MAHSING is acquiring 75.7 acres of land in Johor Bahru for RM76.1m cash, earmarked for affordable landed residential development worth RM480m in GDV. We believe it is paying a fair price for the land with a highly sought-after address in a mature area, allowing for quick monetisation. We maintain our forecasts, TP of RM0.70 and OUTPERFORM call.

Second land purchase in FY23. MAHSING is acquiring two plots of freehold land in Mukim Pulai, Johor Bahru measuring 75.7 acres for RM76.1m (or RM23 per square feet). These lands are located between established townships such as Mutiara Rini and Lima Kedai. The group has earmarked the lands for a landed residential development known as M Tiara with a total GDV of RM480m. M Tiara comprises double-storey terrace and cluster homes with indicativ built-up of 20’/22’x70’ and 32’x70’/75’ with an indicative starting price of RM624k. It intends to launch the first phase in 1HFY24 post completion of the deal.

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 ECOWLD’s purchase of Eco Botanic 2 land back in 2019 located c.10km south from M Tiara, M Tiara’s land/GDV ratio of 16% is comparable with Eco Botanic 2’s land/GDV ratio of c.18% (RM1.67b GDV over land price of RM305m). Meanwhile, M Tiara’s RM23 psf price tag is at a discount against Eco Botanic 2’s RM35 psf purchase price (for200 acres) given its less strategic location.

As for its indicative starting price of RM624k, we find it affordably priced against asking prices of c.RM600k-900k for sub-sale homes within the vicinity listed on property portals.

Overall, we are mildly positive as the intended development is affordably price with a highly sought-after address in a mature area, allowing for quick monetisation. Post-acquisition of these new lands, MAHSING’s net gearing remains healthy at 0.22x (from 0.20x).

Forecasts. Maintained.

Similarly, we keep our TP of RM0.70 based on an unchanged 65% discount to RNAV, which is at the upper-end of the sector’s average of 60%-65%. This is to reflect its high exposure to high-rises which are currently facing 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 0.20x as of 1QFY23, (ii) appealing lifestyle-focused products at affordable prices providing ease of entry for first-time home buyers, and (iii) quick turn-around strategy for its land banks which helps to minimise land carrying costs. Maintain OUTPERFORM.

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

Source: Kenanga Research - 14 Jun 2023