Source: http://www.harimaucapital.com/2013/02/mah-sing-has-eye-for-big-deals_23.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InvestingInBursaMalaysiamalaysiaStockMarket+%28Investing+in+Bursa+Malaysia+%28Malaysia+Stock+Market%29%29
He apologises for being unable to take us out for lunch as he wants to
continue fasting for the remaining week. His holiday wasn't a typical
food feast dotted with long periods of winding down.
“I lost 2 kgs! See how loose my pants are,” says Leong as he shows how
his pants now hangs copiously on his new slimmer waistline.
For Leong, being healthy is just as important as realising his vision of making Mah Sing the next
Cheung Kong Holdings of Malaysia. Cheung Kong belongs to Hong Kong
tycoon Li Ka-shing and is one of the largest property developers in Hong Kong.
As it is, Mah Sing currently has 40 projects and is Malaysia's second-largest developer by sales value.
To realise the Cheung Kong vision, which Leong hopes to achieve within
the next 10 years, Leong realises he needs to be fit, alert and
energetic. Yes, just like
Top Glove Bhd's
managing director Tan Sri Lim Wee Chai, Leong wants to live to a 100 years of age.
“Being a Cheong Kong means expanding and buying more land. I am always
preparing for the future. We do not over-expand our capacity. We have
the financial muscle to do that. For example, expanding into Johor. We
had done thorough research and know who we want to target. We are not
simple,” says Leong.
Not simple indeed. That certainly sums up Leong, who is not easily
swayed by other property developers who have gone to foreign countries
to launch properties.
Leong: ‘Looking at the right land at the right time is also an art’.
“For now, we will remain focused on Malaysia and we are kept extremely
busy with 40 ongoing projects here. While we are focused on our domestic
projects, we attract both Malaysian and international buyers, which is
why we are starting our sales galleries overseas. We will definitely
explore (going overseas) on a longer term basis should any good
opportunities come up. It is not necessarily just the United Kingdom; it
can be Singapore, Jakarta or Shanghai,” says Leong.
Mah Sing's current customer base comprises mainly Malaysians living in
the country as well as those working overseas. Foreign purchasers make
up under 10% of its sales. Even so, Mah Sing has exceeded the RM2bil
sales mark for two consecutive years from 2011 to 2012. With its new
project roll-outs for 2013, Leong expects that to increase by 15% to
20%.
Its closest competitor, S P Setia achieved record-breaking sales of
RM4.23bil for its financial year ended Oct 31, 2012 and is setting
itself a target of RM5.5bil for this financial year.
Meanwhile, Mah Sing is targeting to achieve total sales of RM3bil this
year, which is a 20% growth from RM2.5bil the previous year.
Just a few weeks ago,
Mah Sing Group received
“overwhelming” response for its 69 units of luxury Aspen bungalows,
which the company is promoting on a build-then-sell concept. The units,
located within the 60.75ha Garden Residence in Cyberjaya, were launched
last week. Priced from RM3.88mil, the 3.5-storey Aspen bungalows in
Precinct 4 sits on comfortable lot sizes of 60' x 90' and have spacious
built-up areas of 7,796 sq ft.
These are unique bungalows with 9+1 bedrooms that are 3.5 storeys and come equipped with a lift.
“We build things with practicality and style in mind. This bungalow can
fit in all generations of a family. Previously, the older parents have
to live on the ground floor. Now, with the lift, they can stay upstairs.
There is privacy for all, as everyone can stay on a separate floor.
Your in-laws can stay downstairs,” explains Leong.
He adds: “Nowadays, selling property is about selling an environment.
Even when we do affordable housing, we do it with style. Property
development is more art than science. Land acquisition and knowing what
the market wants is more of an art. Looking at the right land at the
right time is also an art.”
Thus, on his property outlook, Leong says that he is still selectively
optimistic about certain sectors as property is acknowledged as the best
hedge against inflation.
“People buy properties as a form of wealth preservation and not
speculation and we believe there will be strong demand for serviced
apartments from 500 sq ft and landed properties below RM1mil in good
schemes.
“When I say good schemes, I refer to well-located projects with easy
access and amenities or schemes that are mature,” says Leong.
An exciting 2013
CIMB research
head Terence Wong is expecting Mah Sing to meet its new sales target
for its financial year ended Dec 31, 2012 of RM2.5bil almost spot on.
