Mah Sing Group Johor site visit by MIDF Research

Mah Sing Group Retain BUY

Unchanged target price (TP): RM2.24

We recently visited key development by Mah Sing Group (MSGB) in Johor. Some of the notable projects we visited were Sri Pulai I, Sri Pulai II, Austin Perdana and Sierra Perdana. Below are the key-takeaways:-

Average take-up rates fairly strong between 60%- 5%. MSGB currently has 4 key projects in Johor:-

* Sri Pulai I @ 90% completion rate. Mature development with balance GDV for low cost developments.

* Sri Pulai II @ 40%-60%. Matured development with balance GDV for low cost developments

* Austin Perdana @ 85%.

* Sierra Perdana @ 50%.

Building the Mah Sing brand. Despite the successful launch of Sri Pulai I and Sierra Perdana, the general Johorean purchasers are still getting used to the Mah Sing brand. The Johor residential property market is flooded with established developers with a track record i.e such as Pelangi Bhd (presently a PNB owned entity), KSL, Crescendo Corp, Permas Jaya S/B and SP Setia. According to the management, plans are in-place to ramp-up efforts on its brand awareness as well as product offerings which are more responsive to demand.

Proven price appreciation track record. We note that Mah Sing’s property prices have appreciate between 12%- 15% over a period of 5 years, with the exception of terrace developments in Sri Pulai I with prices rising 79% over a 7 year period. The steady appreciation is attributable to the well-maintained property development, including the parks, security guards, road conditions, utilities availability and surrounding amenities.

Completion of coastal highway vital to Sierra Perdana. The construction of the upgraded six-lane coastal highway, will cut through Sierra Perdana, and will reduce travelling time to Permas Jaya and Johor Baru city centre to only a few minutes.The highway will not only inject population into Sierra Perdana, it will cause prices to appreciate. This is expected to entice demand for future development.

Maintain BUY with TP of RM2.44. Our TP is derived from the group’s RNAV. MSGB’s Johor developments which contribute 15% its total GDV will continue to drive its future earnings. We continue to like MSGB for its (i) strong earnings visibility stretching into 2013, (ii) healthy balance sheet, (iii) commendable GDV balance and (v) fair reward to shareholders with steady historical dividend yield (4%-6%) and consistent mid-teens ROE (5-year average 15.7%).

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