CIMB Investment Bank: MAH SING, maintain BUY, higher target price of RM2.40

Mah Sing on a roll in landbanking

Mah Sing Group Bhd
(July 12, RM1.72)
Maintain buy with higher target price of RM2.40 (from RM2.30): Mah Sing’s acquisition of four parcels of land with gross development value (GDV) totalling RM1.2 billion last week exemplifies the group’s mastery of its tried-and-tested “quick turnaround” model.

Last week, Mah Sing announced the acquisition of four parcels of land — two in Puchong next to Bandar Kinrara, one in Bukit Jelutong and one in Sungai Buloh. All in, it is buying 167.8 acres for RM311.6 million. We take a positive view as the price tags are fair and the demand for mixed development, industrial and commercial properties in those locations should be strong. The four parcels with GDV potential of RM1.2 billion lift the group’s undeveloped and unrecognised GDV to RM7.5 billion.

So far this year, Mah Sing has acquired seven plots of land totalling 195 acres with a GDV potential of RM1.9 billion. We are raising our FY2010 to FY2012 EPS forecasts by 1% to 9% for the four new projects and the robust year-to-date actual sales. In 1QFY2010, Mah Sing sold a record RM601 million worth of properties, meeting 60% of its full-year target in a single quarter. At this rate, it could exceed RM2 billion in sales in 2010 if its upcoming condominium launches in Kuala Lumpur and Penang are well-received. There is further upside to our earnings forecasts if the response to its second half launches is strong and pretax margins are wider than our projections of 20% to 25%.

We take a positive view of the acquisitions as the price tags are fair and there are potential upside revisions to GDVs from its various projects, particularly the mammoth commercial project in Petaling Jaya, and the group’s total GDV could approach the RM10 billion mark.

Our target price goes up from RM2.30 to RM2.40, based on an unchanged 10% discount to our target market price-to-earnings-ration (PER) of 15 times. We continue to rate Mah Sing a buy, with the potential re-rating catalysts being continued strong news flow on landbanking exercises, and robust sales and accelerating earnings growth. — CIMB Investment Bank, July 12



This article appeared in The Edge Financial Daily, July 13, 2010.