Share
WE ALL have dreams and dreams change as we grow older and more mature,” says Tan Sri Leong Hoy Kum.
Relaxed and cheerful, the 56-year-old group managing director and chief executive of Mah Sing Group Bhd smiles fondly as he recalls the days of his youth.
“I’m a baby boomer. Back then, I thought I wanted to be an engineer, work for a multinational corporation and have a happy family,” says Leong.
And that would have become a reality if not for his late father, who owned a small plastic manufacturing company.
“My father told me, ‘You had better take over the family business, you’re my only son. If not, I’ll have to sell the business and you’ll regret it. If you work for others, you’re still a salaried man. But if you run your own business, you can grow the business. Then you can have anything you want.’
 |
| We consider ourselves right-end focused. We offer the right type of products to fit the property cycle. — Leong |
“What he said triggered something in me. I told myself I needed to fight; I can’t be a poor man. I learnt that when you take risks and fight for what you want, you may fall, but if you don’t, you don’t even get a chance to try,” says Leong.
Armed with this attitude, Leong turned his father’s business into one of the largest property developers in Malaysia with a market capitalisation of RM3.05 billion.
Interestingly, the company’s foray into property development came from Leong’s own frustrated attempts at buying properties for personal investment.
“It was around 1993, 1994 and the market was quite bullish. At the time, Mont’Kiara was just starting to develop. I wanted to buy there, but each time I saw a unit I wanted, it was taken up. I was so frustrated. The good thing is that the experience sparked the idea of transforming the company into a property developer,” recalls Leong.
Because of limited capital, Leong settled on developing what he calls “bread-and-butter” products on the outskirts of Kuala Lumpur. The 45-acre Taman Desa Ulu Yam in Ulu Yam was launched in 1994 and comprised 1 and 2-storey terraced houses.
“You can’t go wrong with terraced houses. We appointed the right agent and sold everything in six months. It gave me a boost of confidence. Frankly, I couldn’t afford to fail and confidence is very important, especially when you’re just starting out. As the saying goes, ‘once bitten, twice shy’,” says Leong.
Growing in challenging times
Mah Sing, which celebrates its 20th anniversary this year, has 46 completed and ongoing projects with a remaining gross development value (GDV) and unbilled sales of RM31.26 billion.
In FY2013 ended Dec 31, Mah Sing posted a net profit of RM280.6 million on revenue of RM2 billion, which was an improvement of 21.7% and 13% respectively. It also saw record sales of RM3 billion and unbilled sales of RM4.4 billion or 2.6 times the revenue from property development.
While Leong is satisfied with the results, he stresses that the company cannot be complacent going forward, especially in a challenging market. He has set a sales target of RM3.6 billion this year.
Taking pride in Mah Sing being a market-driven developer, Leong says a few years ago, the company was focused on developing high-end semi-detached houses and bungalows, which made up less than 10% of total residential supply nationwide.
“In recent years, in line with market demand and government policy, we started to emphasise mid-range products. We managed to meet market demand for bread-and-butter properties while maintaining some high-end products in selected locations. Our sales performance showed that our products were well received by the public.
“Actually, we are not mid-range or mid-end focused. We consider ourselves right-end focused. We offer the right type of products to fit the property cycle. For 2014, some 87% of our targeted residential launches will comprise mid-range to mass products priced below RM1 million. We would like to continue our township as well as strategic commercial developments.”
When asked what range can be classified as affordable, Leong answers, “Affordability depends on location. In a small town, RM300,000 and below is considered affordable, but in a big city like Kuala Lumpur, affordable can be below RM1 million. In the suburbs, I would say RM500,000 and below is affordable. I think as long as we give the right products at the right price, we will continue to sell well.”
