MAHSING is acquiring a land parcel measuring c.4.0 acres in Setapak, Kuala Lumpur for RM74.3m, earmarked for affordable high-rise residential development worth RM508m in GDV. We believe it is paying a fair price for the land with a highly soughtafter address in a mature area, allowing for quick monetisation. We maintain our forecasts, TP of RM1.00 and OUTPERFORM call.

The fifth land purchase in FY23. MAHSING is acquiring a land parcel measuring c.4.0 acres in Mukim Setapak, Kuala Lumpur for RM74.3m (or RM426/sq ft). This land is located near the proposed MRT3 Rejang station, LRT Sri Ramai and LRT Wangsa Maju. The group plans for a transit-oriented high-rise residential development known as M Azura with a total GDV of RM508m which comprises 2 blocks of serviced apartments with two-to-four-bedroom units with indicative built-ups from 700-1000 sq ft with an indicative starting price of RM397k. It intends to open registration of interest in 1QFY24, ahead of the estimated completion of the proposed acquisition in 2HFY24.

Reasonable land cost. We find the purchase price fair from: (i) price per square feet standpoint, and (ii) a land-to-GDV respective. Compared against the smaller land parcels of less than 1 acre currently at RM380-RM400/sq ft in the surrounding area, the attached premium to its RM426/sq ft price tag seems reasonable for its greater access to public transport infrastructures and major highways. Additionally, an implied land cost/GDV of 15% is reasonable, being within the industry’s average ratio of 10%-20%. As for its indicative starting price of RM397k, we find it affordably priced against asking prices of c.RM400kRM600k for sub-sale homes within the vicinity listed on property portals.

Overall, we are mildly positive as the intended development is affordably priced with a highly sought-after address in a mature area, allowing for quick monetisation. Based on our preliminary estimates, the project could potentially add 2.0 sen and 1.0 sen to our RNAV/share and TP for MAHSING, respectively.

Forecasts. Maintained.

Valuations. We keep our TP of RM1.00 based on an unchanged 50% discount to RNAV, which is below the industry’s average of 60%-65%. This is to reflect its significant exposure to high-rise residential and commercial segments which are highly sought after currently. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 5).

Investment case. We like MAHSING for: (i) its efforts to keep its net gearing ratio in check, with a 3QFY23 reading of 0.13x being the lowest, creeping up to 0.34x in 2QFY22, (ii) lifestyle-focused products to provide ease of entry for first-time home buyers, and (iii) sound land bank management turnaround which minimises carrying costs. That said, MAHSING is still relatively heavily exposed to high-rise residential properties which will continue to be in a state of overhang in certain regions. 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 - 11 Dec 2023