We met up with the management recently to get more clarity on the latest land deal with Mammoth Empire Holding SB and its launches in the pipeline, especially in their flagship development, Damansara Perdana. We understand that the recent JV to develop an 11.8-acre plot of land is located at a difficult terrain adjacent to the existing residential development of Mammoth Empire i.e. Empire Damansara, and hence the lower than expected land price of RM160psf. As for new projects, the plan is to launch at least one project this year, with 3 more projects on the drawing board with combined estimated total GDV of c. RM1bn. Separately, MK land's 2QFY15 results are expected to be released on Feb 16, 2015.

JV with Mammoth Empire. The JV to develop an 11.8-acre plot of land in Damansara Perdana, whereby MK Land will get a minimum of RM82.1m or RM160psf appears to be cheap if compared to the Group's land deal back in April 2013, which was transacted at RM200psf. However, we understand that the land is located adjacent to Mammoth Empire's existing project i.e. Empire Residence and was thought to be too challenging for development due to the steep slopes and lack of accessibility, and hence not included in the net land calculation of c.157 acres that was deemed feasible for development in the Group's flagship area. Hence, we believe the JV is a win-win situation as MK Land will get more value from its landbank and Mammoth Empire will expand its existing project, which we understand is selling well. The sales proceeds with be progressively billed, with the project expected to commence within six months and development period not exceeding six years.

Projects in the pipeline. As reported earlier, MK Land expects to launch one project in Damansara Perdana this year to replenish the waning unbilled sales, which is now at c.RM300m, due to lack of launches and slow sales of existing project i.e Rafflesia. Pending approvals, the project to be unveiled is said to have GDV in excess of RM200m (average selling prices: RM700psf). Other projects include a 7-acre development in Damansara Damai and 17-acre development (3 phases, c.RM500m GDV) in Damansara Perdana.

Maintain Outperform and TP of RM0.80 or 50% discount to our RNAV estimate. The next catalyst in our view will come from launching more projects, especially in their crown jewel Damansara Perdana, to maximize returns from the Group's prime landbank. The latest land deal is expected to strengthen the balance sheet further, and hence potentially translating into more cash dividends for shareholders.

Source: PublicInvest Research - 11 Feb 2015