PETALING JAYA: Mah Sing Group Bhd’s acquisition of a 100-acre piece of land in Sepang is set to boost the developer’s near-term sales performance and will have a limited impact on its balance sheet.
RHB Investment Bank in a report yesterday said it was raising Mah Sing’s 2022 earnings marginally by about 1% to account for the incremental profits from M Senyum, the proposed affordable housing project that will be developed on the newly acquired land.
“Mah Sing is due to announce its fourth-quarter 2020 results on Thursday and we expect it to hit its 2020 sales target of RM1.1bil.
“Meanwhile, unbilled sales of RM1.76bil should provide good earnings visibility for the property development business.”
TA Securities said it is positive on the land acquisition, as the deal was in line with Mah Sing’s focus to acquire prime land in strategic locations especially within the Klang Valley.
“This new land acquisition will increase the group’s landbank to 2,096 acres with total remaining gross development value (GDV) and unbilled sales of RM25bil.
“Based on the estimated GDV of RM656mil (for M Senyum), the land cost makes up 14.6% of the total development value.
“As the land cost to GDV ratio comes below the general rule of thumb of 20%, we deem the acquisition price reasonable.”
TA Securities said M Senyum will replicate the group’s existing landed residential projects, such as the Meridin East township in Johor and the M Aruna township in Rawang which have been well-received.
“At an indicative selling price of RM250 per sq ft, onwards, we believe the project is competitively priced as compared with the new launches in Sepang such as Serenia Ariya and Cendana Greenwoods, which are priced from RM356 paper sq ft and RM305 per sq ft respectively.”
MIDF Research said the land acquisition will have a limited impact on the company’s balance sheet.
“Mah Sing intends to fund the land acquisition through a combination of internally generated funds and bank borrowings.
“The impact on the balance sheet is expected to be minimal.
“This is because Mah Sing had a cash pile of RM1.1bil as of the third quarter of 2020.
“Meanwhile, we estimate minimal earnings impact in 2021 as the project will only be launched in the second half of 2021, with a development period of more than five years. Hence, we make no changes to our earnings forecast for 2020 and 2021.”
Additionally, CGS-CIMB said the increase in Mah Sing’s landbank will boost the company’s near-term sales performance, which could re-rate its share price.
“We believe Mah Sing will likely continue to scout for more land in strategic locations in the Klang Valley, as there could be good bargains amid a soft property market, ” said the research house.
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