INVESTMENT HIGHLIGHTS

• Acquiring Sentul land

• Valuation is fair in our view

• Positive on the news

• Earnings estimate maintained

• Maintain NEUTRAL with higher TP of RM1.62

Acquiring Sentul land. Mah Sing Group Berhad (MAHSING) has entered into agreement to acquire 78% of the equity interest in Cosmowealth Housing Development Sdn Bhd (CHDSB) for RM54.96m (to be paid on deferred payment over 72 months). CHDSB has entered into an agreement to acquire 8.5 acres of freehold land in Sentul, KL for RM95.07m. We gather that MAHSING plans to develop service apartments with indicative built ups of 650 sq ft, 850 sq ft and 1000 sq ft. The price will be from RM326,000 and total GDV of the project is estimated to be RM1.3b. Expected launch is in the second half of 2017.

Fair valuation. Valuation works out to be RM349 per sq ft while the land cost to GDV is 9.9%. We view the acquisition price as fair as it is close to the land price in the surrounding area at above RM300 per sq ft. The land is located 8.3km away from Kuala Lumpur City Centre and situated at the centre of matured townships such as Kepong, Taman Seri Gombak, Setapak, Segambut and Batu Caves.

Positive on the news. We are positive on the news as we believe that the good location of the landbank with price at an affordable price (from RM326,000 onwards) should translate into good take up rate. The land purchase is estimated to be RNAV accretive and hence should result in enhancement of shareholder value.

Earnings estimate maintained. We maintain our earnings forecast for FY17 and FY18 pending the completion of the land deal and the official launch of the project.

Maintain NEUTRAL with higher TP of RM1.62: Our Target Price has been increased to RM1.59 (from RM1.57) after including Sentul land into our RNAV. Valuation method is unchanged based on 25% discount to RNAV.

Source: MIDF Research - 29 May 2017