Mah Sing’s Cosmowealth stake purchase viewed positively
PETALING JAYA: The market is viewing positively Mah Sing Group Bhd’s latest acquisition of a 78% stake in Cosmowealth Housing Development Sdn Bhd (CHD) for RM55mil, coming just two weeks after the acquisition of five plots of freehold land in Kuala Lumpur.
Mah Sing, which has almost zero gearing, has now made two acquisitions within a short space of time after a two-year hiatus from landbanking activities.
Analysts said the latest acquisition could lift the property developer’s sales target and a possible re-rating catalyst for its share price.
The positive stance also came as CHD, a private development company, had earlier inked a sale and purchase agreement to buy three parcels of adjoining land measuring 8.5 acres in Sentul for RM95.1mil. CHD intends to keep its 22% stake.
CIMB Research kept its “add” call with a higher target price of RM1.85, from RM1.52 previously.
It cut financial year ending Dec 31, 2017 (FY17) to FY18 forecasts by 2% to account for higher marketing expenses, but raised FY19 forecast earnings per share by 5% to reflect earnings contribution.
“Potential upward revision in its sales target is a possible re-rating catalyst for Mah Sing’s share price. Although this acquisition raises the group’s remaining gross development value (GDV) by 4%, its surplus value lifts its realised net asset value (RNAV) by only 0.5%.
AmInvestment Bank Research (AmInvest) upgraded Mah Sing to a “buy”, from “hold” previously, with a higher fair value of RM1.68.
This is based on a 30% discount to its RNAV due to the expected positive contribution from the proposed development from the financial year 2018 onwards.
“Mah Sing plans to develop an affordably priced residential development named M-Centura on the land with an estimated GDV of RM1.3bil.
“We are positive on the acquisition, as Mah Sing could gain access to 8.5 acres of mature and strategic land, about 8.3km from Kuala Lumpur City Centre. And since the development is targeted towards the affordable segment of the market,” said AmInvest in its note.
AmInvest believes the price paid for the deal was fair since it was towards the low end of the price range for the area.
“We are also positive since the land costs make up only 7.3% of the project’s GDV and also since it would contribute towards better project profitability.
KAF-Seagroatt and Campbell Securities Sdn Bhd (KAF) initiated a ‘buy’ rating with an unchanged target price of RM1.80, pegged to 36% discount to KAF’s net asset value (NAV) of RM2.81.
Mah Sing still offered the best proxy robust residential demand, KAF said.
“Assuming a plot ratio of eight times, we estimate the break-even cost to be around RM400 sq ft. Based on the indicative selling price from RM500 per sq ft, the development margin is at least 20%.
“We believe that the market response would be strong given its strategic location, big residential catchment areas at the centre of mature townships and affordable pricing,” noted KAF. Based on the last traded price of RM1.52, KAF noted that the stock was trading at a depressed 46% discount “to our NAV of RM2.81.” to