City & Country: Mah Sing on the move

MD and CEO Tan Sri Leong Hoy Kum draws up ambitious plans to grow market capitalisation to RM5 billion in five years

Mah Sing Group Bhd has been known for its aggressive and quick-turnaround business strategies in good or bad times.

Since the height of the recent global financial crisis in October 2008, Mah Sing has nailed several land acquisitions. From just four projects in 2004, the developer now has under its belt 30 projects in the Klang Valley, Johor Baru and Penang, offering a full range of properties.

Managing director and CEO Tan Sri Leong Hoy Kum has lined up more ambitious plans for the property development business the group ventured into in 1994. He is targeting a market capitalisation of RM5 billion in five years from about RM1.49 billion now, and has stepped up its operations to ensure that this is achievable.

“It shouldn’t be a problem at the rate we are going currently. To grow market capitalisation, fundamentals have to be very strong and that’s why we keep pursuing research and development, and market studies before we launch. We still have landbank worth RM7.5 billion [in gross development value] to go, including unbilled sales of RM1.7 billion as at June 30, which is double the revenue recognised from the property division in 2009. This is all in prime locations in the Klang Valley and can last us five to seven years. Our projects are all ready to launch,” he tells City & Country.

The developer’s net gearing has also been managed well, currently standing at 0.05 times compared with 0.78 times in 2004, due to strong sales and financial discipline. It achieved a compound annual growth rate of 51% in seven years, from 2002 to 2009.

On the back of its healthy balance sheet, the developer is acquiring land to meet the RM5-billion market capitalisation target — it has been one of the most active developers in expanding its landbank. The acquisitions have in areas such as Bukit Jelutong in Shah Alam, Jalan Ampang in Kuala Lumpur, Cyberjaya, Sungei Way in Petaling Jaya, Sungai Buloh as well as in Kinrara, Puchong in Selangor.

The group also recently announced its first overseas venture with DanLong Realty (Beijing) Co Ltd to jointly develop 87.31 acres of land for a mixed development located along Wuyi Road in Wujin district, Changzhou, in China’s Jiangsu province.

The joint-venture company will also have an option to develop an additional 53.13 acres of land located north of the Wujin New High-Tech Zone of Changzhou City as well as 82.37 acres at the north intersection of Wunan Road and Wuyi Road.

Mah Sing’s business model allows it to roll out different products at different phases of the economic cycle for visible and consistent earning streams, says Leong.

As at last Tuesday, Mah Sing’s market capitalisation stood at RM1.49 billion, having grown multiple fold from about RM250 million in 2005.
The developer has also announced a proposed issuance of up to RM325 million in nominal value seven-year redeemable convertible secured bonds. The coupon rate is up to 3.5% per annum payable on a semi-annual basis.

Mah Sing is also proposing to increase its authorised share capital to RM1 billion, comprising two billion shares with the creation of one billion new shares to accommodate the issuance of new shares as a result of the conversion of the bonds.

The proceeds from the bonds will be utilised for land acquisitions, as well as for working capital. RHB Research, in a report dated Sept 13, says the bulk of the proceeds is believed to be mainly for land acquisitions including a key parcel measuring up to 200 acres for township development which the developer has been eyeing in the Klang Valley.

The research house also notes that the developer is also looking at some plots near Jalan Ampang, Jalan Stonor and Jalan Lidcol in Kuala Lumpur — sites which the government is expected to put up for tender as announced during Invest Malaysia 2010.

In March, its shareholders had unanimously approved a bonus issue up to maximum of 151 million new ordinary shares of 50 sen on the basis of one bonus share for every five existing ordinary shares of 50 sen each.

Generally our economy is stabilising and the outlook for next year should be optimistic. Most launches are doing well and we see high take-up rates. - Leong

Sales target
Besides accumulating strategic land, Mah Sing has also been promoting and marketing its products aggressively. The developer is encouraged by the better-than-expected property sales from its recent launches. A sales target of RM1 billion for this year has already been exceeded in the first seven months of the year. This led to a new sales target of RM1.5 billion. To achieve this, about 13 projects worth RM1.5 billion in total have been lined up for the second half of the year.

“We hardly see developers with so many launches. Property development is a cycle so we can’t wait. If it is time to launch then we have to launch and now is the time to launch,” Leong says.

“Generally our economy is stabilising and the outlook for next year should be optimistic. Most launches are doing well and we see high take-up rates. That’s why we have lined up so many projects this year and also next year. With favourable market sentiment, I believe we will be able to achieve the target of touching RM5 billion market capitalisation in five years, or earlier than expected,” he adds.

