Maybank IB Research - Company Update: 23 April 2010

altNiche development at KLCC-area

Another quick turnaround project. Mah Sing (MSGB) is acquiring a 1.4-acre freehold commercial land along Jalan Ampang for RM54m. It plans to develop affordable small-sized serviced residences with GDV of RM257m, lifting total GDV and unbilled sales to RM6.2b (+4%). We expect a strong take-up for the project given the scarcity of similar developments. Maintain Buy with an ex-bonus TP of RM2.20.

Acquiring freehold commercial land. The 1.4-acre land along Jalan Ampang (next to Great Eastern Mall, and close to Gleneagles hospital) will be acquired from F&N for RM54m or RM857psf. The purchase price is 4% lower than the price transacted (RM889psf) between F&N (vendor) and an independent third-party (buyer) in Jun ‘08, but this was subsequently rescinded in Nov ’08 due to the government’s partial compulsory acquisition (0.4% of total land size).

RM257m GDV planned. The land will be developed into serviced residences, named [email protected] Ampang. GDV is estimated at RM257m (over 3 years), with a small built-up area of 430-1,150 sq ft per unit valued at RM350,000 onwards (RM814psf). A quick turnaround is expected for the land with its maiden launch in 2H10 as it already has a development order. Assuming a 20% pretax margin, it will add RM13m in annual net profits (2sen EPS) over 3 years, and 4sen to our RNAV estimate. We maintain our forecasts pending more details.

altHigh take-up expected. We are positive on this acquisition/project as there is limited supply of affordable small-sized serviced residences within the KLCC-area (majority has size of >1,200 sq ft). Assuming rental yield of 5% (in line with KLCC-area rate) for the project, monthly rental is merely RM1,500, comfortably within the budgets of professionals (including embassy staff).

Adjusting for the recently-completed 1-for-5 bonus issue, our 2010-12 EPS is revised downward by 17% and our new TP is now RM2.20 (-15%). We continue to like Mah Sing as a proxy to the robust domestic property market (1Q10 new sales: +3x YoY, +4.6x QoQ) and expect more land acquisitions to fuel positive sentiment on the stock.

Definition of Ratings
Maybank Investment Bank Research uses the following rating system:

BUY Total return is expected to be above 10% in the next 12 months
HOLD Total return is expected to be between -5% to 10% in the next 12 months
SELL Total return is expected to be below -5% in the next 12 months Applicability of Ratings

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altSome common terms abbreviated in this report (where they appear):

Adex = Advertising Expenditure
FCF = Free Cashflow
PE = Price Earnings
BV = Book Value
FV = Fair Value
PEG = PE Ratio To Growth
CAGR = Compounded Annual Growth Rate
FY = Financial Year
PER = PE Ratio
Capex = Capital Expenditure
FYE = Financial Year End
QoQ = Quarter-On-Quarter
CY = Calendar Year
MoM = Month-On-Month
ROA = Return On Asset
DCF = Discounted Cashflow
NAV = Net Asset Value
ROE = Return On Equity
DPS = Dividend Per Share
NTA = Net Tangible Asset
ROSF = Return On Shareholders’ Funds
EBIT = Earnings Before Interest And Tax
P = Price
WACC = Weighted Average Cost Of Capital
EBITDA = EBIT, Depreciation And Amortisation
P.A. = Per Annum
YoY = Year-On-Year
EPS = Earnings Per Share
PAT = Profit After Tax
YTD = Year-To-Date
EV = Enterprise Value
PBT = Profit Before Tax

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