Harimau Capital

KUALA LUMPUR: SP Setia recorded total sales of RM6.27b in the 10 months for its financial year ending Oct 31, 2013, which exceeded its target of RM5.5bil, as its international property sales gathered momentum.

It said on Wednesday the record-breaking sales this year reflected the property gropup’s success in both Malaysian and international markets.

 “As at Aug 31, total international sales amounted to RM2.533bil of which RM1.247bil was contributed by the group’s 40% share of the sales achieved by the Battersea Power Station joint-venture project in Central London,” it said.


SP Setia said two other overseas projects – Fulton Lane in Melbourne and Eco Sanctuary in Singapore – contributed significantly to sales numbers. It added Fulton Lane recorded RM409mil in sales during the year and Eco Sanctuary RM877mil.

SP Setia Bhd’s earnings were marginally higher at RM101.88mil in the third quarter ended July 31, 2013 from RM100.40mil a year ago. Its revenue rose 16.4% to RM761.50mil from RM654.19mil. Earnings per share were 4.14 sen compared with 5.21 sen.

For the first nine months, its earnings rose 8.9% to RM290.56mil from RM266.79mil a year ago. Its revenue rose at a stronger pace of 22.5% to RM2.16bil from RM1.76bil a year ago.

Elaborating on the overseas projects, SP Setia president & CEO Tan Sri Liew Kee Sin said SP Setia’s foray into the Australian market has borne well for the group.

“Fulton Lane’s success spurred us to look for a second venture in Melbourne and we recently previewed Parque Melbourne to overwhelming response,” he said.

As for Eco Sanctuary in Singapore, launched at the start of the year, saw most of units sold to Singaporean purchasers.

 Liew said whilst the group is expanding overseas, its strong Malaysian base remained the main contributor to earnings.

Sales from the group’s Malaysian projects totalled RM3.737bil as at Aug 31, 2013 compared with RM3.55bil for the full FY2012. - The Star Biz

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The government, which is facing shrinking current account surplus and growing contingent liabilities, has decided not to roll out and fund new mega infrastructure projects, according to officials familiar with the public policy.

“Any new projects will not be approved unless they are undertaken fully by the private sector... there won’t be any PFI (private finance initiative) awards as well,” said a source. The government, in future, will also also stop providing guarantee to back debts secured for new infrastructure projects. Read more >>

大选落幕股价高攀　產业股重回基本面

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