IJM Land Bhd managing director and CEO Datuk Soam Heng Choon has reason to be optimistic; 2010, he says, was a “record year” for the property market in Malaysia, and although the economy is expected to grow at a slower pace this year, he believes that prospects for the market remain bright. The favourable demographics, which include a young population and rising wealth, is in the country’s favour, he points out.
The recent volatility in equity markets across the region can also present opportunities for developers like IJM Land, with investors preferring to switch their investments from equities to property. In fact, over the last few weeks, the one question that has been frequently posed to Soam is: “Should I buy, should I wait or not buy at all?”
“It’s a common topic … and it’s a good indication [for the property market]. It means people are still looking at property as a source of investment. And there are also people who want to buy to upgrade. Even in a secondary market, homeowners are willing to sit down and talk where previously they would have said, ‘This is my asking price, take it or leave it’. Now they are willing to talk,” he says.
Buoying Soam’s optimism is the response to the developer’s property launches in FY2011 — the launch of its Light Collection II condominiums in Penang earlier this year, for example, saw prospective buyers queuing for a week for the properties that were pegged at an average of RM700 psf.
In FY2011 ended March 31, the company recorded revenue of RM1.16 billion, a growth of 6% over the previous financial year. Soam attributes the increased revenue to record property sales of RM1.46 billion. The company’s profit before tax also rose 91%, thanks to improving profit margins as well as a RM63 million gain on the disposal of subsidiary Delta Awana Sdn Bhd (owner of Aeon Bandaraya Melaka Shopping Mall).
In FY2012, the developer has 15 active projects in the country with an estimated gross development value (GDV) of RM2 billion. Its priorities in the immediate term, says Soam, is to continue to roll out projects in the medium range as well as large-scale projects such as Phase 2 of The Light, Canal City (in Kota Kemuning, Selangor) and Sebana Cove in Johor. These projects, he adds, will “propel aggregate sales to the next level”. In an interview with The Edge, he talks about the developer’s strategies in the immediate term, its priorities and why “making good, better” is the key to building a brand buyers can trust.
The Edge: Describe IJM Land’s sales and financial performance in the current year.
Datuk Soam Heng Choon: It’s been a good year for us. The challenge is now going forward. In 2008, during the last financial crisis, many developers pulled the brakes [deferred launches], which led to pent-up demand in 2009 and 2010. At the time, we were also lucky in the sense that we continued to launch [products] and we had the right products. So when we launched our products in 2009, they were well received.
What’s the mood like in the market?
It’s not so much the mood but there are questions raised by potential buyers: ‘Should I wait, should I buy now or should I not buy at all?’ But at the end of the day, they still buy, it’s just a question of when.
So for that question of whether to buy, wait or defer, what do you tell them?
We tell them that if they like the location, buy now rather than wait because it’s already been proved that property is a good hedge against inflation. While many are worried based on the property markets in Singapore and Hong Kong where property prices can go up 80% to 90% in a year, here our property prices go up about 10% a year, so comparatively, we are still more affordable. Plus, there is a big secondary market in Malaysia.
What are your priorities for the rest of the year and 2012?
We will continue to launch what we have put in place. We need to be more wary of changing market conditions and mindful of cash flow management, which is most important during crises. As you know, during a downturn, cash flow is more important than profits so we are focused on making sure that we have all the financing in place for the projects that we want to undertake. We’ve gone through this cycle [recession and financial crisis] many times and what we tell our colleagues is that cycles are getting shorter and we need to be proactive in trying to get things done fast. Let’s say the focus is on affordable homes, we must ensure that we have the products to launch. If we do not have the product, we won’t be able to catch the market ... so during good or bad times, we must continue to sell.
Are you actively looking at expanding landbank, especially in areas that do well?
Yes, we are looking but we still have 4,796 acres (with an estimated GDV of RM18.9 billion) to be developed. And there are a few major townships coming up that we are excited about. We believe that when we launch them, the timing may be just right for us.
What are some of the townships that excite you?
Canal City which we are launching next year. This project is giving us a lot of energy to push forward. We are using this development as a platform for us to move into green township development.
What are some of the attributes of Canal City that excite you?
There will be a lot of water features, and this will be among the main selling points. We are also working with GBI (Green Building Index) to turn this into a green township. While there are other pockets of properties that are called green developments, as a township, this will be the first of its kind in Malaysia. The challenge is for us to ensure that the concept and everything is right. Some of the green attributes that are important are water conservation, energy-saving features and community interaction. We have a lot of linear parks and walkways so that people can interact … when you build a township, you’re not just selling houses, you’re building communities.
Will green be the way forward for IJM Land?
