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Saturday, January 30, 2010

SP Setia in growth mode in southern Johor

Land JV in China (RM500mil GDV) is expected to take off after all the necessary approvals are obtained in the next 12-18 months, JP Morgan says.

SP Setia Bhd’s performance in southern Johor will be on the road to stronger growth given the number of projects in the pipeline and the overall economic recovery in the country, says executive vice-president (property division – northern and southern region) Chang Khim Wah.

“We will launch several hundred houses this year in all our four projects and we expect sales to be healthy,” says Chang.

Setia EcoGardens show house and (inset) Chang Khim Wah.

On average, about 800 to 1,000 units will be launched in each of the four developments with price ranging from RM300,000. The company will also launch some high-end semi-detached and bungalow units ranging from RM1mil in all four projects.

“This is a very conservative figure,” says Chang, adding that more may be introduced into the market based on prevailing market sentiments.

He says the company’s winning factor is the diversity of products and their location. Due to the different locality, each of the four projects will have their own draw. Bukit Indah, established some 10 years ago, with its proximity to the Second Link has become very popular whereas Setia Tropika, which is adjacent to the North-South Expressway, offers urbanised contemporary living.

Setia EcoGardens is the latest and most green project. When completed, Setia EcoGardens will have a total gross development value (GDV) of RM3.5bil, comprising 6,600 residential and commercial properties; about 900 units have been launched cumulatively. Setia Indah is also very established with basic amenities.

Although Johor has been known to have the highest incidence of property oversupply, Chang says the company’s development has never experienced this problem.

“Purchasers want new concepts and we have strived to provide elements of differentiation. This has been our competitive advantage,” he says.

Chang adds that overall, the company’s selling points are location, lifestyle, overall concept securty and brand and reliability.

“About 80% of our purchasers come to us through word of mouth,” he says.

As with last year, Chang’s strategy this year will be to limit the number of units per launch to about 50 units or less, depending on area and type of housing.

The company launched 75 units of double-storey housing in Setia Indah in November which is currently 80% sold. A week ago, it launched 45 more units costing about RM400,000 each in the same area which, to date, is half sold.

The company will be launching a further 66 units this March in Setia Indah and 22 units of bungalows in Setia Indah after June. There are plans to launch 300 units in Setia Tropika this year.

Because all four projects are located in Iskandar Malaysia, the company will be able to tap into the growth of the country’s foremost economic growth region.

“Major roads are being widened to four lanes and rivers are being cleaned. We have seen an improvement in infrastructure over the last two years and this will add value to all our projects. A lot of money has been poured to improve the standard of living in southern Johor. We also see more police patrols to curb crime. Definitely business will improve and this will lead to job creation. In that respect, sales have been good,” says Chang.

With the company’s “The best of the best” promotions coming to an end by April this year, the company will “no longer have a margin loss,” says JP Morgan.

The group’s project at the new KL EcoCity and international expansion will also be another growth catalyst.

“Privatisation of land for the RM6bil EcoCity commercial project is expected to be completed by August this year, with the launch targeted for October.

“The commercial component will account for 70% with residential making up the remaining 30%. Focus for the commercial component will be mainly on service apartments and offices,” JP Morgan says.

SP Setia’s share of profits in this JV will be 48% (after netting off 20% of profits to be paid as consideration for the land over the project period of between eight and 10 years).

The group is expected to spend upfront capital of about RM250mil to improve infrastructure and accessibility to the project.

“Given the learning curve and need to establish a brand in new segments (i.e. commercial, high-rise) and overseas (i.e. Vietnam, China), property margins will remain below historical average levels of 25%. The group guides for property margins to be at 18%-20% going forward (still an improvement from 16% in FY09), close to our forecast of 19% to 20% excluding land sales.”

Its Vietnam projects contributed RM70mil to sales for the 2009 financial year and the Hangzhou Land JV in China (RM500mil GDV) is expected to take off after all the necessary approvals are obtained in the next 12-18 months, JP Morgan says.'

By The Star (by Thean Lee Cheng)

1 comment:

Anonymous said...

nice post. thanks.