Hong Leong upgrades Mah Sing TP to RM2.40 from RM2.12

by **Cals** Fri 16 May 2014, 17:35

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Friday, 16 May 2014 12:22

KUALA LUMPUR (May 16): Hong Leong Investment Bank Bhd (HLIB) raised its target price (TP) for Mah Sing Group Bhd shares to RM2.40 from RM2.12. HLIB, however, maintained its “hold” call on shares of the property developer.

HLIB said that Mah Sing was well positioned to take on challenges in the property market this year, as the group had targeted RM3.6 billion in sales for FY14. This came on the back of RM4 billion in launches.

“Our conversation with the management suggests it remains confident of meeting its sales target this year, as it has planned for 80% of its launches to be priced below RM700,000,” said HLIB in a note today.

Mah Sing's projects in the Klang Valley will continue to be the major contributor to its sales target, accounting for 60% of the year's target, according to HLIB.

“We note that its key projects such as Southville @ Bangi, D’sara Sentral and Lakeville Residence are high-rise projects located in the hot spots of Klang Valley, which we believe will enjoy good take-up rates this year,” said HLIB.

For its projects in Johor, the group is focusing on landed property townships, with its most notable landed-residential project being the RM5 billion Bandar Meridien East. The project is scheduled for a preview in 4QFY14.

On its high-rise project in Johor, Meridin @ Medini, the group has sold 78% of its phase one units, while an en bloc buyer for one of the three towers in phase two has been secured.

“Its sole high-rise project, Meridin @ Medini has done well due to the low pricing of its units (from RM300,000 onwards), which leverages well on the exemption from the minimum price floor restriction for foreigners,” said HLIB.

Meanwhile, Mah Sing's Southbay City project in Penang is well positioned to benefit from the new second Penang bridge, as the bridge is located close to the development, HLIB said.

Mah Sing expects 3% to 5% of the soon-to-be implemented goods and services tax (GST) to be passed through to purchasers of residential properties, which may lead to a purchasing rush by house purchasers in 2H14, HLIB said.

Foreign investors' interest in Mah Sing is closely watched. HLIB said
Mah Sing indicated that there was heightened interest in the company from US fund managers.

“We view this as a potential catalyst, given its current 19% foreign shareholding is way below the May 2013 peak of 28%,” said HLIB.