Sunrise has a simple philosophy - to create value for its stakeholders. Having a 'long term partnership commitment' with its customers has been key to value creation. Now, the company is taking its game to the next level by adding sustainability to its repertoire.
Sunrise Bhd’s focus on value creation for its customers seems to have paid off for the property developer, buttressing it against the worst of the global economic crisis that has taken chunks out of other companies.
Case in point, Sunrise reached new heights of profitability for its financial year ended June 30, 2008, with its profit before tax (PBT) crossing the RM200 million mark for the first time in its history, at RM201.1 million. The record was broken again the following year, when the company’s PBT was RM205.8 million.
Sunrise executive chairman Tong Kooi Ong attributes the company’s performance to buffers provided by its large unbilled sales of about RM1 billion and favourable cost structures.
While these protective barriers would no doubt have an important defensive role to play in padding Sunrise’s bottom line for the next couple of years, they are also a testament to the popularity of the offerings of the developer that is synonymous with the exclusive Mont’Kiara enclave in Kuala Lumpur.
Sunrise’s philosophy is simple, Tong says. “Our fundamental belief is that we must always create value for stakeholders — be it our customers or shareholders. We create value for our buyers by delivering superior homes that appreciate in value and generate decent yield.”
“For us, there must be a win-win situation for all our stakeholders,” says Tong. “When we launch a product, we must not only be confident of selling them — we want to ensure there is decent upside for the buyer.
“We continue to maintain the quality of all our buildings long after delivery — we do not just wash our hands when we’re finished. This long-term partnership commitment sets us apart from most other developers.”
Tong says although this means constructing quality buildings, it also means creating sustainable, lively and livable communities. Sunrise’s unique proposition is its commitment to community creation, which extends beyond simply setting up guarded gateways leading in and out of the building premises.
Nonetheless, its main concern for FY2008 and FY2009 — like other property developers — has been its business operations. Although the country has weathered the so-called unprecedented economic crisis fairly well, the jury is still out as to whether the recovery will take root.
The present crisis has wreaked havoc on property developers around the world, but the lessons learnt from the Asian financial crisis have served Sunrise well this time around, Tong says.
Sunrise’s success in weathering the economic storm has largely to do with its corporate practices, Tong says. Its bet has paid off, at least according to the profit numbers.
“I think everyone in Malaysia has learnt well from the Asian financial crisis, from the government to the banks, the corporate sector and consumers,” Tong says. Moreover, the absence of a price bubble in the Malaysian property market has also shielded the sector from an industry-wide meltdown.
Part of those lessons, he adds, means keeping a watchful eye on risk and cash levels, as well as managing gearing. This, he says, has always been part of Sunrise’s corporate practice, but more so as the company has stepped up its operations.
“We have always practised financial prudence, and are proactive and vigilant in risk and cash flow management. As we brought the company to higher levels in recent years, we also increased our efforts in risk management. In property development, you need to read cycles and manage gearing well,” Tong says.
The large chunk of forward sales also means that Sunrise’s margins will improve going forward as the price of construction materials has eased significantly since the fourth quarter of last year. More importantly, Tong says, Sunrise has started locking in purchases of certain basic building materials for its future projects.
“Many of our projects are still under construction, although substantially sold. These projects do benefit from the lower construction costs presently, although I must also add that there was a time when we faced very high material costs,” he continues.
Tong adds that while the understanding of macro risks such as the economic crisis is important, it is just as important for companies to execute the necessary steps to control the effects of the risks on the micro level.
“Companies must have proactive risk management and controls in place,” Tong says. In this respect, Sunrise had foreseen the macro problems earlier, which is why it stopped new launches after 11 Mont’Kiara in 2007.
11 Mont’Kiara, a 339-unit luxury residential development with a gross development value (GDV) of about RM900 million, is due for completion in 2011. As at August, it had been 90% sold. Recent research reports noted that sales of 11 Mont’Kiara and Mont’Kiara Residence, Sunrise’s bungalow development in Mont’Kiara, has picked up notably in 4Q2008.
The developer’s other ongoing projects include the 332-unit 10 Mont’Kiara, which was launched in 2006, and a commercial development worth RM1.5 billion at Solaris Dutamas. The take-up for these projects stands at 93% and 94% respectively.
Two of Sunrise’s condominium projects — the 11 Mont’Kiara and 10 Mont’Kiara — won five-star awards at the Asia-Pacific Property Awards 2009 held in Singapore in July this year. The former won the award for Best High Rise Development in Malaysia while the latter grabbed the prize for Best High Rise Architecture in Malaysia.
