puchong for a total cost of RM85.9m with estimated GDV of RM726m, translating to an attractive land cost-to-GDV of 11.8%. We view the acquisition positively given (i) the attractive acquisition price; (ii) swift time to market with tentative launch date in 2H23; (iii) strategic location with proximity to two LRT stations; and (iv) affordable price range. Post-acquisition, the group’s net gearing will increase to 29.5% (from 27.1% as at 30 Sep 2022), while its remaining GDV will increase to RM21.85bn (from RM21.12bn as at 30 Sep 2022). We make no changes to our forecasts. Maintain BUY with an unchanged TP of RM0.84 based on SOP valuation.

NEWSBREAK

Mah Sing had acquired two parcels of lands in Puchong:
i) M Terra - parcel 1 measuring 4 acres planned as residential development; and
ii) M Hana – parcel 2 measuring 4 acres planned as mixed-use development.
The total land cost is RM85.9m with estimated GDV of RM726m.  

The group will launch M Terra first, while M Hana will be the second phase of development. The group targets to launch M Terra in 2H23 which will have c.994 units with built up size of 552sqft, 769sqft and 1,005sqft and price ranging from RM250-460k.

HLIB’S VIEW

We are positive on this development due to:
(i) attractive acquisition price with land cost-to-GDV of 11.8%;
(ii) swift time to market as the tentative launch date will be in 2H23;
(iii) indicative selling price of M Terra is in the affordable range of below RM500k; and
(iv) proximity to two LRT stations: LRT Puchong Perdana (c.500m) and LRT Puchong Prima (c.900m) (see Figure #1).  

Given the affordable price range and strategic location in proximity to train stations, the project should be able to enjoy good demand. We view the group’s strategy to launch its affordable M-series in the Klang Valley region positively as products in this price range should continue to do well given the growing middle class in the region.

Outlook. Separately, we understand that for FY23 the group is setting a launch target of RM2.2bn (9M22 launches: RM867m) and sales target of RM2.2bn (9M22 sales: RM1.69bn, FY22 sales target: RM2bn). In addition, we also view the government’s recent plan to relax the conditions and speed-up the recruitment of foreign workers positively as this will allow Mah Sing to expedite the recognition of its sizeable unbilled sales of RM2.3bn (1.71x of FY21 property development revenue), which should contribute positively to its FY23 earnings.

Forecast. Post-acquisition, the group’s net gearing will increase to 29.5% (from 27.1% as at 30 Sep 2022), while its remaining GDV will increase to RM21.85bn (from RM21.12bn as at 30 Sep 2022). We make no changes to our forecasts.  

Maintain BUY with an unchanged TP of RM0.84 based on SOP valuation. We continue to like Mah Sing for its asset-light and agile business model which allows it to adapt and pivot its launching strategy in response to the changing sector dynamics. The group’s products with exposure mainly in the affordable housing segment (c.65% priced at <RM500k) should continue to enjoy resilient demand given the growing middle class in the region.

Source: Hong Leong Investment Bank Research - 19 Jan 2023