07 June 2014

All systems go with Mah Sing

  07 June 2014

By THE STAR
BUOYED by strong sales for its property projects, Mah Sing Group Bhd will be proceeding with its project launches worth RM4bil this year.
Unlike some developers who are moving into lower gear in terms of project launches following a more challenging market environment in the first half of this year, group managing director and chief executive Tan Sri Leong Hoy Kum says Mah Sing has gone on with its project launches and previews as planned.
These include Savanna Executive Suites and Dsara Sentral, both launched in March, and the preview of Lakeville Residence and Avens Residences garden linkhomes in Southville@KL South in May. There are also the ongoing launches of new phases of linkhomes, MResidence 1 & 2 in Rawang, Leong shares with StarBizWeek.
Of Mah Sing’s product portfolio, 26% worth RM8.3bil comprises landed residential property, 21% (RM6.3bil) are serviced apartments and small office home office (Soho) units, and 19% (RM5.8bil) are condominiums and apartments.
Leong believes the fundamentals of the local property market remains solid, driven by a relatively young working population, continued urbanisation, a stable employment market, attractive mortgage rates, and a cultural preference for owning and investing in properties.
“These factors should sustain demand for the right properties in major hotspots where demand will outpace supply over the short and medium terms,” he says.
Mah Sing’s confidence stems from the strong sales it has garnered, having turned in RM770mil in sales as at March 31 this year. It is confident of clocking up a 20% increase in sales to the tune of RM3.6bil in 2014.
Leong says mid-range mass market products like Savanna Executive Suites in Southville City@Bangi, linkhomes in MResidence 1 & 2 in Rawang, and apartments in DSara Sentral, Sungai Buloh have resulted in strong sales momentum for Mah Sing.
The Southville City township recorded bookings of RM530mil compared with the full-year sales target of RM700mil. As for the D’sara Sentral project in Sungai Buloh, bookings have reached RM250mil compared with the full-year sales target of RM300mil.
Leong attributes Mah Sing’s strong performance to the right product planning and good landbanking strategies over the past few years.
“We have planned for the right products over the past two years by acquiring landbank for mainly mass market products. The right products at locations with supply shortage still see strong demand from buyers who buy for their own occupation, while investors are in for the medium to long term,” he explains.
Next month, Mah Sing will open for booking 197 units of 3-storey link houses (priced from RM860,000) with a gross development value (GDV) of RM200mil. There are already 1,000 bookings for the project.
After the Government’s market cooling measures came into force in January this year, Leong says Mah Sing has shifted its focus to the affordable residential property segment that still enjoys robust demand.
Versatile player
“The focus this year is to ensure affordability of our products. This property segment has been underserved for many years now and there is strong pent-up demand. To cater to this market segment, some 81% of our residential launches this year will be priced below RM700,000 compared to only 41% in 2013,” Leong says.
He points out that the implementation of the 6% goods and services tax from April 1, 2015 will cause commercial property prices to go up by 6%, while residential property prices will need to rise by 3%-5% for developers to cover the higher input costs.
He believes this will encourage potential property purchasers to buy ahead in the second half of this year to avoid having to pay more for their property.
Mah Sing has 47 projects spread across the country in the Klang Valley, Johor, Penang and Sabah.
Location-wise, the group’s focus is still in the Klang Valley which is expected to contribute 60% to group sales this year, followed by Johor Baru projects at 23%, Penang projects 10% and Kota Kinabalu projects 7%.
But it has no intention of spreading to other smaller markets such as Perak, Pahang or Negri Sembilan, although Leong says Mah Sing may explore Seremban when the high speed rail project takes off. It also has no plans to expand overseas.
He says Mah Sing is on the lookout for good land although he laments that despite the tougher market backdrop, the price of land has not come down.
“We are not in a hurry to buy land but we are constantly looking for new land. We will lock in if the price is right and payment terms are attractive. We will focus on the four hotspots where we have a presence, namely the Klang Valley and Greater KL, Iskandar Malaysia, Penang and Sabah.”
Leong says Mah Sing has the capacity to lock in further new land before hitting the company’s target of maintaining a net gearing ratio of 0.5.
Mah Sing’s balance sheet remains strong with a strong cash pile of some RM614.2mil and a low net gearing of 0.25 times as at March 31.
“Having the right land will give us the flexibility to plan ahead of the property market cycle,” he says.
Mah Sing still has 2,786 acres with a total remaining GDV of RM26.08bil that will sustain the group for seven to eight years.
It also has unbilled sales of RM4.64bil. Of the total remaining GDV and unbilled sales of RM30.72bil, commercial property makes up 28% or RM8.585bil and industrial property makes up 6% (RM1.718bil).
Leong says Mah Sing is also looking at injecting its industrial and commercial assets into a real estate investment trust (Reit) in the next three to five years.
“We have the right profile of properties should we decide to venture into a Reit. However, this is a medium to long-term plan for us.”
Meanwhile, Leong is confident the 43 million options under Mah Sing’s 10-year employee share option scheme will be converted upon the expiry date in July given the low weighted average price of RM1.44 per option. The exercise price of the options ranges from RM1.24 to RM2.03.
“The exercise of one option will involve the issuance of one new share. So if all 43 million options are exercised before the expiry date of July 10, that will involve an issuance of 43 million new shares in Mah Sing,” Leong says.
The low price-to-earnings ratio of around 9 to 10 times presents a good entry opportunity for investors, he adds.
Leong says the conversion of the options will raise Mah Sing’s market capitalisation by some RM97mil, giving a boost to Mah Sing’s share liquidity.

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