HLIB positive on Mah Sing’s latest development

KUALA LUMPUR: Hong Leong Investment Bank Research (HLIB) is “mildly positive” on Mah Sing Group Bhd’s latest acquisition as the proposed development will be RNAV accretive to Mah Sing.
 
Additionally, HLIB said the land cost relative to GDV was competitive at 12.7%.
 
Mah Sing is acquiring a 78% 78% equity stake in a development company for RM55mil, which will in turn acquire an 8.5-acre plot of land for RM95.1mil.
 
The proposed development is a serviced residence named MCentura, with an estimated gross development value of RM1.3bil over a span of 4-5 years.
 
Target launch of the project is in the 2H17 with an indicative price from RM326,000 onwards for built-up size of 650-1000 sq ft.
 
HLIB said the land price works out to be about RM129mil or RM349 per sf. At a plot ratio of eight times, the acquisition price translates to RM56 per sf of gross floor area and constitutes 12.7% of the estimated effective GDV. 
 
The effective GDV of RM1bil is expected to increase total effective remaining GDV for the group by 3.7% to RM28.2bil.
 
“Assuming an EBIT margin of 25%, the project’s NPV is estimated at RM110mil or 2 sen per share,” HLIB said.  
 
“The fast turnaround pocket size development is targeted at a more affordable segment and is located in a matured Sentul area. It should gain good interest as similar projects surrounding the area are doing well with good take-up. 
 
“Moving forward, we expect Mah Sing to be actively replenishing its landbanks in Klang Valley as it targets to increase to 75% (from the current 65%) of overall remaining GDV within the next 2 to 3 years,” HLIB said. 
 
HLIB has maintained its “hold” on Mah Sing with a higher target price of RM1.56 from RM1.54 based on unchanged 35% discount on revised RNAV of RM2.41.