Property division to remain Hap Seng’s key earnings contributor

KUALA LUMPUR: Its property development division will remain Hap Seng Consolidated Bhd’s key earnings contributor. Hap Seng is set to launch development projects with a combined gross development value (GDV) of RM1 billion, said its managing director Datuk Edward Lee.

Among these projects, which are expected to be completed in two years, are high-end serviced residences along Jalan Tun Razak, and mid- to high-end projects in Balakong.

The diversified group has a landbank of 2,350 acres (951ha), with some 2,200 acres in Sabah, where Hap Seng has already established its name as a leading township developer.

Asked if Hap Seng would consider listing its property divison, as it had listed its plantation division, Hap Seng Plantations Holdings Bhd in 2007, Lee replied that it was always an option for the company.

“At the moment we do not have any concrete plans to list any of our divisions as we are concentrating on growing our business,” he told reporters after the group’s annual general meeting yesterday.

The property division had contributed 50% to the group’s operating profit for the financial year ended Dec 31, 2013 (FY13).

Hap Seng is also optimistic about the performance of its plantation division, despite the current downward trend in the prices of crude palm oil (CPO).

“Commodity prices do not stay [the same], it is always going to have ups and down, but [on average] the price should be firm, “ said Lee.

The group anticipates higher CPO prices than RM2,343 per tonne last year, due to the effects of unfavourable weather conditions such as the El Nino droughts that cause lower production and push up CPO prices.

On its automotive division, Lee said the group is investing in a new Mercedes-Benz showroom in Kota Kinabalu, and is in the planning stage of constructing a new showroom in Kuching.

“These are investments that we are making to enhance our business in the Mercedes-Benz dealership [in Malaysia], “ he said.

Hap Seng announced that it reported a net profit of RM125.41 million for the first quarter ended March 31,2014 (1QFY14), up 22% from the RM 102.78 million in the previous corresponding quarter.

This was attributed to the improved contributions of all divisions, except its quarry and building materials division which had a flat performance.

Quarterly revenue increased 8% to RM858.47 million in 1QFY14, against RM792.47 million a year ago, on the back of higher contribution from its plantation, property and trading divisions.

This article first appeared in The Edge Financial Daily, on May 29, 2014.

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