PETALING JAYA: The acquisition of Mah Sing Group Bhd’s latest parcel of land is expected to strengthen its development portfolio within the Klang Valley’s key growth corridors.
The move is in line with the developer’s plans of scouting for more land in strategic locations, said analysts, as there could be good bargains amid the soft property market currently.
CGS-CIMB Research in a report said the latest deal marks the second land purchase by Mah Sing in 2021, with more acquisitions likely in the near future.
“Our sum-of-parts-based target price remains at RM1.29. We reiterate ‘add’, given the potential contribution from its glove unit (commencing this year), its healthy balance sheet and decent dividend yield of 6% to 7% for 2021 to 2023.”
Mah Sing announced on Tuesday that it is acquiring a parcel of leasehold vacant land measuring five acres in Setapak, Kuala Lumpur, for RM89mil.
CGS-CIMB said the deal translates into an acquisition cost of RM409 per sq ft, which it believes is fair, given the cost of similar transactions that tend to range between RM355 and RM376 per sq ft.
The land will be developed into a mid-range, high-rise residential project called M Astra.
“The project will have an estimated gross development value of RM618mil, comprising two blocks of serviced suites with built-up of 850 to 1,030 sq ft and indicative starting prices from RM399,000.
“We revise up our 2023 earnings forecast slightly by only 1% to account for the net profit contributions from M Astra. Unbilled sales stood at RM1.64bil as at December 2020, ” said RHB Investment Bank.
Additionally, RHB said earnings from the new glove manufacturing business should kick in as expected from the second quarter of this year.
Meanwhile, TA Securities said it is making no change to its 2021 to 2023 earnings forecasts for now, pending the completion of the acquisition of the Setapak land.
“In terms of funding, we believe Mah Sing’s healthy balance sheet, with a cash balance of RM1.2bil as at December 2020, should provide financial flexibility for future land acquisitions.”
Additionally, TA Securities said it is positive on the developer’s latest land deal.
“The proposed acquisition augurs well for the group as it is in line with Mah Sing’s focus to acquire prime land in strategic locations, especially in the Klang Valley. We continue to see strong demand for affordable homes in the urban areas.
“For instance, M Adora in Wangsa Melawati (3km from the new land) achieved a healthy take-up of 73% in less than 10 months from launch.
“Given the similar characteristics such as strategic locations with ready amenities and infrastructure, we anticipate M Astra to replicate the success of M Adora.”