We raise our fair value to RM2.18. Mah Sing’s purchase consideration of RM85m (or RM298 psf) for its new 6.55 acres leasehold land at Sungai Buloh appears more reasonable after taking into account the 4x plot ratio (pending approval) and more strategic location along Jalan Sg Buloh–Shah Alam. The land is targeted for a RM800m mixed development project named D’sara Sentral. Given that Star Avenue was fully sold, we think the demand for D’sara Sentral, will be similarly strong.

New landbank at Sg Buloh. On surface, compared to RM85 psf land cost for the low-rise project Star Avenue that was acquired two years ago, the price for D’sara Sentral land appears slightly expensive. However, the more strategic location and higher plot ratio should be taken into consideration. The additional cost of up to RM10m, covering the conversion premium (to commercial status), extension of lease to 99 years (from 66 years) and obtaining 4x plot ratio (from 3x), will have to be paid by Mah Sing. The company’s recently completed rights issue will be able to support the funding of the acquisition.

RM800m D’sara Sentral. D’sara Sentral comprises SOVO, retail space and serviced residences. We have no concern on demand. The land is strategically located opposite Kwasa Damansara (RRI) land, at the junction of Jalan Welfare and along Jalan Sungai Buloh-Shah Alam. It is also along the MRT Line 1 track and a linked pedestrian bridge will be built to connect D’sara Sentral to the MRT station 2 diagonally opposite. Mah Sing plans to launch the project in 1H2014, and the SOVO will be priced from RM650 psf with unit size from 750 sqf. We expect demand to be strong, as Star Avenue (shop offices and retail lots), which is located near MRT station 3, was successfully sold after the launch in 2011.

Forecasts. We raise FY14 earnings forecasts slightly by 2%. Earnings contribution from D’sara Sentral is expected to be more material from FY15 onwards.

Maintain Neutral. As a result of positive RNAV contribution, we raise our fair value to RM2.18, based on 20% discount to RNAV.

Source: RHB