Mah Sing earnings visibility remains solid

Mah Sing Group Bhd (Oct 5, RM1.28)

Maintain buy with an unchanged fair value of RM2.12: According to The Edge Weekly, Mah Sing Group is set to launch the second phase of its Feringghi Residence project in Penang by year end.

Feringghi Residence is a freehold development that comprises low-rise condo villas and high-rise resort condos on 61 acres (24.68ha) of elevated land in Batu Feringghi. The gated development is to be developed in three phases. The parcel of land was bought in 2010, and is strategically located along the famed Batu Feringghi tourist belt and 1km away from Hard Rock Hotel Penang.

Phase 1 of Feringghi Residence (approximately 11 acres) was launched in the fourth quarter of 2012 (4Q12). It consists of 210 apartments with built-ups of 1,510 sq ft to 1,752 sq ft in a five-storey block, and priced between RM870, 000 and RM1.4 million a unit. To date, more than 90% of these units have been sold.

As for the upcoming Feringghi Residence 2, a total of 632 units will be on offer in three blocks of four, 10 and 32 storeys. The average built-ups will be smaller than that of the first phase, ranging from 1,208 sq ft to 1,565 sq ft.

The third phase will comprise 410 resort condominiums, 80 town villas and 32 hillside villas. The gross development value for Feringghi Residence 2 is approximately RM700 million or RM700 per sq ft to RM750 per sq ft.

We expect Feringghi Residence 2 to be one of only two new launches for Mah Sing in Penang this year, given the soft market conditions. The Penang market accounts for 6% of the group’s revised presales target of RM2 billion for FY15.

We understand that Feringghi Residence 2 received 600 registrations within two weeks during a preview held last July. Given its smaller built-ups, we believe the average pricing per unit could be lower than that of phase 1.

While we expect Feringghi Residence 2 to be similarly well-received given its strategic location and low-density features, we expect the conversion into sales to take longer compared with phase 1.

While presales momentum will likely be muted in the near term, earnings visibility remains solid with a remaining GDV of RM26 billion and unbilled sales of RM4.8 billion. — AmResearch, Oct 5

If you are interested in properties in Batu Feringghi, go HERE.

This article first appeared in The Edge Financial Daily, on Oct 6, 2015.