News  Proposed acquisition of 85.43 ac leasehold land, which forms part of the Sultan Salahuddin Abdul Aziz Shah Golf Course (SGC) from Great Doctrine (M) S/B for RM327.5m (RM88psf). The land is located in a sought after address in Shah Alam within a 9-hole section of the 27-hole course of SGC. It enjoys strong accessibility to the Guthrie Corridor, Federal Highway via Jln Subang-Batu Tiga exit, NKVE and ELITE Highway.

Comments  The payment terms are favourable as 90% is due 30 months after SPA or 6 months after CPs are met (whichever is later), meaning that the group has locked in the acquisition at today’s price with a later payment date. Hence, there will be no major impact to FY14-15E net gearing.

 Estimated GDV of RM2.5b, which will feature mainly mid to high end residentials where 70% will be landed (superlink, clusters, semi-detached, bungalows) and the remaining 30%, apartments. We also understand the project will be facing the remaining 18-hole golf course which is a major selling point. Expected launch is in 2016.

 Land pricing appears fair. We gather that the land still entails some conversion cost but will not be overly substantial at c.5% of land cost. Taking that into account, total land cost constitutes up to 14% of GDV (below the 20% threshold). Expected pre-tax margin is 23%.

Outlook  We view the acquisition as positive in the medium-term and it is also not overly surprising as MAHSING has always been on the hunt for landbanks. Since the project profile is for the mid to high-end segment, it is appropriate that launching does not take place within FY14-15 where affordable housing is still the theme; so there will be no immediate term contributions. Positively, the payment scheme is favourable as MAHSING will have significantly less repayment obligations by the time this payment becomes due late.

 Meanwhile, its FY14 launches mainly comprises of affordable housings which should be digestible by the market. The company is also expecting a conclusion of its Pasir Gudang land deal by Apr-14.

Forecast  No changes to estimates.

Rating Maintain OUTPERFORM

Valuation  The project from this new land increases our FD RNAV by 5% to RM3.43. However, we maintain our TP at RM2.56 which implies a wider RNAV discount of 25% from 21% as the project impact leans towards the medium-term. Also, on a separate matter, we like to be more conservative in our valuations pending the conclusion of the Pasir Gudang land deal issue. At last traded price, the stock is trading at trough valuations at 9.3x-8.1x FY14-15E PER with decent dividend yields of 4.3%-5.0%. We laud the company for its continuous landbanking activities amidst the current challenging environment and its ability to secure favourable payment terms.

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

Sector risks, including additional negative policies.

Source: Kenanga