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Wednesday, August 8, 2012

Increased investor interest on property player Mah Sing

PETALING JAYA: Property player Mah Sing Group Bhd is seeing increasing interest by investors and some analysts reckon the company is emerging nicely as a steady proxy to the Malaysian property sector.

The company's shares appreciated by some 16% over the last two weeks. However, it closed one sen down at RM2.41 yesterday.

“Given a changed competitive landscape, Mah Sing's ascendancy under the stewardship of its major shareholder Tan Sri Leong Hoy Kum should now firmly solidify its valuation from long overdue market recognition of its entrepreneurial spirit in driving net asset value growth,” said AmResearch in its initiation report.

In a poll of 14 analysts by Bloomberg, 10 analysts have a “buy” rating, three analysts have a “hold” rating while only one has a “sell” call. The consensus target price is RM2.54, while the consensus net profit for its financial year (FY) ending Dec 31, 2012 is RM220mil, and RM286.36mil for FY13.

Yesterday AmResearch rated a fair value of RM3.60 for Mah Sing, based on a mid-cycle discount of 25% to its estimated net asset value of RM4.80 per share. This fair value implies a price earnings of 12 times (x) on FY13 net income of RM260.2mil.

Its two large township projects would be its soon-to-be-launched Southville City in Bangi, with a gross development value (GDV) of RM2.2bil as well as the M Residence in Rawang, Selangor.

Mah Sing has a net gearing of 33%. It has bought over RM1bil worth of land in the past four years with about RM11bil in GDV.

AmResearch said that this year, the group had secured three parcels of land which will yield a total GDV of RM3.63bil or accounting for 73% of its 2012 GDV replenishment target of RM5bil. It currently has total estimated GDV of RM16bil.

“Mah Sing is well known for its small, niche, fast turnaround developments as the group does not own a single parcel of land bigger than 400 acres until the recent acquisition of the Bangi land,” said AmResearch.

“The group's sales are very much secured with current unbilled sales of RM2.5bil. It has achieved RM1bil in new sales up to the middle of May, or accounting for 40% of its sales target of RM2.5bil,”

“In the first quarter alone, it sold RM676mil worth of properties or a 21% growth year on year. Key contributors include Kinrara Residence, M City and M Residence 1,” said AmResearch.

AmResearch forecast earnings to expand by 24% to RM209.5mil in FY12 before growing by another 24% to RM260mil in FY13 and reaching RM320mil in FY14 in line with management's earnings growth target of 20%-25% per annum.

Industry observers also point out that part of the reason why Mah Sing is getting more attention now is due to a slight lessening of interesting in market leader SP Setia Bhd.

For close to a decade, SP Setia has held the spot of sector leader. However, the takeover of SP Setia by Permodalan Nasional Bhd (PNB) last year at a price of RM3.90, has seen its sector leadership being increasingly discounted, and this is evident from its share price.

Last month, SP Setia chief Tan Sri Liew Kee Sin exercised his put option for the first time, reducing his stake to 5.88% from 8.23%. The 2.35% block was worth RM178.53mil based on the transacted price of RM3.95. With that exercise, PNB has a 73.06% stake. SP Setia closed the day at RM3.53 down 7 sen.

Liew and PNB have entered into an agreement where Liew will continue to steer the company for a three-year period, and with no board changes during that time.

Interestingly, many analysts have said that the departure of Liew would see them downgrading SP Setia.

By The Star

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