Harimau Capital

MAH Sing Group Bhd group managing director Tan Sri Leong Hoy Kumhas just come back from a four-day retreat in Koh Samui. He's looking dapper and his eyes are gleaming with energy.

He apologises for being unable to take us out for lunch as he wants to continue fasting for the remaining week. His holiday wasn't a typical food feast dotted with long periods of winding down.

“I lost 2 kgs! See how loose my pants are,” says Leong as he shows how his pants now hangs copiously on his new slimmer waistline.

For Leong, being healthy is just as important as realising his vision of making Mah Sing the next Cheung Kong Holdings of Malaysia. Cheung Kong belongs to Hong Kong tycoon Li Ka-shing and is one of the largest property developers in Hong Kong.

As it is, Mah Sing currently has 40 projects and is Malaysia's second-largest developer by sales value.

To realise the Cheung Kong vision, which Leong hopes to achieve within the next 10 years, Leong realises he needs to be fit, alert and energetic. Yes, just like Top Glove Bhd's managing director Tan Sri Lim Wee Chai, Leong wants to live to a 100 years of age.

“Being a Cheong Kong means expanding and buying more land. I am always preparing for the future. We do not over-expand our capacity. We have the financial muscle to do that. For example, expanding into Johor. We had done thorough research and know who we want to target. We are not simple,” says Leong.

Not simple indeed. That certainly sums up Leong, who is not easily swayed by other property developers who have gone to foreign countries to launch properties.

“For now, we will remain focused on Malaysia and we are kept extremely busy with 40 ongoing projects here. While we are focused on our domestic projects, we attract both Malaysian and international buyers, which is why we are starting our sales galleries overseas. We will definitely explore (going overseas) on a longer term basis should any good opportunities come up. It is not necessarily just the United Kingdom; it can be Singapore, Jakarta or Shanghai,” says Leong.

Mah Sing's current customer base comprises mainly Malaysians living in the country as well as those working overseas. Foreign purchasers make up under 10% of its sales. Even so, Mah Sing has exceeded the RM2bil sales mark for two consecutive years from 2011 to 2012. With its new project roll-outs for 2013, Leong expects that to increase by 15% to 20%.

Its closest competitor, S P Setia achieved record-breaking sales of RM4.23bil for its financial year ended Oct 31, 2012 and is setting itself a target of RM5.5bil for this financial year.

Meanwhile, Mah Sing is targeting to achieve total sales of RM3bil this year, which is a 20% growth from RM2.5bil the previous year.

Just a few weeks ago, Mah Sing Group received “overwhelming” response for its 69 units of luxury Aspen bungalows, which the company is promoting on a build-then-sell concept. The units, located within the 60.75ha Garden Residence in Cyberjaya, were launched last week. Priced from RM3.88mil, the 3.5-storey Aspen bungalows in Precinct 4 sits on comfortable lot sizes of 60' x 90' and have spacious built-up areas of 7,796 sq ft.

These are unique bungalows with 9+1 bedrooms that are 3.5 storeys and come equipped with a lift.

“We build things with practicality and style in mind. This bungalow can fit in all generations of a family. Previously, the older parents have to live on the ground floor. Now, with the lift, they can stay upstairs. There is privacy for all, as everyone can stay on a separate floor. Your in-laws can stay downstairs,” explains Leong.

He adds: “Nowadays, selling property is about selling an environment. Even when we do affordable housing, we do it with style. Property development is more art than science. Land acquisition and knowing what the market wants is more of an art. Looking at the right land at the right time is also an art.”

Thus, on his property outlook, Leong says that he is still selectively optimistic about certain sectors as property is acknowledged as the best hedge against inflation.

“People buy properties as a form of wealth preservation and not speculation and we believe there will be strong demand for serviced apartments from 500 sq ft and landed properties below RM1mil in good schemes.

“When I say good schemes, I refer to well-located projects with easy access and amenities or schemes that are mature,” says Leong.

An exciting 2013

CIMB research head Terence Wong is expecting Mah Sing to meet its new sales target for its financial year ended Dec 31, 2012 of RM2.5bil almost spot on.

“This is the group's best-ever performance and is 11% higher year-on-year. Compared with 2007, just before the global financial crisis, new sales have more than tripled,” says Wong.

Apart from targeting total sales of RM3bil this year, unbilled sales of RM2.95bil is 2.2 times its financial year 2011 property segment revenue.

Mah Sing's product range also spans the entire range from affordable housing to premium upmarket homes, high-rise units, commercial properties and industrial properties.

For the nine months ended Sept 30, 2012, Mah Sing's net profit rose 37% to RM175.2mil while revenue was up 16% to RM1.3bil from the previous period.

For this year, Leong is launching six new projects which consist of Southville City and M Residence 2 in the Klang Valley, Ferringhi Residence in Penang island, Mah Sing iParc@Tanjung Pelepas and The Meridin@Medini which are located in Iskandar Malaysia and Sutera Avenue in Kota Kinabalu. He says some 77% of sales will come from landed residential projects and niche size high-rise projects

Leong is particularly excited about the RM3.63bil Southville City project in Bangi, a 420-acre township which Leong is hoping to develop from scratch over the next five to seven years and transform it into the next thriving township of Puchong, Cheras and Kota Damansara.

