Mah Sing Group Bhd’s sales are expected to hit new high in the last three months of the year from the record RM900mil achieved in the third quarter, buoyed by strong take-up rate of its Lakeville project in Kuala Lumpur.
The group has launched four blocks of apartments worth RM820mil of its Lakeville project in Taman Wahyu, that saw an 85% take-up rate.
This has lifted its total unbilled sales to RM5.06bil.
“We expect new sales in the fourth quarter to be stronger on the back of the conversion of the record bookings achieved in the second half of 2014,’’ CIMB Research said in a note.
So far this year, Mah Sing had spent RM1.34bil on landbank, its most aggressive year-to-date, with gross development value (GDV) potential worth RM19.3bil.
The company had recently proposed a cash call of up to RM630mil to launch some of these projects.
CIMB Research said it was “more neutral” on the corporate exercise, and believed that the free warrants and a one-for-four bonus issue should act as a sweetener for shareholders to pick up the rights issue.
“Mah Sing has big ambitions. It wants to be the ‘Cheung Kong’ of Malaysia and without a cash call, its growth would be more subdued,” CIMB Research said. Cheung Kong (Holdings) Ltd is the flagship of the Cheung Kong group based in Hong Kong. It is one of Hong Kong’s leading multi-national conglomerates. The chairman of Cheung Kong Holdings is Li Ka Shing.
CIMB Research added that Mah Sing could further take RM1bil in debt to acquire more landbank if the opportunity arises.
But the rights issue, while positive in the longer term, may impact the group’s near term earnings. CIMB Research estimated that the new shares would dilute earnings “to the tune of 15% to 16%” in the next two financial years.
“This raises FY15/16 fully diluted price earnings multiple from nine -10 times to a still reasonable 10-11 times,’’ it said.
The firm is keeping its target price for the stock at RM3.21, valuing the company based on revised net asset value (RNAV) of RM3.21 a share.
“The impact on RNAV is lower at 3%. Hence, the potential cut in our RNAV and target price is also around only 3%,’’ CIMB Research said.
The proposed rights issue will raise cash to pay for the two recent land purchases, the 960acre Seremban township and the 89acre Puchong land.
Of the RM630mil proceeds, RM530mil would be used for land and property development activities, RM92mil for working capital and RM8mil for expenses related to the proposals.
Mah Sing sold RM2.45bil worth of properties in the nine months to end of September. Some RM1.89bil or 77% of its new sales came from the Klang Valley, RM503mil or 21% from Johor, while the rest was contributed by projects in Penang and Sabah. - By The Star