Mah Sing Group: Multi-Engine Growth Strategy with Data Centers, Manufacturing, and Property Development
UOB Kay Hian
October 10, 2024
Mah Sing Group (MSGB MK), one of Malaysia’s leading property developers, is evolving its business model by tapping into fast-growing sectors such as data centers and manufacturing, while maintaining its strong property development operations. With strategic ventures into the digital economy, manufacturing, and its traditional property business, Mah Sing is positioning itself for multi-engine growth in the coming years.
Engine 1: Expanding in Data Centers
Mah Sing has taken significant strides in the data center space, a rapidly growing sector driven by global digitalization. After its initial collaboration with Bridge Data Center (Bridge DC) in May 2024, Mah Sing is progressing with further negotiations for partnerships on its Southville township project. Southville’s 150-acre land has been earmarked for data center developments, with 17.55 acres already secured by Bridge DC for up to 100MW of capacity. Now, Mah Sing is in advanced discussions for additional data center developments on the remaining land, potentially adding 90MW and 300-400MW capacity for global data center operators.
In addition to Southville, Mah Sing is expanding its data center footprint in Johor Bahru, specifically within its 42.52-acre Meridin East development. This land could support up to 300MW of data center capacity. With recent land transactions valued between RM100-140 per square foot (psf), Mah Sing anticipates significant profits from potential sales. The company’s historical land acquisition costs at RM7psf offer attractive margins, potentially contributing RM74 million to its 2025 net profit. This venture could account for 27% of its 2025 earnings, driven by its strategic location and rising demand for data centers.
Engine 2: Value-Unlocking in Manufacturing
Mah Sing’s manufacturing segment is gaining momentum, with an ongoing expansion of its plastic business. Recently, the company entered a joint venture with its long-term Indonesian partner, PT Gaya, to increase the production and trading of plastic pallets, containers, and other handling and storage solutions. This joint venture is expected to increase Mah Sing’s manufacturing capacity by 10%, starting in October 2024.
With continued expansion plans, including new ventures in Thailand, Mah Sing is targeting further growth for its plastic manufacturing business, which may pave the way for a potential initial public offering (IPO) within the next three years. The Indonesian expansion alone is projected to drive a 10% increase in revenue for the plastic segment, unlocking additional value for shareholders and enhancing the company’s profitability.
Engine 3: Positive Outlook for Glove Business
Mah Sing’s glove manufacturing business is on the path to profitability, with the company expecting to break even by the second half of 2025. The global demand for gloves, especially in the US market, has supported Mah Sing’s recovery in this sector. Currently, 90% of the company’s glove production is exported to the US, where increased tariffs on Chinese-made gloves have benefited Malaysian manufacturers.
Operating five out of its 12 production lines, Mah Sing has an annual production capacity of four billion pieces of nitrile gloves. The company expects to reach profitability by achieving an 80% utilization rate and an average selling price (ASP) of US$21 per 1,000 pieces. As of now, the company’s utilization rate stands at 40%, with an ASP below US$20 per 1,000 pieces. Once it reaches the breakeven point, Mah Sing’s glove business is expected to contribute RM15-20 million to its net profit, representing 6-8% of its overall earnings.
Engine 4: Strong Property Development Business
Mah Sing’s core property development business remains robust, driven by the success of its M-Series projects. As of August 2024, the company had achieved RM1.66 billion in new property sales, reaching 66% of its full-year target of RM2.5 billion. This sales momentum is expected to accelerate in the latter part of the year, as Mah Sing launched RM2 billion worth of projects in 2024, with most launches taking place in August.
In Johor, Mah Sing has seen strong demand for new property launches, with many projects almost fully sold out. The company also reported rising property prices in Johor’s Tebrau area, with prices increasing to RM400psf from RM350psf within the span of a year. The strategic location and affordability of Mah Sing’s M-Series products have been key factors in driving sales. Moreover, Mah Sing is expected to benefit from Malaysia’s Budget 2025 initiatives, particularly the Madani Deposit Scheme and adjustments to civil servant salaries, which could further boost demand for affordable homes.
Conclusion
Mah Sing Group is capitalizing on a multi-engine growth strategy, tapping into diverse and high-potential sectors such as data centers, manufacturing, and glove production, while continuing to strengthen its core property development business. With an expanding presence in the digital economy and a proven track record in property development, Mah Sing is poised for sustained growth in the coming years. Investors looking for exposure to Malaysia’s evolving business landscape should keep a close eye on Mah Sing’s developments across these dynamic sectors.
UOB Kay Hian
October 10, 2024
