News  MAHSING proposed to acquire 76.4ac, comprising of 20 pieces of prime freehold contiguous land in Jawi, Penang, for total consideration of RM42.6m, which will be paid over a period of 18 months. The project has a potential GDV of c. RM400m. Jawi is located on the mainland of Penang.

Comments  Land cost is fair at RM42.6m or RM12.8psf, which is much lower than the current asking price of about RM18-25psf in the area. Meanwhile, the cost only makes up 11% of the GDV, which is lower than the industry average of 15%-20%. Given the staggered payment terms, we believe the land will be financed by internally generated funds and should not have any major impact to its net gearing.

 The project, a.k.a Southbay East, will be a mass housing township which features mainly landed residential of RM400k-RM500k/unit onwards, meaning it will target the affordable or upgraders market. It is strategically located 15.6km away from the second bridge while being surrounded by matured neighbourhoods and industrial parks. We are current assuming a conservative PBT margin of 20%. (More details overleaf).

 The acquisition will likely be completed and commenced by 1H15.

 While it is positive that the acquisition price and payment terms are favourable, earnings accretion will likely take place from FY16 onwards. Furthermore, the acquisition only results in a 3sen increase in our FD RNAV to RM3.23.

Outlook  Meanwhile, we are looking forward to more new launches of on-going projects, including M Residence 1&2 @Rawang, Southville City, D’sara Sentral, Meridin@Medini and new projects that include Lakeville Residence and Bandar Meridin East (known as Bandar Bestari Perdana previously). These are largely affordable and mid-high (priced below RM1m/unit) residential projects.

Forecast  No changes to FY13-14E earnings as the project will only contribute meaningfully from FY16 onwards.

Rating Maintain OUTPERFORM

Valuation  TP of RM2.56, which is based on a slightly widen 21% discount to their FD RNAV of RM3.23, remains

unchanged as the acquisition does not make a significant impact to our FD RNAV. As a result, discount rate to RNAV has widened to 21% from 20% previously.

 We continue to maintain OUTPERFORM on MAHSING due to its increased affordable housing offerings while valuations are trading at trough with its FY13-14E PER of 9.0x-7.4x and Fwd PBV of 1.6x-1.4x.

Risks to Our Call Unable to meet sales targets or replenish landbank.

Sector risks, including negative policies.

Source: Kenanga