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MAHSING – A Must Have Property Stock in Your Portfolio



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Jul 01 2007
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Talk about property stocks and Mah Sing Group Berhad (KLSE: MAHSING, stock-code 8583) will probably pop-up from everyone’s mouth. If you do not know this stock, chances are you’re living in the stone-age. It’s one of the darling stocks for property investors, and this stock has been blogged endlessly by bloggers out there. It was one of the low-profiled property companies until early this year when the spot-lights were aiming at the stock.

As for me, I don’t really have to dig much about this company to know that it’s one of the quality stocks to have in my portfolio (and so should you). Suffice to say that Mah Sing is one of very few property stocks which survived the 1997-1998 Asia Economy Recession without having to have a haircut (pity the barbers who couldn’t get any business from this fella). As the saying goes, if you can survive a crisis, you’ll emerge from it stronger than ever. And that’s precisely where Mah Sing is today.

Started as a plastic manufacturer in 1988 and ventured into property development sector (in 1994) building middle-range property, Mah Sing has transformed itself into a name synonym with quality in high-end products. Listed on Second Board of KLSE in Oct-1992, the company which was incorporated in Dec-1991 was transferred to Main Board in July-2004.

Two key projects

Property fanatics will tell you two dream-projects associated with Mah Sing, “The Icon” and “Southbay”. The Icon is a piece of architecture with Grade-A office development on Jalan Tun Razak in the heart of Kuala Lumpur with a target price of RM900 per sq ft. The group acquired a 23.25ha piece of land at the area with an estimated gross development value (GDV) of RM246 million in Oct-2006.

Southbay, on the other hand is the 34.7ha of land project in Batu Maung, Penang, which was acquired at the cost of RM 116 million recently. Targeted to be launched in the first half of next year (2008), the development of Southbay Penang is estimated to generate RM1.28 billion in GDV.

According to BusinessTimes, Mah Sing has also proposed to build a sea villa adjacent to the Southbay commercial development area since Penang attracts about three million tourists each year.

RoadMap

Mah Sing is exploring opportunities to tap markets abroad, especially in the Middle East and Vietnam, and has already spoken to some parties in the two countries. But the group is not in the rush for oversea expansion simply because it has 13 development projects mainly in the Klang Valley, Penang and Johor Baru, with a total GDV of RM3.9 billion, which is sustainable over the next seven years.

Currently, the group’s Klang Valley projects contribute 70% to revenue, with the rest coming from Johor. With the buzz of IDR, the group is scouting for land in Johor but the Mah Sing group managing director Datuk Leong Hoy Kum was fast to add that the group is studying how much value the group can create from the land and NOT the amount of land to have.

Corporate Exercise

The recent corporate exercise involving rights issue, share split and bonus issue will generate substantial amount of money for working capital and new development projects in the Klang Valley and Johor. The recent concluded one-for-four renounceable rights issue of up to 53.04 million shares at an issue price of RM3.30 per share had been over-subscribed by 56.24%. Together with the share split involving the subdivision of every one existing ordinary share RM1 each into two ordinary shares of 50 sen each, investors had gained good profit (if you’re a shareholder who benefited from the corporate exercise mentioned, you would know what I mean).

But that’s not all, the up coming bonus issue of up to 106.07 million new ordinary shares of 50 sen each on the basis of one bonus share for every five existing ordinary shares of 50 sen each could make you laugh a second time to the bank (depending on the market pulse). The ex-date for the bonus-issue is 5th July, 2007.

In summary, if you owned 1,000 shares of Mah Sing before the above exercise, you should have 3,000 shares ultimately. It’s a good move to bring the stock price to a more affordable level so that more investors can invest and potentially push up the shares price *evil grin*.

Fundamental and Technical Analysis

Since 2003, the revenue, net profit and shareholders funds have been on uptrend year-on-year. I particularly like the ROE (return on equity) whereby it has increased from 6% in 2002, 14% in 2003, 12% in 2004, 19% in 2005 and 21% in 2006.

Basic earning per share (EPS) – increased from 12.1 (2002), 16.6 (2003), 19.2 (2004), 33.3 (2005) to 43.9 (2006) sen. Mah Sing has been paying dividends from 2002 onwards till 2006.

Technically, the stock price has been on uptrend since early 2006 and the fact remains that it’s not easy to find similar stock which give you almost a 45 degrees chart-line. The stock price had appreciated about 165 percent since Feb-2006 and you simply have to give credit to the management for creating values to the company’s bottom line.
Looking forward, I’m pretty sure this stock will continues to perform and long-term investors would benefit from the prudent and competent management team.

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