DATUK SERI LEONG HOY KUM Managing director and CEO Mah Sing Group Bhd WHAT is your outlook for the property market next year?
We believe that the property market in 2008 will be robust, underpinned by a resilient domestic driven economy. Various pump-priming initiatives under the Ninth Malaysia Plan will provide a boost to propel the economy upwards and increase disposable incomes. Malaysia’s young population, rising urbanisation, low unemployment rate and increasing wages, as well as a high savings rate will continue to contribute to the property market’s positive run.
The Government has been proactive in this manner, with several goodies announced for Budget 2008. EPF contributors will be allowed to make monthly withdrawals for financing one house effective Jan 1, 2008. This could potentially unleash close to RM9.6bil annually into the property industry, allowing homebuyers to afford homes costing 20% more than previously.The 50% waiver on stamp duty for purchase of homes under RM250,000 should boost demand for homes, and the Group has taken the initiative to ride on these incentives.
We are setting up a help desk to advise our buyers on the EPF withdrawals, as well as waiving the remaining 50% stamp duty for Mah Sing homes priced up to RM250,000, to ease the burden of home ownership.
Besides domestic demand, there has been increased foreign interest in our properties as they like the quality of our properties, boosted by the waiver of real property gains tax. We have the most liberal landownership laws in the region, and now, foreigners are allowed to buy unlimited units of residential properties above RM250,000 without restriction of usage.
What are some of the opportunities and challenges for industry players going forward?
Growth corridors including the Iskandar Development Region (IDR) and Northern Corridor Economic Region have resulted in renewed interest in these areas, and improving infrastructure as well as strong economic and population growth will spur demand for housing there.
Malaysia’s increasing exposure as an international property market will attract more foreign participation. It is indeed an opportune time for foreign investors because whilst our properties may be world class, valuations still lag behind those of our regional peers. Increases in raw material prices have increased construction costs, resulting in higher pricing for good housing projects in strategic locations. Buyers will want to hedge against inflation by investing in assets that have potential upside.
Which property sector and development types offer the best potential for your company?
In terms of the residential market, we believe that medium to high-end gated and guarded residential properties should do well. Demand for these properties is a reflection of Malaysians’ growing affluence and sophistication. These properties would need innovative concepts and practical layouts, as well as being supported by a strong brand.
For the commercial market, there is a shortage of good office space, especially Grade A offices in Kuala Lumpur. The limited number of good quality investment grade buildings available for sale in the market has driven up the capital value of prime offices. Depending on the location, commercial retail buildings should do well.
What are the challenges faced by the industry and the impact on your company?
Prime land is increasingly scarce, especially land that fits our fast turnaround business model. However, we have a proven landbanking track record, securing good land year on year to maintain our earnings visibility.
Sometimes, landowners also approach us either to sell land, or to propose joint ventures on their land to tap into our branding, experience and skills.
Our capability to appropriately manage cash flow is key to the company’s ability to capitalise on opportunities. Increases in raw material are inevitable, but we have taken steps to mitigate the effects, for example, by using step up pricing for new launches, bulk purchasing to enjoy discounts, and lowering our funding costs via shrewd negotiations.
Human capital, i.e being able to continuously recruit, train and retain good people who are willing to take the company to new heights amidst increasing globalisation, will be the key to success.
We have a very strong team which is striving to realise the Group’s vision.
What are some of the interesting property launches that can be expected from your company in the coming months?
We have started a registration exercise for our new commercial projects, which will be launched in 2008.
Southgate Commercial Centre offers investors the opportunity to own offices in the heart of Kuala Lumpur, as opposed to just leasing the offices in most new buildings.
There will be food and retail outlets to support the offices. Southbay City in Batu Maung, Penang will be a new “must-visit” destination, integrating leisure, commercial and retail offerings near the upcoming Second Bridge on the island.
Our existing residential projects are Perdana Residence, Kemuning Residence, Hijauan Residence and Aman Perdana in the Klang Valley, and Sierra Perdana, Austin Perdana and Sri Pulai Perdana in South Johor within the IDR.
We shall continue our sales from these projects, mainly semi-detached homes and bungalows within gated and guarded communities.
What are your expectations of project take-up rate, sales revenue and earnings for the company next year?
We believe 2008 will be another good year and we should be able to achieve another year of uninterrupted profitability and good take-up. This will be underpinned by our unbilled sales exceeding RM1bil, which is twice our revenue in 2006.
We have a remaining Gross Development Value (GDV) of RM3.042bil, representing a total GDV of RM4.119bil, which will ensure earnings visibility for seven years. We expect another year of good sales, especially with the implementation of the Employees Provident Fund withdrawals next year. We will continue to focus on the lifestyle medium to high-end residential and commercial segments, which have given us very good results.
The Star Newspaper
