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Mah Sing Group
Buying land along Jln Ampang
Acquiring 1.44ac prime freehold commercial land next to Great Eastern Mall, Jln Ampang from Fraser & Neave Holdings Bhd (F&N) for RM53.8m. It is Mah Sing Group (MSGB) third land acquisition in FY10. Site location is strategic with main road frontage of Jln Ampang, near the Embassy Row, international schools, hospitals and 5-10mins driving distance from KLCC (map below). Although debt-equity funding mix has not been disclosed, we believe MSGB can fund it entirely using internal funds given its net cash position and
RM397m cash pile.
Cost of RM857psf is fair for “ready-to-go” land. Land with main road frontage is scarce in the area with few transactions. Also, the land is immediately developable; the site comes with an approved DO with ready infrastructure, whose cost and conversion premium were borne by F&N. The site carries 6.5x plot ratio implying 0.4m sf GFA, which is considered high for a low -dense development area.
Earmarked for service apartments of GDV RM257m, called M Suites; it represents MSGB’s new branding for mid to high end service apartments/condominiums with an average selling price of RM857psf. Launch is targeted in 2H10. (See below for details).
We do not discount possibility of more acquisitions of F&N owned development land. F&N has c.7.3ac freehold commercial land along Jalan Yew, which is near Jalan Cochrane. The area is extremely matured and would be ideal for development like StarParc Point @ Setapak and Southgate @ Jln Sungei Besi which have both achieved high take-up rates before completion.
Raising FY11-12E net profit by 3%-7% to RM141m -RM169m. We expect launch to start in 4Q10 with signifi cant billings from FY11 onwards, hence FY10E net profit of RM113m is unchanged. We are also assuming gross development margins of 27% which is similar to Residence branding margins.
Reiterate BUY with higher fair value of RM2.01 (previous RM1.96) as we add M Suites to our FD SoP RNAV. Last traded price is attractive with 12x-10x FY10-11E PER, while our fair value implies 15x-12x FY10-11E PER vs. historical averages of 16x. We expect more land acquisitions in the near term given its landbank exhaustive quick-turnaround strategy that provides stronger positive news flow, low land holding cost and greater earnings growth of 22% 3-year
Key Points
Acquiring 1.44ac prime freehold commercial land next to Great Eastern Mall, Jln Ampang from Fraser & Neave Holdings Bhd (F&N) for RM53.8m; it is Mah Sing Group (MSGB) third land acquisition in FY10. Site location is strategic with main road frontage of Jln Ampang and is near the Embassy Row, 3 international schools (Fairview International School, Sayfol International School, International School of Kuala Lumpur), 2 hospitals (Gleneagles, Ampang Puteri), as well as, being 5-10mins driving distance away from KLCC.
Although debt-equity funding mix has not been disclosed, we believe MSGB can fully fund this via internal funds given its net cash position and RM397m cash pile.
Cost of RM857psf is fair for “ready-to-go” land. Land is scarce in the area with few transactions. The few neighboring freehold commercial land asking prices are RM600psf-RM800psf; but these do not have main road frontage. Additionally, the land is immediately developable; the site comes with an approved DO with ready infrastructure, whose cost and conversion premium were borne by F&N. The site carries 6.5x plot ratio implying 0.4m sf GFA, which is considered on the high side for low-dense development area (4x-6x plot-ratio typically).
Earmarked for service apartments of GDV RM257m, called M Suites; it represents MSGB’s new branding for mid to high end service apartments/condominiums. Launc h is targeted in 2H10. MSGB is guiding c.0.3m sf NSA (inclusive of retail podium or 7% of NSA) implying an average sale price of RM857psf. Sale price appears to be attractive since nearest comparable, Embassy View Service Apartments has asking prices of RM950psf - RM1,000psf.
M Suites built-ups ranges from 430sf-1,150sf with starting prices of RM350,000/unit, which is ideal when targeting professionals wanting
close proximity to KL city center.
We do not discount possibility of more acquisitions of F&N owned development land. F&N has c.7.3ac freehold commercial land along Jalan Yew, which is near Jalan Cochrane. The area is extremely matured and would be ideal for developments like StarParc Point @ Setapak and Southgate @ Jln Sungei Besi which have both achieved high take -up rates before completion. F&N also has development land in Hulu Langat (60.6ac) and Jln Tebrau, Johor (3.0ac).
Raising FY11-12E net profit by 3%-7% to RM141m -RM169m. We expect launch to start in 4Q10 with signifi cant billings from FY11 onwards, hence FY10E net profit of RM113m is unchanged. We are also assuming gross development margins of 27% which is similar to Residence branding margins.
Reiterate BUY with higher fair value of RM2.01 (previous RM1.96) as we add M Suites to our FD SoP RNAV. Last traded price is attractive with 12x-10x FY10-11E PER, while our fair value implies 15x-12x FY10-11E PER vs.historical averages of 16x. We expect more land acquisitions in the near term given its landbank exhaustive quick-turnaround strategy that provides stronger positive news fl ow, low land holding cost and greater earnings growth of 22% 3 -year CAGR.
