MAHSING announced the acquisition of a piece of land measuring 4.52 acres in Wangsa Melawati costing RM62.0m. This marks its third land acquisition this year. With GDV of RM378.0m, this project targets the affordable housing segment, which has seen encouraging momentum of late. BUY with a of RM1.05.

A SPA was entered into with KLFA Properties S/B to acquire 4.52 acres of leasehold land with approved DO in Wangsa Melawati for RM13.7m per acre or just under RM315psf. The land is nestled within a matured area surrounded by 8 public schools, and 6 malls in Setapak. The acquisition cost works out with a land cost to GDV ratio of c.16%, which we deem is fair considering that the land has approved development order.

We gather that the land already has its development order (DO) in place for two blocks of service-apartments. Named M Adora, it will be positioned similarly to Mah Sing’s previous successful launches namely M Luna, M Vertica and M Centura. At a land cost-to-GDV ratio of c.16%, it should yield mid-to-high teens pre-tax margins by our estimates, in-line with the group’s average pre-tax margins. Post-acquisition, we expect FY19 net cash position to narrow down to 0.09x (from 0.10x).

Focusing on affordability is key to this project’s success as the right pricing strategy for the affordable mid-market segment. At the expected average selling price of c.RM550.0psf, the smallest unit (at ~850sf) at M Adora would sell from RM468.0k onwards – a figure well within the acceptable range of Klang Valley’s affordable mid-market home seeker.

We anticipate the official launch to take place in 2020 and it has been factored into our FY20 sales estimates of RM1.5b.

Source: Rakuten Research - 7 Aug 2019