First land deal of the year
? Mah Sing is acquiring 6.9 acres of land in Mukim Tebrau, Johor Bahru, for
RM39m. The land has a potential GDV of RM469m.
? The deal marks the first land acquisition by Mah Sing in 2022, and we expect
more land deals to be in the pipeline. Reiterate Add.
First land deal in 2022
? Mah Sing today announced that it is acquiring a parcel of freehold land measuring 6.9
acres in Mukim Tebrau, Johor Bahru, for RM39.3m, from Dynasty View Sdn Bhd. The
land comes with a converted title for serviced apartment development. This translates
into an acquisition cost of c.RM130 per sq ft, which is fair in our view, as the acquisition
costs of similar transactions range between RM118 and RM135 per sq ft.
? The land is located 6.5km away from Mah Sing’s Johor office in the matured township
of Austin Perdana and is expected to have a huge target catchment as it is within the
vicinity of matured neighbourhoods, such as Taman Seri Austin, Taman Setia Indah,
Taman Mount Austin and Bandar Dato’ Onn. It is 5km from the North-South Expressway
interchange and 8km from the Pasir Gudang Highway Interchange.
M Minori – affordable serviced apartments in Johor
? Mah Sing estimates that the land has a gross development value (GDV) of c.RM469m,
translating into a lucrative land cost-to-GDV ratio of 8%, below the industry’s normal
20% threshold. The group aims to launch the Tebrau project — M Minori — by 4Q22F,
subject to market conditions and relevant authorities’ approvals.
? The mixed development will comprise three blocks of serviced suites with an indicative
starting price of RM260,000 per unit to cater to the strong market demand for affordable
residential properties. This development also features some retail lots, with plans to
accommodate drive-through food and beverage outlets.
? Mah Sing plans to fund the land deal via internally generated funds and borrowings. We
estimate that its net gearing ratio could increase by 1% pt from c.33%, as at end-Mar
22, after factoring in the land acquisition; this would still be at the lower end vs. its peers’
0.35x.
Reiterate Add
? We expect this deal to further strengthen Mah Sing’s development portfolio in Johor and
competitive positioning in the affordable segment. We believe the group will likely
continue to scout for more land in strategic locations, as there could be good bargains
amid a soft property market.
? Our SOP-based TP is unchanged at RM0.75. Reiterate Add, given its strong sales
momentum, additional contributions from its glove unit, and decent dividend yields of 4-
5% for FY22-24F. Potential re-rating catalysts are additional contributions from its glove
unit, solid balance sheet and decent dividend yields. Downside risks are a sudden
deterioration in property market sentiments and weaker property sales.