New sales in 2013 will be anchored by the group's new flagship township, the RM3.63bil Southville project in Bangi, where the group is launching RM1.2bil to RM1.3bil worth of properties this year.

So far, Mah Sing has received some 7,000 registrants for the township, and many have been attracted by the affordable pricing for its residential properties. Three-storey superlink houses will be priced from RM760,000 onwards and 2- to 3-bedroom apartments priced at below RM300,000 and from RM208,000 onwards.

Besides the six new projects, the main launches for 2013 will come from Icon City Petaling Jaya, M Residence 1 in Rawang, Garden Residence and Garden Plaza in Cyberjaya and M City in Jalan Ampang.

Mah Sing is targeting to achieve 62% of total sales from its projects in the Klang Valley, 20% from Johor, 13% from Penang and 5% from Sabah.

Leong says Mah Sing is extremely keen to tender for jobs on the Rubber Research Institute (RRI) land once tenders are opened. Last August.Kwasa Land Sdn Bhd, a wholly owned subsidiary of the Employees Provident Fund, announced it had finalised the purchase price of RM2.28bil for 2,330 acres of prime RRI land in the Klang Valley. It is the master developer for this township.

Kwasa Land had mentioned that the proposed township development is expected to create abundant opportunities for developers and contractors to participate in developing residential and commercial properties, main infrastructures and public amenities for an expected population of 150,000.

Mah Sing's gearing level has been an issue of concern for many in the investing fraternity but Leong feels those fears are unfounded. As of Sept 30, 2012, Mah Sing has some RM545.3mil in its coffers.

In December, Mah Sing proposed a renounceable rights issue of new shares with free warrants to its shareholders to raise gross proceeds of RM400mil to finance its operations and business expansion. The entitlement basis, date and issue price have yet to be determined.

Leong says Mah Sing is planning up to 0.5 times net gearing post-rights issue in the first quarter of 2013 as it is eyeing new strategic landbank.

“We are certain we will not gear up beyond 0.5 times. Our gearing level now stands at 0.3 times. We have cashflow from our ongoing projects and each of our projects has a 60%-80% takeup rate before we start development works. For this financial year, we are receiving some additional RM228mil from the delivery of vacant possession of our tail-end properties, over and above our existing billings,” he says.

Hong Leong Investment Bank Bhd analyst Sean Lim feels the company is handling its gearing level well, with support provided from a rights issue in December and favourable land payment terms.

Lim estimates that the expected RM400mil proceeds from the rights issue would help bring down net gearing from 0.3 times to 0.22 times currently.

“On top of the proceeds, the additional RM440mil gearing headroom (before gearing hits 0.5 times post-placement) would easily generate RM4bil of new gross development value, conservatively speaking,” Lim says.

Aside from that, Mah Sing is seeking favourable payment terms for its upcoming land acquisitions via joint ventures or prolonged payment periods of four to five years.

Lim notes that the move to seek favourable payment terms and joint ventures could be a good move to mitigate high gearing as sectoral headwinds could cause landowners to become more reasonable in their asking prices.

“In terms of landbanking, Mah Sing beat its target of RM5bil GDV worth of projects last year by around RM900mil and believes it should do better this year. Mah Sing's ability to execute is one of the best in the sector and its earnings prospects remain positive given the high unbilled sales of RM2.95bil, rising annual new sales and aggressive landbanking,” says Wong.

The appeal of Johor

The influx of interest into Johor property has become even more evident.

“The Iskandar region is developed mainly for Singaporeans,” says one investment banker from Singapore, who just bought a bungalow from one of the developers there.

“In Singapore, we don't have space. So here in Johor, we can afford to buy huge landed properties at such cheap prices,” he says.

Singaporean property buyers are feeling the heat even more in recent times. Singapore has imposed more measures to curb speculation on residential and industrial properties after home prices climbed to a record high. Some analysts, including the investment banker, feels that the curbs will fuel demand for Johor properties.

Some of the measures introduced include stamp duty for buyers, which has been increased by between five and seven percentage points. Permanent residents will have to pay the additional tax when they buy their first home while Singaporeans will have to pay the levy from their second purchase onwards.

While Leong is not revealing all of his cards just yet, he does tellStarBizWeek that he has a vision of becoming the largest lifestyle developers in the Iskandar Development Region (IDR) with a minimum gross development value (GDV) of at least RM5bil over the next few years.

In the Iskandar area, the three main areas of economic focus include Nusajaya, Medini and Danga Bay. Leong is of the opinion that all three areas will thrive, and each is already attracting its own niche market.

For Mah Sing, the target is clear. Just like Southville City in Bangi, which is targeting students from the 20 educational institutions in that area, Leong is targeting the students in Educity, Nusajaya.

The educational institutions in Educity include University of Reading from the United Kingdom, the Newcastle University Medicine Malaysia, the University of Southampton Malaysia campus, the Netherlands Maritime Institute of Technology, Raffles University Iskandar and Marlborough College Malaysia.

