PETALING JAYA: Analysts are positive over Mah Sing Group Bhd
’s growing presence in the industrial development space.
Last week, the property developer announced that it will be developing 185 acres of prime industrial development, named Mah Sing Business Park, Sepang, with an estimated gross development value of approximately RM728mil.
Hong Leong Investment Bank (HLIB) Research in a report noted that the company has vast experience in industrial developments.
“To date, it has completed five industrial parks that were launched between 1995 and 2012.
“We are positive on the venture, given that the industrial segment is attractive, having higher margins and shorter construction periods than residential developments.”
The research house added that demand for industrial space is supported by strong foreign direct investment flow.
“This segment is expected to lift earnings considerably, as it can be launched in parallel and without competing with its residential developments.”
HLIB Research said this latest industrial development can likely command a higher margin than the group’s high-rise residential development, which has an earnings before interest and tax (ebit) margin of around 18%.
“For the first phase of the development, assuming a conservative ebit margin of 20% and development period of four years, we estimate the group’s share of profit to be RM15.5mil per year, which would make up around 6.9% of our financial year 2025 (FY25) forecast. We maintain our forecasts pending completion of the acquisition.”
MIDF Research said the development will have a marginal impact on the company’s balance sheet.
“Mah Sing intends to fund the land acquisition via a combination of internally generated funds and bank borrowings. We estimate the balance sheet of Mah Sing to remain healthy post land acquisition, with net gearing expected to inch up marginally to 0.15 times from 0.13 times in the third quarter of FY23.
“Meanwhile, the development on the land will also be aligned with Mah Sing’s quick turnaround strategy, as the proposed development is expected to commence in the second half of FY24 and be developed over a span of three-to-four years.”
RHB Research said it is upbeat on the Sepang development.
“Apart from the land’s reasonable pricing, the company’s collaboration with a Chinese party should also ensure promising take-up of industrial properties in this project, in our view.
“The impact to our FY25 forecast earnings is minimal.
“Our new target price (of RM1.12 from 98 sen previously) is now based on a 50% discount to the revised net asset value from 55%, given improving sentiment in the property market.”
Mah Sing’s net profit grew 6.29% year-on-year to RM50.02mil in the third quarter ended Sept 30, 2023, on the back of revenues falling slightly to RM644.26mil from RM671.12mil in the same quarter a year ago.
For the year-to-date period, the company recorded revenue and pre-tax profit of RM1.93bil and RM226.8mil, which is a 17.3% and 15.6% improvement respectively compared with a year ago.
