INVESTMENT HIGHLIGHTS

• Acquiring land in Old Klang Road

• Positive on the land acquisition

• Minimal impact on balance sheet

• Earnings forecasts maintained

• Upgrade to BUY with a revised TP of RM1.06

Acquiring land in Old Klang Road. Mah Sing Group Berhad (Mah Sing) announced that it has entered into a sale and purchase agreement with TC Goldyear Sdn Bhd for the proposed acquisition of 4.63 acres of land in Old Klang Road for a purchase consideration of RM90.3m. The development order of the land has been obtained. The land acquisition is expected to complete in 2H2019.

Positive on the land acquisition. We are positive on the land acquisition as this will strengthen Mah Sing’s presence in homes with affordable price points in the Klang Valley. Mah Sing plans to develop serviced apartments with pricing starting from RM428k per unit for size of 700sf. Total GDV of the project is estimated at RM500m which is expected to launch in 2H2019, in line with its quick turnaround strategy. Meanwhile, location of the land is strategic which is within 10km radius of KLCC and is located 800m to the upcoming Taman Naga Emas MRT station. Effective land cost to total GDV is estimated at 15.5% which we think is attractive.

Minimal impact on balance sheet. We see funding is not an issue to Mah Sing considering cash pile of RM1.2b as at end FY18. We estimate Mah Sing to remain in net cash position post-acquisition of the land. Meanwhile, we estimate earnings impact in FY19/20 to be minimal as the project will only be launched in 2HFY19. Hence, we maintain our earnings forecasts for FY19/20.

Upgrade to BUY with a revised TP of RM1.06. We revise our TP for Mah Sing to RM1.06 from RM1.05 after factoring in the RNAV contribution from the land acquisition. Our TP is based on unchanged 52% discount to RNAV. We upgrade Mah Sing to BUY from Neutral as we see valuation of Mah Sing turns attractive following the recent weakness in its share price. Mah Sing is trading at 35% discount to its NTA per share of RM1.43. Balance sheet of Mah Sing is sturdy at net cash position which will give its financial muscle for more landbanking exercise.

Source: MIDF Research - 29 Mar 2019