We recently paid a visit to two flagship projects in Bangi a.k.a KL South, namely, Mah Sing’s Southville City and IOIPG’s Bandar Puteri Bangi. Key takeaways are:

Made significant progress since official launch

Southville City is the key contributor to sales for Mah Sing and it has chalked up RM1.7bn in sales to date since the official launch in Mar-2014. Southville City’s GDV makes up 35% of the group’s total remaining GDV of RM26.9bn. On the other hand, Bandar Puteri Bangi’s GDV makes up 5% of IOIPG’s total on-going GDV of RM60bn. About RM1bn worth of properties have been launched in Bandar Puteri Bangi since Jan-15. Both Southville City and Bandar Puteri Bangi have made significant progress in just 2- 3 years after their maiden launch in 2014 and 2015 respectively. The construction of the Southville City direct interchange to the KL-Seremban Highway, which is scheduled for completion by end of 2017, is under rapid construction progress. On the other hand, the vibrancy of Bandar Puteri Bangi has seen significant enhancement after the opening of Tesco in August 2016.

First handover in 2017

2017 will see Mah Sing and IOIPG delivering their first phase of Southville City and Bandar Puteri Bangi. Mah Sing’s Avens Residence (GDV: RM172mn, 99% sold) which comprises 2½ storey (RM900k/unit onwards) and 3 storey link homes (RM1mn/unit onwards) is targeted for vacant possession in mid-2017. Meanwhile, IOIPG is expected to handover Kubica Square (3 & 4 storey shop office), The Terresse 1 and 2 (2-storey link house) to property buyers in 1Q2017. Besides, Almyra Residence, the first high-rise strata residential property in Bandar Puteri Bangi (GDV: RM250mn, 669 units serviced apartments) is scheduled for completion in Nov-17.

Slower sales momentum and price appreciation for recent launches

The sales performance of the maiden launch of Southville City, i.e. Savanna Executive Suites (total GDV: RM1.5bn) was overwhelming as the 8 blocks of Savanna Executive Suites comprising 3,192 units are 95% sold to date. The project was officially launched in Mar-14. We understand that the selling price has appreciated from the initial RM320psf to RM500psf for the final tower. Following the success of Savanna Executive Suites, the group has unveiled Cerrado Residential Suites, which comprised of two phases with 1,616 units offering two types of layouts namely 2 and 3 bedrooms with built-ups from 656 sq ft – 825 sq ft. The group has launched the Tower A and Tower B of Cerrado Residential Suites in 3Q16. With an estimated selling price of RM550psf, the units in Tower A and B are 80% and 70% booked respectively. Moving on to Bandar Puteri Bangi, sales momentum is also slowing with Phase 1 of The Terresse launched in Jan-15 is fully sold, while Phase 2 which was launched in Oct-15 is only 70% taken up. Meanwhile, the four blocks of serviced apartments within Almyra Residence have achieved a combined 80% take up rate since the official launch in Jan-15. The group recently soft-launched the second high-rise project in Bandar Puteri Bangi. Dubbed Palmyra Residence, this project will feature 2 blocks of serviced apartments (588units) with an indicative selling price from RM357k/unit. We were told that Tower A is 30% taken up. In terms of price per

square foot, we understand that Palmyra Residence is expected to cost RM10 - 20 more expensive than the Alymra Residence.

Rolling out more affordable landed and high-rise properties in 2017

Catering to the demand of the young working adults and first time home buyers, Mah Sing and IOIPG are looking to roll out more affordable properties in 2017. Mah Sing is expected to launch the remaining two towers of Cerrado Residential Suites (Tower C & D) @ Southville City (GDV: RM400mn) in 2017. IOIPG is slated to launch The Strata Townhouse – 1.5-storey superlink townhouse (from RM530k/unit) at Bandar Puteri Bangi, in early 2017 with total GDV of about RM300mn. Given the attractive pricing of RM320psf, we believe the Strata will be well-received.

Recommendation

The site visit to Mah Sing’s and IOIPG’s townships in the Bangi reinforces our view that demand for affordably priced properties are still relatively healthy. However, the slower sales momentum and price appreciation for the recent launches are largely within expectations amid weak market sentiments and the tight lending environment. No change to our earnings forecasts, target prices and recommendations for Mah Sing (Hold, TP: RM 1.60) and IOIPG (Sell, TP: RM2.16). We maintain our Underweight stance on the property sector as we believe market headwinds such as: 1) weak market sentiment; 2) increasing supply, and 3) the tight lending environment, are expected to weigh on property sales. Meanwhile, declining property sales over the past years and narrowing margins due to heavy marketing and promotional campaigns could pose further downside risk to earnings.

Source: TA Research - 14 Dec 2016