THE BUZZ
Yesterday Mah Sing announced
on Bursa Malaysia that its
wholly-owned subsidiary, Capitol Avenue Development SB (Capitol Avenue), had on
26 March 2012, entered into a Joint Development Agreement (JDA) with Paduan
Hebat SB (PHSB) for the proposed joint development of 4.26 acres of
prime leasehold commercial land known as Lot 37, Harbour City Kota
Kinabalu. Under the terms of the
agreement, Paduan Hebat and Capitol
Avenue will jointly develop the Land for an entitlement
of RM39m, or approximately RM210 psf.
OUR TAKE
The deal at a glance.
Under the JDA, PHSB will provide the development land while Mah Sing will
provide the expertise and financing for the development. The total consideration
payable by Mah Sing for being allowed to develop on the property is RM39m, or
RM210psf, with 64% or RM25m payable in cash in 4 tranches over an estimated
minimum period of 9 months, while the balance RM14m is to be paid in kind (from
units in the development). Mah Sing has also been given the option
of jointly developing an
additional 2 lots totalling 4.408 acres, exercisable within 6 months of the said
agreement at a cost of RM216 psf, or about RM41.5m. The land, located
diagonally opposite Sutera Harbour and near KK Times Square, is 3.9km from Kota
Kinabalu International Airport and about 1.1km to the CBD.
Another milestone.
This JDA marks Mah Sing’s foray into
Sabah as well as East Malaysia. We view this move positively as we believe there is strong
potential and demand for high quality commercial and residential properties in
Kota Kinabalu and Sabah in general. As one of
the top leisure destinations in Malaysia, we believe Mah Sing should be
able to leverage on Kota Kinabalu’s international appeal among local or foreign
investors. Given the state’s vibrant economic landscape and its wealth of
natural resources including oil palm, timber and oil and gas, Mah Sing should
be able to tap into the burgeoning demand for properties with modern designs in
Kota Kinabalu’s CBD from the 800,000-strong population in the city
and the surrounding cities of Penampang, Tuaran and
Kota Belud. Tentatively called Sutera Avenue, the proposed joint development
comprises multi-storey shop offices fronting the Coastal Highway, which will
be complemented by street mall retail
lots as well as serviced apartments. The
company is targeting to commence registration of interest for the development
in 3Q12 and expects to start construction in 1HFY13. Based on the preliminary
plan, the project is estimated to have a total GDV of RM360m. Including the
option land, the total GDV is estimated at about RM830m.
Maintain BUY. We
maintain our forecast and Buy recommendation on Mah Sing, at an unchanged FV of
RM2.69, based on a 20% discount to its RNAV. The stock’s relatively inexpensive
valuation makes it an attractive value proposition, especially for
investors seeking cheaper exposure
among mid-sized property
counters.
Source: OSK188
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