Stock Name: MAHSING
Company Name: MAH SING GROUP BHD
Research House: MIDF
Mah Sing Group Bhd
(April 23, RM1.68)
Maintain buy at RM1.65 with target price of RM1.94: Launches from the M Suites@Jalan Ampang's development will be catered to local professionals and foreign buyers looking for affordable high-rise serviced apartments in the heart of KLCC. The residence will house units with built-ups between 430sf and1,150sf. In addition, the serviced residence will also house retail outlets on the ground floor of the development as well as recreational facilities such as a swimming pool and a podium roof garden. We believe the property will be able to garner strong interest given its strategic location coupled with convenient amenities with direct access to key access roads MRR2 highway, Smart highway and Maju Expressway. The estimated gross development value (GDV) is approximately RM257 million. The development named M Suites@Jalan Ampang will be housed under Mah Sing's new brand "M Suites" which offers mid to high end high-rise residences. Construction works is expected to commence by 2H10 and to be developed over three years.
Note that this is not Mah Sing's first venture into high-rise residence. We believe demand was supported by the successful response for its Icon Residence@Mont'Kiara and Icon Residence@Penang. Other high-rise condominium developments are located at Garden Plaza (Cyberjaya) and high-rise residence on the land parcel along Pykett Road (Penang). More so, the introduction of high-rise residence development will complete the group's product offerings and launch its brand name to compete with the likes of Ireka Corp Bhd and Sunrise Bhd.
The present ample supply of high-rise residential units in Kuala Lumpur City Centre (KLCC) presents further pressure on prices. Present yields have declined from 7% to 4%. Data collected by Henry Butcher indicate up to 19,455 new units (+40.5%) will be introduced through 2012. Nevertheless, we believe prices of residential properties will recover with the return of foreign interest and domestic investors favouring inflation-hedging asset class. We gather from key developers that present local investors are still keen on properties within KLCC, but are either looking for own-occupancy or smaller sized units, which are easier to disposed off in the market. We believe reception for M Suites@Jalan Ampang will be encouraging due to Mah Sing's brand name and on the back of the company's successful launch of the Icon Residence@Mont'Kiara and Icon Residence@Penang which have been receptive.
Inclusion of the M-Suites development could potentially raise EPS for FY11/12 by +5.4% and +15.0%, respectively. We have introduced our FY11 numbers, which also reflects contributions from the Pykett development (Penang) and M-Residences.
Our preliminary estimates suggest that the balance purchase sum of RM48.42 million will be financed via Debt/Equity of 70:30. Assuming an average financing cost of 4.5%, Mah Sing's gearing levels and interest coverage ratio remains fair at 0.31 times (versus peers of 0.55 times) and 30.6 times (versus peers of 22.8 times) which are in-line with its peers.
Maintain buy with an adjusted target price of RM1.94 (ex-bonus issue). Our target price is derived from the group's revised net asset value (RNAV) parity. Mah Sing remains our sector's top pick given its (i) proven ""quick turnaround model'' (ii) commendable GDV balance that provides strong earnings visibility, (iii) healthy balance sheet, (iv) steady historical dividend yield (4%-6%) and consistent mid-teens return on equity (ROE) (five-year average 15.7%). The group's year-to-date sales remain impressive at RM516 million, accounting for almost 50% of its FY10 target of RM1 billion. We remain confident the group is on track to meet its FY10's sales target with future launches. - MIDF Research, April 23
This article appeared in The Edge Financial Daily, April 26, 2010.
Company Name: MAH SING GROUP BHD
Research House: MIDF
Mah Sing Group Bhd
(April 23, RM1.68)
Maintain buy at RM1.65 with target price of RM1.94: Launches from the M Suites@Jalan Ampang's development will be catered to local professionals and foreign buyers looking for affordable high-rise serviced apartments in the heart of KLCC. The residence will house units with built-ups between 430sf and1,150sf. In addition, the serviced residence will also house retail outlets on the ground floor of the development as well as recreational facilities such as a swimming pool and a podium roof garden. We believe the property will be able to garner strong interest given its strategic location coupled with convenient amenities with direct access to key access roads MRR2 highway, Smart highway and Maju Expressway. The estimated gross development value (GDV) is approximately RM257 million. The development named M Suites@Jalan Ampang will be housed under Mah Sing's new brand "M Suites" which offers mid to high end high-rise residences. Construction works is expected to commence by 2H10 and to be developed over three years.
Note that this is not Mah Sing's first venture into high-rise residence. We believe demand was supported by the successful response for its Icon Residence@Mont'Kiara and Icon Residence@Penang. Other high-rise condominium developments are located at Garden Plaza (Cyberjaya) and high-rise residence on the land parcel along Pykett Road (Penang). More so, the introduction of high-rise residence development will complete the group's product offerings and launch its brand name to compete with the likes of Ireka Corp Bhd and Sunrise Bhd.
The present ample supply of high-rise residential units in Kuala Lumpur City Centre (KLCC) presents further pressure on prices. Present yields have declined from 7% to 4%. Data collected by Henry Butcher indicate up to 19,455 new units (+40.5%) will be introduced through 2012. Nevertheless, we believe prices of residential properties will recover with the return of foreign interest and domestic investors favouring inflation-hedging asset class. We gather from key developers that present local investors are still keen on properties within KLCC, but are either looking for own-occupancy or smaller sized units, which are easier to disposed off in the market. We believe reception for M Suites@Jalan Ampang will be encouraging due to Mah Sing's brand name and on the back of the company's successful launch of the Icon Residence@Mont'Kiara and Icon Residence@Penang which have been receptive.
Inclusion of the M-Suites development could potentially raise EPS for FY11/12 by +5.4% and +15.0%, respectively. We have introduced our FY11 numbers, which also reflects contributions from the Pykett development (Penang) and M-Residences.
Our preliminary estimates suggest that the balance purchase sum of RM48.42 million will be financed via Debt/Equity of 70:30. Assuming an average financing cost of 4.5%, Mah Sing's gearing levels and interest coverage ratio remains fair at 0.31 times (versus peers of 0.55 times) and 30.6 times (versus peers of 22.8 times) which are in-line with its peers.
Maintain buy with an adjusted target price of RM1.94 (ex-bonus issue). Our target price is derived from the group's revised net asset value (RNAV) parity. Mah Sing remains our sector's top pick given its (i) proven ""quick turnaround model'' (ii) commendable GDV balance that provides strong earnings visibility, (iii) healthy balance sheet, (iv) steady historical dividend yield (4%-6%) and consistent mid-teens return on equity (ROE) (five-year average 15.7%). The group's year-to-date sales remain impressive at RM516 million, accounting for almost 50% of its FY10 target of RM1 billion. We remain confident the group is on track to meet its FY10's sales target with future launches. - MIDF Research, April 23
This article appeared in The Edge Financial Daily, April 26, 2010.
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