The business of selling bricks and mortar will move up several notches in Malaysia when the high-flying S P Setia Bhd takes its marketing to the skies…literally.
Come March 31, the body of the first of seven ATR 72-500 twin propeller planes belonging to Firefly Sdn Bhd — the community airline of Malaysia Airlines — will officially don S P Setia’s brand when the 72-seater takes off for Penang from the Sultan Abdul Aziz Shah Airport in Subang.
By end-April, all seven aircraft will bear images of the S P Setia brand as part of a year-long marketing campaign. Managing director and CEO Tan Sri Liew Kee Sin, however, declined to reveal how much the whole exercise will cost the property developer.
All he would tell City & Country was that the cost of the company’s new and innovative way to market its properties was within the group’s advertising and promotion budget for the year.
Firefly flies to 17 destinations including Penang, Johor, Singapore, Kota Baru and Langkawi from Subang. From Penang, it flies to Phuket in Thailand and Bandar Acheh in Indonesia. Its average load of 70% offers S P Setia a captive audience of about 3,500 daily. Travellers spend an average of 50 minutes on board the plane each time.
One obvious draw of Firefly is its accessibility — it is based in the Sultan Abdul Aziz Shah Airport in Subang. In contrast, depending on where one is in the Klang Valley, it takes 50 minutes or so to get to the Kuala Lumpur International Airport or the low-cost carrier terminal in Sepang.
The S P Setia advertising campaign will not be restricted to the exterior of Firefly’s aircraft. Inside, travellers will find information detailing the developer’s activities and new launches. These marketing and promotional materials will be updated from time to time during the year-long campaign.
The idea to tie up with Firefly came from Koe Peng Kang, CEO of Bandar Eco-Setia, one of the developer’s townships in Shah Alam. A frequent Firefly flier himself, Koe noticed that the travellers — mostly professionals and businessmen — fitted the demographics of buyers targeted by the developer.
Among Firefly’s popular destinations are Singapore, Johor Baru and Penang. The developer has four projects in Johor — Bukit Indah, Setia Indah, Setia Tropika and Setia Eco Gardens — while in Penang, it is building Setia Pearl Island.
“While on board, travellers will also get to read a specially produced magazine, called Setia Today,” Koe tells City & Country. “The publication is expected to touch on lifestyle topics — something to take the minds of the ‘professional’ passengers off their upcoming meetings.”
RM2 billion sales target
While S P Setia is no stranger to innovation, be it in product design or marketing endeavours, it will need a lot more of it to meet its RM2 billion sales target for its financial year ending October 2010.
Property buying sentiment may appear to have generally improved in recent months but buyers have become picky. Landed property is now the darling of the market while the buying of high-rises has become selective.
S P Setia’s sales target is no last-minute decision; it was set by management on the back of strong sales of RM608 million in 1QFY2010, the highest ever in a first quarter. The RM608 million is 15% higher than the sales achieved in 1QFY2008 and almost six times that in 1Q2009.
Group profit after tax for 1Q to Jan 31, 2010, came in at RM38.2 million on the back of revenue of RM363.9 million, contributed by ongoing projects such as Setia Alam and Setia Eco-Park in Shah Alam; Setia Walk in Pusat Bandar Puchong; Setia Sky Residences in Kuala Lumpur’s Jalan Tun Razak; Bukit Indah, Setia Indah, Setia Tropika and Setia Eco Gardens in Johor Baru; and Setia Pearl Island in Penang.
The award-winning developer has also penetrated the Vietnam market and more recently China.
Starting off as a township developer, S P Setia has progressed into building high-end landed and high-rise homes and retail and office space.
The market will remember the group’s bold 5/95 financing scheme introduced in January 2009, when property buyers withdrew from the market in response to the global financial crisis. Under the innovative package, buyers of the developer’s housing properties in the Klang Valley, Johor and Penang had to pay only 5% of the purchase price as down payment. The rest was to be paid upon completion of the property.
To woo more potential buyers, the developer picked up entry costs such as legal fees, stamp duty on the sale and purchase and loan agreements as well as the memorandum of transfer for the purchases.
The scheme was so successful that it had to be extended to July from April. By the time the bookings were processed in October 2009, the campaign had raked in a cool RM1.48 billion in sales.
The scheme was made possible by the support of Maybank, Public Bank, CIMB Bank and EON Bank, which together committed more than RM1 billion to the scheme. This was on top of the RM600 million cash the developer had set aside for the purpose.
While it was highly popular, the financing package ate into the developer’s margins. “But the volume made up for it,” says Liew, who does not discount a repeat of the 5/95 campaign if banks support it.
A report on S P Setia Bhd by Inter-Pacific Research dated March 24, 2010, agrees. Group pretax profit margin dropped 8.7% in 1QFY2010 but the research house believes the developer will bounce back.
“Moving forward, we reckon that sales chalked up after the launch of its current promotional package, namely ‘Best of the best’, will not erode its margin as S P Setia appears to have adopted a transfer pricing strategy,” it states.
The new launches lined up for this year include the remaining two blocks at Setia Sky Residences in Jalan Tun Razak, Kuala Lumpur, most likely in May. The first two blocks are already on the market (see sidebar on Page 6).
Given its track record, the developer might just pull off a surprise or two to push sales.
One project that excites Liew is KL EcoCity, an integrated commercial project with an estimated gross development value (GDV) of RM6 billion and net built-up of 5.5 million sq ft. About 60% of the development, which sits on about 24 acres and is situated near Mid Valley City, will be office space and 40% residential. There will be some retail outlets to cater for office workers and residents in the area.
According to Liew, KL EcoCity will complement Mid Valley City rather than compete with it.
It will be accessed via specially built ramps from the Federal Highway and roads coming from Bangsar. The cost of the infrastructure, of about RM300 million — will be borne by the developer. There is already an LRT station near the development while a KTM Komuter station will be relocated to the area to improve accessibility.
American architecture and urban planning firm The Jerde Partnership was commissioned to ensure the development has an efficient and effective human and vehicular traffic flow. Jerde has done similar integrated mixed-used developments, such as Roppongi Hills in Tokyo, Japan and Zlote Tarasy in Warsaw, Poland.
KL EcoCity is a joint venture between S P Setia and Kuala Lumpur City Hall. This partnership is on a profit-sharing basis, with City Hall taking 20% of the project’s net profit. If all goes well, the project is set to be launched in 4Q2010, after waiting 10 years for the squatters in the area to be relocated. There are still two restaurants on the site but these will be relocated soon.
S P Setia has a landbank of 3,633 acres, with an estimated GDV of RM28 billion. Still, how KL EcoCity fares will have a major impact on the developer.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 799, Mar 29 – Apr 4, 2010
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