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Mah Sing
Acquiring Three Land Parcels In The Klang Valley For RM276m
? Acquiring three land parcels in one shot. Mah Sing is acquiring three land parcels in the Klang Valley, i.e. residential in Kinrara, commercial in Sungai Buloh and Industrial in Bukit Jelutong, with a total area of 155 acres for RM276.1m that are expected to fetch a total GDV of RM1,092m (see Table 2).
? Pricing appears mixed. The price tag of RM33 psf for the Kinrara residential land appears reasonable vis-a-vis the current asking prices of
RM12-56 psf in the area. For the Sungai Buloh commercial land, the pricing appears to be at a premium to the current asking prices of up to RM50 psf that may be justifiable given the huge potential of land arising from its location, i.e just right opposite the much publicised 3,300-acre Rubber Research Institute land owned by the Government pending privatisation and redevelopment. On the other hand, it appears that the Bukit Jelutong land is a bargain at RM67 psf vis-à-vis the current asking prices of RM73-103 psf in the area (see Table 3).
? 14.9sen/share enhancement. Ceteris paribus, the acquisitions will increase Mah Sing’s net debt and gearing of RM42.8m and 0.05x as at 31
Mar 2010 to RM318.9m and 0.37x that is still manageable. Assuming a PBT margin and tax rate of 20% and 25%, the projects will fetch RM163.8m net profit over the next five years, or an NPV of RM124.2m or 14.9sen/share based on a discount rate of 10%. We are positive on the latest development.
? Forecasts. Maintained pending the completion of the land deals.
? Risks and concerns. The risks include: (1) A shortened property upcycle; (2) Rising mortgage rates that hurt affordability; and (3) Delays in obtaining project approvals.
? Maintain Outperform. We continue to like Mah Sing given: (1) Its opportunistic land acquisition strategy that enables short turnaround times for its property projects; (2) Its strong net profit CAGR of 29% between FY12/09-12; and (3) It being a good proxy to the upturn in the local property market. Indicative fair value is RM2.09 based on RNAV (see Table 6).
Acquiring Three Land Parcels In The Klang Valley For RM276m
? Acquiring three land parcels in one shot. Mah Sing is acquiring three land parcels in the Klang Valley, i.e. residential in Kinrara, commercial in Sungai Buloh and Industrial in Bukit Jelutong, with a total area of 155 acres for RM276.1m that are expected to fetch a total GDV of RM1,092m (see Table 2).
? Pricing appears mixed. The price tag of RM33 psf for the Kinrara residential land appears reasonable vis-a-vis the current asking prices of
RM12-56 psf in the area. For the Sungai Buloh commercial land, the pricing appears to be at a premium to the current asking prices of up to RM50 psf that may be justifiable given the huge potential of land arising from its location, i.e just right opposite the much publicised 3,300-acre Rubber Research Institute land owned by the Government pending privatisation and redevelopment. On the other hand, it appears that the Bukit Jelutong land is a bargain at RM67 psf vis-à-vis the current asking prices of RM73-103 psf in the area (see Table 3).
? 14.9sen/share enhancement. Ceteris paribus, the acquisitions will increase Mah Sing’s net debt and gearing of RM42.8m and 0.05x as at 31
Mar 2010 to RM318.9m and 0.37x that is still manageable. Assuming a PBT margin and tax rate of 20% and 25%, the projects will fetch RM163.8m net profit over the next five years, or an NPV of RM124.2m or 14.9sen/share based on a discount rate of 10%. We are positive on the latest development.
? Forecasts. Maintained pending the completion of the land deals.
? Risks and concerns. The risks include: (1) A shortened property upcycle; (2) Rising mortgage rates that hurt affordability; and (3) Delays in obtaining project approvals.
? Maintain Outperform. We continue to like Mah Sing given: (1) Its opportunistic land acquisition strategy that enables short turnaround times for its property projects; (2) Its strong net profit CAGR of 29% between FY12/09-12; and (3) It being a good proxy to the upturn in the local property market. Indicative fair value is RM2.09 based on RNAV (see Table 6).
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