Mah Sing’s current high-end offerings include the 9.9-acre One Legenda in Cheras with 3-storey freehold bungalows priced from RM3 million; the five-acre M City in Jalan Ampang with SoHos (small offices/home offices) and serviced apartments priced from RM400,000 to RM2.5 million; and the 20-acre integrated development Icon City in Petaling Jaya, which has a GDV of RM3.17 billion.
 |
| The developer will continue to focus on hot spots such as Penang where its 35.6ha Southbay township is located |
Aggressive landbanking
Known for its aggressive landbanking, Mah Sing has locked in large tracts for township developments in the past two years: 480 acres in Rawang for a project that will offer mostly terraced homes priced from RM400,000; 428 acres in Bangi for Southville@KL South with Phase 1 offering mainly apartments priced from RM318,000; and 1,352 acres recently for Bandar Meridin East, which will comprise mainly terraced houses.
Bandar Meridin East, which has an estimated GDV of RM5 billion, will be Mah Sing’s biggest township so far and its fifth in Johor.
Last year, the developer acquired six tracts with a total GDV of RM9.35 billion. It currently has a landbank of 2,181 acres with an estimated GDV of RM26.82 billion.
“On the six tracts we acquired last year, we will have a mix of products but mostly townships as we know there is demand for landed homes. Last year was interesting for landbanking as not only were the tracts earmarked for different kinds of products, but they were also located in different locations, which include Sabah and Penang,” says Leong.
Mah Sing’s focus continues to be the property hot spots of Greater Kuala Lumpur and the Klang Valley, Iskandar Malaysia and Johor Baru, Penang and Sabah.
“We concentrate on these locations because we have already established our branding there. They are also vibrant economic zones where there is high demand for property,” says Leong, who also refers to the Economic Transformation Programme (ETP).
“The government has identified Greater KL and the Klang Valley as a National Key Economic Area under the ETP and aims to grow the population here from 6 million to 10 million with a focus on increasing foreign talent from 9% to 20% of the population and creating 553,000 jobs.”
And according to data from the National Property Information Centre, of the RM51.51 billion worth of property transactions recorded nationwide from January to September 2013, about 50% came from Greater KL, he adds.
However, Leong does not discount the possibility of buying land in other locations. “We are exploring Seremban and even Ipoh. We will go where the demand is. It’s a matter of location, products and timing. Some of the land we have acquired is in locations that are not traditionally viewed as prime areas, but with extensive market studies and infrastructure improvements, we have transformed the areas.”
A prime example is the integrated township of M Residence in Rawang, he adds. “Rawang was perceived as a backwater, far away from the city. However, with scarcity of land, the city came out to Rawang instead. We arrived in Rawang at an opportune time as our in-house studies showed that the middle class saw a 30-minute commute to work as a fair trade for a good-sized house.
“With Rawang only 20 minutes from both the Damansara and Duta toll plazas, M Residence was a viable offer indeed. Furthermore, Rawang is now very accessible with the Guthrie Corridor connecting it to Shah Alam and the North-South Expressway, Jalan Ipoh and the LATAR Expressway linking it to KL’s central business district.”
According to Leong, Mah Sing usually picks the smaller tracts for niche products and the larger ones for townships as it has the capacity to offer a variety of products.
“Our balance sheet remained strong with a high cash pile of RM822.3 million and low net gearing at 0.16 times, comfortably below management’s optimal net gearing target of 0.5 times. We are in a strong position to continue our expansion drive via landbanking and development activity,” he observes.
On March 13, Mah Sing announced its first acquisition for the year — 85.43 acres of fairway in Sultan Salahuddin Abdul Aziz Shah Golf Course, Section 13, Shah Alam, Selangor. The tract was acquired for RM327.4 million or RM88 psf.
According to research house AmResearch Sdn Bhd, the purchase price is fairly attractive when stacked against its future development value. It also notes that a piece of land was transacted at RM120 psf last year in Section 13 while another tract in Section 15 was sold for RM114 psf in 2012. Both tracts are smaller than Mah Sing’s recent purchase.
The developer has earmarked the land for an eco-themed development, comprising a mix of landed and high-rise residences. It is scheduled to be launched in 2016 and is targeted at upgraders and those looking for sustainable living surrounded by Mother Nature. The project has an estimated GDV of RM2.5 billion.