Leong says response for his Johor properties has been immense and the company is getting serious queries from Singaporeans, South Koreans, Japanese and Indonesians.

With all such feedback, Leong is not wasting any time and will be opening his sales gallery in Singapore after the Chinese New Year celebration.

“We will be organising buses to bring over interested buyers to view our sales gallery in the Iskandar region. We want to do this in a big way,” says Leong.

Currently, Mah Sing has five projects in Johor worth RM2.29bil.

The two new projects to be launched this year are Meridin@Medini, which is an RM1.1bil integrated project in the middle of the Medini special zone in Iskandar Malaysia, and 20 minutes from Singapore via the Second Link.

The other project is Mah Sing's i-Parc, which is currently the only sizeable freehold industrial project neighbouring the Port of Tanjung Pelepas.

Mah Sing i-Parc has a free-zone status, making it a premier industrial location, says Leong.

Undemanding valuations

Wong says Mah Sing's valuations remain undemanding with forward price earnings ratios of 5 to 6 times and a dividend yield of around 5%. He has a “neutral” call and target price of RM2.14 based on unchanged 20% discount to revised net asset value, which factors in the dilutive impact from the proposed rights issue.

UBS Investment research head Chris Oh expects another record year for Mah Sing which he views as the best property stock in the sector as the company is entrepreneurially managed with ambitious plans to grow within Malaysia. Another factor is the company's aggressive sales targets which it has delivered in the past.

“We continue to like Mah Sing for its entrepreneurial management team and high asset turnover business model. The company recently announced a record sales target for 2013 of RM3bil (which is a 20% year-on-year increase) and anticipates further landbank acquisitions through financing via a proposed RM400mil rights issue to be completed by the first half of 2013. The past five-year sales and net earnings compounded growth were 23.1% and 28% respectively. Our view is that Mah Sing will deliver some 20% sales and earnings growth based on its diversified range of products,” says Oh.

Oh feels the stock's valuations look attractive as Mah Sing's shares are trading at a 12-month forward PE of 6 times with a dividend yield of over 6%. He has a “buy” call and target price of RM2.80, which is based on a 30% discount to their sum-of-the-parts revised net asset value of RM3.99.

The StarBiz

（沙登30日讯）绿野种植计划（Country Heights Grower Scheme）创办人丹斯里李金友承诺，若投资者同意自愿终止计划献议，将会自行承担脱售资产后的不足金额，保证全额退还本金予投资者。

拟售地

李金友接受《南洋商报》独家专访时表示，一旦自愿终止计划献议获批，管理公司Plentiful Gold-Class有限公司（简称PGC），将会公开招标脱售位于吉兰丹话望生的种植地。

根据独立调查公司预计，这块土地现估值为1亿2900万令吉。

不过，PGC需偿还投资者的本金总额达2亿1550万令吉，中间存有8650万令吉的差距。

对此，李金友表示，旗下持有PGC股权的Bee Garden控股，已正式发出具有法律效应的担保书，将会自行承担此差距。

产量差

“Bee Garden缴足资本约3000万令吉，并拥有许多房地产，绝对能承担这项费用。”

根据记录，绿野种植计划在过去5年派共发了7850万令吉的回酬予投资者，回酬率达48%，即首3年8%，后两年各12%，加上所需归还的2亿1550万令吉本金，意味着PGC支付给投资者共达2亿9400万令吉。

PGC稍早前已通过广告和招股书宣布，因气候、野象破坏、土壤肥沃度、地形严峻等不利因素，公司将无法满足计划承诺期限内的最低净回酬，并声称未来几年收成料不尽理想，因此建议自愿终止计划。

由于所召开的种植者大会落在2月8日，也是农历新年前两天，引起不少投资者反弹，因许多人已放假回家过年，或无法到场表达意愿，更怀疑李金友有“自肥”私有化的意思。

PGC也建议在议案批准的30天内，先以现金回退10%资本，未来两年内再支付另90%，同样让投资者担忧该公司的偿还能力。

详文请购阅《南洋商报》

Tan Sri Lee Kim Yew is giving a mediabriefing on the Country Heights Grower's Scheme

PETALING JAYA: Plentiful Gold-Class Bhd founder and chairman Tan Sri Lee Kim Yew has urged all growers of Country Heights Growers Scheme (CHGS) to consider the proposed voluntary termination of the scheme, stressing that the holding company – Bee Garden Holdings Sdn Bhd – would pay the shortfall between the final sale price of the land and the total buyback amount to investors.

“I urge all the growers to seriously consider accepting the proposal and the one-to-one buyback, plus the net yield payout for 2007-2011 of RM78.5mil. This would mean that the growers will receive in the end, a total of RM294mil compared with the total one-time funds raised of RM215.5mil when it was first launched in 2007,” Lee said in a statement.

CHGS was Malaysia’s first oil palm plantation investment scheme. It is managed by Plentiful, which, in turn, is a wholly owned subsidiary of Bee Garden.

