• Maintain BUY, with new MYR2.26 TP from MYR2.00, 35% upside and c.3% yield. With Mah Sing successfully securing its 500MW power allocation last week, we believe the supply certainty will significantly enhance the value of its 150-acre land, earmarked for Mah Sing Data Centre (DC) Hub @ Southville City. This should also attract other DC players. We raise our TP, imputing a higher value for the DC Hub land and narrowing our discount to RNAV to 30% (from 35%) from better demand prospects, particularly for its industrial land.

• 500MW power allocation secured. From our recent meeting with management, we understand that Mah Sing has officially received the approval from Tenaga Nasional (TNB MK, BUY, TP: MYR16.10) for the allocation of 500MW power supply to the 150-acre DC Hub. As power supply is now deemed to be a “scarce” resource due to the influx of DC investments from global technology players, the 150-acre land for DC Hub in Southville City should receive a greater premium as it well suits DC players looking for a near-term commencement of operations (as the application for power supply and construction of the primary metering unit usually take time). In addition, the infrastructure and road access are ready at the site. More importantly, Mah Sing also has the balance sheet to invest further in the DC segment (currently at 0.06x net gearing).

• Revaluing the remaining land for DC Hub. With greater visibility on the DC Hub development, we now re-value Mah Sing’s c.132 acres of remaining land in Southville DC Hub (150-17.55 acres for Bridge DC Malaysia V). Recall, the 17.55 acres of commercial land earmarked for Bridge DC was transacted at MYR160 psf, while the commercial land at the surrounding area is valued at MYR200 psf. Assuming a gross margin of 50% (for the balance 132-acre DC Hub land), the net surplus from our revaluation for the entire Southville will be boosted by 63%.

• Potential site at Bandar Meridin East. Meanwhile, about 70-80 acres of land at Mah Sing’s Bandar Meridin East in Pasir Gudang is zoned for commercial and industrial development. In our view, as most of the DC investments have been concentrated at Nusajaya (western side of Iskandar Malaysia), we think some DC players may start to explore areas on the eastern side of Iskandar Malaysia as the availability of resources may possibly be better.

• Landbank replenishment effort continues. While DC is now a new growth engine, management continues to stay focused on growing its property development business. Mah Sing is likely to acquire more sites that are suitable for its M-series projects as well as industrial development. This should provide further upside to our RNAV estimate.

Source: RHB Research - 25 Jun 2024