Boost for Mah Sing’s earnings from Penang project


Mah Sing Group Bhd’s earnings could be enhanced by RM25 million per annum over the next eight years based on the assumption of an average 30% profit-before-tax margin from its proposed Southbay Penang project.

Mah Sing has proposed to acquire 86.78 acres of freehold land in Batu Maung on Penang island for RM116 million or RM30.61 per sq ft (psf) to undertake mixed development projects.

The proposed Southbay Penang mixed development, with a total gross development value (GDV) of RM1.28 billion, would be developed over five to seven years starting from 2008.

“We are maintaining our FY08-09 earnings forecast for now, pending guidance on timing and GDV launches for 2008. “Nevertheless, we continue to recommend a ‘buy’ on weakness for Mah Sing,” it said.

Aseambankers Research said its ex-rights target price of RM5.40 — based on 15 times CY08 FD earnings per share (EPS) and supported by its FD revised net asset value (RNAV) of RM4.21 per share (previously RM3.77) — was under review for a potential upgrade.

On the purchase consideration for the land, it said the price tag could increase to RM33.79 psf as a maximum cost of RM12 million may be incurred to vacate existing squatters and occupants.

“The acquisition price inclusive of potential vacating cost is fair when compared to recent transactions of nearby locations between RM29.40 psf to RM39 psf by Sunway City and SP Setia,” it said.

On the project, Mah Sing is expected to rope in a local joint venture partner but it would maintain substantial control with a 70% equity stake.
Southbay Penang would comprise commercial and residential components, offering high-end and medium-upper residence houses.

Initial assessment showed this project would add 45 sen to RNAV per share and keep the company busy over the next seven to 10 years.

Aseambankers Research also said Mah Sing had unbilled sales totalling RM430 million as at March 31, 2007. The largest was RM243 million involving the Aman Perdana project near Meru.

Its GDV was RM3.47 billion as at March 31, 2007, of which RM1.48 billion was in the Klang Valley, South Johor (RM703 million) and Penang island (RM1.28 billion).

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