The group entered into three inter-conditional sale and purchase agreements with SP Setia’s wholly owned subsidiary Petaling Garden to acquire several parcels of freehold land totalling 500 acres in Semenyih, Selangor.
Named Glengowrie Estate, the land holds an estimated gross development value (GDV) of RM3.3 billion and is planned as an integrated township development that will comprise mainly double-storey landed homes.
AmInvestment Bank Bhd has maintained its “buy” call on Mah Sing with a higher fair value of 89 sen from 87 sen previously, after accounting for the newly acquired land’s contribution.
“While maintaining FY2023F/FY2024F earnings, we raise (the group’s) FY2025F core net profit by 1% to factor in the earnings contribution from the acquired Semenyih land,” analyst Khoo Zing Sheng said.
Khoo added that this proposed acquisition is expected to be completed by the second quarter of FY2024.
“Mah Sing has cash balances of RM 707 million as of March 31, 2023, and post-acquisition, we expect the group’s FY24F net gearing ratio to increase to 0.32 from 0.22,” he added.
RHB Investment Bank Bhd also maintained its “buy” call on Mah Sing, raising its target price to 77 sen from 75 sen previously.
“We are upbeat on Mah Sing’s latest land acquisition, as its development will feature affordable landed homes targeted towards the middle income segment,” analyst Loong Kok Wen said.
“Selling bread and butter landed housing, this new township should be well-received,” Loong added.
“Although the new land is surrounded by other developments, such as EcoForest, Setia Mayuri, and Diamond City, Mah Sing’s product will be more affordable,” she added.
Hong Leong Investment Bank Bhd (HLIB) similarly kept its “buy” call unchanged on the property developer, maintaining a target price of 86 sen.
The acquisition translates to a cost-to-GDV ratio of 11.9%, which HLIB found as attractive given the land’s proximity to established townships.
Furthermore, some of the township’s infrastructure work has already been completed or paid for by SP Setia, thus saving financial and time cost for Mah Sing, added HLIB.
“Mah Sing should be able to capture spillover demand from the adjacent townships as well as strong demand for landed homes within the Klang Valley area,” HLIB analyst Tan Kai Shuen said.
As for UBS Securities Pte Ltd, analysts Terence Lee and Michael Lim think the 500-acre land transaction is a beneficial arrangement for both Mah Sing and SP Setia.
“SP Setia’s plan to monetise assets is paired with Mah Sing’s balance sheet strength and affordable brand positioning that would drive earnings accretion,” they said.
“Hence, we think the project can likely sell faster than the initial eight-to-10 year timeframe. This should also ease concerns over the holding cost of land on its balance sheet,” they added.