KUALA LUMPUR: CIMB Securities Sdn Bhd expresses confidence in Mah Sing Group's recent acquisition of 100.4 acres of land in Skudai, Johor, known as M Tiara 2, especially following the earlier acquisition of a 75.7-acre site located 400 metres away in June last year.
The research house said it views the acquisition as a pre-emptive strategy by Mah Sing due to the anticipated growing demand in Johor's property market.
"The project could also benefit from the Rapid Transit System (RTS) link as it is located around a half-hour drive from the RTS Bukit Chagar Station.
"We expect a good take-up rate for M Tiara 2, as the indicative starting price of a double-story terrace with a 22'x70' built-up is RM771.6k, or RM501 per square foot (psf).
"This price, although slightly higher, is justified as it reflects a reasonable premium for a new development compared to existing properties in the nearby established township of Mutiara Rini, which typically range between RM450psf and RM490psf," it said.
The firm noted that the new site for M Tiara 2 spans 100.4 acres with a cost of RM23.70 psf, similar to the previous site's cost.
"M Tiara 2 is expected to have a gross development value (GDV) of RM1.45 billion, three times larger than its predecessor, offering larger residential units, serviced apartments, and commercial spaces.
"The land cost to GDV ratio is attractive at approximately 7.2 per cent, promising mid- to high-teen pre-tax margins," it noted.
As a result, CIMB Securities has increased Mah Sing's target price to RM1.55, up from RM1.16 previously.
"We expect Mah Sing to sustain its positive earnings trajectory in the financial year 2024 (FY24), supported by the anticipated completion of M Oscar, Sensory Residence, M Arisa, and Meridin East property projects, which will also boost free cash flows by RM500 million.
"This provides the group with the war chest to pursue more land acquisition in Johor and Klang Valley," it added.