Analysts positive on Mah Sing’s property project near RRI

PETALING JAYA: The market is viewing the proposed multi-million ringgit project by Mah Sing Group Bhd near the Rubber Research Institute (RRI) positively due to several factors including its proximity to a mass rapid transit (MRT) station.

Analysts are generally positive on Mah Sing’s land purchase mainly because it is located in a prime area.

Maybank Investment Bank (Maybank IB) said in a report that it was “excited” about Mah Sing’s land acquisition in Sungai Buloh as it was opposite a future MRT station.

Thus, it has a “hold” call on the stock after adjusting its financial year 2014 (financial year 2014/2015) earnings forecasts by minus 0.2%/2% and revised net assets value (RNAV) by an additional 7 sen to factor in the new project.

“Our target price is raised to RM2.15 (+5 sen) on an unchanged 35% discount to RNAV of RM3.31. We are (also) positive due to its fair pricing compared with current asking prices of RM 216- RM 250 per sq ft around that area.

“We believe the slightly higher price tag is justified by its strategic location with excellent connectivity,” Maybank IB said.

Meanwhile, Kenanga Research said in a report that it was “neutral-to-positive” on the acquisition, noting that the announcement was largely within its expectation as landbanking should come after the recent cash-call exercise of RM400mil.

“Positively, the payment is paid progressively in three tranches over six months versus the typical three months from the sale and purchase agreement while there is another nine months’ extension, subject to the vendor obtaining approval for a plot ratio of not less than 1:4.

“The land is ready to be developed as we understand there is not much infrastructure work to be done except a bridge connection to the MRT,” it said.

Kenanga noted that the land cost was considered “fair” as it only made up 11% of gross development value and that Mah Sing should be able to reap 25% profit before taxes margin.

It added that the impact on net gearing was minimal, being main- tained at 0.3 times due to the progressive payment structure.

The project is expected to boost Mah Sing’s bottom line from financial year 2015 onwards, assuming the company launch it by early financial year 2014.

“As a result, there are no changes to its financial year 2013 and 2014 estimated earnings,” it added.

Kenanga rated the stock a “market perform” with a target price of RM2.40 based on a 20% discount to the unchanged fully-diluted sum-of-parts RNAV of RM2.98.