Mah Sing buys prime land
The proposed projects in KL and Penang will have GDV of RM2.35bil
PETALING JAYA: Mah Sing Group Bhd has acquired two parcels of prime land in Cheras, Kuala Lumpur and Bukit Mertajam, Penang for an integrated development and a business park respectively.
The proposed projects would have an estimated combined gross development value (GDV) of RM2.35bil.
The group said in a statement that it would acquire Cordova Land Sdn Bhd, which has an offer accepted by DBKL to purchase 11.233 acres opposite Courts Mammoth along Batu 2.5 Jalan Cheras.
The land is 1.8km from the Sunway Velocity Mall and will be developed into M Vertica, an integrated development with an estimated GDV of RM2.2bil.
“The total consideration of up to RM263.48mil or RM538 per sq ft after taking into consideration the share sales, land cost, reconstruction and upgrading cost, estimated at RM25mil allocated for the Kuala Lumpur Badminton Stadium, is at a discount from the indicative market value of the surrounding land, as per an indicative valuation by Rahim & Co at RM333.18mil or RM680 per sq ft,” the group said in the statement.
Mah Sing said PricewaterhouseCoopers has also been appointed to conduct due diligence on Cordova.
It said that under the share sale agreement, the shares in Cordova would be paid over a maximum of 21.5 months, subject to completion of the vendor’s obligations.
“The prime KL city location coupled with the affordable entry level pricing provides an unbeatable value proposition.
“We are looking at residential suites from 850 sq ft at an indicative price from RM450,000 or RM529 per sq ft and a choice of bigger units at 1,000 sq ft,” Mah Sing’s group managing director Tan Sri Leong Hoy Kum said.
“The Maluri mass rapid transit (MRT) and light rail transit (LRT) interchanges are only 600m away and Taman Pertama MRT Station is only 800m from M Vertica. Upon the completion of the MRT Line 1, Sunway Velocity Mall, My Town Shopping Centre and Ikea Cheras will be within walking distance from the Cochrane MRT station.
“It is also easily accessible via Jalan Cheras and is 300m away from thw Besraya Highway,” he added.
Mah Sing said the location and product met the current market demand as well as the company’s quick turnaround strategy due to the connectivity, established catchment, ready infrastructure and amenities.
Meanwhile in Penang, the group acquired 10.89 acres of freehold land in Bukit Mertajam along the south-western side of Jalan Permatang Tinggi.
The group said that the purchase price of RM43.8mil included the costs for conversion premium, land clearance, earthworks and development planning which have already been paid by the vendor.
According to a valuation report by PPC International Penang Sdn Bhd, the market value of the land is RM45.31mil.
“The land, with development order obtained and earthworks done, is ready for immediate development which fits in well with the quick turnaround model of the group,” it said.
Mah Sing said it planned to develop an industrial park using the award winning iParc concept.
The proposed development, with an estimated GDV of RM150mil, will offer well-conceptualised multi-functional industrial spaces comprising a mix of shop offices and light industrial factories.
On another matter, the group said it had mutually agreed to terminate the sales and purchase agreement with the vendor of 85.43 acres in Sultan Salahuddin Abdul Aziz Shah golf course, Selangor after the land conversion approval and consent to transfer were not fulfilled.
This termination will allow Mah Sing to focus on affordably priced products in other developments rather than high-end products, it said.
It also sold its 51% equity interest in Convention City Development Sdn Bhd to Diverse Capital Sdn Bhd for RM6.557mil.
The stake was acquired on May 27, 2013 for RM1.632mil as Convention City has a development agreement to develop 8.33 acres next to the Sabah International Convention Centre.
“We will continue to streamline our portfolio of landbanks to fit our business strategies and match current market demand.
“With the new acquisitions, currently Klang Valley yields 67% of our remaining GDV and unbilled sales, and we target to increase it to 75% within the next two to three years.
“To match market demand, we will choose lands that can be developed into quality homes with affordable pricing,” Leong said.
HLIB Research is neutral on the recent electric tariff announcement, because the Government will compensate RM1.3bil to Tenaga Nasional Bhd (TNB) to cover higher energy fuel costs under the imbalance cost pass-through (ICPT) mechanism.
Last week, the Government announced the continuation of the tariff rebate of 1.52 sen per kWh for the second half of this year, despite the increase in fuel energy costs.
The research house said that the actual tariff rate was supposed to be 39.55 sen per kWh compared to benchmark 38.53 sen per kWh due to the rising fuel costs.
However, the Government has decided to maintain the tariff at 37.01sen per kWh and bear the differential of 2.54 sen per kWh, amounting to RM1.3bil in total costs.
It pointed out that the announcement will allay investors’ concerns on the Government’s commitment in honouring incentive-based regulation (IBR) and ICPT mechanisms even in the event of high fuel costs.
Presently, coal price and the ringgit have both been relatively stable, relieving concerns on further increases in coal fuel costs.
However, HLIB expects gas price to increase further by RM1.50 per mmbtu for every six months until market price of RM26 per mmbtu is matched.
HLIB said TNB’s earnings and cash flow are expected to be stable due to the implementation of the IBR/ICPT mechanisms.
The expected IBR revision to lower return on regulated assets by 2018 will be offset by new contributions from associates and power plants.
HLIB said it has maintained a buy call on TNV with target price of RM17.00. It remained positive on TNB’s long term growth and strong cash flow.
It added that TNB’s shareholders stand to receive higher dividend yields of up to 5% compared to 2%-3% historical, based on the updated dividend payout policy of 30%-50% of net income. Among the risks on TNB are disruption in energy fuel supply, IBR-ICPT suspension and unscheduled power plant shutdowns.
Lower allowable return on assets for the transmission and distribution segment for the next IBR review in 2018 would also pose risks on TNB.
CYPARK Resources Bhd’s second quarter ended April 30, 2017 core net profit fell 27% year-on-year (y-o-y), mainly due to the recognition of RM5.2mil in the employee stock option scheme (ESOS).
Excluding this, CIMB Research said Cypark’s operating profit rose 7% y-o-y in Q2 to RM23mil, driven by the environmental engineering (EE) performance.
EE’s operating profit rose 27% y-o-y to RM15mil in the quarter, which offset the marginally weaker performance in all other divisions and lifted the group’s overall operating profit.
Cypark issued 23.1 million ESOS options to its directors and employees at RM2.12 per share, which resulted in the RM5.2mil of non-cash expense being recognised in Q2.
Based on Cypark’s existing employee share option scheme that runs from October 2015 to October 2020, the company is allowed to issue up to 15% of its initial paidup capital.
CIMB said the 23.1 million ESOS options issued represent about 9% of the initial paidup capital of Cypark.
While the ESOS issuance was negative for Cypark’s earnings, CIMB said it was positively surprised that the company’s EE division’s external revenue registered 37% growth in the first half of FY17 and 28% growth in Q2.
Cypark’s EE is the division that provides environment-related services such as landfill closure and wastewater treatment. It is also the key earnings contributor for Cypark among its non-renewable energy (RE) businesses.
In FY16, EE contributed 87% of Cypark’s non-RE pre-tax profit.
CIMB pointed out that the increase in EE’s external revenue eases concerns that Cypark’s EE earnings may drop drastically when it completes a key internal project – Cypark’s waste-to-energy (WTE) plant in Negeri Sembilan.
Cypark’s EE division is a key contractor of the WTE plant that is scheduled to complete by the end of this year and the EE division has been recognising construction profits related to the development of the WTE plant.
CIMB said approximately 80% of Cypark’s EE pretax profit in FY16 was generated from internal projects.