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Monday, October 20, 2008

SunCity holding its own in facing challenges

SUNWAY City Bhd’s (SunCity) growing exposure in the international property market and expanding portfolio of quality property development and investment assets in Malaysia will help “cushion” the company from the current meltdown in the global financial markets

Its cash reserve of RM554mil as at financial year ended June 30 (FY08) is the highest among all the listed property companies in the country.

Ngeow Voon Yean showing the site for a new office project within the Sunway Integrated Resort City

SunCity managing director for property development Ngian Siew Siong said the company’s strong cash position gave it a competitive advantage to “shop around” for viable distressed assets that might appear in the coming months as a result of the contagion effect of the global financial crisis on the local property market.

“SunCity has the resilience to face the tough times ahead. The company’s stronger foray in the international property market and increasing number of high-end projects and high net worth customers will come in handy to weather a market crunch locally,” Ngian told StarBiz.

The company’s huge unbilled sales of RM1bil to be realised over FY09 and FY10 will also provide a buffer against a soft market.

“Overall the market, especially for high-end residences, is still holding steady. Having gone into the high-end residential sector in a big way, SunCity will be able to weather the tough times ahead quite well,” he said.

Best of both worlds

Concurring with Ngian, managing director for property investment Ngeow Voon Yean said: “SunCity has the best of both worlds - a good combination of property development and property investment assets. The ratio in terms of revenue contribution between development and investment activities to the company is more balanced now at 52:48 (FY08) compared with 60:40 in FY07.”

He said the optimum balance was achieved after a company-wide rejuvenating and asset enhancement strategy over the past eight years that resulted in a leaner SunCity.

SunCity currently has undeveloped landbank of 757.6ha with estimated gross development value (GDV) of RM12bil and more than 12 ongoing projects locally and abroad.

Its stable of high margin products and good take up of properties have contributed to a strong balance sheet.

For FY08, SunCity recorded a revenue of RM1.3bil versus RM1.1bil in FY07 while pre-tax profit was higher at RM638mil against RM296mil previously. (Profit in FY08 was boosted by revaluation net gains of RM130.8mil of Sunway Pyramid and Sunway Carnival shopping malls.)

Sales reached RM1bil in FY08, a big jump from M688mil recorded in FY07, while the margin of its property products is maintained at around 30%.

Going offshore

Ngian said although projects in Malaysia presently accounted for more than 90% of SunCity’s property sales, offshore projects were gaining importance and would make higher contributions going forward.

Within the next five years, overseas projects will contribute 30% to sales, with the majority from India and China.

“The huge population and growing middle-class in China and India have created a big demand for houses in those countries.

“We are also exploring opportunities in Vietnam and have received a number of offers for joint ventures with local partners,” Ngian said.

He said with its strong design and marketing capability, SunCity had the competitive advantage to add value to property projects in the various regional markets.

The company’s maiden property project in India, Sunway Opus Grand Residency in Hyderabad, undertaken jointly with Indian partner Opus Developers & Builders Private Ltd, will be launch in the first quarter of next year.

To venture into China, SunCity partnered Sunway Holdings Bhd’s subsidiary Sunway Mas Sdn Bhd and Shanghai Guanghao Real Estate Development Group Co Ltd for a mixed high-rise development in the central business district of Jiangyin New Harbour City in Jiangsu Province.

The ultra modern resort-style project will have 1,110 medium to high-end condominium units on over 6.8ha. The project will cost some one billion renminbi (RM473mil).

“We believe our maiden project in China will form a base to secure other future property projects in this high growth country in line with the company’s plans to expand into the regional property market,” Ngian said.

Quality investment assets

Besides having established a strong brand name as a reputable and innovative developer of medium to high-end projects, SunCity has also built up a strong property investment division with total assets worth close to RM4bil.

The assets range from office buildings to shopping complexes, university campuses, a medical college, hotels and theme park resorts.

Over the years revenue contribution from commercial properties has grown to RM630mil in FY08 against RM470mil in FY07.

“Despite the current market uncertainties, we are looking towards achieving a 15% revenue growth from our stable of hospitality, leisure and commercial properties going forward,” Ngeow said.

SunCity’s property investment division is also planning to broaden the export of its property management expertise to other regional countries.

Advanced negotiations are underway to manage hotels under the company’s Allson International brand name in China and Vietnam. Allson International clinched a contract to manage a hotel in Siem Reap, Cambodia early this year.

In China, SunCity’s retail property management team was involved in designing and managing a shopping centre in Chongqing, Szechuan province.

By The Star (by Angie Ng)

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