City&Country: The Edge Property Excellence Awards 2011-- SP Setia: Staying ahead of the curve

It was on an early Friday morning that The Edge visited S P Setia Bhd’s KL Eco City office in Mid Valley City to interview president and CEO Tan Sri Liew Kee Sin. Despite a business engagement that had kept him up late the previous night, an energetic Liew blew into the office like a gust of wind.

His passion and pride were evident as he spoke about the company’s achievements and he had good reasons to be proud.

S P Setia Bhd now holds the distinction of being the only property developer to be ranked No 1 six times in The Edge Top Property Developers Awards since its inception in 2003. Over the years, it has built a reputation for itself as a trusted developer and become synonymous with quality and service.

Since the company was incorporated in 1974, it has developed several highly regarded townships, such as Setia Alam and Setia Eco Park in Shah Alam, Bukit Indah in Johor Baru, Pusat Bandar Puchong, EcoLakes in

Vietnam as well as high-end products such as Setiahills in Ampang and Duta Tropika in Sri Hartamas.

It has landbank of 4,442 acres in Malaysia with a gross development value (GDV) of RM43 billion and 545 acres overseas with a GDV of RM5 billion. Among other tracts, the developer recently acquired 1,010.5 acres in Semenyih for RM330.1 million and 268.11 acres in Cyberjaya for RM420.4 million.

Read on for Liew’s take on the success of S P Setia, its plans and the property market. (This interview was done before S P Setia received a notice of takeover offer from Permodalan Nasional Bhd.)

The Edge: What are some of the critical factors that have made S P Setia such a successful property developer?
Tan Sri Liew Kee Sin: There are a lot of successful property developers in the market. Each of The Edge Top 10 Property Developers is as good as we are and most of us use similar consultants, contractors and suppliers. I think the difference between each developer is the team.
I am proud that we have built a strong team over the years. So if there is one thing I would consider as a critical success factor, it would be our team work. We come together in whatever we do, be it for work, business, charity or social functions.

I always tell my team that we must differentiate ourselves and the biggest differentiation is our people. Anyone can give ideas and developers can have similar ideas but the difference is that we execute them with our hearts and with passion.

We do this through simple things like how you handle a customer. You do it with passion and because you want to get it done.

We also have plenty of long-term employees. When we won the overall best employer in Malaysia this year in the Aon Hewitt Best Employers in APAC study, we were very proud because it was judged by the staff. It is not us saying we are the best.

Normally, the best employee practices can be found in multinational corporations and service companies. We have participated in the study for 10 years and we learn from the best.

Talent is vital to the success of the company. If we have a strong team, we can do 10 more projects tomorrow. If we have a weak team, I would worry about how to embark on the next project.

Where do you think S P Setia stands in the market now?
We are not one to blow our own trumpet, but a good indication of market respect for us would be The Edge Top Property Developers Awards. The other awards we value would be the ones from the International Real Estate Federation. But I think the best indicator of our stand in the market is the sales we achieve every year.

A lot of our customers are repeat customers. We are in multiple locations and have a multi-product range. We have both depth and breadth.

We do [from] low-cost housing to expensive bungalows that cost RM4 million to RM5 million. We have a range of condominiums, luxury homes, eco developments and townships. And aside from the Klang Valley, we have developments in Penang and Johor, overseas in Vietnam, China, Singapore and Australia. So that shows the strength that we have.

Speaking of sales, S P Setia achieved a new record of RM2.31 billion in FY2010. Are you confident of another record this year?
We have achieved more than our targeted RM3 billion inFY2011 and we still have one more month to go before the financial year ends. It is now a matter of how much more than RM3 billion we are going to achieve. Again, the sales record is recognition of our brand.

Can you share with us some medium and long-term plans to grow the company further?
We started in the middle end of the market and have grown into a very strong township developer. While the Malaysian market has changed tremendously in the past 15 years, our core business will still be township [development].

We love township developments because the value enhancement over a long period of time is tremendous. Let’s say you buy a land that is worth RM5 million today. It can appreciate to RM10 million in 10 years based on valuations.

There are four more segments in our business. The second would be integrated developments such as the KL Eco City project, for which land clearing has started. Such developments will have a mix of retail, commercial and residential components in a compact area.

Then, we have our eco homes. We have developed a successful eco theme, and Setia Eco Park in Shah Alam has won many awards since it was developed. In Johor, we have Setia Eco Gardens which is doing very well and we hope to launch another phase either by year-end or early next year. Also, we are expanding our eco homes to Cyberjaya with Setia Eco Glades, which is slated to be launched early next year.

The fourth segment is high-end residences, bungalows, apartments and condominiums. This is a more niche market for us.

Lastly, we have our international developments. We will focus on the countries we are in for now and our aim is to be No 1 in the city we operate. This will take time as we need to make sure people accept our brand, let them know us and create a base first. It is a step-by-step approach.
I also think what the government is doing with the 1Malaysia Housing Programme (PR1MA) is correct because there is huge demand in that sector of the market, which is the new middle class.

