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Tuesday, November 13, 2007

Consortium eyes strategic stake in Mah Sing

A consortium of Middle East and Malaysian blue-chip institutional and individual investors is eyeing a strategic stake in established property developer Mah Sing Group Bhd, sources said yesterday.

The local, Abu Dhabi and Kuwait investors are the ones who have been steadily purchasing real estate in Malaysia and investing in the property boom in the country in recent months.

In control: With a 40 percent shareholding Leong would continue to maintain a controlling stake in the firm

"They are eyeing a strategic stake in Mah Sing to complete part of the Middle East-Southeast Asia property value chain," one source told Business Times.

"Partnering with the current major shareholders and management of Mah Sing will likely be the vehicle of choice for the investors' Southeast Asian expansion plans.

"This is especially due to its strong cash balances, low gearing, solid management and good track record. Mah Sing, with its financial muscle and niche offerings, is of strong appeal to the consortium of investors," the source added.

The sources declined to identify the potential investors in the consortium and Mah Sing officials were unavailable for comment.

Mah Sing's share price closed at RM1.71 on Bursa Malaysia yesterday.

The sources said the company was currently trading at an attractive valuation and the consortium was likely to enter into an equal partnership in buying a strategic stake in the developer.

The current controlling shareholder Datuk Seri Leong Hoy Kam, with 40 per cent stake, would continue to maintain a controlling stake in the firm and retain management control, they added.

Institutional investors such as Capital Group International Inc and Koperasi Permodalan Felda are other stakeholders with holdings of 9.7 and 8.6 per cent respectively in the company.

The deal would likely vary from the manner in which Middle East investors recently bought into construction firm, Putrajaya Perdana, and water works company Loh & Loh Corp Bhd.

In Putrajaya Perdana and Loh & Loh, the Middle East investors together with local investors took control of the companies by buying major stakes in both of them, triggering a general offer.

Mah Sing is an established developer with 14 projects spread across the Klang Valley, Kuala Lumpur, Penang and Johor Baru.

It is one of the few local Malaysian developers who have received international awards such as the International Property Award 2007 in association with CNBC in London for its Damansara Legenda project in Petaling Jaya.

The latest investor interest in Mah Sing follows moves by investors from Abu Dhabi institutions such as Mubadala Development Company and Aldar, along with Kuwait Finance House and others to pour billions of ringgit to purchase land in the Iskandar Development Region in Johor and elsewhere.

Prominent individual investors from the Gulf and Malaysia also secured controlling stakes in companies such as Putrajaya Perdana and Loh and Loh, both companies with healthy cash piles and negligible debt, to enhance their bids for Malaysian, Abu Dhabi and Kuwait projects.

"With the potential tie-up of the consortium of investors in Mah Sing, the company's ability to grow further locally, regionally and in the Middle East is set to be very good," said the source.

Based on its closing price of RM1.71 yesterday, Mah Sing is currently traded at a prospective price earnings ratio of nine times and seven times for financial years 2008 and 2009 respectively, analysts said.

Mah Sing is traded at a deep 40 per cent discount to its revised net asset value of RM2.86 as estimated by Macquarie Research.

Deutsche Bank (target price of RM3.02), CIMB (target price of RM3.00), Aseambankers (target price of RM3.00) and SJ Securities (target price of RM3.15) have all placed a buy on Mah Sing stock.

The company has a dividend policy of 40 per cent of net profit as dividends for the 2007 financial year.

The group's market capitalisation has doubled to over RM1billion to date from RM511 million as at end 2006.

By New Straits Times

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