Mahsing has acquired a 5-acre leasehold land in Setapak, Kuala Lumpur for RM89m, earmarked for a RM618m mixed development spread over four years. Positive on the land deal given the attractive land/GDV ratio of 14% coupled with the matured location with three road frontages. Keep earnings unchanged on FY21-22E sales assumption of RM1.7b/annum. Given the recent run-up in share price, we downgrade our call to MP (from OP) with unchanged SoP derived TP of RM1.05.

Acquired land in Setapak for RM89m. Mahsing has acquired a 5-acre leasehold land in Setapak for RM89m (or RM408 psf) which is earmarked for a RM618m GDV mixed development to be known as M Astra which comprise 2 blocks of affordable residential suites (1,400+ units) and some retail lots to be developed over four years.

Registration of interest for M Astra will commence in 3QCY21 and how quickly the launch can materialize will hinge upon Mahsing’s ability to obtain the necessary authority’s approval. Note that the land is currently housing the Sri Utama International and National School (KL Campus).

Attractive land deal. We find the acquisition’s land/GDV ratio of 14% appealing given the matured status of the land which is surrounded by various amenities. Despite M Astra’s tentative PSF pricing of RM469 psf being on the higher-end against surrounding developments’ pricing of RM340 – RM481psf (refer table overleaf), we find it fair given that its location has the best frontage (i.e. three road frontages vs. surrounding developments of 1-2 road frontages – allowing for greater accessibility to the project). Overall, we are positive on the deal.

Post deal, net gearing to increase to 0.27x (from 0.25x as of 4QFY20) while the group’s total remaining GDV will increase to RM25.3b (+2.5%; includes unbilled sales is RM1.6b). Keep FY21-22E earnings estimates unchanged based on sales assumption of RM1.7b/annum.

Downgrade to Market Perform (from OP) with unchanged SoP derived TP of RM1.05 given the recent run up in share price. Besides earnings surprises, we do not envision any immediate catalysts specific to the group which would trigger us to increase our target price for now.

Source: Kenanga Research - 5 May 2021