The company had in the last five years paid out 48% of returns in total, giving an 8% return per annum for the first three years and 12% in the consequent years.

However, net yield dividend for 2012, due on Feb 14 this year, would lapse.

“Based on the financial model, Plentiful will have to pay out another net yield dividend by Feb 14 this year. The company has no cash to pay out net yields and is not allowed to make any borrowings or charge the land to raise additional funding,” Lee explained.

According to Lee, CHGS was not able to reach its full potential because its estate was bearing poor fresh fruit bunches (FFB) yield. He added that the company had already highlighted the various challenges affecting the development and operation of the oil palm estate in a recent circular to investors. These included unpredictable weather conditions, incursions of wild elephants into the plantation, poor soil fertility, shortage of key personnel and manual workers, and uncompromising terrain.

Lee said: “Without the expected output and FFB yield income, the management is not in a financial position to pay out net yield continuously based on the contracted rate, as doing so puts it at a risk of default.

“Should the company go into default, the appointed trustee (CIMB Commerce Trustee Bhd) will have to take over the Gua Musang plantation land, and ultimately, wind up this interest scheme. If and when the trustee takes over, the management of the company would not be able to influence or manage the outcome of the issue any longer,” he explained.

According to Lee, the company’s board of directors were receptive to putting the estate up for sale via an open tender in the market immediately after the proposed voluntary termination is passed through, should the growers agree, with a reserve price of RM170mil.

“Any shortfall between the final sale price and total buyback amount will be borne by the holding company, via a fully enforceable letter of undertaking.

This is to clear the misconception of many investors on the estate’s worth of being much more than its current value, and that the management company is in a rush to privatise it for personal gains,” he said.

A general meeting will be held early next month on the eve of Chinese New Year in relation to the proposed voluntary termination of the investment scheme.

“I need to clarify on the concern many growers have on calling for the Feb 8 growers meeting. The decision is a must to avoid Plentiful from defaulting on its obligations,” Lee explained in his letter.

In the event of default, the scheme would have to be handed over to the trustee. Plentiful would subsequently not have any more control over whatever decisions made for the scheme.

When contacted, some of the disgruntled investors said they were still pursuing an adjournment of the meeting.

One of the investors told StarBiz that the Minority Shareholder Watchdog Group (MSWG) had agreed to take up their case. A meeting would be held with the MSWG on Feb 4 to discuss the right course of action.

PETALING JAYA: The termination of the Country Heights Grower Scheme (CHGS) has caught the eye of the Minority Shareholder Watchdog Group (MSWG), prompting it to raise some pertinent questions.

In a commentary yesterday, MSWG chief executive officer Rita Benoy Bushon probed: “Why the rush to terminate when the prevailing average crude palm oil (CPO) price is still hovering around RM2,300 per tonne, which is above the minimum RM800 per metric tonne?”

She noted that the CHGS, at the launch of its prospectus back in 2007, offered attractive returns of 8% guaranteed returns per annum in the first to fourth year.

“From the fifth year onwards to year 23, the returns would be based on the prevailing market prices of CPO, as long as it was not below RM800 per metric tonne at an average.”

The board of Plentiful Gold-Class Bhd (PGCB), the offeror of CHGS, had proposed to voluntarily terminate the CHGS.

“It is proposed that Growers will be getting back their fee in cash within a period of two years.”

Rita pointed out that Ferrier Hodgson, the independent adviser, had stated that a shortfall between the grower's fee payable of RM215mil (contributed by the subscribers) and the underlying value of the land at RM129mil cast doubt on the recoverability of the grower's fee.

“Would CHGS be able to refund the capital of about RM215 million in this two years?” questioned Rita.

“If the net yield payments were not made, would it not be deemed as a breach of the terms and conditions of the agreement signed between the subscribers and CHGS?”

Rita also questioned why there was an RM86mil difference in the value of the land.

“Why is there a difference, ie, RM86mil, ie, RM215mil and the value of the land, ie, RM129mil? Why was there no professional valuation carried out for the said land?”

The first grower scheme in the country will be seeing its general meeting next month on Feb 8.

“In addition, what was the reason for fixing the general meeting date a day before the Chinese New Year's celebration, given the expected long break holiday?”

PETALING JAYA: Disgruntled investors of Country Heights Grower Scheme (CHGS) are rallying together to demand for the adjournment of a general meeting to be held early next month on the eve of Chinese New Year in relation to the proposed voluntary termination of the investment scheme.

Taking their concern to the social media space, this group of disgruntled investors have called for urgent meetings among themselves in several locations nationwide, including Penang, Ipoh and Petaling Jaya, to discuss their course of action against the proposed voluntary termination of the investment scheme. A Facebook page had also been created under the name “CHGS Group” in the hope of getting more disgruntled investors to voice their opinion.

“Our intent is firstly to gather enough proxy support to call for the adjournment of the general meeting,” Michael Khor told StarBiz over the telephone.

“To get the adjournment, we need 50% of the vote We hope investors can give their proxies because we feel that the date of the meeting is purposely timed to push through the resolution to terminate this pioneer scheme,” he added.

