Buying Titiwangsa Land

Transcription

1 Mah Sing Group Berhad Buying Titiwangsa Land By Sarah Lim l sarahlim@kenanga.com.my Proposed acquisition of 3.56 ac freehold residential land in Titiwangsa, KL for RM60m. The TOD project will be an affordable service apartment project with a GDV of RM650m and we are positive as these products are saleable. Land cost is also attractive while minimal impact to balance sheet. No changes in earnings. Expect more landbanking news this year. Maintain OUTPERFORM with higher TP of RM1.66. Landbanking news, finally! MAHSING has entered into a conditional SPA to acquire 3.56 ac freehold residential land in Titiwangsa, KL for RM60m (RM387psf) from Saw Shiuo Shyong@Sonny Saw. The purchase consideration is conditioned on the D.O. allowing for 350 units per ac or more, else it will result in adjustments in land pricing. If all conditions are met, the deal will be completed by 4Q17 and launch will take place soon after. Note that the land is immediately developable. The land fronts the ac Titiwangsa Lake Garden and is a Transit-Oriented Development (TOD) project being only 250m away from the Hospital KL MRT station (MRT Line 2) while being close to the Titiwangsa LRT, monorail and MRT interchange within a matured residential area. Estimated GDV of RM650m which will feature affordable service apartments starting from 850sf or RM485k/unit. We are positive on the project because of the strong saleability of affordable housing in KL that has good connectivity plays. We also think the land-cost-to GDV ratio of 9.2% is attractive and should result in closer to 30% gross margins. Post the acquisition, MAHSING remains in a net cash position (0.10x) in FY17. The project adds 2 sen of our FD SOP to RM2.74. Expect more landbanking news. Overall, we are not surprised by the announcement as the group had recently raised RM650m from perpetual bond, which will be partly used for its aggressive landbanking. In our last report (7/3/17), our back-of-the envelope calculations show that if 50% of the funds is used for lanbanking and assuming land financing of 70:30 debt-equity basis, there is RM500m potential funds for landbanking. This would imply a potential GDV replenishment of up to RM3.3b. Since the group has announced this first deal while the land prices have somewhat stabilized, we do expect more landbanking news to materialize. No changes to earnings. Although the project will be launched towards 4Q17, we conservatively maintain our FY17-18E sales at RM1.80b each. Higher TP of RM1.66 (from RM1.63). In addition to the Titiwangsa land, we built-in RM1.35b GDV replenishment assumptions which raise our FD SOP by 2% to RM2.79. Our TP is based on an unchanged property RNAV discount of 48% (in-line with big-cap average) or implied SOP discount of 40%. Further catalyst to our valuations lies with (i) if GDV replenishment for the year exceeds our target, (ii) if management is confident to achieve higher sales targets than forecasted. Maintain OUTPERFORM in-line with our sector tactical play for high-beta stocks. Risks include: (i) weaker/stronger-than-expected property sales, (ii) margin issues, (iii) changes in real estate policies, and (iv) changes in lending environments. OUTPERFORM Share Price Performance Price: RM1.53 Target Price: RM1.66 KLCI 1, YTD KLCI chg 8.2% YTD stock price chg 7.0% Stock Information Shariah Compliant Yes Bloomberg Ticker MSGB MK Equity Market Cap (RM m) 3,686.4 Issued shares 2, week range (H) week range (L) mth avg daily vol: 1,577,282 Free Float 56% Beta 0.7 Major Shareholders MAYANG TERATAI S/B 27.1% EMPLOYEES PROVIDENT FUND 9.3% MAYANG TERATAI LTD 7.5% Summary Earnings Table FYE Dec (RM m) 2016A 2017E 2018E Turnover 2,958 3,142 3,278 EBIT PBT Net Profit (NP) Core NP (CNP) Consensus (Core NP) n.a Earnings Revision n.a. n.a. n.a. FD EPS (sen) FD EPS growth (%) -1% -2% -3% NDPS (sen) BV/Share (RM) FD PER (x) Price/BV (x) Net Gearing (x) 0.0 (0.1) (0.1) Dividend Yield (%) 4.2% 4.2% 4.2% PP7004/02/2013(031762) Page 1 of 6

