Kuala Lumpur, May 29: The Mah Sing Group is making its second acquisition in two weeks, according to a report by CIMB. Located in Sentul, the land has a potential gross development value of RM1.3bn. This is a positive development as it could help the group beat its 2017 sales target.
Acquiring a plot of land in Sentul
Fresh from acquiring a plot of land in Titiwangsa last week, Mah Sing announced that it is acquiring a 78% stake in a private development company for RM55m. The development company will in turn acquire an 8.5-acre plot of land in Sentul, Kuala Lumpur, for RM95m. We gather from Mah Sing that the development company being acquired has little net assets. As such, the implied price for the 100% effective stake in the land works out to be about RM166m. We believe this is a fair price given its size and locality.
Raises remaining GDV to RM32bn
Located approximately 8.3km from KLCC, Mah Sing will undertake a residential development on the land comprising serviced apartments, with estimated gross development value (GDV) of RM1.3bn. This raises Mah Sing’s remaining GDV to RM32bn. Targeted to be launched in 2H17, units in the project will be priced starting from RM326k per unit, or c.RM500 psf.
Second acquisition of the year
This deal marks the second land acquisition undertaken by Mah Sing after a hiatus of more than two years. With a cash balance of RM923m as at end-FY16, the project only has a small impact on the group’s balance sheet strength, in our view. This acquisition also reaffirms our belief that Mah Sing has regained its appetite for landbanking. Future land acquisitions could potentially re-rate its share price as new landbank typically raises a property developer’s RNAV.
Hitting the sweet spot of residential property demand
With the two plots of land being acquired, there is a higher chance that Mah Sing could beat its sales target of RM1.8bn in 2017. Assuming that the land acquisitions progress smoothly, Mah Sing is on track to launch the new projects by 3Q17. With indicative prices of RM500-600 psf, these projects hit the sweet spot of the residential property market in the Klang Valley where there is strong pent-up demand from homebuyers and undersupply of properties in this price range in the past few years.