Khor is from Ipoh. He has been an investor of CHGS since early 2008.

To recap, Plentiful Gold-Class Bhd, the management company of CHGS, last week issued a circular notifying investors of a plan to terminate the grower scheme, and a general meeting to be held on Feb 8 in relation to the proposal.

Plentiful Gold-Class is a wholly owned subsidiary of Bee Garden Holdings Sdn Bhd, a company in which Puan Sri Tan Bee Hong, wife ofTan Sri Lee Kim Yew, is a shareholder. (Lee is the founder of property development and management company Country Heights Holdings Bhd. He also sits on the board of Plentiful Gold-Class.)

According to the circular, the rationale for the proposed voluntary termination is that the scheme had encountered various challenges that had severely affected the development and operation of the plantation. These included unpredictable weather conditions, incursions of wild elephants into the plantation, poor soil fertility, shortage of key personnel and manual workers, and uncompromising terrain.

CHGS was established in March 2007 with a supposed maturity period of 23 years. The scheme involved selling plots of oil palm to retail investors. It guaranteed a return of 8% for the first three years (or planting phase). Subsequent return for the remaining 20 years would depend on the market price of crude palm oil (CPO). The scheme also claimed to provide capital appreciation to investors at the end of the maturity period.

Under the proposed voluntary termination of CHGS, the board of Plentiful Gold-Class had said it would refund in full the grower's fee to the respective grower or investor in cash over a period of two years. The first tranche of refund involved 10% of the grower's fee within 30 days upon approval of the proposed voluntary termination of CHGS, while the remainder 90% would be paid out within a period of two years from the date of approval.

According to Khor, disgruntled investors are not only unhappy with timing of the general meeting, but they are also dissatisfied with the terms of refund.

“The terms of repayment are very unfavourable,” Khor said, pointing to the “long” period of repayment for the remaining 90% of grower's fees to investors.

“We prefer an adjournment (of the general meeting) for better terms to be given or negotiated,” Khor added.

Meanwhile, the proposed voluntary termination of CHGS had also caught the attention of the Minority Shareholder Watchdog Group (MSWG). In her commentary last week, MSWG chief executive officer Rita Benoy Bushon asked: “Why the rush to terminate when the prevailing average CPO price is still hovering around RM2,300 per tonne, which is above the minimum RM800 per metric tonne?”

Rita also questioned the timing of the general meeting, saying: “What was the reason for fixing the general meeting date a day before the Chinese New Year's celebration, given the expected long holiday?”

Rita also pointed out that there was doubt over the recoverability of the grower's fee, considering the fact that there was a shortfall between grower's fee payable of RM215mil (contributed by the subscribers) and the underlying value of the land at RM129mil as highlighted by independent adviser Ferrier Hodgson

THERE are a few blue-chip property developers in the country and S P Setia Bhd certainly is perched high up on that short list. The developer of townships, and high-end condominiums and niche developments has one big edge when compared with the others though.

It has spread its reach well beyond the shores of the country and is now looking to generate at least half of its turnover from developments outside of Malaysia.

The need to venture out of Malaysia seems a natural progression for the property-based company given the size it has already grown to.

Considered the country's largest property developer by sales, it hit a new high in its financial year ended Oct 31, 2012, chalking up sales amounting to RM4.2bil.

For its current financial year, the company announced an ambitious target to grow its sales to RM5.5bil, and by 2017, to achieve a pre-tax profit of RM1bil.

“Achieving a pre-tax profit of RM1bil would be the first for any property developer in Malaysia,” S P Setia president and chief executive officer Tan Sri Liew Kee Sin tells StarBizWeek.

One can't help but ask is it achievable?

Liew recalls S P Setia having an analyst briefing where the company was targeting to achieve sales of over RM4bil for 2012. Many analysts doubted if the company would be able to achieve it.

It went on to hit record-breaking sales of RM4.23bil in 2012.

“But when we did our last analyst briefing where we announced our sales target of RM5.5bil (for 2013), for the first time, no one doubted that we would be able to achieve it,” Liew enthuses.

On its RM1bil pre-tax profit target, despite being confident that it is achievable, Liew admits the company will have to work very hard to make it happen.

Earnings will be through existing and new projects, he says. Currently, S P Setia has ongoing projects, both local and foreign, worth over RM72bil in gross development value (GDV).

“Not all RM5.5bil (of our current financial sales target) will come from new launches. At least 60% of that will come from existing projects, with the remaining 40% from new launches.”

While the bulk of the company's sales are generated through its developments in Malaysia, Liew says S P Setia will not be able to achieve the continuous growth it wants if it were to just focus its efforts in Malaysia.

“The property market in Malaysia is good, but it's challenging in terms of the growth that we want to achieve. We're already in the billions in terms of sales and the challenge is to grow at the same pace.

“For us to maintain a steady growth and sales target, we must operate in a few countries. That's why some time back we decided we needed to go overseas,” he says.

International property player

Over the past six years, S P Setia has been aggressively expanding its presence in several countries. Today, other than Malaysia, it is also in Vietnam, Singapore, Australia, China, Indonesia and more recently UK.

