• MSGB announced the acquisition of 7 parcels of contiguous freehold residential land, measuring 61.0 acres for RM157m, or RM59 psf. We believe this is a fair price given that residential land around the Bayan Lepas area have transacted at RM200 psf previously.
• The acquired land is situated close to Batu Ferringhi and less than 20km from the city centre of historic Georgetown, and will be developed into a resort style development named Ferringhi [email protected] with an estimated GDV of approximately RM800m.
• No impact for the current financial year, as Ferringhi [email protected] will be launched only in 1H FY11.
• We project 3% accretion to net profit in FY12, as profit recognition for FY11 should be minimal.
Pros / Cons
• We view the acquisition favourably as it reaffirms MSGB’s land-banking capability, which is essential to its quick turnaround business model.
• Acquisitions for this year now total RM3.9bn in GDV, bringing overall future GDV to RM9.4bn (inclusive of unbilled sales), and providing earnings visibility of 5-7 years.
• Slower than expected sales (unlikely).
• Execution risks for project management (unlikely).
• Following this acquisition, we keep our profit forecast for FY11 unchanged and raise FY12 net profit by 3%.
• We maintain our BUY call as this development reaffirms our view that MSGB is an agile niche developer who are able to consistently replenish their landbank at reasonable prices.
• We raise RNAV and target price from RM2.48 to RM2.61 per share.
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