- We maintain BUY on Mah Sing Group with the fair value raised from RM3.60/share to RM3.90/share (@ 10% discount to NAV) following the acquisition of 89 acres of prime leasehold land, located just behind IOI Mall in Puchong’s CBD, for RM657mil.

-  In addition, Mah Sing disclosed that has entered into an MoU (four years) with its vendor to either acquire or form a JV for an additional 171 acres of land next to the existing land.

-  The GDV of the first 89 acres is c.RM9bil (development period: 10 years) and could rise by another RM16bil if the MoU land is crystallised. Funding terms are staggered – 10% to be paid upon signing of SPA with the balance 90% stretched over four years.

-  We are upbeat about Mah Sing’s increasingly astute moves in sourcing for value-accretive landbank. More importantly, we believe the implied land cost of RM170 psf (~7% of GDV) is attractive, as the land is arguably the last piece of sizeable land left within Puchong’s CBD.

-  Judging from the early success of Lakeville Residence@Taman Wahyu (85% take-up for first four blocks), we expect Mah Sing to do similarly well with this land in Puchong – earmarked as the group’s largest integrated mixed-development project in Malaysia.

-  It will offer serviced residences, office towers, retail lots, a retail mall and a hotel that targets the mass market as well as mid-to-higher income households. The maiden phase could be launched in 2H15, starting with executive suites that are priced from RM585k.

-  Moreover, the said land is ~seven times the size of Lakeville Residence, and four times that of Icon City. It serves as a natural extension to the buzzing Sunway- Puchong corridor (just south of Sunway City).

-  Accessibility to the land will be further enhanced with five LRT stops within a 2km-radius once the Klang Valley LRT Extension project is completed by 2016. Another key feature of this upcoming project is its lakeside views. Some 800 metres front a 160-acre lake, while another 550 metres face Sg. Kelang.

-  Mah Sing’s GDV pipeline will rise to c.RM50bil with this new Puchong landbank (RM66bil if the MoU land is crystallised), solidifying the group’s position as one of the largest Malaysian developers by GDV.

-  Mah Sing 1H14’s net profit rose 21% YoY to RM169mil – in line with estimates. The stock continues to trade at a steep discount of 43% vs. its NAV, despite its strong pre-sales pipeline and robust unbilled sales of RM4.8bil.

Source: AmeSecurities