Mah Sing - Plans RM690m project in Cyberjaya

Overwhelming response for Southgate project since its launch in 1Q08. To date, three of the blocks within Southgate, namely Vox, Vivo and Vertex have achieved 90% sales. Adding the en-bloc sale to Felda, the Southgate project has contributed about RM389m of sales (RM163m sales achieved from three blocks) for the Group. This represents about 87% of total RM448m GDV of Southgate within just one and a half year since it was launched in 1Q08.

2009 sales target met. The Group has achieved RM543m of sales to date with the en-bloc sale, thereby exceeding its 2009 sales target of RM453m as well as consistently reaching its average yearly sales target of RM500m over the past few years. In addition, this will enhance Mah Sing’s unbilled sales to RM800m.

Township development in Cyberjaya. The 115 acres of land in Cyberjaya will be developed into mid- to high-end gated residential development named Garden Residence with estimated GDV of RM690m (total housing of 760 units). Garden Residence will consist of 2-storey and 3-storey superlink houses, semi-detached and bungalows where pricing range from RM688,800 to RM1.4m or equivalent to RM234-RM438psf. The project is slated for launching in 2010.

Fast turnaround strategy still works under this project. We believe Mah Sing’s land acquisition strategy of switching from small parcels of matured areas to sizeable new township such as Cyberjaya will not affect its fast turnaround strategy as we believe that the project is still highly cash generative mainly due to: a) the project itself is already zoned for residential use and hence, the Group is able to fast track its marketing campaign as earlier as next year, and b) the project itself is saved from low cost components and infrastructure requirements which will save the Group’s land and construction cost.

More land acquisition on the pipeline. We understand that the Group is still scouring for more landbank (perhaps up to four more parcels) which are targeted for commercial and residential developments. The Group also intends to continue its deferred payment scheme (5/95 programme) as it expects the property market’s full recovery in 2H10.

We have revised up our 2009-11 net profit forecasts by 3-19% after factoring in the en-bloc sales of RM226m. However, we do not factor in the Cyberjaya development as details of the launch are not being given yet.

We upgrade our call to BUY with target price of RM2.30. Based on our target price, Mah Sing trades at 13x 2010F PE, which reflects its mid-cycle valuation. Our PE valuation for Mah Sing also reflects the Group’s asset-light and quick turnaround business model.