The company's foray overseas began in 2007, when Vietnam's top state-owned conglomerate, Becamex IDC Corp, chose S P Setia as its joint-venture partner to launch its 558-acre, US$880mil (RM2.7bil) GDV township project.

Known as EcoLakes at My Phuoc, the development is located some 30km outside Ho Chi Minh City. S P Setia has also launched a mixed development project called Eco Xuan at Lai Thieu in Tuan An District, Binh Doung Province.

In 2009, the company established an office in Singapore and two years later, it acquired a 29,440 sq ft site to develop a high-rise condominium called 18 Woodsville.

The successful launch of this project spurred S P Setia to acquire another parcel of 201,285 sq ft for its Eco Sanctuary condominium in Chestnut Avenue.

In June 2011, S P Setia previewed its first project in Melbourne, a high-rise condominium development called Fulton Lane.

The Autralian project's launch in November 2011 spurred S P Setia to look at more opportunities in Melbourne and it then acquired another piece of land, this time at the upmarket St Kilda Road for its second high-rise project Parque Melbourne.

In April 2012, S P Setia was invited by the Government to jointly develop the China-Malaysia Qinzhou Industrial Park. That same month, S P Setia opened its representative office in Jakarta.

Finally, in September last year, SP Setia acquired the Battersea Power Station in UK via a consortium together with Sime Darby and the Employees Provident Fund.

“With Singapore and Melbourne doing well, and with Battersea under way, we feel confident that S P Setia has become a Malaysian player in a world property market. We're very proud of this. This was not something that was done overnight,” says Liew.

“It's something we've been working on over the past five years. We've mapped out a growth pattern and have consistently been working on it.”

But despite building a strong presence overseas, Liew insists that Malaysia “will always be the base” for the company's operations.

“Up to a certain point, we felt that we could achieve our targets in Malaysia. But if we want to grow, to do RM4bil-RM5bil a year in sales, just for Malaysia alone, would be very difficult.

“That's why we are expanding overseas and we're now confident of achieving our sales target. It's a simple idea, really. S P Setia must have the depth and the breadth not only in Malaysia, but around the world, to year-in, year-out lock in the sales.”

Liew says that by 2017, with its RM1bil pre-tax profit target, he expects about 50% of sales to be generated from overseas projects.

“If you think about it, it's difficult to generate a pre-tax profit of RM1bil just from the Malaysian market. There's just no way. A long time ago we realised this already.

“For this year, we're targeting RM5.5bil sales. But to go beyond that, we must have a plan to go overseas. With the proper landbank in these foreign countries, we can ensure that we consistently deliver the sales and profits every year. Only then can we be sustainable.”

But having a presence overseas itself won't be enough, says Liew, adding that the company will need to strive to ensure that it can deliver the same kind of results and assurance that it does for its buyers locally.

“Now that we have gone international, we need to give the same S P Setia comfort to foreign buyers. Otherwise, why would they want to buy from us?

“We need to provide the same customer service to buyers whether it's in Singapore, China, Australia or any other country that we're in. The Malaysian market has also matured. A lot of them today are in the upper income and like to invest overseas. So, I tell them to come with us and we will take care of your loan, sales and purchase agreement and any other queries they may have.”

Consistency the ideal business model

Liew says that with a presence in seven countries already, S P Setia has no immediate plans to enter new markets.

“Now that we are already present in seven countries, we must consolidate and strengthen our base in these countries. Only then will we look into other countries.

“For this year, our focus is to make sure that the investments in the countries that we have gone into can be reaped. We'll be launching a new project in Singapore and Melbourne this year and also we're launching in the UK (Battersea).”

Liew says SP Setia is constantly looking out for more land to ensure that it has ongoing projects it can launch on top of the existing projects that it is working on.

“In Malaysia for example, if the condominium market is good, we launch more high-rise projects. If it's not good, then we switch to township developments. We are a township player, a niche market player, an integrated commercial development player and a commercial retailer. So we have the breadth and the width.

“Now if the Malaysian market is not doing too well, we have other markets to cover us, and vice versa. The issue with a lot of developers today is that one year they do well, then the following year, not so well. But how to be consistent?”

Liew uses English football club Manchester United as a prime example of being “successfully consistently.”

“It's like Manchester United. Year in, year out, if they're not number one, they're at least number two. That's consistency.

“How do you create consistency in a company? The same thing we must consistently deliver results, whether you like it or not.”

Last year saw S P Setia secure a few big property deals in Malaysia. In December, its subsidiary Setia Hicon Sdn Bhd purchased a parcel of land on which the British High Commission was located in Jalan Ampang for RM294.96mil.

The land purchase came on the heels of the conclusion of the company's land swap deal with the Government, where S P Setia's 50%-owned subsidiary Sentosa Jitra Sdn Bhd had signed a privatisation agreement with the Government and Syarikat Tanah and Harta Sdn Bhd to undertake the development on a piece of land in Shah Alam.

In return, the 52.36 acres in Jalan Bangsar would be injected into Sentosa Jitra.

