PETALING JAYA: Mah Sing Group Bhd
is expected to rake in a substantial net gain from the potential sale of a parcel of land in Meridin East, Johor to a data centre player.
The property development company is reportedly in negotiation to sell the 42.52 acres for the development of a data centre, with potential of up to 300MW.
According to Hong Leong Investment Bank (HLIB) Research, the land sale proceeds could range from RM185mil to RM260mil, assuming a selling price of RM100 to RM140 per sq ft.
“The net profit margin for the land sale should be very attractive.
“This is given that the land was acquired at a historical cost of around RM7 per sq ft,” the research house wrote in its report. “Note that the current land cost is higher given that the group subsequently invested in infrastructure while there may also be some holding costs to the land from interest capitalised,” it added.
HLIB Research maintained its “buy” call on Mah Sing, with an unchanged target price of RM1.95.
“We continue to like the stock as the group is expediting the pace of activating its land bank riding on the current recovery in property market.
“Its expansion into the industrial segment, regional venture of plastic manufacturing and investment into data centres are providing the group with new levers of growth,” it explained.
Mah Sing’s Southville data centre hub, with 150 acres and 500MW capacity, for the first partnership with Bridge Data Centres, is progressing well, with design work already completed.
“Bridge is now finalising the terms with its off-takers, which is expected to be completed within six months.
“Thereafter, construction work would be able to commence.
“We understand that Mah Sing intends to hold at least 20% and up to 30% stake in the joint-venture (JV) with Bridge in order to equity account the contribution from the JV,” HLIB Research noted.
Under the JV, Mah Sing would provide services such as construction of core and shell building and infrastructure as well as planning and approvals.
This may form part of the capital contribution to the JV in addition to the land injection.
“For the same data centre hub, Mah Sing is currently in advanced negotiation with another player for a second parcel of land for up to 90MW capacity.
“We understand that the structure of the partnership will be different from Bridge but should still provide Mah Sing with a recurring income stream,” HLIB Research said.
RHB Research said it expected news flow of its investment in the data centre segment to continue driving investor interest in Mah Sing.
“Following the 100MW with Bridge, Mah Sing is now in advanced negotiations for the next plot of land in Southville data centre hub (capacity: 90MW).
“In Johor, about 42.5 acres of land in Meridin East could be up for sale to a data centre player as well,” the research house pointed out.
It added that it expected the group to lock in a substantial land sale gain in 2025.
RHB Research reiterated its “buy” call on Mah Sing, with an unchanged target price of RM2.26.
Mah Sing posted a net profit of RM120.26mil, or 4.84 sen a share, in the first half of 2024 (1H24), against earnings of RM100.53mil, or 4.14 sen a share, in 1H23, while revenue dipped to RM1.14bil from RM1.29bil.
As at end-June 2024, it had RM911.5mil in cash and bank balances and investment in short-term funds, as well as a low net gearing of 0.10 times.
TA Research pointed out that Mah Sing’s recent launches have consistently shown strong market acceptance, maintaining an impressive take-up rate of over 90%.
This indicated that the demand for affordable housing in urban areas remained robust.
The reseach house noted that with eight-month sales already accounting for 66% of the group’s 2024 sales target, Mah Sing should be on track to achieve its sales target of at least RM2.5bil.
TA Research kept its “buy” call on Mah Sing, with unchanged target price of RM2.11.
