Mah Sing was acquiring a 20-acre prime leasehold industrial land in PJ for RM89 million (or RM104 psf) as it planned a mixed development project with RM838 million GDV over a five-year period.

“We estimate RM42 million contribution to yearly net profits during development,” it noted.

According to the research house, the freehold land in Selayang planned for residential development which Mah Sing is buying for RM42 million (or RM37 psf) has a GDV of RM209 million.

“We estimate this to add RM10 million in yearly net profits over three years of development,” Maybank IB said, adding that the company planned to replicate its highly successful Perdana Residence gated development located 2km away.

It pointed out that Mah Sing’s higher 3Q09 net profit of RM24 million (+42% year-on-year) was mainly due to earnings before interest and tax (Ebit) margin expansion (+9ppt y-o-y) as the icon Tun Razak was near completion.

Maybank IB said it expected a stronger 4Q09 with the handover of Icon Tun Razak before December and following a boost of 3Q09 new sales of RM298 million which include Southgate corporate building enbloc sales to Felda of RM226 million in August 2009.

It pointed out that the 10% private placement by Mah Sing could dilute 2010-2011 earnings per share (EPS) by 5.5%-6.1% but stressed it might be offset by robust sales and new launches. To enhance its capital base, Mah Sing also proposes a one-for-five bonus issue.

“We like Mah Sing for its proactive management and asset-light, quick turnaround strategy,” noted the research house. With unbilled sales of RM791 million or 1.6 times 2008’s property revenue, Maybank IB said Mah Sing had good earnings visibility over till end-2010.

“Our RM2.35 target price is pegged at a 15% premium to our raised revalued net asset value (RNAV) of RM2.04,” the research house said in reiterating a buy.

Mah Sing rose one sen to close at RM1.79 yesterday.

This article appeared in The Edge Financial Daily, October 30, 2009.