MahSing ... Aug11

Mah Sing Group Bhd's wholly-owned unit, Grand Pavilion Development Sdn Bhd, has signed a joint venture agreement with Asie Sdn Bhd and its subsidiary, Usaha Nusantara Sdn Bhd, to develop a 1.63-hectare prime land along Jalan Tun Razak-Jalan Pahang here.

Usaha Nusantara would grant Grand Pavilion the sole and absolute right to undertake the development of the land for an entitlement of RM106.60 million to be settled via 60 per cent in cash and 40 per cent stake in Grand Pavillion.

The joint-venture land formed part of the 23.42ha privatized urban regeneration project in Kuala Lumpur with a gross development value (GDV) of RM9 billion, whereby Asie has been granted full rights of and approvals for a mixed development.

The urban regeneration project would comprise residential and commercial properties and community, leisure, recreation and infrastructure facilities on 15 parcels of development land together with five air rights in Precinct 2-Pekeliling of the River Corridor Development under the Blue Corridor policy of Kuala Lumpur City Plan 2020.

For this first joint venture, Mah Sing intended to develop a niche development, named M Sentral, with an estimated GDV of approximately RM900 million. The M Sentral will comprise smaller-sized and more affordable serviced residences as there is strong demand due to lower entry prices, as well as some retail units.

Asie was established in 1977 with construction and property development as its core business. The company has been involved in other regeneration projects for the Kuala Lumpur City Hall.

Asie’s shareholder is Citivest Sdn Bhd. Filings from the Companies Commission of Malaysia showed shareholders of Citivest are Abu Khalil Akasah and Nik Rahimah Wan Ahmad, both of whom are believed to be connected to the Perlis royal family.

The 4.08-acre development is subject to authorities’ approval and is expected to commence by the first half of 2012 and to be developed over five years.

Currently, Mah Sing has a landbank of about 900 acres (of which 477 acres are located in Johor while 315 acres and 108 acres are in the Klang Valley and Penang respectively), excluding the new parcel, with estimated GDV of RM14 billion over the next five to seven years. Mah Sing, which has been aggressively growing its landbank of late with acquisitions in Jalan Ampang, Batu Ferringhi (Penang) and Cyberjaya since early 2011, has a total of 34 projects in the Klang Valley, Penang and Johor Bahru.

The group is looking at possibly acquiring a large tract of land of more than 1,000 acres to develop a new township. It is also exploring acquisition opportunities in Kota Kinabalu, Sabah. They are looking for landbank that can have a quick turnaround.

The new area, more commonly known as the Pekeliling flats, is ready for immediate development as demolition works, soil investigations and partial earthworks have already been completed.

The group noted that it is in sound financial position to take on new projects. Mah Sing issued a seven-year redeemable convertible secured bonds to raise RM325 million for land acquisition two months ago. Mah Sing had cash in hand of about RM750 million.

As at June 2011 Mah Sing’s net gearing stood at 0.24 times.

The EPF owns a 8.5% stake while Koperaso Permodalan Felda has 7.6% stake in Mah Sing. Leong owns 35.1% stake.

The success of M Sentral will give it more credibility in bidding fore for the development of privatized government lands. It is eyeing more government projects, including the development of the Rubber Research Institute land in Sungei Buloh and the Sungai Besi land currently used by the Royal Malaysian Air Force.

They are also looking at M&A (merger and acquisition) deals. It does not rule out acquisitions to play a bigger role (in property development) and enhance shareholders’ value.