Mah Sing Group Berhad (recently announced that its wholly owned subsidiary, Klassik Tropika Development Sdn Bhd had on entered into a sale and purchase agreement with Morningjoy Sdn Bhd for disposal of a freehold land in Pykett Avenue, George Town, Penang for a cash consideration of RM66.3 million. MIDF views the disporal sas neutral since its in line with the groups strategy.
It noted that the land was acquired in 2009 for a proposed high-end condominium development. The purchase consideration of RM66.3m is higher than market value of the land of RM59m and net book value of RM61.9m. The proposed disposal is expected to generate disposal gain of RM1.8m after deducting expenses for the disposal.
The proposed disposal is expected to improve balance sheet of Mah Sing marginally. MIDF estimates net gearing to decline marginally to 0.32x from 0.34x in 2QFY22. Meanwhile, earnings impact from disposal gain of RM1.8m is limited at ~1%. Hence, we make no changes to our earnings forecast for FY22 and FY23. Maintain BUY with an unchanged TP of RM0.74. We maintain our TP at RM0.74, based on 65% discount to RNAV.
The research house remains positive on Mah Sing due to its strategy of selling properties in the affordable price range. New sales outlook is also stable as new sales in 1HFY22 is well on track to hit new sales target of RM2b. Hence, maintains its BUY call on Mah Sing.
