INVESTMENT HIGHLIGHTS

• Acquiring land in Kepong

• Positive on the land acquisition

• Minimal impact on balance sheet

• Earnings estimates maintained

• Maintain BUY with a revised TP of RM1.04

Acquiring land in Kepong. Mah Sing Group Berhad (Mah Sing) announced that it has entered into a sale and purchase agreement with JL99 Holdings Sdn Bhd for the proposed acquisition of 5.47 acres of leasehold land in Mukim Batu, Tempat Taman Metropolitan, Kepong, for a purchase consideration of RM94.76m. The land acquisition is expected to complete in 4Q2019.

Positive on the land acquisition. We are positive on the land acquisition as it fits with Mah Sing’s strategy of building strong presence in affordable homes market within Klang Valley. Mah Sing plans to develop 2 blocks of serviced apartments (M Luna) with total GDV of RM705m. Pricing is expected to start from RM385k per unit for size of 700sf. Meanwhile, the acquisition is also in line with Mah Sing’s quick turnaround strategy as the development order of the land has been obtained while commencement of registration of interest is expected take place as soon as 4Q2019. Location of the land is strategic with a direct access from Middle Road Ring 2 (MRR2). Effective land cost to total GDV is attractive, estimated at 8.7% after including charges pursuant to the Development Order and land premium paid by the vendor.

Minimal impact on balance sheet. Mah Sing intends to fund the land acquisition through a combination of internally generated funds and bank borrowings. We estimate Mah Sing to remain in net cash position post the land acquisition as Mah Sing is sitting on a cash pile of RM1.3b as of 1QFY19. Meanwhile, we estimate earnings impact in FY19/20 to be minimal as the project will only be launched in 4QFY19 with development period of 4 years. Hence, we maintain our earnings forecasts for FY19/20.

Maintain BUY with a revised TP of RM1.04. We revise our TP for Mah Sing to RM1.04 from RM1.03 after factoring in the RNAV contribution from the land acquisition. Our TP is based on unchanged 53% discount to RNAV. We maintain BUY on Mah Sing due to its attractive valuation. Mah Sing is trading at 38% discount to its NTA per share of RM1.45. Balance sheet of Mah Sing is sturdy with net cash position.

Source: MIDF Research - 24 Jul 2019