Date of Report
October 29, 2024
Broker Name
UOB Kay Hian Private Limited
Company Overview
Mah Sing Group Berhad (Bloomberg ticker: MSGB MK) is one of Malaysia’s leading property developers, known for its rapid turnaround strategy. The company has gained prominence for its capability to quickly convert parcels of land into affordable housing and has been diversifying into data center ventures to unlock additional value.
Key Financials and Stock Data
- Share Price: RM1.77
- Target Price: RM2.29, indicating an upside potential of +29.4%
- Market Cap: RM4.17 billion (USD $966.3 million)
- Shares Issued: 2.56 billion
- 52-week High/Low: RM1.97/RM0.76
- Major Shareholders:
- Mayang Teratai Sdn Bhd: 32.5%
- PNB: 13.6%
- Bank of Singapore: 6.1%
Latest Partnership and Data Center Expansion
Mah Sing has recently expanded its partnership with Bridge Data Centres (BDC), which was initially established in May 2024. This extension involves a new collaboration for an additional 35.68 acres (Plots 3A-3B) of land, bringing the total land area under the partnership to 53.23 acres with a combined data center capacity of 300MW. This latest land sale is valued at RM311 million, translating to RM200 per square foot.
- Total Capacity: 300MW across Plots 2 and 3A-3B.
- Investment: Mah Sing is expected to invest RM706 million in the project, funded through both land sales proceeds and debt-equity financing (70% debt, 30% equity).
- Projected Revenue: Mah Sing anticipates a net gain of RM120 million to RM140 million from the RM433.5 million in proceeds, expected to be recorded in 2025.
Strategic Land Bank and Future Prospects
Mah Sing’s Southville Data Centre Hubs have an additional 96.8 acres of land available, including Plots 3C, 3D, and Plot 1, each with capacities of 100MW and 90MW, respectively. With a total potential of 590MW, this capacity exceeds the earlier guidance of 500MW, positioning Mah Sing as a key player in Malaysia’s growing data center market.
- Future Land Sales: The remaining plots have an estimated value of RM800 million. If these sales materialize, a further net gain of RM210 million to RM280 million is projected for 2026.
Financial Highlights and Stock Impact
Mah Sing’s financial performance reflects the positive impact of its property development and data center diversification:
- Revenue Growth: Forecasted net turnover from RM2.85 billion in 2024 to RM3.23 billion by 2026.
- EBITDA Margin: Expected to rise from 16.3% in 2024 to 25.7% by 2026.
- Net Profit Growth: From RM239 million in 2024 to an anticipated RM417 million by 2026, with significant contributions expected from the data center operations.
- PE Ratio: Projected to decrease from 18.0x in 2024 to 10.4x in 2026, aligning with Mah Sing’s improved earnings forecast.
Risk Management and Financial Safeguards
The partnership with BDC incorporates a risk management clause, requiring BDC to secure financially stable, high-tier clients (such as AI-focused and hyperscale companies) before commencing operations. Additionally, BDC has paid an upfront consideration of RM9 million, which is non-refundable, minimizing financial risks for Mah Sing.
Environmental, Social, and Governance (ESG) Updates
- Environmental: Achieved GreenRE Bronze certification for several projects, including M Minori, M Panora, and M Astra.
- Social: The M Adora project reached a milestone of 2,200,000 man-hours without incidents, highlighting Mah Sing’s commitment to safety.
- Governance: Emphasizes transparency with a strong anti-bribery and anti-corruption policy in place.
Valuation and Recommendation
UOB Kay Hian maintains a “BUY” recommendation for Mah Sing with an unchanged target price of RM2.29, based on a 10% discount to the sum-of-the-parts (SOTP) valuation of RM2.55 and a 40% RNAV discount. This target price reflects Mah Sing’s efficient land utilization strategy, which not only strengthens its property portfolio but also establishes a recurring income stream through data center investments.