Buying land along Jln Ampang
Acquiring 1.44ac prime freehold commercial land next to Great Eastern Mall, Jln Ampang from Fraser & Neave Holdings Bhd (F&N) for RM53.8m. It is Mah Sing Group (MSGB) third land acquisition in FY10. Site location is strategic with main road frontage of Jln Ampang, near the Embassy Row, international schools, hospitals and 5-10mins driving distance from KLCC (map below). Although debt-equity funding mix has not been disclosed, we believe MSGB can fund it entirely using internal funds given its net cash position and
RM397m cash pile.
Cost of RM857psf is fair for “ready-to-go” land. Land with main road frontage is scarce in the area with few transactions. Also, the land is immediately developable; the site comes with an approved DO with ready infrastructure, whose cost and conversion premium were borne by F&N. The site carries 6.5x plot ratio implying 0.4m sf GFA, which is considered high for a low -dense development area.
Earmarked for service apartments of GDV RM257m, called M Suites; it represents MSGB’s new branding for mid to high end service apartments/condominiums with an average selling price of RM857psf. Launch is targeted in 2H10. (See below for details).
We do not discount possibility of more acquisitions of F&N owned development land. F&N has c.7.3ac freehold commercial land along Jalan Yew, which is near Jalan Cochrane. The area is extremely matured and would be ideal for development like StarParc Point @ Setapak and Southgate @ Jln Sungei Besi which have both achieved high take-up rates before completion.
Raising FY11-12E net profit by 3%-7% to RM141m -RM169m. We expect launch to start in 4Q10 with signifi cant billings from FY11 onwards, hence FY10E net profit of RM113m is unchanged. We are also assuming gross development margins of 27% which is similar to Residence branding margins.
Reiterate BUY with higher fair value of RM2.01 (previous RM1.96) as we add M Suites to our FD SoP RNAV. Last traded price is attractive with 12x-10x FY10-11E PER, while our fair value implies 15x-12x FY10-11E PER vs. historical averages of 16x. We expect more land acquisitions in the near term given its landbank exhaustive quick-turnaround strategy that provides stronger positive news flow, low land holding cost and greater earnings growth of 22% 3-year
Key Points
Acquiring 1.44ac prime freehold commercial land next to Great Eastern Mall, Jln Ampang from Fraser & Neave Holdings Bhd (F&N) for RM53.8m; it is Mah Sing Group (MSGB) third land acquisition in FY10. Site location is strategic with main road frontage of Jln Ampang and is near the Embassy Row, 3 international schools (Fairview International School, Sayfol International School, International School of Kuala Lumpur), 2 hospitals (Gleneagles, Ampang Puteri), as well as, being 5-10mins driving distance away from KLCC.
Although debt-equity funding mix has not been disclosed, we believe MSGB can fully fund this via internal funds given its net cash position and RM397m cash pile.
Cost of RM857psf is fair for “ready-to-go” land. Land is scarce in the area with few transactions. The few neighboring freehold commercial land asking prices are RM600psf-RM800psf; but these do not have main road frontage. Additionally, the land is immediately developable; the site comes with an approved DO with ready infrastructure, whose cost and conversion premium were borne by F&N. The site carries 6.5x plot ratio implying 0.4m sf GFA, which is considered on the high side for low-dense development area (4x-6x plot-ratio typically).
Earmarked for service apartments of GDV RM257m, called M Suites; it represents MSGB’s new branding for mid to high end service apartments/condominiums. Launc h is targeted in 2H10. MSGB is guiding c.0.3m sf NSA (inclusive of retail podium or 7% of NSA) implying an average sale price of RM857psf. Sale price appears to be attractive since nearest comparable, Embassy View Service Apartments has asking prices of RM950psf - RM1,000psf.
M Suites built-ups ranges from 430sf-1,150sf with starting prices of RM350,000/unit, which is ideal when targeting professionals wanting
close proximity to KL city center.
We do not discount possibility of more acquisitions of F&N owned development land. F&N has c.7.3ac freehold commercial land along Jalan Yew, which is near Jalan Cochrane. The area is extremely matured and would be ideal for developments like StarParc Point @ Setapak and Southgate @ Jln Sungei Besi which have both achieved high take -up rates before completion. F&N also has development land in Hulu Langat (60.6ac) and Jln Tebrau, Johor (3.0ac).
Raising FY11-12E net profit by 3%-7% to RM141m -RM169m. We expect launch to start in 4Q10 with signifi cant billings from FY11 onwards, hence FY10E net profit of RM113m is unchanged. We are also assuming gross development margins of 27% which is similar to Residence branding margins.
Reiterate BUY with higher fair value of RM2.01 (previous RM1.96) as we add M Suites to our FD SoP RNAV. Last traded price is attractive with 12x-10x FY10-11E PER, while our fair value implies 15x-12x FY10-11E PER vs.historical averages of 16x. We expect more land acquisitions in the near term given its landbank exhaustive quick-turnaround strategy that provides stronger positive news fl ow, low land holding cost and greater earnings growth of 22% 3 -year CAGR.
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