Mah Sing Group - Entering a new era of large township development BUY

We maintain BUY on Mah Sing Group with a higher fair value of RM3.80/share (previously: RM3.74/share), at parity to its NAV. This comes as we tweak our NAV to account for value-accretion from a new land deal in Pasir Gudang (c.1,352 acres), Johor that more than sufficiently offsets the removal of contributions from Meridin@Senibong.
- Significantly, this latest move represents Mah Sing’s first major foray into large-scale township development in excess of 1,000 acres. The Pasir Gudang land is strategically located just 1km from the Senai-Desaru highway, roughly 40km from JB city centre. This integrated development is estimated to have a GDV of c.RM5bil spanning seven years.
- The freehold land – purchased at an attractive land cost of RM7.30psf with good accessibility – provides Mah Sing with a solid platform to tap into an underserved affordable landed residential segment amid rising land cost.
- We expect maiden launches of landed homes by 2H14 at an estimated price range of c.RM350k-RM400k. Leveraging on spillover demand from its existing projects (e.g. Sierra Perdana) and a ready catchment of 100,000 people in the Pasir Gudang area, we expect the project to be wellreceived with local buyers being its primary target.
- This trailblazer project would also provide base pre-sales of RM400mil in the first two years, before doubling to c.RM800mil p.a. as the township matures. Payment terms for the land would be staggered over four years; the balance 70% in the final year can be financed through progress billings.
- Acquisitions aside, the robust reception for its two new launches last month – i.e. D’sara Sentral and Southville City - puts the group on firmer ground to achieve record new sales of RM3bil for FY13F (1H13: RM1.5bil).
- A total of 1,068 units of the Savanna Executive Suites under Phase 1 of Southville City were snapped up within 8 hours at an average price of RM330psf during its launch last Saturday. Phase 1B achieved 90% take-up, followed by Phase 1A (50% take-up) which was opened up later in the day. Given the overwhelming response, we understand that the group will likely accelerate the launch of another 2 towers and retail lots (from RM1.3mil onwards) this week.
- Similarly, half of the 322 units of SoVos under Phase 1 of D’Sara Sentral were snapped up (average price: RM680 psf), with all but nine of the 58 retail units pre-booked.
- Mah Sing currently trades at a steep 41% discount to NAV. There is scope for valuation upgrades coming from more NAV-accretive land deals under entrepreneurial-driven management led by group MD, Tan Sri Leong Hoy Kum.
Source: AmeSecurities

Labels: MAHSING