In October, it proposed to acquire 673.3 acres in Rinching worth RM381.2mil, to replicate its successful township development in Setia Alam and Setia Eco Park.

The land in Rinching is situated mid-way between Semenyih and Bangi old town and is forecast to have a GDV of RM4bil.

S P Setia had bought 1,010 acres in Beranang for RM330mil in August.

“Last year, we had a few major deals in Malaysia, namely the Rinching and Beranang estates that we bought. We're opening a new township in the Semenyih area.

“We also secured from the Health Ministry 52 acres in Jalan Bangsar, opposite KL Sentral. That's a major development. Also, before the end of the year, we acquired the British High Commission land in Jalan Ampang. Going forward, we'll still maintain the aggressive landbanking strategies that we've always adopted.”

In capable hands

It's a fact that as far as leadership goes, nothing lasts forever. It's also a fact that via Liew's agreement with institutional shareholder Permodalan Nasional Bhd (PNB), the S P Setia boss will be paring down his stake in the company until his contract expires in March 2015.

PNB, which made a takeover offer for S P Setia last year, holds 51.63% in the company, while Liew holds under 6%.

“It's a fact that my contract will expire in March 2015. Over the next two years, I will be selling down my shares to zero, in accordance with the management agreement so that PNB can take over.

“I'm already 54 years old. I'm not young anymore. One day, I will have to go!”

Despite being considered the “face of S P Setia” by many, Liew assures that the company is in very capable hands.

He says the company has already charted an “internal succession plan” to “move to the next level,” which also includes what needs to be done once Liew leaves.

“The team is prepared to move forward. Whether I stay or not, S P Setia will still be a big property player in this country and internationally.

“The success of a CEO cannot just be measured by what he does during his tenure in a company. It's also what he leaves behind. Look at Apple.Steve Jobs is no longer around but the company is still doing well!”

It's what CEOs are about, says Liew.

“That's the hallmark of a great CEO. He will make sure that there is a strong system to back him up and that the same service and quality is maintained even after he leaves.

“Over the last five years, we've been planning and planning. So, even if Alex Ferguson (manager of Manchester United) is no longer with the team, the club must continue to be successful. Our succession planning was all done long before the PNB takeover,” he says.

Liew says the company's succession planning does not just include paving the way forward once he leaves S P Setia.

“Succession planning would mean strategising who will take over and this won't just include my position in the company. It will include everyone down the line. If you don't train people to become general managers, project managers, planners, sales staff or quality controllers, the company will never grow.

“We have an internal training system whereby we train people to take over positions. For my position alone, there are four guys that can assume my post, who are maybe better than me? There are enough people in our group carry this company forward.”

Liew says that with PNB as a major shareholder, S P Setia is already in good hands.

“Over time, S P Setia will be transformed into an institutionally-owned company. That will give us the firepower and strong base to grow because we have institutional shareholders.

“But with that said, people like me, who have a passion for work, will not just walk away from this company. As long as I am CEO, S P Setia will be at its best. It's our job to deliver and move forward.”

When PNB made the takeover offer for S P Setia last year, many felt that the move was a hostile one.

To this, Liew says: “As far as PNB is concerned, whether the takeover was friendly or unfriendly it's up to interpretation. We were not notified of the takeover until the night before.

“But since the takeover, which was completed in March 2012, PNB has never interfered in management. But more importantly, they have been supportive of everything that we've been doing, whether it involves us buying a project overseas or with regards to our landbanking strategies.”

Liew says that even after the takeover, it was “business as usual” for S P Setia.

“My shareholders have not given me any trouble, why should I give them trouble? So what happens after March 2015? That will be decided then. You can't expect PNB to come and talk to me about it now.

“So the market needs to be fair to PNB and me and not interpret too much. We're still growing by leaps and bounds.”

The Star Biz Week

TWO words: My bank. That's how Tan Sri Azlan Zainol would like RHB Bank Bhd the organisation in which he has been the chairman for the past seven years to be seen by its customers.

Indeed, it is every banker's dream to be the first choice of service providers for customers.

It's not surprising therefore that Azlan is thinking of positioning RHB Bank as such.

“When people look for banks, RHB should be the first choice that comes into their minds,” Azlan tells StarBizWeek in an interview in conjunction with the bank's 100-year anniversary this year.

“The key for us (to achieve that) is to find a niche,” he says, pointing to “Easy by RHB” as one of the most important initiatives that the bank has launched in recent years towards this end.

RHB Bank is one of the key subsidiaries of Main Market-listed RHB Capital Bhd (RHB Cap). It contributes about 80% of the group's pre-tax profit annually.

The banking group will reach a significant milestone come July this year, when RHB Bank is officially 100 years old.

“I presume that we are the oldest bank in Malaysia,” Azlan says, noting that there are not many companies in the country that have reached this milestone.

“We're proud of the fact that we're 100 years old, and that we've done well throughout all these years,” he says.

Lots of programmes are in store, according to Azlan, for the banking group's customers, stakeholders and staff, as it will celebrate in a “reasonably big way”. The organisation, he says, will also focus a little more on charity as part of its celebration.