This will be the way ahead. There was a survey done recently that showed that in Malaysia, only 25% of consumers bother about green products … you tell them about green products and their features and ask them if they are willing to pay more and most are not willing to pay. So we can’t say that we are market driven. In a market-driven scenario, everyone in the market wants these products … what we’re doing is putting these products in the market so they get accepted, and slowly over the years, they become the norm and you expect these features in a house.
Being the first so-called green township, do you anticipate good response from the market?
We believe so. Going forward, we believe it’s important for people to understand that green isn’t a marketing gimmick but that you [the homebuyer] will ultimately benefit. We hope that it will be a win-win situation. For us, we get to sell our products and for homebuyers, they get a product that will benefit them financially, physically or socially. Socially, this is in terms of having more linear parks, more connectivity and a safe city. Ultimately, we hope that the development of green properties will be market driven and not sales driven. It’s just like cars; those days, power windows were an option, today no one would buy a car without power windows!
What other developments excite you?
With respect to our project in Penang, we are pushing forward with the commercial component of The Light. We see our development as complementing Penang’s heritage status. Tourists coming to Penang want to see the heritage aspect; they don’t want to see skyscrapers but at the same time, we need to provide modern facilities such as better hotels and convention facilities.
What about talk about oversupply in Penang? Is this an issue of concern?
We feel the projected value [it was reported that RM29 billion worth of properties have been planned on Penang island for the next 10 to 15 years] may not be 100% true because many are commercial developments and there are also many projects that are still on the drawing board. Whether they take off in the next 15 to 20 years — who knows? Our project is already there so what we need to do is continue to drive the development.
In terms of demand, what has been the response?
Since the launch after the financial crisis in 2009, people have been queuing at every launch. We attribute this to pent-up demand as well as the location of our development, being so close to the water. There are many people who are waiting to upgrade and want to be near the sea.
Are there concerns in view of the slower economic growth locally and globally?
We will have to monitor [the situation] but from what we’re seeing, people are still buying though they may take a longer time to decide. We have a diverse portfolio of properties including medium-range bread-and-butter properties that will do well in good times or bad. If we were just trying to sell properties in the KLCC area then that could be a challenge, to be frank. But if your locations are out of the CBD (central business district), then there shouldn’t be a problem.
How important are strategies to promote properties?
We’ve already started talking to our financial and marketing teams to come up with home ownership packages.
What are these packages?
These we are keeping under wraps [laughs]. This is our recipe — we can’t divulge details now …but we will be unveiling these packages before the end of the year. These, we feel, are important to give added assurance to prospective buyers that the developer is equally confident about the market.
How important is branding to IJM Land? What are IJM Land’s brand values?
Branding is important. When you have a better brand, you are able to sell at a premium. We have been in the market for more than 30 years so what we try to tell people is: here is a developer you can trust, here is a developer that will deliver. We always try not to overpromise and underdeliver. We also strive to build relationships with the buyers … ultimately, they become our sales agents. In many of the townships, 30% to 40% of the buyers are repeat buyers — they see us as a reliable developer and someone they can fall back on. If I tell you that my products are 100% without defects, then I am telling you a lie. What’s important is that if there is a problem, we will solve it quickly.
How do you ensure that these brand values continue to be upheld?
We have a tagline that goes “we make good, better” so this means that there is always room for improvement in terms of innovation, quality, design, customer relationship … so we tell our people that we still have room to improve even though we may think we are the best. Those days, people would ask why we called our townships Seremban 2 and Shah Alam 2? When you are No 2, you are always trying to chase the person ahead so you’re always working to improve. If you say you’re the best then complacency may set in and you may not want to improve anymore or you tend to sit back and relax. In Penang and Sandakan, our properties are selling at a premium. In Sandakan, developers are coming up to us and thanking us for helping to increase the price although they may not be able to sell at our prices.
How do you build and motivate the team to deliver quality, innovation and design?
There is always room to improve. When we take our staff on study tours overseas, they see areas where we can improve and aspects that can be introduced in our projects. So for a guy who is passionate about his job, he can say: ‘Can I try this feature for our next project?’ When we say we want to make good, better, there will be some shortfall in terms of skills so we want to sharpen our skills … we look at strengths and weaknesses and try and address some of the weaknesses.
What about overseas projects? How are these progressing?
We’ve not been very aggressive because the focus is still in Malaysia. We are taking baby steps. I think in some of these growing economies, questions of inflation have set in and we need to do more risk profiling when we go overseas. Our project in China is at the planning approval stage while we’ve decided to hold back the Vietnam project for a while.
With respect to mergers, is this something you’re looking at? What would you be looking at in a potential partner?
It’s not our top priority. Our priority is to do our business and continue to do what we set out to do. But along the way, if we see the possibility of adding value then of course we won’t discount it. There must always be added synergy, and not because everyone is marrying [so] we are also going to marry even though we can’t find someone we can work with. It has to be win-win for all.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 878, Oct 3-9, 2011
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