Mah Sing has acquired 5.2 acres of freehold land along Old Klang Road, Kuala Lumpur for RM113mn, marking its fourth land acquisition in 2024. This newly acquired land is earmarked for a transit-oriented development with an estimated GDV of RM660mn. Overall, we are positive on this acquisition, given its strategic location and reasonable acquisition price (land cost to GDV ratio of 17%). Maintain Buy with an unchanged TP of RM2.40/share, based on SOP valuation.

Buying 5.24 acres of freehold land along Old Klang Road for RM113mn

Mah Sing announced that it has entered into a sales and purchase agreement with Pink Forest Sdn Bhd, a wholly own subsidiary of Team Keris Berhad, for the proposed acquisition of 5.24-acre freehold land along Old Klang Road, Kuala Lumpur for RM113mn (or RM495psf).

Strategic location with excellent connectivity

The land is strategically located along Old Klang Road, providing excellent access to major highways, including direct routes to Jalan Templer, NPE, and Jalan Puchong, as well as connections to KESAS, MEX, BESRAYA, and the Federal Highway. Located just 330m from KTM Jalan Templer Station and 450m from KTM Petaling Station, the site is ideal for a Transit-Oriented Development (TOD). It also offers convenient access to nearby amenities within a 5km radius, such as schools (SMK Petaling, SK Petaling 1 & 2, Sekolah Rendah Agama Al-Razi), higher education institutions (Kolej Kemahiran Tinggi MARA), medical facilities (Assunta Hospital, UM Medical Centre), and shopping centres (Pearl Point Mall, NSK Trade City).

See Appendix 1 for the location of the land.

Transit-oriented development with a potential GDV of RM660mn

The new development, named M Aurora, has an estimated GDV of approximately RM660mn, according to the preliminary plan. Subject to regulatory approval, M Aurora will feature serviced apartments and retail spaces, including drive-through units. Designed to appeal to working adults, families, and buyers looking for upgrades, the development offers two-, three-, and four-bedroom layouts, with sizes of 702 sqft, 852 sqft, and 1,005 sqft, respectively, and starting prices from RM468,800 (or RM668psf). In line with the group’s quick turnaround strategy, management plans to launch an awareness campaign and registration of interest in 1Q25.

Positive on the Deal

The RM113mn land cost represents 17% of the total GDV, below the typical 20% benchmark, indicating a favourable land cost-to-GDV ratio. Meanwhile, the purchase price of RM495psf is approximately 10% higher than Radium's acquisition of a nearby 3.7-acre land parcel (2.9-acre freehold, 0.8-acre leasehold) for the development of Radium Arena in June 2023, priced at RM450psf. However, we consider the premium justified, given M Aurora’s closer proximity to the KTM station, making it ideal for a TOD.

At an indicative starting price of RM668psf, M Aurora is competitively priced. Our market check reveals that upcoming high-rise residential projects in the area are priced around RM900psf near the Federal Highway or Mid Valley City — for instance, Gen Starz Residence near The Scott Garden starts from RM593,000 for a 650 sqft, 2-bedroom unit. In comparison, projects closer to Jalan Puchong are priced around RM650psf, with Radium Arena units starting from RM410,000 for a 658 sqft, 2-bedroom unit.

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 2,392 acres, with a remaining GDV of RM26.8bn. In terms of funding, Mah Sing's robust balance sheet with a net gearing of 0.1x and a cash balance of RM912mn as of June 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 RM2.40/share, based on SOP valuation.

Source: TA Research - 8 Nov 2024