Rich history

The RHB Banking group boasts a rich history that traces the development of the country's banking and financial services industry from pre-independence days to the most turbulent economic times in the region's history.

Its important celebration this year is also taking place amid the changing landscape of the industry that has already seen a spate of mergers and acquisitions (M&As) in the past couple of years, both at home and in the region.

The RHB Banking group, which assumed its current name only in 1997, is itself no stranger to M&As.

It came about through a merger between Kwong Yik Bank Bhd and DCB Bank Bhd (formerly known as the Development and Commercial Bank Bhd) in 1997. That year saw bumiputra entrepreneur Tan Sri Abdul Rashid Hussain emerge as the group's executive chairman. The bank's current initials come from his name.

Kwong Yik Bank was founded by a Chinese community led by Wong Loke Yew, or better known as Loke Yew in July 1913, while DCB Bank was established in 1966 by then finance minister Tun Sir Henry H.S. Lee.

In the aftermath of the 1997/98 Asian financial crisis, the troubled Sime Bank Bhd (formerly known as UMBC Bank) was merged into the RHB Banking group in 1999.

Four years later, when Kuching-based Bank Utama Bhd, the banking arm of Cahya Mata Sarawak Bhd, became the latest bank to be merged into the RHB Banking group, Rashid made his exit from the group.

Today, the controlling shareholder of the RHB Banking group is the Employees Provident Fund (EPF), which owns a 41% stake in RHB Cap.

(Azlan is also the CEO of EPF at present and holds directorship in RHB Cap.)

“As a major shareholder in the RHB Banking group, we (EPF) will continue to make sure that the group grows in a healthy way,” he stresses.

Going international

According to Azlan, the immediate challenge for the group is to try and grow its business outside Malaysia.

“We are still hopeful of the deal with PT Bank Mestika Dharma (Bank Mestika) in Indonesia as part of our plan to grow our presence outside Malaysia,” he says.

RHB Banking group's initial plan was to acquire an 80% stake in Bank Mestika for RM1.16bil. But recent regulatory changes in Indonesia, which put a limit on foreign shareholding, means the group cannot own more than a 40% stake in Bank Mestika.

“We will play by the rules. If the rules now say foreign ownership would be limited to 40%, we will take the 40%,” Azlan says.

In November last year, RHB Bank and Bank Mestika had mutually extended the period for the completion of the conditional sale and purchase agreement to Jan 31, 2013.

According to Azlan, the RHB Banking group will still be able to drive the operations of Bank Mestika with its local partner once it completes the proposed acquisition in the latter, which could be by June this year.

The immediate priority in Indonesia upon completion of the deal is to increase RHB group's network and presence in Sumatra, and all the other key economic areas that the Indonesian government intends to develop.

According to media reports, the Indonesian government has identified at least five special economic zones to boost growth. These include Mandalika in central Lombok, West Nusa Tenggara, and Bitung in North Sulawesi; Sei Mangke in Simalungun, North Sumatra; and Tanjung Lesung in Pandeglang, Banten.

On its regional expansion plans, Azlan further says: “We want to concentrate on South-East Asia first, and then, South China.”

The group already has an office in Hong Kong and China, and is looking at expanding further in the Indochina region, encompassing Vietnam and Laos. The group is also eyeing possible opportunities in the Philippines and Myanmar.

“Our target is to grow our overseas contributions from the current 5% of total revenue to 30% of total revenue by 2017,” Azlan says.

He says the recent acquisition of OSK Investment Bank (OSKIB) has boosted the group's presence outside Malaysia.

“There are plenty of synergies gained from the exercise. A boost to our overseas presence is one. The “people factor” is another this is a merger of talented people,” he says, adding that the focus is to ensure that the group's growth could be accelerated from now on.

Investment banking currently contributes only about 3% of RHB Cap's group pre-tax profit.

“We expect to see huge growth for the group now because OSKIB is in,” Azlan points out.

RHB Cap raked in a net profit of RM1.4bil, or 62.1 sen per share, for the first nine months of 2012. This represented an increase of 8.8% from the corresponding period a year ago.

The group's revenue for the period in review, on the other hand, rose 7.6% year-on-year to RM3.5bil. Pre-tax profit for that period in 2012 stood at RM1.8bil, of which RM1.7bil came from RHB Bank.

Annualised return on equity (ROE) and return on assets stood at 14% and 1.1%, respectively.

“I think we can improve our profitability I don't see why our ROE cannot go to 20% within a short period of time,” Azlan says.

The RHB Banking group has already outlined several strategies to grow its business and improve its bottom line.

According to Azlan, these strategies include boosting loan growth to enhance interest income, expanding the group's transaction banking and treasury businesses as well as enhancing other areas that could boost its fee income.

But to Azlan, what's most important is not just about keeping the business growing and making profits.

“I want to build a wholesome bank it is not just about profits and making money, but it is also about our responsibility to society, our duty to develop talent within the management of RHB group, and making our customers happy,” he explains of his longer-term vision for RHB Banking group.