Tuesday, 4 July 2017

(NST) Mah Sing's 'loss' of two land deals a blessing in disguise, says Kenanga Research

KUALA LUMPUR: Mah Sing Group Bhd’s “loss” of two land deals is a blessing in disguise, Kenanga Research said.

Mah Sing on Monday announced the termination of the sale of its 51 per cent stake in the Kota Kinabalu Convention Centre (KKCC) project and the Sultan Salahuddin Abdul Aziz Shah Golf Course (SSAAS) land deal.

“Overall, we see the loss of KKCC and SSAAS land deals as a blessing in disguise as the market is fairly soft in Kota Kinabalu, Sabah while the very high-end residential market segment of SSAAS may require longer gestation periods,” Kenanga Research said.

In total, Mah Sing is expected to have lost an effective gross development value (GDV) of RM3.07 billion.

But this was partially offset by replenishing about RM2.35 billion in GDV from two new land deals, said Kenanga Research, which reiterated its “market outperform” tag on Mah Sing with a target price of RM1.67.

In its Monday statement, Mah Sing also announced the acquisitions of 11.23 acres in Cheras for RM263.48 million and 10.89 acres in Bukit Mertajam, Penang for RM43.80 million.

Hong Leong Investment Bank Bhd (HLIB) is mildly positive on both the new land deals and termination of the “old” deals.

The firm said overall, the move would enable Mah Sing to refocus its strategy on Klang Valley area as well as affordability segment.

HLIB said assuming an earnings margin of 25 per cent and 17 per cent respectively, the proposed developments of the Cheras and Bukit Mertajam land are expected to generate net present values (NPVs) of RM239 million or eight sen per share.

The “terminated” deals, meanwhile, are expected to reduce its real net asset value by 3.2 per cent or eight sen per share.

Imputing the effect of these proposals, HLIB revised upward Mah Sing’s earnings for financial year 2018 by 1.2 per cent and 1.9 per cent for financial year 2019.

The firm kept its “hold” call on Mah Sing with higher target price of RM1.57 from RM1.56 based on unchanged 35 per cent discount on RNAV of RM2.42.