News    MAHSING’s 51% owned subsidiary Convention City Development (“KKCC”) signed a development agreement with Yayasan Sabah to develop 8.33 acres of prime commercial land in Kota Kinabalu for an entitlement of RM163m. Followed by the agreement, KKCC was also acquired a 1-acre land together with a building for RM21.9m from Sasinma. The total land cost of RM184.9m will be paid in 4 tranches over a minimum period of 42 months, subject to fulfillment of landowners’ obligations, which includes settling the land conversion premiums for commercial titles. 

KKCC is also entitled to exercise an option for 5.95 acres of adjacent land for RM117m within 2 years. This will add another RM600m new GDV, implying a total project GDV of RM2b.  

Comments    The project is positioned to be the “KKCC of Sabah” with a GDV of RM1.4b for the 9.33ac site. This will be developed into a world-class waterfront integrated development. This assumes a price range of RM800psfRM1500psf for a range of service apartments to retail lots; in fact, the group’s recent launch of Sutera Avenue, KK (3.5km away from the project site) has garnered strong responses at similar pricing levels. 

We are pleasantly surprised to see another landbanking announcement, following their acquisition of Meridin@Senibong of Johor and Tmn Wahyu Lakeville Residence. The group has also exceeded its FY13 GDV replenishment target of RM5.5b with its land deals over the last 2 days amounting to RM7b.

Positively, the land payment is progressive over a  42-month period vs. the 9.33ac site development period of 4-5 years. Furthermore, land cost appears to be fair, being 13% of the project’s GDV. However, impact is not overly significant as the project only increases the group’s total GDV (incl. unbilled sales) by 5% to RM27.8b. 

Outlook   MAHSING’s FY13E sales target of RM3.0b will be mainly driven by Icon City @ PJ, Southville City, Clover @ Garden Residence, etc. D’sara Sentral’s sales will only be felt in FY14E.

Forecast   No changes to FY13-14E earnings as the project will only contribute meaningfully from FY15 onwards. 

Rating   Maintain OUTPERFORM

MAHSING has now increased their Johor exposure by 196% to RM6.6b via the said land acquisition relative to their FY13E sales target of RM3.0b. We view Johor as strong demand drivers which will help the group secure, if not, exceed sales targets.

Valuation    Higher TP of RM3.65 (RM3.17 ex bonus). Our TP is based on parity with their FD RNAV and the new project has increased it by 1% from RM3.60 (RM3.13 ex bonus).

Risks   Unable to meet sales targets or replenish landbank.

Sector risks, including negative policies.

Source: Kenanga