Mah Sing announced  yesterday  that it was acquiring 1,352 acres of land in  Pasir Gudang, which will  yield a GDV of MYR5bn. Meanwhile, it has also  terminated  the  proposed  acquisition  of  a  35-acre  parcel  in Senibong,  as  it  was  unable  to  obtain  consent  for  access  to  the  site within  a  specific  timeframe.  Net  impact  to  our  RNAV  is  neutral.  We maintain our NEUTRAL call on the stock, with its FV kept at MYR2.42. 

- New sizeable land in Pasir Gudang. Mah Sing is acquiring 1,352 acres of freehold land (current status: agricultural) in Pasir Gudang, Johor, from LP World SB, which was the developer for  the  Bandar Bistari Perdana. Mah Sing will continue with the township development. 

- A  long-term  project.  Given  the  MYR429.87m  purchase  consideration, we think the  MYR7.30 psf  land cost  is reasonable.  Payment terms look favourable,  as 70% of the consideration (MYR301m)  will only  be paid  in four years’ time. While the location seems slightly far from key landmarks (28km from the Customs, Immigration & Quarantine Complex; 40km from Johor Bahru city centre; and 50km from the Senai International Airport), it targets  to capture  demand from Johor’s  two  largest industrial hubs  (Pasir Gudang  and  Tanjung  Langsat)  and  the  future  oil  &  gas  hub  in Pengerang.  The land is adjacent  Focal Aims’ (FAH MK, NR)  Kota Masai project.  EcoWorld has a 65% stake in  FAH.  Although management has projected  a  7-year development period, we think it could take up to  9-10 years given the large land size.

- Senibong land deal  terminated.  Two days ago, Mah Sing called off the acquisition of 35.26 acres of freehold land from Kim San Investments  SB, as  it  was not able to obtain the consent for access to the site from the neighbouring land owner. Hence, the proposed development is no longer viable.  It  announced  the  land  acquisition,  at  a  consideration  of MYR365.55m (or MYR238 psf),  back in May.  The land was  supposed to deliver MYR4.35bn GDV. Its deposit will be fully refunded.

- FV  kept  at  MYR2.42.  The  net  impact  is  neutral.  We  maintain  our NEUTRAL  rating on the stock.  Our FV  is  unchanged at  MYR2.42,  based on a 15% discount to RNAV. We believe concerns on potential regulatory tightening will overshadow the  property sector in the  weeks ahead of the Budget  2014  announcement.  Nevertheless,  we  encourage  investors  to take positions in the sector when valuations are depressed.

Source: RHB