Mah Sing has terminated its proposed acquisition of the Seremban land. Maintain NEUTRAL, with a lower TP of MYR1.62 (10% upside), as we remove the incremental value of the land from our RNAV estimate. We also raise our discount to RNAV to 35% as the property market outlook is expected to be more challenging, given the latest macro headwinds and political risks. The company’s unused cash can now be preserved for better opportunities ahead.

Seremban land acquisition is off. Mah Sing announced that the sales and purchase agreement for the land acquisition is now void, due to misrepresentation and/or the breach of terms and conditions by the vendors, and/or events that are unlawful have occurred. Its 10% deposit of MYR35.96m will then be refunded. To recap, the company announced the proposed acquisition of 1,051 acres land in Seremban (Rantau) in August last year at a total consideration of MYR359.6m (or MYR8.60 psf). The land was planned for a township development worth MYR7.5bnin GDV.

Utilisation of proceeds from rights issue. Mah Sing had raised MYR629m via an equity call early this year, and MYR107m was earmarked for part payment of this acquisition. With the latest development, management plans to use the amount for other landbanking opportunities and/or accelerate some selected existing projects. An EGM will be convened on the variation of the utilisation of the proceeds.

Forecasts and risks. We cut our FY16-17 earnings forecasts by 3-5% as we remove the contribution from this Seremban development. Key risks to our forecasts include: i) political risks subsiding; and ii) sooner than-expected recovery in sentiment.

Maintain NEUTRAL. We remain NEUTRAL on the stock. Given thetermination of the land deal and worse-than-expected deteriorating market sentiment as a result of the recent volatility in the equity market, the depreciation of the ringgit and political instability, we lower our TP to MYR1.62 (from MYR2.08) based on a larger discount to RNAV of 35% (from 25%). The property sector is likely to take a longer period to recover.