Mah Sing has purchased 6.2 acres of leasehold land in Taman Desa, Kuala Lumpur for RM108mn, marking its third land acquisition in 2024. This newly acquired land is planned for a mixed development, which is expected to generate an estimated GDV of RM1.01bn. Overall, we are positive about the proposed acquisition, given its strategic location and reasonable acquisition price (land cost to GDV ratio of 11%). Maintain Buy with an unchanged TP of RM2.05/share, based on SOP valuation.

Buying 6.2 Acres of Leasehold Land in Taman Desa for RM108mn

Mah Sing announced that it had entered into a conditional sales and purchase agreement with Datuk Bandar Kuala Lumpur for the proposed acquisition of 6.169-acre leasehold land in Taman Desa, Kuala Lumpur for RM108mn (or RM401.9psf).

A Mature Neighbourhood With Readily Available Amenities

Located adjacent to the former Desa Waterpark in Taman Desa, the land benefits from excellent accessibility via several expressways, including MEX Highway, Federal Highway, New Pantai Expressway, Setiawangsa-Pantai Expressway, SPRINT Highway, SMART Tunnel, and KL-Seremban Highway. The land is also conveniently situated near Bandar Malaysia. Since its development in the 1970s, Taman Desa, located off Jalan Klang Lama and the East-West Link Expressway, has been sought-after. Its prime location offers easy access to the city centre, Mid Valley Megamall, KL Sentral, Bangsar, and major suburbs like Petaling Jaya and Cheras.

See Appendix 1 for the location of the land.

Mixed Development With a Potential GDV of RM1.01bn

According to the preliminary plan, the total GDV of the new development, which will be named M Aspira, is approximately RM1.01bn. I. It is earmarked for a mixed-use development with approximately 1,600 residential units on 3.7 acres and approximately 800 units of Residensi Madani on a 2.47-acre site. The development offers three layout options, with indicative sizes of 708 sqft, 858 sqft, and 1,008-1,011 sqft, indicatively priced from RM448,800 onwards (or RM600-620 psf).

Aligned with the group's quick turnaround strategy, the management plans to launch an awareness program and registration of interest for the development in 3Q24, pending approval from the relevant authorities. M Aspira is designed to attract urbanites, first-time homebuyers, and foreign buyers under the Malaysia My Second Home (MM2H) program, offering the vibrancy of city living combined with suburban tranquillity. With the new requirement for MM2H holders to purchase a house with a minimum value of RM600,000 under the Silver category, M Aspira presents a highly attractive option for both local and foreign buyers.

Positive on the Deal

The land cost of RM108mn represents 11% of the total GDV, which falls below the general rule of thumb of 20%. This indicates a favourable land cost-to-GDV ratio. Besides, the purchase price (RM401.9psf) is about 6% higher than Avaland’s acquisition of a 3.9-acre freehold land in Taman Desa for the development of Aetas Taman Desa in March 2023, which was priced at RM380.3psf. Considering these factors, we believe the acquisition price is reasonable.

This land acquisition aligns with Mah Sing's strategy of acquiring prime locations in Greater Kuala Lumpur, Penang, and Johor to expand its M-Series projects. Following this acquisition, Mah Sing’s landbank will increase to 2,440 acres, with a remaining GDV of RM26.7bn. In terms of funding, Mah Sing's robust balance sheet with a net gearing of 0.06x and a cash balance of RM966mn as of March 2024, positions the company well for more land acquisitions in the future.

Impact

No change to our FY24-26 earnings forecasts for now, pending the completion of the acquisition.

Valuation

We Maintain Our Buy Recommendation With An Unchanged TP of RM2.05/share, Based on SOP Valuation.

Source: TA Research - 4 Jul 2024