Mah Sing eyes Vietnam as its first overseas market

August 7, 2008
Mah Sing eyes Vietnam as its first overseas market
Malaysian developer considering RM1b joint venture

(KUALA LUMPUR) Mah Sing Group Bhd, Malaysia's fifth biggest developer
by revenue, is considering a Vietnam venture worth more than RM1
billion (S$421 million) for its first step overseas as a sagging home
economy slows the company's sales.

'You need to diversify your earnings stream by going overseas,' group
managing director Leong Hoy Kum, 50, said in an interview
yesterday. 'We can't depend only on Malaysia for our growth. The
foreign market is a must.'

Mah Sing, which cut this year's property sales target by half because
of rising building costs and Malaysia's slowing economy, is looking
to expand across Asia to almost triple sales within five years to as
much as RM1.5 billion. Its stock has tumbled 25 per cent this year,
faster than the benchmark Kuala Lumpur Composite Index's 22 per cent
slide.

'It's very bold and a bit too optimistic,' said Fatimah Zahra Fadzil,
an analyst at Inter-Pacific Capital Sdn, who has a 'neutral' rating
on Mah Sing stock. 'These are volatile markets. It'll be very
difficult to achieve that target.'

Malaysia's economy is stumbling as higher fuel prices weigh on
consumer spending, Second Finance Minister Nor Mohamed Yakcop said on
Monday. A 41 per cent increase in petrol prices to trim fuel
subsidies in June pushed inflation to a 26-year high, leaving
Malaysians with less to spend.

Mah Sing's total sales, including the company's plastics unit, more
than tripled in the past five years to reach RM573.4 million in 2007.
Profit last year surged to a record RM81 million from RM5.3 million
in 2002.

The company is exploring India, China and Indonesia, Mr Leong said.
Overseas sales will account for 20 to 30 per cent of the group's
total in the next five years, he said. The company is seeking revenue
growth of 20 per cent each year, he said.

'If Malaysia is on a weaker growth path, then the other Asian
countries could beef up' its earnings, said Ong Chee Ting, an analyst
at Aseambankers Malaysia Bhd. 'It's a good diversification strategy,
it could possibly bring it close to its RM1.5 billion target.' Shares
of Mah Sing, based in Kuala Lumpur, rose 2.1 per cent to RM1.47
yesterday on the local stock exchange, the biggest advance since July
28.

Vietnam is Mah Sing's priority as the 'overheating' in its economy
provides chances to buy land more cheaply, Mr Leong said.

'We won't simply venture into a country without a good reason,' the
Mah Sing CEO said.

The company is examining a joint-venture to build homes on 300 to 500
acres of land in Ho Chi Minh City, he said. It may later build
offices at a separate location there.

'Next year will be a good year to start if we find that the timing is
right again' in Vietnam, he said.

Vietnam's government on July 21 raised the retail price of the most
commonly used grade of petrol in the country by 31 per cent and
kerosene by 44 per cent, to reduce the burden of government subsidies
paid to fuel retailers. Consumer prices rose 27 per cent in July from
the same month a year earlier, the fastest since at least 1992, the
General Statistics Office reported on July 24.

Vietnam's 'long-term growth story looks quite decent, looking at the
very young population and the housing requirements,' said
Aseambankers' Mr Ong. 'The overheating could slow the pace of
development for the next two years or so.'

Mr Ong recommends buying Mah Sing, estimating its shares will rise to
RM1.74. The stock has slid 23 per cent since he started coverage with
a 'buy' rating, according to data compiled by Bloomberg. He has
a 'hold' recommendation on SP Setia Bhd, Malaysia's largest property
group, expecting its shares will decline to RM3 from RM3.14.

Mah Sing is rated a 'buy' by 9 of 13 analysts who cover the stock and
SP Setia has a similar recommendation from 10 of 24 analysts,
according to Bloomberg data.

At home, Mah Sing plans to buy land that will generate gross
development value of at least RM600 million each year, Mr Leong said.
He wants to bolster Mah Sing's market value within five years to RM5
billion, which is more than SP Setia's current worth of RM3.2
billion.

'If you don't have a dream or vision, there's no direction for my
group to move forward,' he said. 'It's a management objective.'