CIMB Research Sees More Land Deals for Mah Sing, Retains Add
CIMB Equities Research is positive on Mah Sing Group’s purchase of 5.47 acres of land in Kepong for RM94.8mil which has a potential gross development value (GDV) of RM705mil.
“This deal marks the second land acquisition by Mah Sing in 2019, and we believe more land deals could be in the pipeline. We retain our Add call with a TP of RM1.20, based on 35% discount to RNAV,” it said on Wednesday (24 July 2019).
On Tuesday (23 July 2019), Mah Sing announced it was buying the parcel of leasehold vacant land in Taman Metropolitan, Kepong for RM94.8mil from JL99 Holdings Sdn Bhd.
The land cost is inclusive of development charge and land premium, and the land comes with approved development order (DO) for serviced apartments.
Excluding these costs, the actual land cost is c.RM61mil or c.RM257 per sq ft. Given its net cash of RM707mil as at end-March FY19, Mah Sing could comfortably finance the acquisition of the land with its cash balance.
This is the group’s second land acquisition in 2019, after the 4.3 acres land parcels acquisition at Sri Petaling in March 2019 for RM90.3mil.
The land is located 14km away from Kuala Lumpur City Centre (KLCC) with a wide catchment from the established neighbourhoods of Kepong, Taman Selayang Jaya, and Batu Caves.
The land is also within walking distance of the Kepong MetropolitanPark, and near public transport (3.3km from the upcoming Metro Prima MRT 2 Station, and 4km from the Taman Wahyu KTM Station).
“The land deal is fair in our view, given the land cost to GDV ratio is c.13%, which is below the normal 20% threshold. Mah Sing aims to launch the Kepong project –M Luna by 4Q19, which will consist of two blocks of serviced apartments with an indicative built up from 700 sq ft and starting price of RM385,000.
“We are positive on this deal, given the land's good location and the increased land bank could boost its near-term sales performance, which could re-rate its share price."
“In our view, Mah Sing will likely continue to scout for more strategic land banks in Klang Valley, as there could be good bargains in the market given the muted property market."
“Our TP of RM1.20, which is based on a 35% discount to RNAV remains intact. We keep our earnings forecasts intact, as the group is still keeping its FY19 new property sales target at RM1.5bil and FY19 expected project launches at RM2bn GDV. "
"Key risks to our Add call are a sudden deterioration in property market sentiment and weaker-than-expected property sales,” it said.