Mah Sing bounces back in Johor

KUALA LUMPUR: A day after terminating a deal to purchase 35.26 acres (14.27ha) of land in Johor, Mah Sing Group Bhd entered into another sale and purchase agreement (SPA) to acquire 1,352 acres of agriculture land that it plans to develop into a township over seven years.

In an announcement yesterday, Mah Sing said it was acquiring the land, also located in Johor, from Bistari Land Sdn Bhd, whose directors are Dr Wong Poh Kun and Wong Poh Lum, for RM429.9 million. The amount is to be paid over 48 months.

The land acquisition works out to RM7.30 psf, which is much lower than the cost of the land that Mah Sing had wanted to acquire earlier at a price of about RM238 psf.

On Monday, the shareholders of Mah Sing had approved the group’s acquisition of 35.26 acres of land in Senibong, Johor for a total consideration of RM365.55 million.

But in an announcement to Bursa Malaysia later in the day, the group said the SPA was terminated at the last minute, as the vendors had failed to secure the consent of the owners of the neighbouring land parcels to construct an access road to the planned development on the site.

Mah Sing had planned to launch a project called Meridin@Senibong that was supposed to have a gross development value (GDV) of RM4.35 billion and implemented over five years.

Meanwhile, the land to be purchased from Bistari Land is located between Pasir Gudang and Tanjung Langsat, which are key components of Flagship D: Eastern Gate of Iskandar Malaysia project.

It is located 80km from Pengerang, which together with Tanjung Langsat and Tanjung Bin, is the focal point of Iskandar Malaysia’s much touted Asia-Pacific oil and gas hub.  

In a statement yesterday, Mah Sing said the land would be developed into a township with an estimated GDV of RM5 billion.

“The reasonable entry cost of RM7.30 psf for the new land, coupled with the deferred payment term of 48 months tie in very well with Mah Sing’s strategy.

“Over a period of seven years, we will create a very nice, masterplanned township that will change the landscape of the locality for the better,” said group CEO and managing director Tan Sri Leong Hoy Kum.

The land is 5km from the Pasir Gudang town centre, which already has established commercial facilities. Taman Kota Masai, developed by Focal Aims Sdn Bhd, is located adjacent to the land, along with other existing townships nearby.

“Using the Senai-Desaru highway, the land is just 1km from the Cahaya Baru interchange,” Mah Sing said in its statement.

“Together with this new land, Mah Sing’s projects in Iskandar Malaysia yield a remaining GDV and unbilled sales of about 26% of the group’s remaining GDV and unbilled sales of approximately RM28.6 billion.  The group’s projects in Iskandar Malaysia comprise five townships, an industrial project at the Port of Tanjung Pelepas and the integrated project of Meridin@Medini.”  

In a note, research firm AmResearch said the acquisition of the land in Pasir Gudang would more than offset the removal of contributions from the aborted Meridin@Senibong.

“We expect maiden launches of landed homes by 2H14 at an estimated price of about RM350,000 to RM400,000. Leveraging spillover demand from its existing projects and a ready catchment of 100,000 people in the Pasir Gudang area, we expect the project to be well received with local buyers being its primary target,” it said.

AmResearch also said the Pasir Gudang project will provide Mah Sing base pre-sales of RM400 million in the first two years, before doubling to about RM800 million per annum as the township matures.

“Payment terms for the land will be staggered over four years; the balance 70% in the final year can be financed through progress billings,” it said.

Mah Sing is one of AmResearch’s top two large-cap picks for the property sector. The group is currently trading at a 41% discount to its net asset value and is supported by its remaining landbank valued at RM29 billion and unbilled sales of RM3.9 billion, as at end-June.


This article first appeared in The Edge Financial Daily, on October 02, 2013.