RHB Research maintains ‘buy’ call on Mah Sing

Land deals will enable firm to concentrate on affordable housing

PETALING JAYA: Mah Sing Group Bhd’s move to acquire two new plots of land and terminate two previous land deals will enable the developer to stay focused on the affordable housing segment as well as the Klang Valley property market.

RHB Research, which maintained a “buy” call on the counter, noted that the acquisition of both new land parcels would be funded by the company’s RM650mil perpetual bond raised earlier.

On Monday, Mah Sing announced the acquisition of an 11.2-acre leasehold land in Cheras, about 1.8km away from Sunway Velocity Mall for RM263.5mil or RM538 psf.

It said the land would be developed into M Vertica, an integrated development with a gross development value (GDV) of RM2.2bil targeting first-time home buyers and an indicative pricing from RM450,000.

Mah Sing also announced the acquisition of a 10.89-acre freehold land in Permatang, for RM43.8mil, which would be turned into an industrial park under the company’s existing i-Parc concept with a GDV of RM150mil.

At the same time, the company announced the termination of two previous land deals in Shah Alam and Kota Kinabalu.

“Given that both the Sabah property market and the high-end segment (for the Shah Alam land) have been challenging, it looks like a wise move for Mah Sing to call off the acquisitions,” RHB Research said in a note.

The research house revised its financial year ending Dec 31, 2018 (FY18) to FY19 earnings upwards by 1% to 7%, as both new projects in Penang and Cheras will be launched in the second half of the year.

It also raised the target price RM1.70 from RM1.68. slightly to

CIMB Research, which has an “add” call, said all the announcements were collectively positive for Mah Sing’s share price.

“The land acquisitions reaffirm our view that Mah Sing has regained its appetite for land banking while more land banking could boost its near-term sales performance, which could re-rate its share price, in our view,” it said in a note.

It cut FY17to FY18 earnings per share (EPS) by 2% to 8% to account for higher marketing and administrative expenses related to the two projects, but raised FY19 EPS by 17% to reflect their earnings contribution.

“Apart from the boost to its medium-term earnings, these acquisitions could also help Mah Sing beat its sales target of RM1.8bil for 2017, in our view, if the projects could be launched by Q4 FY17 as schedule,” the research house added.

Mah Sing’s share price closed 1 sen higher at RM1.58.