Hwang-dbs2 13/8/2009

Property
Land Rush Emerging

We see further signs that confidence is returning to
Malaysian property market with developers starting to
replenish landbank while investors are making large
commercial transactions.
Mah Sing (Not Rated) has announced two big transactions:
a) RM130.5m land acquisition in Cyberjaya (115
acres freehold @ RM26psf, for medium-high end residential
development - estimated GDV RM690m) + option to
acquire 6.3 acres of adjacent commercial land @ RM79-
82psf (within next 12 months); and
b) RM226m sale-and-leaseback of commercial space at
Southgate, Sungai Besi (KL) to Felda for RM800psf (5/95
financing scheme, 2-year 8% gross yield guarantee).

The land acquisition price seemed fair - we understand SP
Setia was looking at the same parcel back in 2007 for
RM28psf (subsequently aborted due to poor access which
has since improved after the opening of Maju Expressway
and KL-Putrajaya; as well as heightened economic/ political
concerns following Mar 08 general election - lower risk now
after Najib's smooth leadership transition). In Dec 08, UEM
Land bought 98 acres of residential land in Cyberjaya
for RM24psf. Mah Sing's land comes with infrastructure
and no low-cost housing/public amenities requirement.
As for the sell-and-leaseback transaction, the selling price
also looked fair based on current ASP for its Southgate
project.
With the en-bloc sale, Mah Sing has achieved RM543m
sales for the last 7.5 months - ahead of its RM453m target
for 2009 and almost on par with 2008's RM560m.

Unbilled sales currently stands at RM800m (1.6x 2008
property development revenue), while total landbank 671
acres (GDV RM3.6b).
Implication
Mah Sing's acquisition is the first large landbank acquisition
following recent positive policy changes to liberalise the
Malaysian property sector.
Felda's en-bloc acquisition of Southgate commercial space
came on the heels of Hap Seng's acquisition of a 50% stake
in Citibank Tower for RM607m (RM828psf, 6.3% net
yield) earlier this week.
More landbank acquisitions likely on the cards (currently
negotiating four in Klang Valley including another large
parcel), as Mah Sing expects the sector to experience an
upcycle in 2H10.
From our channel checks, increasingly more developers
are looking to acquire landbank especially in Klang Valley
with property brokers receiving more enquiries.
Developers with prime landbank in KL and Penang would
stand to benefit the most from rising property prices. Top
picks:
a) SP Setia (Buy; TP: RM5.00, RNAV: RM5.54) – The Group
has knack of acquiring cheap prime landbank and fast land
turnaround. We understand it is bringing forward a
RM5b mixed development project opposite Midvalley KL to
2010
b) E&O (Buy; TP: RM1.50, RNAV: RM2.20) - largest
developer in land-scarce Penang with 1,123 acres (including
rights to reclaim 740 acres at Seri Tanjung Pinang Phase 2).
The Group also owns 335 acres in KL


Ray comment :Property will start to pick up...we can look closer on potential share...like BRDB,SPSETIA and E&O..Smal Cap stock with low PE like KSL and Favco also can be consider...cheer..