Take its freehold Garden Residences in Cyberjaya, for example. The launch of Phase Three of the project was initially planned for year-end but due to the overwhelming response to the launches of the earlier phases, it was brought forward. Now the developer plans to introduce Phase Four, also its final phase, by year-end. The whole project comprising 2- to 3-storey superlink homes, 2- to 3-storey semi-detached homes and 3-storey bungalows with a GDV of RM775 million is currently 85% sold, and Leong expects the remaining units to be fully sold by year-end as well.

According to Leong, some of its projects have also seen impressive capital appreciation. The value of semi-detached homes and bungalows at Garden Residences have climbed by 50% to 55% within six months of launch at the sub-sale level before they were completed.

“Specifically, prices of 2-storey semi-detached homes in Garden Residences increased from RM800,000 to RM1.2 million while prices of the 3-storey semi-detached homes increased from RM900,000 to RM1.4 million. In the more mature neighbourhood of Perdana Residence 2 [in Selayang], prices of the superlink homes increased about 24% from RM750,000 to RM930,000 in six months. Up north in Penang, prices of superlink homes at Residence@Southbay enjoyed a 30% appreciation to nearly RM1 million, from RM770,000 during its first launch in 2Q2009,” he notes.

New projects
Among the projects to be previewed in the second half of the year are Icon Residence Mont’Kiara; Garden Villas in Hijauan Residence, Cheras; One Legenda, Cheras; Garden Residence, Cyberjaya; Kinrara Residence; Bayu Sekamat, Hulu Langat; M Suites, Jalan Ampang; Garden Plaza, Cyberjaya; Icon City, Petaling Jaya; Star Avenue@Damansara, Sungai Buloh; Legenda@Southbay and Southbay Plaza in Penang; as well as Austin Suites serviced apartments and Sierra Perdana in Johor Baru.

The freehold Icon Residence Mont’Kiara was previewed in July. The project comprises semi-furnished serviced apartment units with built-ups from 874 sq ft. They are priced from RM956,800. The first block, priced at RM1,100 psf, is 70% booked while the second block which has a higher price tag of RM1,200 psf is 30% booked.

Mah Sing also launched a gated-and-guarded precinct in the freehold Sierra Perdana in Johor Baru last month. The developer launched 2-storey cluster homes with built-ups of 2,156 sq ft from RM436,800, as well as 2-storey semi-detached homes with built-ups of 2,263 sq ft from RM462,800.

Garden Villa in the freehold Hijauan Residence in Cheras, with built-ups from 7,000 sq ft, are priced from RM2.8 million; the 3-storey to 4-storey resort bungalows in the freehold Legenda@Southbay on Penang island offer built-ups from 6,400 sq ft and are priced from RM3.6 million. The 3-storey bungalows in the freehold One Legenda, Cheras, with built-ups from 6,313 sq ft, cost RM3.5 million onwards.

Over at the leasehold Kinrara Residence, 271 units of 2-storey linkhouses with built-ups of 2,488 sq ft are priced from RM700,000 to RM750,000.

Garden Plaza in Cyberjaya and M Suites in Jalan Ampang were also opened for preview recently this month. Garden Plaza offers serviced apartment units of 500, 700 and 1,000 sq ft, with indicative prices of RM228,800. Meanwhile, the RM300 million M Suites, targeted at investors, is a semi-furnished serviced apartment project with built-ups from 500 sq ft and priced at RM500,000 and above.

Mah Sing’s upcoming projects include the Austin Suites serviced apartments, Southbay Plaza residential suites and lifestyle retail shops, Sierra Perdana’s 3-storey shop offices, the leasehold Icon City in Petaling Jaya and Star Avenue@Damansara.

As for its China project, Leong expects work to start by early next year after it gets the approval for a mixed development, comprising medium to high-end residential and commercial components, with an estimated investment cost of US$620 million (RM1.9 billion). It is also looking at venturing into Vietnam, Singapore, Australia and Indonesia.

“I think Indonesia is the next country as our plastic manufacturing division already has a factory in Jakarta … so it is easier for us to make inroads there. We should not be in a hurry when we are not familiar with a country. We believe in proper planning before we venture overseas.

“We have a dedicated research team that conducts in-depth market studies as we are very market-driven. We keep studying what is actually happening in the market and what the markets’ want and need,” Leong says.

“The needs of our target market are ever changing, hence we need to be nimble and strategic to be able to adapt and plan to cater to such needs. We had started as a developer focusing on landed residential units, but now we offer a full range of properties namely residential — both landed and high rise — industrial and commercial properties like Grade A offices and retails to cater to market demands,” Leong says.

 
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 825, Sep 27-Oct 3, 2010