“This is the group's best-ever performance and is 11% higher
year-on-year. Compared with 2007, just before the global financial
crisis, new sales have more than tripled,” says Wong.
Apart from targeting total sales of RM3bil this year, unbilled sales of
RM2.95bil is 2.2 times its financial year 2011 property segment revenue.
Mah Sing's product range also spans the entire range from affordable
housing to premium upmarket homes, high-rise units, commercial
properties and industrial properties.
Aspen Bungalows are slated for completion in mid-2013.
For the nine months ended Sept 30, 2012, Mah Sing's net profit rose 37%
to RM175.2mil while revenue was up 16% to RM1.3bil from the previous
period.
For this year, Leong is launching six new projects which consist of
Southville City and M Residence 2 in the Klang Valley, Ferringhi
Residence in Penang island, Mah Sing iParc@Tanjung Pelepas and The
Meridin@Medini which are located in Iskandar Malaysia and Sutera Avenue
in Kota Kinabalu. He says some 77% of sales will come from landed
residential projects and niche size high-rise projects
Leong is particularly excited about the RM3.63bil Southville City
project in Bangi, a 420-acre township which Leong is hoping to develop
from scratch over the next five to seven years and transform it into the
next thriving township of Puchong, Cheras and Kota Damansara.
New sales in 2013 will be anchored by the group's new flagship township,
the RM3.63bil Southville project in Bangi, where the group is launching
RM1.2bil to RM1.3bil worth of properties this year.
So far, Mah Sing has received some 7,000 registrants for the township,
and many have been attracted by the affordable pricing for its
residential properties. Three-storey superlink houses will be priced
from RM760,000 onwards and 2- to 3-bedroom apartments priced at below
RM300,000 and from RM208,000 onwards.
Besides the six new projects, the main launches for 2013 will come from
Icon City Petaling Jaya, M Residence 1 in Rawang, Garden Residence and
Garden Plaza in Cyberjaya and M City in Jalan Ampang.
Mah Sing is targeting to achieve 62% of total sales from its projects in
the Klang Valley, 20% from Johor, 13% from Penang and 5% from Sabah.
Leong says Mah Sing is extremely keen to tender for jobs on the Rubber
Research Institute (RRI) land once tenders are opened. Last August.
Kwasa Land Sdn Bhd, a wholly owned subsidiary of the
Employees Provident Fund,
announced it had finalised the purchase price of RM2.28bil for 2,330
acres of prime RRI land in the Klang Valley. It is the master developer
for this township.
Kwasa Land had mentioned that the proposed township development is
expected to create abundant opportunities for developers and contractors
to participate in developing residential and commercial properties,
main infrastructures and public amenities for an expected population of
150,000.
Mah Sing's gearing level has been an issue of concern for many in the
investing fraternity but Leong feels those fears are unfounded. As of
Sept 30, 2012, Mah Sing has some RM545.3mil in its coffers.
An artist’s impression of Mah Sing’s Ferringhi Residence project in Penang.
In December, Mah Sing proposed a renounceable rights issue of new shares
with free warrants to its shareholders to raise gross proceeds of
RM400mil to finance its operations and business expansion. The
entitlement basis, date and issue price have yet to be determined.
Leong says Mah Sing is planning up to 0.5 times net gearing post-rights
issue in the first quarter of 2013 as it is eyeing new strategic
landbank.
“We are certain we will not gear up beyond 0.5 times. Our gearing level
now stands at 0.3 times. We have cashflow from our ongoing projects and
each of our projects has a 60%-80% takeup rate before we start
development works. For this financial year, we are receiving some
additional RM228mil from the delivery of vacant possession of our
tail-end properties, over and above our existing billings,” he says.
Hong Leong Investment Bank Bhd analyst
Sean Lim feels the company is handling its gearing level well, with
support provided from a rights issue in December and favourable land
payment terms.
Lim estimates that the expected RM400mil proceeds from the rights issue
would help bring down net gearing from 0.3 times to 0.22 times
currently.
“On top of the proceeds, the additional RM440mil gearing headroom
(before gearing hits 0.5 times post-placement) would easily generate
RM4bil of new gross development value, conservatively speaking,” Lim
says.
Aside from that, Mah Sing is seeking favourable payment terms for its
upcoming land acquisitions via joint ventures or prolonged payment
periods of four to five years.
Lim notes that the move to seek favourable payment terms and joint
ventures could be a good move to mitigate high gearing as sectoral
headwinds could cause landowners to become more reasonable in their
asking prices.
