PETALING JAYA: Mah Sing Group Bhd
’s move to acquire more land in Johor and its proposed development there is welcomed by analysts who have in turn raised their valuation for the property developer.
CIMB Securities stated Mah Sing’s purchase of 100.4 acres of land in Pulai, Johor from Amanah Raya Bhd for RM103.7mil or RM23.70 per sq ft is in response to growing demand for residential property there.
The proposed RM1.45bil gross development value (GDV) M Tiara 2 development planned for the site reflects Mah Sing’s management aim to benefit from the infrastructure buildup in the southern state such as the Rapid Transit System (RTS) link to Singapore.
“We are optimistic on the project as we view this as a pre-emptive strategy by Mah Sing’s management due to the anticipated growing demand in Johor’s property market. The project could also benefit from the RTS link as it is located around half an hour drive from the RTS Bukit Chagar Station,” the research house stated in a report on the property developer following announcement of the deal.
CIMB Securities expects a good take-up rate for the residential units proposed for M Tiara 2, which is located near established townships such as Mutiara Rini and Lima Kedai.
Hong Leong Investment Bank (HLIB) Research added the M Tiara 2 project is likely to enjoy a brisk take-up rate once launched in the first quarter of 2025, given the strong interest demonstrated for Mah Sing’s M Tiara development nearby.
“We expect M Tiara 2 to have a similar margin as M Tiara as the higher margin from the landed homes is balanced out by the lower margin from the affordable serviced apartments.
“The group should be able to extract more value from M Tiara 2 due to the higher GDV per acre,” the research firm stated.
HLIB Research forecast a pre-tax profit of 18% on the proposed project, assuming a six-year development period.
The project is expected to contribute annual earnings of around RM33mil or 1.3 sen earnings per share (EPS) to Mah Sing from financial year 2026 (FY26) to FY30.
Post-acquisition of this land, Mah Sing’s landbank and GDV will increase to 2,478 acres and RM26.12bil respectively.
CIMB Securities expects Mah Sing to sustain its positive earnings trajectory in FY24, backed by the anticipated completion of development such as M Oscar, Sensory Residence, M Arisa and Meridin East property projects, which will also boost free cash flow by RM500mil.
“This provides the group with the war chest to pursue more land acquisition in Johor and Klang Valley,” the research firm added. The positive outlook for earnings could see more investor interest in Mah Sing despite the recent share price rally the company experienced.”
CIMB Securities has kept its “buy” call on Mah Sing and raised its target price to RM1.55 a share from RM1.16 on factoring in a lower discount to its revised net asset value as the group increases its footprint in Johor.
This will be helped by the faster turnaround and monetisation of its landbank and taking into account its low net gearing ratio of 0.2 times (compared to industry average of 0.3 times) despite Mah Sing’s aggressive land banking exercise.
TA Research, meanwhile, stated the new land acquisition by Mah Sing aligns with its strategy of acquiring prime locations in greater Kuala Lumpur, Penang and Johor to expand its M-Series projects.
The strong Singapore dollar creates an opportune market landscape for M Tiara 2.
“The evident demand is seen in the remarkable sales of M Minori in Taman Seri Austin, with Tower A selling out its 252 non-bumiputra units over a single weekend in November 2023.
“M Tiara attracted over 5,000 registrants within 10 months for its 754 units of double storey terrace and cluster homes.
“With such promising demand indicators, we believe M Tiara 2 is well-positioned to capitalise on potential spillover demand from M Minori and M Tiara,” TA Research stated in a report on the developer.”