2 OTHER POINTS Location Map Source: Company PP7004/02/2013(031762) Page 2 of 6

3 FD SOP Projects Stake Duration (assumed) Years Remaining GDV (RM'm) Remaining Net Profit *** (RM'm) WACC (%) DCF Value (RM m)*** Total Unbilled Sales various various 4, % 572 Northern Region Southbay, Penang 70% % 10 Southbay City (Commercial), Penang 100% % 207 Icon Residence, Georgetown 100% % 34 BatuFerringhi / Ferringhi Residence 100% % 66 Southern Region Sri PulaiPerdana, Skudai 100% % 7 Sri PulaiPerdana 2, Skudai 100% % 2 Austin Perdana, Tebrau 100% % 17 Sierra Perdana, Tebrau-Plentong 100% % 60 Meridin@Medini 100% % 40 Mah Sing TjKupang Johor 100% % 28 Bandar Meridin East 100% % 460 Central Region AmanPerdana, Meru Shah Alam 100% % 12 Hijaun Residence, Cheras 100% % 27 Southgate Commercial Centre, KL 100% % 0 Icon Residence, Mont Kiara 100% % 12 Low cost housing, BayuSekamat, Hulu 100% % 0 Langat Garden Residence, Cyberjaya 100% % 17 Clover, Garden Residence 2, Cyberjaya 100% % 3 Garden Plaza, Cyberjaya 100% % 4 Perdana Residence 2, Selayang 100% % 2 Icon City (PJ Commercial LDP) 100% % 206 M JlnAmpang 100% % 1 Kinrara Residence + Kinrara JV 100% % 4 Star Avenue, PekanSubang 100% % 11 M-City 100% % 19 Star residence, Subang 100% % 16 D'saraSentral 100% % 41 SouthVille Bangi 100% ,374 10% 1,042 M Rawang 100% % 51 M Residence 100% % 36 Lakeville Residence, TmnWahyu 100% % 72 M Residence 3@Rawang 100% % 56 SSAAS Golf Course 100% % 278 GDV Replenishment 100% % 139 East Malaysia Sutera KK Sabah (portion 1: 100% % ac) Kota KinabaluCovention City 51% % 52 GDV Replenishment 100% % 139 Property 31/12/15 2,896 Property RNAV 6,580 Plastics - based on FY16E PER of 10x 89 Other Assets at 0.8x PBV 470 FD impact (RM'm) 695 FD SOP per share (RM) RM 2.79 FD No of shares ('m) 2,810 Discount to Property RNAV -48% SOP Discount -40% TP per share (RM) RM1.66 Source: Kenanga Research PP7004/02/2013(031762) Page 3 of 6

4 Income Statement Financial Data & Ratios FY Dec (RM m) 2014A 2015A 2016A 2017E 2018E FY Dec (RM m) 2014A 2015A 2016A 2017E 2018E Revenue Growth (%) EBITDA Revenue Depreciation EBITDA EBIT EBIT Interest Expense Pre-tax Income Investing Core NP Associate/JCE Exceptionals/FV PBT Profitability (%) Taxation EBITDA Margin Minority Interest EBIT Margin Net Profit PBT Margin Core NP Core Net Margin Effective Tax Rate Balance Sheet ROE FY Dec (RM m) 2014A 2015A 2016A 2017E 2018E ROA Fixed Assets Intangibles Other FA DuPont Analysis Inventories Net margin (%) Receivables Assets Turnover (x) Other CA Leverage Factor (x) Cash ROE (%) Total Assets Leverage Payables Debt/Asset (x) ST Borrowings Debt/Equity (x) Other ST Liability Net Debt/(Cash) (361) (372) LT Borrowings Net Debt/Equity (x) (0.10) (0.10) Other LT Liability MI/Perpetual Bond Valuations Net Assets Core EPS (sen) Core FD EPS (sen) Share Capital NDPS (sen) Reserves BV/share (RM) Shareholders Equity Core PER (x) Core FD PER (x) Cashflow Statement Net Div. Yield (%) FY Dec (RM m) 2014A 2015A 2016A 2017E 2018E PBV (x) Operating CF EV/EBITDA (x) Investing CF Financing CF Net Change in Cash Free Cash Flow Source: Kenanga Research Note: 1. Net gearing definition excludes the perpetual bond from the calculations as we view it as an MI. Fwd Core PER Band Fwd PBV Band Source: Bloomberg, Kenanga Research PP7004/02/2013(031762) Page 4 of 6

