Mah Sing has acquired 59.12 acres of freehold land in Pulai, Johor Bahru for RM63.0mn, marking its fifth land acquisition in 2024. This newly acquired land is planned for a township development with an estimated GDV of RM463mn. Overall, we are positive on this acquisition, given its strategic location and reasonable acquisition price (land cost to GDV ratio of 14%). Maintain Buy with an unchanged TP of RM2.41/share, based on SOP valuation.

Buying 59.12 Acres of Freehold Land in Johor for RM63.0mn

Mah Sing has announced its fifth land acquisition for the year with plans to acquire 59.12 acres of freehold land in Mukim Pulai, Johor Bahru, for RM63.0mn (or RM24.50psf). This marks the group’s third land acquisition in Pulai, following the purchase of 100.4 acres in April 2024 (M Tiara 2) and 75.7 acres in June 2023 (M Tiara) - see Appendix 1

Prime Freehold Land With Excellent Accessibility

The 59.12-acre freehold lands, located at Tempat Batu 18, Jalan Pontian, Mukim Pulai, Johor Bahru, Johor, are contiguous and currently covered primarily with old oil palm trees. Strategically located, the site enjoys excellent connectivity, being just 2.7 km from the Skudai-Pontian Highway, 8.8 km from Pontian Highway, 12.6 km from Skudai Highway, and 38 km from both the SingaporeMalaysia Second Link Expressway and the North-South Expressway. Additionally, the land benefits from proximity to educational institutions, shopping malls, and recreational facilities, enhancing its appeal for future development.

See Appendix 2 for the location of the land.

Township Development With a Potential GDV of RM463mn

The preliminary plan outlines that M Tiara 3 has a potential GDV of around RM463mn. Positioned as an upgraded version of the M Series developments, M Tiara 3 is envisioned as a premium township featuring modern, spacious superlinked homes designed to appeal to a wider range of buyers. Indicative built-up sizes are 22’x70’, 24’x70’, and 28’x60’, with starting prices from RM780,000. The development is expected to attract Singaporean homebuyers, professionals commuting to Singapore, and upgraders from nearby townships.

Planned as a continuation of M Tiara 2, the project is slated for completion over a span of three to four years, further solidifying its appeal as a prime residential offering.

Positive on the Deal

The land cost of RM63.0mn represents 14% of the total GDV, which falls below the general rule of thumb of 20%. This indicates a favourable land costto-GDV ratio. Besides, the purchase price (RM24.50psf) is comparable to Mah Sing's previous two acquisitions in Mukim Pulai, which ranged from RM23.10psf to RM23.70psf. Considering these factors, the acquisition price is considered reasonable.

This acquisition aligns with Mah Sing’s strategy of acquiring prime locations in Greater Kuala Lumpur and Johor to expand its M-Series projects. Additionally, the swift decision to acquire a second plot in Pulai within a year underscores the group's strategic agility in anticipating Johor’s property market growth. Key drivers include major upcoming infrastructure projects like the Johor BahruSingapore Rapid Transit System (RTS) and the potential revival of the KLSingapore high-speed rail. Additionally, plans for the Johor-Singapore Special Economic Zone (JS-SEZ) are expected to spur economic activity and draw more residents to Johor.

Adding to the favourable outlook is the strong Singapore dollar, which creates an opportune market environment for M Tiara 3. Demand indicators are promising, as evidenced by the remarkable response to M Tiara, which attracted over 14,000 registrants and achieved a 100% take-up rate for international lots in its first two phases. These factors position M Tiara 3 to effectively capture spillover demand from M Tiara, reinforcing its growth potential in Johor’s evolving market.

Following this acquisition, Mah Sing’s landbank will increase to 2,406 acres, with a remaining GDV of RM29.8bn. In terms of funding, Mah Sing's robust balance sheet with a net gearing of 0.2x and a cash balance of RM747mn as of Sep 2024, positions the company well for more land acquisitions in the future. According to the announcement, the acquisition is expected to be completed in the first half of 2025.

Impact

No change to our FY24-26 earnings forecasts for now, pending the completion of the acquisition.

Valuation

We maintain our Buy recommendation with an unchanged TP of RM2.41/share, based on SOP valuation.

Source: TA Research - 4 Dec 2024