Mah Sing aims for RM5b market cap within five years

KUALA LUMPUR: Mah Sing Group Bhd has a three-pronged strategy for continued growth and aims to have a market capitalisation of RM5 billion within five years.

In the immediate term, the property developer will continue its focus on its niche, quick-turnaround development model for its residential, commercial and industrial series, said Mah Sing group managing director-cum-group chief executive, Tan Sri Leong Hoy Kum.

“With our low net gearing, we target to acquire large tracts of strategic land bank over the next two years which will allow further expansion and enhance shareholders’ value,” he said of its medium-term growth strategy.

For the long term, Mah Sing will continue to explore overseas expansion in countries like China, Vietnam, Australia, Singapore and Indonesia to diversify its earnings base and provide a new leg of growth.

In December last year, the group announced its first overseas venture into China. Its wholly owned subsidiary Mah Sing International (HK) Ltd, together with Danlong Realty (Beijing) Ltd, had signed a letter of intent (LoI) with Wujin District People’s Government in Changzhou City near Shanghai to develop a mixed property development project on an 87-acre piece of land.

Mah Sing and its JV partner are still seeking land use rights in China and hope to finalise the details before the end of this year.
On its RM5 billion target in market capitalisation, Leong said the group was stepping up operations. Mah Sing has a market cap of RM1.4 billion as of last Friday. The stock closed six sen lower at RM1.69.

Last Friday, it announced the acquisition of three parcels of land in the Klang Valley totalling 154.5 acres for RM276.1 million. The parcels have a combined gross development value (GDV) of RM1.1 billion comprising three planned projects — Kinrara Residence, Star Avenue and i-Parc [email protected] Jelutong.

Kinrara Residence is a landed medium- to high-end, gated and guarded project with a gross land size of 125.8 acres and GDV of RM730 million. Star Avenue is a commercial project featuring three-storey shops, retail lots and offices incorporating a neighbourhood lifestyle mall on 17.82 acres, with a GDV of RM280 million.

i-Parc [email protected] Jelutong forms part of its industrial series featuring semi-detached factories on 10.95 acres, with a GDV of RM82 million.   

The latest acquisitions make up 17% of the group’s GDV of RM6.5 billion. Inclusive of the three projects’ GDV of RM1.1 billion, Mah Sing’s total GDV comes up to RM7.5 billion for its projects in the Klang Valley, Penang and Johor Bahru.

Analysts said the acquisitions gave Mah Sing additional options for future launches, and would help it meet consensus annual earnings growth of 20%-25% for 2010, 2011 and 2012.

The target launch for Kinrara Residence is 2010 while Star Avenue and i-Parc [email protected] Jelutong will be launched in the first half of 2011. Mah Sing’s unbilled sales of RM1.1 billion as at March 31, 2010 are expected to provide earnings visibility for the next one to two years.

“The acquisition price seems fair and the locations are good with ready infrastructure. In general the acquisitions are positive for Mah Sing,” said an analyst with a foreign research house.

The latest buys add to Mah Sing’s list of three other acquisitions this year in Shah Alam, Cyberjaya and Kuala Lumpur. On July 5, it announced a joint venture with Medan Damai Sdn Bhd, a subsidiary of Mahajaya Bhd, to jointly develop a 13.2-acre piece of land in Kinrara, Selangor.

Leong said the group, open to JVs with land owners, had also expressed interest to jointly develop land with relevant government-linked companies (GLCs) which had been given mandates to be the master developers.

With a vision to venture abroad, Leong said Mah Sing’s focus in Malaysia would continue to be in the medium- to high-end segment, and in key markets in the Klang Valley, Penang and Johor Bahru.

Leong said Mah Sing was spot on in identifiying the growing appeal of semi-D and bungalow developments in a gated-and-guarded environment while in the commercial space, it had popularised en bloc sales in the primary market.
“For the industrial segment, the group identified the opportunity for niche semi-D industrial properties in the Klang Valley which resulted in brisk sales for our [email protected] Jelutong.

“Our subsequent launch of [email protected] Alam also attracted significant interest, and that is why we are acquiring a piece of land to develop [email protected] Jelutong,” he said. Response to its launches this year had been brisk, according to Leong.

“For the first quarter of 2010, we have already achieved 60% of our 2010 sales target of RM1 billion; thus we are confident of meeting our target,” he said.

New project launches this year include the [email protected] Jelutong, Perdana Residence 2 in Selayang, Garden Residences in Cyberjaya and iParc [email protected] Alam.

This article appeared in The Edge Financial Daily, July 12, 2010.
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