He said Mah Sing was keen on China because its property market was expected to do well as it had the right structure with population-led demand.
“With increasing consumer sophistication in the country (China), it gives opportunities for expatriate developers like Mah Sing to expand there,” he said in a statement.
In a filing with Bursa Malaysia on Dec 2, Mah Sing said its subsidiary, Mah Sing International (HK) Ltd, had jointly with Danlong Realty (Beijing) Ltd entered into a letter of intent with the Wujin District People’s Government, Changzhou City.
This was to develop the project, which would have a total gross development value (GDV) of RM2.2bil.
In the same announcement, the company said Mah Sing International and Danlong intended to establish a joint-venture (JV) company.
On the local front, Leong said Mah Sing had had a very good year so far, and its success could be attributed to the pre-emptive measures in terms of project planning, pre-construction, cost and cash management as well as marketing strategies.
“We have a healthy balance sheet with only 0.18 times net gearing as at Sept 30 due to our strong financials and branding.
“Mah Sing was able to introduce innovative marketing concepts like Easy Home Ownership programme which helped us exceed our sales target by 1.4 times.
“We achieved RM615mil for the nine-month period against our full-year sales target of RM453mil,” he noted.
Leong said the local property market was expected to gain momentum as the country had the third-highest savings rate in the region.
With this liquidity, coupled with low returns on fixed deposit rates, property remained an attractive investment, he said.
“Malaysia’s financing environment is still conducive with attractive interest rates and financing packages.
“The new scheme allows further drawdowns from Employees Provident Fund’s Account 2 to finance first-home buyers and will further increase affordability.”
Leong said the domestic outlook was turning brighter as more consumers were willing to buy big-ticket items like properties.
“All these factors should result in improved property demand in the coming months in anticipation of asset reflation as our properties are still among the cheapest in the region.
“We believe this will lead to a strong demand recovery in mid-tier to high-end landed properties,” he said.
An analyst with Maybank Research said Mah Sing’s entry into China was a strategy to growing its earnings base beyond Malaysia.
“Its maiden project in China is a baby step but a long-term positive move to growing its base and becoming a global player in the industry,” he said.
The analyst said the JV was targeting to develop residential and commercial properties in two phases, with an estimated total costs of US$620mil, starting in 2011.
Assuming a 20% pre-tax margin and 25% China corporate tax rate, the project could deliver RM395mil in net profits, with Mah Sing International getting RM202mil based on its 51% equity stake.
“We estimate this amount to be recognised over five to six years and that the project could add RM34mil to RM40mil in yearly profits,” he said.
Locally, the analyst said Mah Sing’s 3.4-acre land in Penang was slated for high-end residential development with a GDV of RM280mil.
The research house’s earnings forecast for Mah Sing remains unchanged, with a “buy” call on the stock and a target price of RM2.35.
By The Star (by Danny Yap) (Posted on 24th December 2009)
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