It said the land cost includes development charge and improvement service fund. Excluding these costs, the actual land cost is RM77.5mil or c.RM385 per sq ft.
“Given its net cash of RM655mil as at end-FY18, Mah Sing could comfortably finance the acquisition of the land parcels with its cash balance.
“While we retain our target price for Mah Sing at RM1.20 (based on 35% discount to its RNAV), we believe the land acquisition deal is positive for its share price,” it said.
CIMB Research was positive on this deal due to the good location and the increased land bank could boost its near-term sales performance, which could re-rate its share price.
Key risks to its Add call are a sudden deterioration in property market sentiment and weaker-than-expected property sales.
The research house, in its comments on the location of the land parcels, said they were within 10km radius of Kuala Lumpur City Centre (KLCC), Cheras, Ampang, Petaling Jaya, and Seri Kembangan.
The land has a wide catchment from established neighbourhood of Old Klang Road, Sri Petaling, Bukit Jalil and Salak South. The land is only 800m to the upcoming Taman Naga Emas MRT station along MRT Line 2 which is on track to be completed by July 2021 and fully operational by 2022. This station would enjoy Park and Ride facilities.
Mah Sing estimated that the land has a gross development value (GDV) of c.RM500mil.
“We believe the land deal is fair as the land cost to GDV ratio is c.16%, which is below the normal 20% threshold. This land bank will be a quick-turnaround niche development as the land comes with development order for c.900 units of serviced apartments.
“Nonetheless, Mah Sing intends to revise the development plans given the land's prime location, in order to fit current market demand.
“Mah Sing aims to launch the Sri Petaling project by 2H19. We keep our earnings forecasts unchanged for now, as the group is still keeping its FY19 new property sales target at RM1.5bil and expected projects launches at RM2.2bil GDV,” it said.
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