Mahsing has acquired 6.9acres of freehold land at Tebrau Johor Bahru for RM39.3m earmarked for a RM469m GDV development called M Minori (4x plot ratio). M Minori will have c.1500 of serviced residences built over 3 blocks with sizes ranging from 550sf – 880sf. The starting prices of the units will be at RM260k (or RM472PSF). Registration of interest will commence in 4QFY22 with launches slated in FY23. With unchanged sales targets of RM1.7b for FY22 and FY23, we keep our earnings estimates. Maintain MP with unchanged TP of RM0.60 derived from 65% discount to RNAV (switched from 0.4x PBV).

First land purchase in FY22. This land purchase marks the company’s first land purchase of the year. Note, purchasing pocket of lands for a fast turnaround is part and parcel of Mahsing’s business model.

We are Neutral over the potential development of M Minori. We list the advantages and our concerns of the development below:

Advantages:

• Attractive land cost to GDV of 8.4% compared to three previous land deals in Klang Valley of 12-15%.
• M Minori has a low absolute entry price point of RM260k (for 550sf; or RM472PSF).
• The land is located within a matured neighbourhood with various amenities available.

Concerns:

• M Minori is a relatively dense development of c.1500 units. Developments completed within the vicinity over the past 10 years’ ranges from 260units to 1843units.
• There could be competition from sub sale high rises in the vicinity. There are 3 relatively new developments which are situated at Taman Mount Austin – the heart of commercial activities within the area. These 3 developments are Residenci ARC, Havona and Austin Regency – all completed in the year 2019 with similar development profile to M Minori i.e. small sized units with >1000 units for the development.

Maintain FY22/23E earnings estimates backed by unchanged sales target of RM1.7b for both FY22 and FY23.

Switch valuation methodology to 65% discount to RNAV (from 0.4x PBV) but make no changes to TP of RM0.60 and keep MARKET PERFORM. We find valuations fair as the implied PBV of 0.4x is lower than peers average of 0.45x given its development profile is skewed towards high rises which are weighed down by overhang concerns.

Risks includes: (i) Increasing supply overhang from high rises due to continued mismatch in supply and demand, (ii) widening losses at its glove division due to the glove oversupply situation post-pandemic, (iii) higher-than-expected inflation from subsidy removals which will erode buyer’s affordability.

Source: Kenanga Research - 29 Jun 2022