5 Peer Comparison NAME Price (17/5/17) Mkt Cap PER (x) Est. NDiv. Yld. Hist. ROE Fwd ROE Fwd P/BV Net Profit (RMm) FY17/18 NP Growth FY18/19 NP Growth (RM) (RMm) FY16/17 FY17/18 FY18/19 (%) (%) (%) (x) FY16/17 FY17/18 FY18/19 (%) (%) (RM) Target Price Rating DEVELOPERS UNDER COVERAGE S P SETIA BHD* , % 4.1% 4.2% % 0.4% 2.30 OUTPERFORM IOI PROPERTIES GROUP BHD*# , % 9.7% 8.0% % -18.5% 3.86 OUTPERFORM UEM SUNRISE BHD* , % 2.2% 3.4% % -30.9% 1.45 OUTPERFORM SUNWAY BHD* , % 7.3% 6.7% % 4.0% 3.41 OUTPERFORM MAH SING GROUP BHD^ , % 10.1% 10.0% % -3.4% 1.66 OUTPERFORM ECO WORLD DEVELOPMENT , % 3.7% 4.4% % 120.4% 1.72 OUTPERFORM GROUP BHD UOA DEVELOPMENT BHD* , % 19.4% 9.8% % 3.2% 2.56 MARKET PERFORM MALAYSIAN RESOURCES CORP BHD , % 8.6% 2.4% % 10.0% 1.65 MARKET PERFORM KSL HOLDINGS BHD , % 8.8% 6.9% % 2.0% 1.30 UNDERPERFORM MATRIX CONCEPTS HOLDINGS BHD , % 31.8% 22.7% % 6.3% 2.65 MARKET PERFORM SUNSURIA BERHAD , % 6.9% 13.3% % 60.1% 1.61 OUTPERFORM CRESCENDO CORPORATION BHD* % 2.2% 8.0% % 3.0% 1.70 MARKET PERFORM HUA YANG BHD % 21.9% 12.2% % -12.3% 1.33 OUTPERFORM CONSENSUS NUMBERS IGB CORPORATION BHD GLOMAC BHD PARAMOUNT CORP BHD TAMBUN INDAH LAND BHD LBS BINA GROUP BHD , % 6.7% 6.4% % -21.7% 4.80 BUY % 12.7% 6.0% % 72.7% 0.75 SELL % 6.7% 8.3% % 5.3% 2.24 BUY % 22.5% 16.6% % 0.4% 1.63 BUY , % 8.0% 9.1% % 25.0% 2.12 BUY * Core NP and Core PER ^ Last price and TP is Ex-rights and Ex-Bonus. Source: Kenanga Research PP7004/02/2013(031762) Page 5 of 6

6 Stock Ratings are defined as follows: Stock Recommendations OUTPERFORM : A particular stock s Expected Total Return is MORE than 10% MARKET PERFORM : A particular stock s Expected Total Return is WITHIN the range of -5% to 10% UNDERPERFORM : A particular stock s Expected Total Return is LESS than -5% Sector Recommendations*** OVERWEIGHT : A particular sector s Expected Total Return is MORE than 10% NEUTRAL : A particular sector s Expected Total Return is WITHIN the range of -5% to 10% UNDERWEIGHT : A particular sector s Expected Total Return is LESS than -5% ***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage. This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. Published and printed by: KENANGA INVESTMENT BANK BERHAD (15678-H) Level 12, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia Telephone: (603) Website: research@kenanga.com.my Chan Ken Yew Head of Research PP7004/02/2013(031762) Page 6 of 6