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Mah Sing (Inter Pacfic Research) outperform; target price RM2.30

Acquire 2 pieces of land with RM1.2bn GDV

Highlights:

? Outperform: We maintain our OUTPERFORM recommendation with target price of RM2.30 which is 5% discount to our RNAV per share of
RM2.42. We revised upward our RNAV estimation emanating from the proposed acquisition of 2 plots of land with potential GDV of RM1.2bn. M City Jalan Ampang and the new precinct of Garden Residence had been schedule for launching in 2011.

Nonetheless we had maintained our forecast with possible upward revision moving forward, depending on sales response of new launches. We like Mah Sing due to
(1) efficient quick turnaround strategy; (2) healthy balance sheet with 0.05X gearing ensuring flexibility in land banking activities; and (3) unbilled sales of RM1.17bn which is 2.07X of FY09 revenue contribution from property division.

? New land slated for mixed development named M City Jalan Ampang: Mah Sing proposed to acquire 4 parcels of contiguous prime commercial freehold land along Jalan Ampang, measuring 4.7 acres for RM114.9mn or approx RM560.6 psf.

The proposed acquisition constitutes an option to purchase two parcels of adjacent commercial land at RM560 psf. We are positive over the acquisition considering the land; (i) strategically located close to Ampang Point, enjoying more than 700 feet frontage of Jalan Ampang and is less than 5 km from KLCC. (ii) The Land is acquired with conversion premium paid by the Vendor for parcel 4 of the Lands which also comes with substructure for 2 levels of basement car parks. The other parcels are vacant and flat in terrain and are ready for immediate development (iii) scarcity of freehold land in the prime address of Jalan Ampang.

? Mixed development with RM920mn GDV: M City Jalan Ampang is proposed to be developed into a niche development comprising serviced residences, SoHo and retail outlets with an estimated GDV of approximately RM920mn. Based on preliminary plans, the proposed development shall comprise flexible sized serviced residences and SoHo with built ups from approximately 500 square feet with indicative pricing from RM399K. There will also be lifestyle retail outlets with land size of approximately 2,184 sq ft with indicative pricing from RM1.6mn.

? Garden Residence land size augmented to approximately 150.11 acres via the proposed acquisition of a parcel of freehold residential land in Cyberjaya measuring 34.86 acres located adjacent to the existing 115.25 acres Garden Residence. Bought as a new precinct to Garden Residence, total purchase consideration comprises of RM48.9mn for land acquisition (approx RM32.20psf) and RM2.7mn for infrastructure consideration (RM1.80psf). The purchase consideration represents 33% accretion on the acquisition price of the existing Garden Residence land just over a year ago on Aug 2010 which might also denote the valuation creation of the project towards land price in the vicinity.

? New precinct of Garden Residence had an estimated gross development value of approximately RM280 mn. The new precinct offer 2 and 3 stories semi detached houses with indicative pricing RM1.2 mn and RM1.4 m respectively. We are optimistic over the land acquisition was mainly due to: (i) impressive sales of Garden Residence as well as registration of interest for Garden Plaza; (ii) the Land is also acquired free from low cost, low medium cost and medium cost housing units requirements (iii) potential buyers from at least 20K requirements; population who commute daily; (iv) expansion of the exiting MNC companies which drawn workers to Cyberjaya and (v) ready infrastructure.


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