Buys Land in Setapak

Mah Sing’s wholly-owned subsidiary, Jastamax Sdn Bhd, has signed a sale and purchase agreement to acquire a parcel of leasehold land measuring 4.036 acres in Mukim Setapak, KL from Tekun Juara Sdn Bhd for a purchase consideration of RM74.3mn.

A Matured Neigbourhood With Ready Amenities

The land is located within the vicinity of matured neighbourhood such as Wangsa Maju, Setapak Jaya, Setiawangsa, Danau Kota and Titiwangsa. Located just 5km away from KLCC, the land enjoys excellent connectivity via Jalan Genting Kelang, Middle Ring Road 2, Duke Expressway and Jalan Tun Razak. In terms of public transportation, the land is only 3.9km away from Sri Rampai LRT Station and 4.0km away from Wangsa Maju LRT Station. Besides, the land is just 250m away from the proposed MRT 3 Rejang Station.

Within 5km of the land, there are ready retail amenities like NSK Wangsa Maju, Giant Hypermarket Setapak, Setapak Central Mall, Star Parc Point Commercial Center, Alpha Angle Shopping Centre and Wangsa Walk Mall, as well as healthcare institutions namely Rampai Puteri Medical Centre and Columbia Asia Hospital. Meanwhile, the land is also surrounded by 6 public schools and 3 higher learning institutions.

See Appendix 1 for the location of the land.

Mixed Development With a Potential GDV of RM508mn

According to the preliminary plan, the total GDV of the new development to be named M Azura is approximately RM508mn. It will consist of two blocks of service apartments, featuring residences in different layouts such as 2- bedroom, 3-bedroom, and 4-bedroom options. The indicative sizes will range from 700 sq. ft. to 1,000 sq. ft., with the most affordable units starting at an estimated RM396,800.

Aligned with the group's quick turnaround strategy, the management intends to launch an awareness programme and registration of interest for the development in the first quarter of 2024, subject to the relevant authorities' approval. Targeted primarily at the mass market segment, the M Azura aims to attract first-time homebuyers and residents from neighbouring matured areas seeking an upgrade.

Positive on the Deal

The land cost of RM74.3mn represents 14.6% of the total GDV, which falls below the general rule of thumb of 20%. This indicates a favourable land cost to GDV ratio. Additionally, the land comes with a converted land title under the "Bangunan" category, which will expedite the development process.

Besides, the purchase price (RM423psf) is comparable to Mah Sing's previous acquisition of 5.0-acre land in the same vicinity for the development of M Astra, announced in May 2021, at an acquisition price of RM409psf. Considering these factors, the acquisition price is considered reasonable.

Overall, this land deal aligns with the group’s strategy of acquiring prime land in strategic locations within Greater Kuala Lumpur, Penang, and Johor to expand its M-Series projects. The sustained robust demand for affordable urban housing is evident in the impressive take-up rate, exceeding 90%, observed across Mah Sing's new launches in the first nine months of 2023. Notably, M Astra was fully sold within a year from its launch. Given the shared attributes, including strategic locations with accessible amenities and infrastructure, we anticipate M Azura to emulate the success achieved by M Astra.

To date, Mah Sing has acquired 593 acres of land with a potential GDV of RM5.5bn – see Figure 1. Following this acquisition, the company's landbank will increase to 2,286 acres, with a remaining GDV of RM24.4bn.

Impact

No change to our FY23-25 earnings forecasts for now, pending the launch of the project. Despite Mah Sing's acquisition spree totaling RM713.6mn thus far, we believe the company will not need to raise fresh equity for landbanking. This is due to its robust balance sheet, with a net gearing ratio of 0.13x and a cash balance of RM865mn as of end Sep-23. More importantly, Mah Sing is expected to maintain strong future cash flows, supported by substantial final billings of RM440mn upon vacant possession in 2024.

Valuation

We maintain our Buy recommendation with an unchanged TP of RM0.95/share, based on a CY24 P/Bk multiple of 0.6x.

Source: TA Research - 11 Dec 2023