Developer chalks up RM9.2bil unbilled sales for 2015
BASED on the headline figures of its latest financial year ended Dec 31, 2015, property developer SP Setia Bhd seems to be making a strong return to the property scene.
The company chalked up unbilled sales of RM9.2bil, the highest in the industry for 2015. It also exceeded its sales target of RM4bil by 7.5% for a 14-month period. The company changed its financial reporting year to be in line with Permodalan Nasional Bhd (PNB), its largest shareholder.
The launching of Setia Eco Templer in Rawang this weekend marks the first major offering since 2014. It will also set the course for one of Malaysia’s top 10 property companies on a rebranding exercise.
“Setia Eco Templer is founded on nature and the environment. It is next to the forest reserve. It will help us to create a brand,” says SP Setia executive vice-president Datuk Koe Peng Kang.
Not that SP Setia needs rebranding or that it has been resting on its laurels the last couple of years.
But it would like to make a strong return now that a couple of issues have been ironed out. The launching of Setia Eco Templer is also seen as a fresh new start for the company under its new leadership.
In early April, the board of directors confirmed Datuk Khor Chap Jen as president and CEO.
Khor was acting president/CEO between Jan 1, 2015 and March 31, 2016. Prior to that, he was acting deputy president/chief operating officer between May 1, 2014 and Dec 31, 2014.
Extremely low profile, Khor is a man of few words, which leaves his deputy Datuk Wong Tuck Wai to do most of the talking. His leadership style is one of quiet assurance and he has declined several interview requests since September last year and even after his confirmation by the board.
He just likes to work quietly, says Wong earlier this year.
Wong was also confirmed as deputy president by PNB. Choy Kah Yew was confirmed as chief operating officer.
The confirmation of this line-up is a major and welcome move for the company and the market. It removes lingering doubts and uncertainties in an already uncertain and slow property market and, at the same time, helps to crystallise and sets a clear course of direction for one of Malaysia’s most well-known property companies.
Koe made no reference to the corporate manoeuvres of the past few years and neither does he come across as the type to give in to drama and hyperbole. But one of his next statements was pregnant with meaning when he said: “We did not buy any land the last three years… Today we are able to commit to more land to get ready for the next boom.”
The delineation is also clear with Wong looking after projects in Britain and Singapore and Khor in charge of Australia and Vietnam developments.
Successful Aussie foray
The company seems to like its foray into Australia, confirming this with its fifth land purchase in Melbourne early this month.
It bought 1.02 acres in the east end of commercial business district (CBD) of Melbourne for A$101mil, just a few weeks after buying a smaller piece in Prahran, south-east of Melbourne for A$10mil.
The latest CBD purchase will be developed as a mixed development with an estimated gross development value (GDV) of A$640mil and is slated to be launched by the second half of 2017. The Prahran project will have 47 suburban apartment units.
The group also bought a piece of land in Carnegie, Melbourne in December 2015, for A$6.68 mil. It has approval to develop 48 apartment units on that site, with a GDV of A$34mil.
Located 11km from Melbourne’s CBD, then acting CEO Khor explained in December that Australia will be SP Setia’s growth strategy.
Says Koe during the interview at Setia Eco Templer: “We are familiar with Melbourne today.”
This effectively brings to three upcoming projects in Australia. It has two previous projects in Melbourne, Fulton Lane and Parque.
The company is leveraging on a quick turnaround strategy in Australia as the land purchases come with planning permission. It could also be that the Australian projects use fewer staff members and tend to be more profitably comparatively, says a source in the property industry.
The company also has a 40% stake in Britain’s Battersea Power Station. The other consortium partners for this 39-acre project are the Employees Provident Fund (20%) and the Sime Darby Group (40%).
The first phase of Battersea, with a GDV of £846mil (RM4.9bil), is scheduled to be completed by the end of this year and its handover to buyers will be keenly followed as it is Malaysia’s most highlighted real estate venture abroad. That regeneration project is also meaningful to the British as that site was abandoned for a few decades.
Of its RM4.3bil sales achieved in the 2015 financial year, a huge chunk of RM1.2bil were from Battersea.
As for its local operations, Koe says other than the Templer’s Park brand-building exercise, the company will also be launching Setia EcoHill in Semenyih (GDV: RM5.2bil) this year.
Says Koe: “Setia Eco Templer will fetch a higher premium than Setia EcoHill. In terms of products, it will also be different.
“Both pieces of land have their unique characteristics. Over the longer term Setia Eco Templer will give us the branding,” says Koe. He says both the Templer and the Semenyih projects are different but each will have strong individual merits. Setia Eco Templer is 194 acres and is located next to a forest reserve while the Semenyih project is more than 1,000 acres in an upcoming township.
SP Setia is like “a property supermarket”. We have township developments, mixed integrated developments like KL Eco City in Bangsar and affordable housing schemes and niche products, he says.
Challenging environment
SP Setia has also taken note of the current slow take-up rate and affordability issues. To meet that need, the company will also be launching more mid-priced range of properties within its townships, including 900 units of affordable housing in Setia Eco Templer with prices ranging from RM150,000 to RM400,000. Sizes range from 700 sq ft to 1,000 sq ft.
The Selangor government will provide the names of the successful buyers, says Koe. It will built Rumah Selangorku affordable homes in different parts of the Klang Valley.
With the current slow and subdued market, Koe says the company’s unbilled sales of RM9.2bil will provide a large and clear pipeline of sales that will be delivered in the next few years.
“It will provide profit visibility for the group and will stand the group in good stead in the current challenging environment,” he says.
The company has set a sales target of RM4bil for this 2016 financial year, keeping to its 2015 target which it surpassed when it brought in RM4.3bil sales.
Of this amount, 67% (or RM2.88bil) is from the local market, while a third of it or RM1.42bil were from the overseas market, with Battersea accounting for RM1.2bil.
For its 2015 financial year, profit before tax totalled RM1.4bil, an increase of 88% over previous year and revenue was RM6.7bil, an increase of 74%.