Mah Sing Group - Strong interest in Southville City BUY

- We reaffirm our BUY on Mah Sing Group (Mah Sing), with our fair value unchanged at RM3.60/share, based on a 25% discount to our NAV estimate of RM4.80/share. Our fair value implies a PE of 12x on FY13F’s earnings. 

- We spoke to the management to get updates on the launch of Southville City. We understand the development has so far seen a very strong interest with about 4,000 registrants for Phase 1 – since the registration opened at end-May.  

- The majority of the registrants (estimated at 75%) are eyeing the terraced-houses, while the remaining 25% are interested to purchase the affordable units (Savanna Suites). Recall that we highlighted in our previous report (dated 1 Oct  2012) that there had been some revisions to development plans of Southville City, where Phase 1 would include the offer of affordable homes.  

- To recap, Savanna Suites would have a GDV of RM270mil and will comprise 1,000 units of: (1) Studio suites – priced from RM208,000,  (2) 1-Bedroom (from RM268,000), and (3) 2-bedrooms (from RM338,000). We gather margins would remain decent at 15%-20% despite the attractive prices. 

- Savanna suites would be built on the commercial plot, which should eliminate some concerns about the potential waning of the appeal of the township given the emergence of the affordable units. In fact, these units would provide the critical mass and should add to the vibrancy of the commercial area within Southville City. 

- The commercial plot has a direct frontage to the North-South Expressway, and is earmarked to be the commercial hub of the southern corridor Klang Valley. 

- Mah Sing remains undervalued and currently trades at a steep 53% discount to its estimated NAV and an attractive PE of 7x FY13F earnings. We expect valuation to catch up, having seen the stock oversold the past week due to misplaced concerns about further restrictive policies by the regulators.

Source: AmeSecurities