KUALA LUMPUR: Analysts have maintained their *Buy" call on Mah Sing Group Bhd after it sealed a deal to buy a 2.5 hectares of leasehold land in Taman Desa here for RM108 million from Dewan Bandaraya Kuala Lumpur (DBKL).
UOB Kay Hian Securities (M) Sdn Bhd (UOBKH) said the acquisition translates to a land cost-to-GDV (gross development value) ratio of 11 per cent, within Mah Sing's and the industry's average of less than 15 per cent for affordable housing.
"Based on our channel check, acquisition cost of RM402 per square feet (psf) is fair. The current land prices in Taman Desa are trending around RM380 to RM642 (psf) (from various land sales and residential transaction)," it said in a research note today.
According to the firm, Mah Sing's selling price of RM448,800 for 708 square feet translates to RM634 psf, which is competitive with the surrounding area.
Considering the strong demand for Mah Sing's other M-series products, which have achieved take-up rates exceeding 90 per cent, UOBKH expects this project to be well-received as well.
"Based on GDV of RM1 billion, earnings before interest and taxes (EBIT) margin of 18 per cent, interest cost of 4 per cent, and tax rate of 24 per cent, this project is expected to yield RM133.5 million in net profit.
"Assuming a development period of four to five years, annual contribution to net profit expected to be around RM26.7 million to RM33 million, or 10 to 12 per cent of 2025 forecasted net profit of RM267 million," it added.
UOBKH estimated Mah Sing's net gearing to increase to 0.09 times from 0.06 times in the first quarter of this year.
As it maintains the" buy" call, the firm set a slightly higher target price of RM2.29 a share for Mah Sing from RM2.27.
Meanwhile, TA Securities believes the acquisition price is reasonable given that the purchase price at RM401.9 psf is six per cent higher than Avaland's acquisition of a 1.58 hectares freehold land in the same area in March 2023, which was priced at RM380.3psf.
"Following this acquisition, Mah Sing's landbank will increase to 2,440 acres, with a remaining GDV of RM26.7 billion.
"In terms of funding, Mah Sing's robust balance sheet with a net gearing of 0.06 times and a cash balance of RM966 million as of March 2024, positions the company well for more land acquisitions in the future," it added.
The firm maintained its "Buy" call on Mah Sing with unchanged target price of RM2.05 a share.