“In terms of landbanking, Mah Sing beat its target of RM5bil GDV worth
of projects last year by around RM900mil and believes it should do
better this year. Mah Sing's ability to execute is one of the best in
the sector and its earnings prospects remain positive given the high
unbilled sales of RM2.95bil, rising annual new sales and aggressive
landbanking,” says Wong.
The appeal of Johor
The influx of interest into Johor property has become even more evident.
“The Iskandar region is developed mainly for Singaporeans,” says one
investment banker from Singapore, who just bought a bungalow from one of
the developers there.
“In Singapore, we don't have space. So here in Johor, we can afford to
buy huge landed properties at such cheap prices,” he says.
Singaporean property buyers are feeling the heat even more in recent
times. Singapore has imposed more measures to curb speculation on
residential and industrial properties after home prices climbed to a
record high. Some analysts, including the investment banker, feels that
the curbs will fuel demand for Johor properties.
Some of the measures introduced include stamp duty for buyers, which has
been increased by between five and seven percentage points. Permanent
residents will have to pay the additional tax when they buy their first
home while Singaporeans will have to pay the levy from their second
purchase onwards.
While Leong is not revealing all of his cards just yet, he does tellStarBizWeek that
he has a vision of becoming the largest lifestyle developers in the
Iskandar Development Region (IDR) with a minimum gross development value
(GDV) of at least RM5bil over the next few years.
In the Iskandar area, the three main areas of economic focus include
Nusajaya, Medini and Danga Bay. Leong is of the opinion that all three
areas will thrive, and each is already attracting its own niche market.
For Mah Sing, the target is clear. Just like Southville City in
Bangi, which is targeting students from the 20 educational institutions
in that area, Leong is targeting the students in Educity, Nusajaya.
The educational institutions in Educity include University of Reading
from the United Kingdom, the Newcastle University Medicine Malaysia, the
University of Southampton Malaysia campus, the Netherlands Maritime
Institute of Technology, Raffles University Iskandar and Marlborough
College Malaysia.
Leong says response for his Johor properties has been immense and the
company is getting serious queries from Singaporeans, South Koreans,
Japanese and Indonesians.
With all such feedback, Leong is not wasting any time and will be
opening his sales gallery in Singapore after the Chinese New Year
celebration.
“We will be organising buses to bring over interested buyers to view our
sales gallery in the Iskandar region. We want to do this in a big way,”
says Leong.
Currently, Mah Sing has five projects in Johor worth RM2.29bil.
The two new projects to be launched this year are Meridin@Medini, which
is an RM1.1bil integrated project in the middle of the Medini special
zone in Iskandar Malaysia, and 20 minutes from Singapore via the Second
Link.
The other project is Mah Sing's i-Parc, which is currently the only
sizeable freehold industrial project neighbouring the Port of Tanjung
Pelepas.
Mah Sing i-Parc has a free-zone status, making it a premier industrial location, says Leong.
Undemanding valuations
Wong says Mah Sing's valuations remain undemanding with forward price
earnings ratios of 5 to 6 times and a dividend yield of around 5%. He
has a “neutral” call and target price of RM2.14 based on unchanged 20%
discount to revised net asset value, which factors in the dilutive
impact from the proposed rights issue.
UBS Investment research head Chris Oh expects another record year for
Mah Sing which he views as the best property stock in the sector as the
company is entrepreneurially managed with ambitious plans to grow within
Malaysia. Another factor is the company's aggressive sales targets
which it has delivered in the past.
“We continue to like Mah Sing for its entrepreneurial management team
and high asset turnover business model. The company recently announced a
record sales target for 2013 of RM3bil (which is a 20% year-on-year
increase) and anticipates further landbank acquisitions through
financing via a proposed RM400mil rights issue to be completed by the
first half of 2013. The past five-year sales and net earnings compounded
growth were 23.1% and 28% respectively. Our view is that Mah Sing will
deliver some 20% sales and earnings growth based on its diversified
range of products,” says Oh.
Oh feels the stock's valuations look attractive as Mah Sing's shares are
trading at a 12-month forward PE of 6 times with a dividend yield of
over 6%. He has a “buy” call and target price of RM2.80, which is based
on a 30% discount to their sum-of-the-parts revised net asset value of
RM3.99.
The StarBiz
Saturday February 2, 2013
（星洲日報／財經）
