PETALING JAYA: Mah Sing Group Bhd’s recent acquisition of a 75.7-acre freehold land in Mukim Pulai, Johor Bahru, has been well received by analysts across the board.
The land, which was acquired for RM76.1 million cash, is earmarked for affordable landed residential development worth RM480 million in gross development value (GDV).
This is Mah Sing’s second land purchase for the year after the acquisition of 8.2 acres of land in Puchong for RM85.9 million in January, said KAF Equities Sdn Bhd analyst Nabil Zainoodin in a note today.
“We deem the land acquisition price (as) fair given that it represents 16% of the total potential GDV to be churned from this land, lower than the general rule of 20%,” he said.
The proposed acquisition is expected to be completed in the first half of 2024.
“We do not expect a significant impact on the group’s gearing post-acquisition, given its strong balance, 20% net gearing and RM707 million in cash and cash equivalent,” said Nabil.
Although the development is positive, the deal is unlikely to result in any short-term improvement to earnings.
Hong Leong Investment Bank estimates a negligible contribution in FY2024 and FY2025, with earnings to gradually increase to 5% by FY2029.
“Given the land’s good connectivity, ready amenities as well as Mah Sing’s solid brand presence in Johor, we are positive about the acquisition which will help sustain Mah Sing’s property segment’s earnings over the medium term,” it said.
Meanwhile, UBS Securities Pte Ltd analysts Terence Lee and Michael Lim were also positive on the development.
“We expect the market to take the news positively; Mah Sing’s share price was up 6% in the week following the landbank acquisition announced in January 2023,” they said.
As at 4.01pm, Mah Sing’s share price has yet to react, moving up only 0.84% or 0.5 sen to 60 sen, giving it a market capitalisation of RM1.46 billion.