MAHSING announced its first landbanking deal for the year with a 4.63 ac land in Mukim Petaling, KL for RM90.3m. The project (with GDV of RM500m) will have similar positioning as M Vertica and M Centura namely affordable housing in KL, which have seen promising momentum. Overall, we are positive on the project. No changes to earnings. Upgrade to OUTPERFORM with an unchanged TP of RM1.050.

First landbanking activity for the year. MAHSING has entered into a SPA with TC Goldyear S/B for the proposed acquisition of 4.63 ac freehold land in Mukim Petaling, KL for RM90.3m. The land in a matured area with established neighborhoods of Old Klang Road, Sri Petaling, Bukit Jalil and Salak South, is just 800m to the Taman Naga Emas MRT station and 1.1km from SILK and NPE highlight (refer overleaf for location map). The news does not come as a surprise to us as we had anticipated landbanking activities (note that our SoP includes RM2.2b GDV replenishment).

Affordable housing with GDV of RM500m. We gather that the land already has its development order (DO) in place with a 5.0x plot ratio for a service apartment and that the land cost is inclusive of development charges and improvement service fund. Thus, the land cost to GDV ratio of 18% is reasonable and should yield mid-to-high teens pre-tax margins, in-line with the group’s average pre-tax margins. The land cost will be internally funded, resulting in FY19E net cash position narrowing to 0.13x (from 0.16x).

Easily saleable project. Overall, we are positive on the project as it will be positioned as an affordable housing project in matured areas of KL, similar to M Centura and M Vertica, which have seen promising take-up rates. This will increase the odds of meeting, or even better, of exceeding sales targets. We gather that sizes of the unit will start from 700sf for 2 bedrooms with a starter price of RM428k/unit and there will also be 3-4 bedrooms units as well. ASP is expected to range between RM600-650psf. Previews will likely start in 2H19. Development period is over 4-5 years.

FY19E sales target to be at least RM1.50b, according to management. This will be driven by RM2.2b worth of launches from its on-going projects and is largely driven by more urban affordable units to residential upgrades of which 81% are priced below RM700,000. With its light balance sheet, we note that MAHSING is still on the lookout for affordable housing landbanks in Klang Valley, likely quick turnaround landbanks in more established areas.

No changes to earnings. We prefer to maintain our FY19E sales target at RM1.52b for now pending timing of the project’s launch and status of its inventory clearing process.

Upgrade to OUTPERFORM (from MP) with an unchanged TP of RM1.05 based on a SoP discount of 63% (-1.25SD) on its FD SoP of RM2.84. There are no changes to our RNAV as the said project is part of our RM2.2b GDV replenishment assumption. Post this acquisition, our GDV replenishment assumption is now RM1.7b. The implied SoP discount is in-line with our universe’s valuation range (-1.0SD to historical trough levels) while MAHSING’s positioning as an affordable housing player warrants the better-end of our applied discount spectrum. Fwd. PBV of 0.6x is at historical trough levels whilst its above peers’ average dividend yields of 4.3% provide some downside support. Given the recent share price weakness, this may be good entry point as the stock is one of the YTD laggards for the year.

Source: Kenanga Research - 29 Mar 2019