PETALING JAYA: MIDF Research, TA Securities and HLIB Research have maintained ‘buy’ calls for Mah Sing Group Bhd following its first land acquisition in 2023.
Mah Sing is buying two parcels of land totalling 8.2 acres in Puchong, Selangor, for RM85.86 million from Millennium Acres Sdn Bhd to develop transit environment district (TED) projects with an estimated gross development value (GDV) of RM726 million.
The group intends to develop one of the parcels into a residential project (M Terra) and the other into a mixed-use development (M Hana).
MIDF Research said it maintains a ‘buy’ call on Mah Sing with a revised target price (TP) of RM0.75 due to its turnaround strategy of selling affordable homes in Klang Valley, which continue to see demand from home buyers.
The research house is positive on the land acquisition as it allows Mah Sing to expand its M Series affordable range of products in Klang Valley. It said the land acquisition will have a limited impact on the balance sheet as Mah Sing’s net gearing, expected to only increase marginally to 0.28 times from 0.27 times as of Sept 2022.
Meanwhile, TA Securities has a ‘buy’ call on Mah Sing with an unchanged TP of RM0.71 per share.
It is positive about Mah Sing’s purchase of the land due to its strategic location and reasonable acquisition price.
“The land cost makes up 11.8% of the total development value. The land cost to GDV ratio comes below the general rule of thumb of 20%. Additionally, the land comes with the benefit of a converted title for ‘Bangunan” which will expedite the development process,” it added.
TA Securities said with an indicative selling price of RM453 per square foot onwards, M Terra is reasonably priced compared with most new launches in Puchong.
The acquisition is part of the group’s focus to acquire prime land in strategic locations in greater Kuala Lumpur, Penang and Johor to expand its M Series.
“The acquisition will increase the group’s landbank to 1,925 acres with a total remaining GDV of RM21.9 billion. The group is on track to meet its sales target of RM2 billion and has set its sales target for 2023 to a minimum of RM2.2 billion (9MFY22 launches: RM867 million; 9MFY22 sales: RM1.69 billion),” it said.
In terms of funding, TA Securities believes Mah Sing’s balance sheet with net gearing of 0.27 times and a cash balance of RM500 million as of Sept 2022 should provide financial flexibility for the land acquisition and future land banking.
HLIB Research also maintains a ‘buy’ call on Mah Sing with a target price of RM0.84 based on sum of the parts valuation.
It is positive on the development due to the acquisition price with land cost-to-GDV of 11.8% and swift time to market as the tentative launch date will be in the second half of 2023 as well as affordable selling price of M Terra and its proximity to two LRT stations.
HLIB Research is also positive on the relaxing of conditions and speeding-up of foreign worker intake to expedite the unbilled sales which will bring positive contribution to its FY23 earnings.
It said the group’s net gearing will increase from 27.1% as of Sept 30, 2022, to 29.5%. Meanwhile, the GDV will increase to RM21.85 billion from RM21.12 billion as of Sept 30, 2022.
Overall, HLIB Research continues to like Mah Sing for its asset-light and agile business model which allows it to adapt and pivot its launching strategy to the changing sector dynamics.
“The group should also continue to enjoy resilient demand given the growing middle class in the region with an affordable price range of below RM500,000 housing segment,” it said.