“Our landbanking track record shows our flexibility and adaptability as a market-driven developer. We are always on the lookout for potential markets and might replenish different types of land, depending on the property cycle,” says Leong.
Expanding its market presence
While Mah Sing has seen much success in Malaysia, Leong is wishing for an international presence. “We are looking at opportunities overseas, but we are not in a hurry. We are exploring Australia, the UK and certain developing countries. To expand our market presence, first and foremost, we have to ensure our products are rightly offered. We need to be able to provide the right type of product in different regions based on market demand.”
To create an international presence, Mah Sing has set up a sales office in Shanghai, China, and a property gallery in Singapore, for starters. These offices will serve as one-stop centres for international buyers.
“We are looking at both Malaysian and international buyers. At present, even though there has been growing interest among overseas buyers, our base is still small,” says Leong, adding that investors from countries such as China, Hong Kong, Taiwan, Japan, Singapore and Indonesia have shown keen interest in Malaysian real estate.
Currently, Mah Sing’s core buyers are owner-occupiers and those who buy to invest for long-term rental income.
“This group usually seeks strong yield potential and medium to long-term stable growth. Foreigners make up about 7% of our buyers. International investors usually aim for reasonably priced real estate with sustainable growth potential in the residential, commercial and tourism sectors,” says Leong.
He adds that last year, 52% of its sales came from projects in Greater KL and the Klang Valley, followed by 32% from Johor, 11% from Penang and 5% from Sabah.
Another opportunity Mah Sing is considering is a real estate investment trust (REIT). “Property development is what we do best, but we may look at diversifying and exploring different areas, such as a REIT. To qualify as a REIT, we must have good commercial properties, which we do. We have good commercial products in some of our integrated projects, such as Southbay City in Penang, Icon City and D’sara Sentral in Sungai Buloh,” says Leong.
Southbay City is the largest phase of the 35.6ha Southbay township in Batu Maung, near the Penang second bridge. The 34.5-acre phase offers a mix of residences, offices, retail outlets, hotel and resort, and other recreational attractions. Meanwhile, the 6.55-acre D’sara Sentral is an integrated development with a GDV of RM901 million.
“A REIT is a medium-term plan. We are looking at one in three to five years from now. I think it’s good to plan for a REIT, for us to eventually diversify. As it is, any time we are ready, the portfolio is there. Our commercial products sell well, so if we were to retain components of a development, it will be in the second phase of an integrated development. Retaining the second phase for recurring income will add value to our project and customers,” comments Leong.
For the immediate future, he acknowledges that the government policies and cooling measures will affect all industry players. “They are challenges that all of us will have to face. The first half of the year will be slower with a lower number of launches. But I think demand will pick up in the second half.”
Leong attributes his forecast partly to the impending implementation of the Goods and Services Tax (GST) next year. “Several research houses have noted that property demand may increase this year due to GST. Buyers are expected to take advantage of the current accommodative interest rate regime and based on what happened in the other countries, the public will purchase properties in anticipation of future costs and the impact of inflation on asset prices.”
Another challenge, then and now, adds Leong, is to carve out a niche in a crowded marketplace. He believes Mah Sing has overcome this with product branding and differentiation.
“It is up to us to plan how we maintain our market leadership position and how to roll out products that are still relevant at a price point that people can accept. We also want to have repeat buyers and to ensure that they get good rental income and capital appreciation.”
Perhaps, the most important thing that has helped Leong come this far is his and, by extension, Mah Sing’s ability to adapt to change. “You must be able to adapt to market changes. You have to adapt quickly and execute fast. This is true for life as well. It’s the survival of the fittest, so always plan ahead. I believe in analysis, prudent evaluation and good planning. I may be very cautious during planning, but when it comes to execution, I move fast with consistency and positivity, and I never look back. Hence, I have no big regrets,” he concludes.
 |
| Mah Sing’s 6.55-acre D’sara Sentral is an integrated development with a GDV of RM901 million |
This article first appeared in The Edge Malaysia Weekly, on March 31, 2014.
