News     Proposed acquisition of 6.6ac in D’sara Sentral for RM85m or RM298psf. It is located diagonally opposite the upcoming MRT station, which is the Rubber Research Institute (RRI) Malaysia’s land and is also near to its Star Avenue project in Sungai Buloh (6km away). It will also be able to tap on catchment from Sierramas, Valencia, Kepong, Selayang, TTDI, Kota Damansara and Bandar Utama.

Comments     We are neutral to positive on the acquisition. Positively, the payment is paid progressively in 3 tranches over 6 months vs. the typical 3 months from SPA while there is another 9 months extension, subject to the vendor obtaining approval for a plot ratio of not less than 1:4 (refer overleaf). The land is ready to be developed as we understand there is not much infrastructure work to be done except a bridge connection to the MRT. However, the new projects GDV of RM800m only increases MAHSING’s total GDV by 4% to RM19.7b. This announcement is largely within our expectation as landbanking should come after its recent cash-call exercise of RM0.4b.

Damansara Sentral’s GDV of RM800m includes the developments of SOVO, retail and service apartments. It will have a direct link to the MRT via a pedestrian bridge to tap on the 442k traffic daily. We believe the project’s ASP of RM650 (SOVO) and RM1000 (retail and service apartment) are decent as new launches with MRT connectivity in the area are also commanding those prices.

Land cost is considered fair, given that it only makes up 11% of GDV. The group should be able to reap 25% PBT margins. The impact on net gearing is minimal (maintained at 0.3x) due to the progressive payment structure.

Outlook      MAHSING’s FY13E sales target of RM3.0b will be mainly driven by Icon City @ PJ, Southville City, Clover @ Garden Residence, etc.

Forecast     Expect significant earnings contributions from FY15 onwards, assuming launch by early FY14E. As a result, there are no changes to our FY13-14E earnings.

Rating     Maintain MARKET PERFORM

Valuation      Maintain TP of RM2.40 based on 20% discount to the unchanged FD SoP RNAV of RM2.98 (refer overleaf).

Risks     Unable to meet sales targets or replenish landbank. Sector risks, including negative policies.

Source: Kenanga