Mah Sing Group - A New Project in Johor With RM469m GDV

Date: 
2022-06-30
Firm: 
HLG
Stock: 
Price Target: 
0.90
Price Call: 
BUY
Last Price: 
0.595
Upside/Downside: 
+0.305 (51.26%)

Mah Sing acquired a new plot of land in Tebrau, JB with the size of 6.9 acres at a cost of RM39.3m for a mixed development with estimated GDV of c.RM469m. We are positive on this development due to (i) the group managed to secure the land at a strategic location; (ii) the land cost per GDV is attractive; and (iii) the swift time to market of the project. Maintain BUY with an unchanged TP of RM0.90 based on SOP derived valuation. We continue to like Mah Sing for its asset-light and agile business model as well as its exposure in the affordable housing segment. The group also has a decent projected dividend yield of 4.9%.

NEWSBREAK

Mah Sing has acquired a new plot of land in the district of Tebrau, Johor Bahru with the size of 6.9 acres for a total cost of RM39.3m. The land purchase is for the development of a mixed project named “M Minori” with estimated GDV of c.RM469m. M Minori will comprise 3 blocks of serviced suites with c.1.5k units and some retail lots with plans to accommodate drive through F&B outlets. The indicative built-up area for the suites range from 550-880 sq ft with price starting from RM260k.

HLIB’S VIEW

We are positive on this development due to (i) the group managed to secure the land at a strategic location; (ii) the land cost per GDV is attractive; and (iii) the swift time to market of the project. We expect minimal impact to the group’s net gearing ratio as the group indicated that the purchase will be partially funded by the recent land sale of Permatang Tinggi which has sales proceeds of c.RM49m (more than sufficient to fund the land purchase).

Strategic location. The development is strategic as it is situated within the matured township of Mount Austin area and as such it has (i) well established and good access to amenities and road infrastructure; and (ii) lower overhang issue (compared to other areas in Johor). The affordable price range of the units (RM260-400+k) should also be supportive of the take-up rate of the development. As comparison, the group’s previous serviced suites development in 2017 – Meridin BayVue at Taman Sierra Perdana, Johor with c.1.2k units and price ranging from RM300-400k – was fully sold out. As such, we believe the current development at a comparable price range and a more strategic location should be able to achieve good take-up rate.

Attractive land acquisition price. The land cost per GDV for this development is at a bargain cost of only c.8.4%. For comparison, the 3 lands in Klang Valley acquired by the group in 2021 (M Senyum in Salak Tinggi, M Nova in Kepong and M Astra in Setapak) have a land cost per GDV in the range of 12-15%.

Swift time to market. Finally, the time to market for this project is also very fast as the group expects to launch the project either in 4Q22 or 1Q23. The land is already a commercial land for serviced suites (no need to convert the land) and as such, the expected approval time for the development will be faster. Maintain BUY with an unchanged TP of RM0.90 based on SOP valuation. We continue to like Mah Sing for its asset-light and agile business model which allows it to adapt and pivot its launching strategy in response to the changing sector dynamics. The group’s exposure in the affordable housing segment (c.60% priced at <RM500k) should continue to do well as home buyers are likely to opt for lower priced house due to the ending of HOC (no more stamp duty waiver for competing mid-range properties) and rising cost of living. The group remains committed to its 40% dividend payout policy, which gives a decent projected FY22 dividend yield of 4.9%.

 

Source: Hong Leong Investment Bank Research - 30 Jun 2022

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