It is noteworthy that Sunrise has been in the top 10 of The Edge Top Property Developers Awards since its inception in 2003, awards which place equal emphasis on quantitative and qualitative attributes.
Some quarters have expressed concern that there is an oversupply of homes from new launches because developers had held back their launches when the country plunged into the crisis last year. Research houses say the property market may see a property glut in the Klang Valley, particularly in the high-end condominium sector.
Tong demurs, although he agrees that this may be true in some areas of the Klang Valley. It is for this reason that Sunrise did not build any high-rise condominiums in the Kuala Lumpur city centre, he says.
“On a macro level, I do not see the facts supporting this hypothesis, and it is not just because I am a property developer. In developed countries, the annual increment of new homes is about 1% of the population,” Tong adds.
“This is despite having negative or zero population growth. In Malaysia, our annual supply of new homes is about 150,000 units. In the last three quarters, it has been substantially less. We not only have a growing population but an even faster growing work force.”
As for the prospects of the property sector, the recovering global economy is boosting investor sentiment across a broad range of assets, including property, he notes. Attractive financing schemes and low interest rates have also boosted interest in the sector, as have government support through income tax exemption on interest for new homes.
Tong feels there has been recent renewed interest in the property sector because of the growing awareness of the very real threat of inflation.
“With the huge global fiscal and monetary expansions, one should be wary of inflation going forward. Property has historically been a good hedge and I think this has been compounded by the recent recovery in the property market,” Tong says.
On the company’s overseas operation, notably a project in Canada, Tong says Sunrise is expanding abroad slowly because caution is still a watchword for the developer in that regard. Its project in Canada, which has a GDV of RM1.2 billion, will be launched in two phases three years apart.
“We do not have the same competitive advantage at the moment,” he notes. “We will expand abroad slowly, learn and not rush into any disaster.”
While Sunrise offers no immediate concrete news of any new launches, which may be a concern for its future income stream, Tong assures that there is a pipeline of projects ready for launch.
What Sunrise is waiting for, he says, is the right time so that its “buyers can generate better returns”. Tong declines to comment on new launches but word has it that Sunrise is ready to launch two projects within the next six months, with the first being a residential complex in Mont’Kiara and the second, a commercial development in the city centre.
At a recent analysts’ briefing, Tong noted that there were parties looking to partner Sunrise for its expertise and branding to help with developments. These projects, which will not be capital intensive for Sunrise, will pad its revenue stream going forward without increasing its gearing.
Sunrise may have thus far showcased resilient numbers and received numerous accolades for its projects but Tong remains vigilant against complacency.
“Although we have done well, we cannot rest on our laurels. We must continuously innovate and reinvent if we want to stay ahead,” he says. “We will continue to widen our product mix and create new products that will cater for new and wider markets.”
Value creation and going green
Sunrise’s unique proposition as a developer is the extra effort it takes to promote community development, and part of what this means is creating sustainable communities. It realises the need to take a proactive role in bringing the residents together, as exemplified in its Mont’Kiara developments.
A community initiative launched recently was a free shuttle bus service for the exclusive use of Sunrise Mont’Kiara residents. Sunrise, which bears the entire cost of maintaining and running the bus, was responding to the requests of its residents who are looking for a better way of getting out and about the community.
Other initiatives include the development of a multipurpose community centre and setting up events for Sunrise residents. It is this “long-term partnership commitment” that extends beyond the handing over the keys that sets Sunrise apart, Tong says.
Sunrise has recently added sustainability to its development repertoire. The developer’s efforts to promote its eco-friendly agenda has been recognised by Singapore’s Building and Construction Authority (B&C), which awarded 11 Mont’Kiara a provisional Green Mark Certified Award.
It is an impressive accolade as 11 Mont’Kiara is the first residential development in Malaysia to receive the environmental mark of approval. Sunrise’s planned Solaris on the Park mixed development also received a similar award from the B&C at the same time.
Sunrise has always been mindful of its role towards environmental preservation through its actions and policies.
“Apart from promoting recycling efforts within the Sunrise Mont’Kiara community and environmentally friendly building through the incorporation of numerous eco-features in our latest iconic development, 11 Mont’Kiara, we believe a long-term approach calls for the need to go beyond ‘greening efforts’ to the concept of sustainability,” says Tong.
“With a growing population, we need to reduce our carbon footprint and be more efficient in the utilisation of scarce resources such as land... By creating sustainable communities that are well supported by a host of amenities, services and infrastructure, we reduce pollution and improve human mobility as travel distance becomes shorter.”
Sunrise’s strategy is holistic, Tong adds. Community development will always be at the forefront of the company’s agenda.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 776, Oct 12-18, 2009.