Property Guru Malaysia

May 25, 2012

Malaysian developer Mah Sing Group Bhd is expected to gain from its latest land acquisition in Bangi, Selangor, thanks to the huge pre-tax profit margins that could be achieved by the Southville City project, the new development planned for the land.

Experts forecast that the upcoming Southville City project, which is sited on a four-acre leasehold land and a 408-acre freehold land, could attain pre-tax profit margins of up to 25 percent.

Wong Wei Sum, Analyst at Maybank Investment Bank Bhd, reported that the project, which is set for launch in 2013, could generate a net profit of RM50 million per year or six sen per share. This is on the assumption that the project is developed within eight years and achieves a 25 percent pre-tax profit margin.

"Post-acquisition, Mah Sing's net gearing would jump to 0.6 times from 0.3 times as at end-Dec 2011. There's no change to our RM2.95 revised net asset value estimate," added Wong.

At the same time, Hong Leong Investment Bank (HLIB) said that they are "positive" on Mah Sing's land purchase.

"We are positive on this acquisition as land cost makes up 16 percent of overall gross development value, meaning margins should be healthy."

"This is a very quick turnaround project, with phase one to be launched in the second half of this year. We expect earnings contribution to commence in the first half of 2013. phase one will comprise double-storey link homes indicatively priced from RM530,000."

Meanwhile, analysts at Kenanga Research retained their "market perform" rating on Mah Sing's stock and decreased the target price from RM2.18 to RM2. This lowered target price is due to dull sector dynamics, coupled with the group's higher-than-average net gearing level among property developers monitored by the research firm.