Kenanga Research & Investment

Mah Sing Group Berhad - Acquiring Land in Puchong for RM86m

Publish date: Thu, 19 Jan 2023, 10:07 AM

MAHSING is acquiring 8.2 acres of land in Puchong for RM85.9m cash, earmarked for affordable high-rise developments worth RM726m in GDV. The price tag of RM240 per sq ft (psf) is fair from a land-to-GDV perspective as well as compared against a recent transaction within the vicinity. We are mildly positive as the intended developments are affordably priced within a well sought after matured vicinity, allowing for quick turnaround. We maintain our forecasts, TP of RM0.60 and OUTPERFORM call.

First land purchase in FY23. MAHSING is acquiring 2 plots of leasehold land in Puchong Perdana measuring 8.2 acres for RM85.9m (or RM240 per square feet). The group has earmarked these lands for two affordably priced developments known as M Terra (phase 1) and M Hana (phase 2) with a total GDV of RM726m. M Terra comprises 2-to- 3-bedroom units with sizes from 552sf to 1005sf with indicative starting price of RM250k while M Hanna is planned for a mixed development. MAHSING intends to launch the first phase in 2HFY23.

Fair purchase price. We find the purchase price fair from: (i) a land-to GDV perspective, and (ii) price per square feet standpoint. Compared against typical land/GDV transactions of c.15%, these new lands implied land-to-GDV of 11.8% is at a slight bargain. Meanwhile, the RM240psf price tag is similar against Binastra Land’s RM242psf purchase price in 2019 for its 5.69 acres Puchong Utama land (currently under development i.e. Suria Garden) located c.2km away.

Overall, we are mildly positive as the intended developments are affordably priced within a well sought-after matured vicinity, allowing for quick turnaround. Post-acquisition of these new lands, MAHSING’s net gearing remains healthy at 0.3x (from 0.27x).

Forecasts. We maintain our earnings forecasts as launches from the land to be acquired will not contribute significantly during our forecast period. We maintain our annual sales target of RM2.2b in FY22 and FY23.

Maintain OUTPERFORM with an unchanged TP of RM0.60 based on a 65% discount to RNAV, at the upper-end of the sector’s average of 60-65% to reflect its on-going projects which are skewed towards high rise products faced with a national overhang issue. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 5).

We like MAHSING for: (i) its commendable cash management with net gearing reduced from a peak of 0.37x to 0.27x as of 3QFY22, (ii) appealing lifestyle-focused products at affordable prices providing low barrier of entry for first time home buyers, and (iii) quick turnaround strategy for its land banks which helps save on land carrying costs.

Risks to our call include: (i) persistent overhang in the high-rise segment, (ii) widening losses at its glove division due to oversupply, and (iii) sustained elevated inflation and rising interest rates, hurting affordability.

Source: Kenanga Research - 19 Jan 2023

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