Mah Sing expanding with emphasis on affordable homes

Property developer Mah Sing Group Bhd, which posted yet another quarter of stellar earnings, will continue with its strategy of acquiring land amid the softer market sentiment in the sector.

Mah Sing group managing director and chief executive Tan Sri Leong Hoy Kum said the company would continue to look for land that fit into its business model to ensure that the company was able to offer the right product in various locations.

“As long as the land fits into our business model, which is to have a quick turnaround, and enables us to keep it affordable… it doesn’t matter where the land is,” he said at a briefing yesterday.

The company, which will be launching projects in the Klang Valley, Iskandar Malaysia, Penang, Negri Sembilan and Sabah next year, saw its net profit rise 21% to RM85.94mil for the third quarter ended Sept 30 against RM70.62mil a year earlier.

Revenue was 33% higher at RM713.55mil versus RM536.5mil in the corresponding quarter last year, contributed by higher sales from its Icon City project in Petaling Jaya and M Residence @ Rawang.

Nine-month earnings were 21% higher at RM254.7mil year-on-year on revenue of RM2.06bil.

Although there may be a slight impact on sales following the implementation of the goods and services tax (GST), executive director Datuk Steven Ng said that the underlying demand for mass-market properties was still strong.

He added that in line with the company’s focus on mass-market properties, 87% of its residential properties launched this year had been priced below RM1mil.

“Next year, Mah Sing will maintain this strategy with 84% of launches to be priced below RM1mil,” he said.

Mah Sing, the largest property developer in the country that is not controlled by the Government, is viewed as an aggressive player with its land acquisitions and new launches this year.

So far in 2014, the group has acquired land in Puchong and Seremban amounting to some 459ha with a collective potential gross development value (GDV) of RM19.3bil.

This brings Mah Sing’s total land-bank to 1,440ha with an estimated GDV of RM66bil. The group’s unbilled sales currently stand at RM5.1bil, which is three times the revenue recorded last year.

Ng said the huge unbilled sales would be able to sustain the company’s earnings for two to three years.

Mah Sing is also keeping its options open for high-end property developments.

“We will not neglect the mid to high-end property segments. We expect sales to foreign owners to make up about 10% of total GDV, banking on the Malaysia My Second Home programme,” he said.

In line with its intention to continue land-banking, Mah Sing is embarking on a fund-raising exercise, which could see it raising up to RM630mil.

The exercise entails a rights issue with free warrants, which is expected to be completed by the first quarter of 2015. Some RM530mil of the anticipated proceeds will be used to finance its property development activities and land acquisitions in Seremban and Puchong.

Ng said RM92mil of the proceeds would be utilised as general working capital.

The rights issue will be followed by a one-for-four bonus issue that is targeted to be completed by the third quarter of 2015.

“This corporate exercise will further strengthen our balance sheet, result in interest savings and increase the capital base of the company to better reflect the current scale of operations and assets employed.

“With increased shareholders’ funds, we are also expected to be better positioned to obtain debt funding for future business development and expansion activities, should the need arise in the future,” said Leong.

He said that after the exercise was completed, Mah Sing would be able to borrow up to RM1bil to fund its future expansion while keeping its gearing level at 0.5 times.

Mah Sing has yet to fix the entitlement basis and issue price for the rights issue.

As at Sept 30, the group had about RM656.1mil in cash and net gearing at 0.37 times.

In the past nine months, the group achieved RM2.5bil in sales, RM1.1bil short of its RM3.6bil sales target for 2014. - By The Star

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