Every year, the number of entries into the workforce is large. We can tell just by looking at our staff. This group is looking for homes priced from RM200,000 to RM300,000 and the market is big.
It is business for us. The trick for developers, including us, is how to cater for this segment of the market. The key thing is land cost and whether we can find land that is cheap enough to do such a project.

The government has put its money into building the mass rapid transit system and if the LRT, MRT, Komuter and bus services are coordinated, this will open up a whole avenue of development for developers.

If the Klang Valley has an efficient transport system, you can build beautiful townships along or near the stations. People will want to move out of the city for better quality of life and more space. It is no longer a big deal for a person to live in Kajang, Rawang and even Seremban and work in the city.

Look at the big cities such as London, New York and Sydney. People take public transport, even CEOs, because it is easy for them to move around.

This is the new thing we are looking at— how to tap this initiative the government is rolling out.

Can you tell us more about the acquisitions S P Setia has made this year?
We have to buy because we are selling so fast. If we do not replenish our landbank, we will have nothing to sell. Land to a developer is a basic raw commodity and we have to plan in advance. That is where the trick is.

When you buy a piece of land today, you must think about what the market wants in two years’ time when the project is launched. How do you read the market two years from now?
Because of the depth we have, we are able to adjust our business plan according to market demands. Whether the market is in favour of RM300,000 homes or expensive high-end condominiums, we have the landbank to cater for the market. We are big enough and we have the strength and depth to be flexible.

The acquisitions are for the five market segments; townships, integrated developments, eco homes, high-end products and also overseas. Our land acquisitions overseas are small compared with the parcels we acquire in Malaysia. They are usually about one to two acres but the value is high.

With rising inflation and increasingly discerning and demanding consumers, how will you juggle creating products that meet market demand and still ensure a healthy profit?
Ultimately, the market sets the pace. It is about what people want. No developer can plan without taking the market into consideration.

But having said that, investors will pay a premium for your products if they think it is value for money. In order to do that, you must ensure there is always long-term capital appreciation. We pride ourselves on being a developer that can always price above the market.

The first rule of a CEO is rewarding the shareholders but how do you do that when customers want as low a price as possible and shareholders want maximum profit? You have to find that balance and this is where branding comes into play.

Branding is not about placing an advertisement in the papers or magazines. To us, branding is very simple — your end product must be of superior quality.

Product quality is crucial. When a customer takes the key to a new bungalow or even a low-cost home, you have to make sure the customer is satisfied with the product. Are there any complaints? We work very hard to achieve this. If you do it well consistently year after year, it creates a brand.

In S P Setia, we aim to not only provide customers with five-star products, but also five-star service. That means the minute you enter our office, you must feel like you are entering a five-star hotel.
At the end of the day, you have to make sure the customers are happy and that you deliver what you promised. You have to build their trust. Over time, people will respect you and they will come back again and again.

Are there any significant upcoming projects you can tell us about?
Right now, we have three government projects. One of them is KL Eco City, which is a joint venture with Kuala Lumpur City Hall. We have received letters of offer from the government for two more projects — the development of a 40-acre tract in Federal Hill with a GDV of RM10 billion and the redevelopment of the low-cost area of Taman Ikan Emas in Bandar Tun Razak, Cheras, with a GDV of RM2.8 billion.

How will today’s global economic uncertainties impact the local property market? What is S P Setia’s strategy in such unstable times?
I do not foresee the market slowing down because it is a matter of supply and demand. The reason there are so many projects and so many developers in the market today is that demand is strong.
If you survey the developers in The Edge Top Property Developers Awards, not just the top 10, but also the lower-ranked developers, you’ll see that they are all very strong financially. Because of this, they can hold. Assuming there is a slowdown in demand, the developers will just reduce supply.

But I don’t think that will happen as land cost and the cost of construction have gone up so much. A home we sell to you today cannot be replaced by a similar home in two years’ time. So, demand will always be there.

Whatever we are selling today is from land we bought two to three years ago, so our cost structure is lower. There is always a time lag between the acquisition of land and the start of the project. If the market is slow, we will just hold and if the market is good, we will keep rolling them out.

Right now, you can see demand from not only our sales but also from that of other developers. There is plenty of money circulating in the local economy. But, of course, customers tend to be choosier these days because they have plenty of choices. This is where the differentiation of the five-star product quality and
service comes in.

What is the most important thing you have learnt from your years as a property developer?
Property development is a very dynamic business that evolves every day. The market is constantly changing, whether it is customers changing their taste, different designs or technology advancement. People change too; your staff gets younger and you get older.

Then, there are so many developers coming up. With easy money, everybody wants to be a developer, and we have big and small developers coming after us.

How do you keep up with the constant changes? You must brace yourself for change and keep abreast of changes.

The key to any successful business is staying ahead of the curve. If you can, you will be fine. If you cannot, then it is time for someone else to take over as CEO.


This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 878, Oct 3-9, 2011

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