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Saturday, August 25, 2012

Mah Sing targets to become proxy leader

Artist impression of Mah Sing’s Lagenda@Southbay project.

Mah Sing Group Bhd managing director Tan Sri Leong Hoy Kum has big ambitions, and he's ready to articulate his aspiration for all who want to hear.

First of all, he has a vision of making Mah Sing the next Cheung Kong Holdings of Malaysia. For the uninitiated, Cheung Kong belongs to Hong Kong tycoon Li Ka-shing, and is one of the largest property developers in Hong Kong.

Like Leong, Li also started off Cheung Kong as a plastic manufacturer back in the fifties.

Some may even judge this as being a little presumptive, but Leong wants to work towards being the proxy leader of the property sector in Malaysia.

Leong: ‘I have worked very hard over the past 18 years as I want to leave a legacy.’

After chalking up more than 10 years of double digit growth, 39 projects ongoing and a remaining gross development value (GDV) and unbilled sales of some RM18bil, Mah Sing as a proxy leader of the sector might not be too far fetched a scenario.

Meanwhile sources added that Mah Sing was close to concluding two en-bloc sales from its existing developments in the Klang Valley to a group of foreign investors who are keen to take a bet on the Malaysian property market.

In the past, Mah Sing has concluded six en-bloc deals to both institutional and private investors.

When asked by StarBizWeek, Leong says an appropriate announcement will be made when such developments take place.

Potential proxy leader

The title of proxy leader undisputably belongs to one company over the last decade. Mention property in Malaysia, and the first company that springs to mind is S P Setia Bhd. And, of course, everyone knows S P Setia is what it is today thanks to its leader Tan Sri Liew Kee Sin.

While Liew's Midas touch is growing in its efficacy, much of the company belongs to Permodalan Nasional Bhd (PNB) which made a general offer for S P Setia last year. Today PNB owns some 70% of S P Setia. The takeover has seen S P Setia's sector leadership being increasingly discounted, and this is evident from its share price.

While Liew continues to steer the company for the next three years, his ownership in the company has been reduced to 5.65%.

So here comes Leong, who is focused on steering his company towards pole position by taking the approach of being a professionally-run company with an entrepreneurial spirit.

Mah Sing has delivered every quarter in terms of sales and profits over the last 10 years. As it stands, Mah Sing has a market capitalisation of more than RM2bil, putting it in sixth position. Leong is targeting Mah Sing to have a market capitalisation of RM5bil in the next 3 to 5 years.

“I have worked very hard over the past 18 years as I want to leave behind a legacy. We are building the company to be the next proxy of the property sector, by being the premier lifestyle developer that can be counted upon to deliver the results and the quality that is associated with the Mah Sing brand,” says Leong.

As Malaysia's second biggest listed property developer by sales value, Mah Sing has the credentials for these ambitions.

Up to June 30, 2012, the company has achieved sales of RM1.29bil, which is also 52% of their 2012 RM2.5bil sales target. It has unbilled sales of RM2.69bil and a cashpile of RM555mil.

For the first half, net profit was up 42% to RM120mil on the back of a 25% improvement in revenue to RM913mil.

From 2002 to 2011, Mah Sing has enjoyed a compounded annual growth rate (CAGR) of 47% on net profits. Housebuyers who purchased Mah Sing homes, especially its landed properties, have also seen capital appreciation of more than 50% over a three to four year period.

For instance, Aspen and Clover @ Garden Residence in Cyberjaya has a resort lifestyle concept with lots of lush greenery. Clover@Garden Residence for example, is set upon a hillslope and for home owners, so it is virtually having a mountain beside one's home.

Ferringhi Residence involves condo villas and resort condominiums.

For its upcoming Ferringhi Residence in Penang which also offers the same concept but with an ocean view, registration has currently reached a cumulative 2,787 units, out of total units of 210 units.

Its M Residence in Rawang has seen registration of 2,509 units out of actual units of 779, for its linked units. Its semi-dees have seen registration of 891 units out of actual units of 68.

It is with these statistics that Leong's conviction to achieve his sales target of RM2.5bil for 2012 has been further strengthened.

“If we buy the right land, offer the right product and right concept and launch at the right time, then I am very sure that my developments will sell. Property development is a cashflow game. You have to manage that well. To have a quick turnaround, we must target the right segment,” says Leong.

In 1994, Mah Sing was a fledgling property developer that started off as a plastic manufacturer, foraying into the development of an industrial park. Mah Sing can today boast of a remaining GDV and unbilled sales of RM18bil in Penang, Johor, Kota Kinabalu and the Klang Valley.

Over the past four years, Mah Sing has also bought over RM1bil worth of land with about RM12.6bil in GDV. It is still reasonably geared at 30%, well below management's target of 50%.

The company is known for its small, niche and fast turnaround developments. Previously, the company never owned a single parcel of land bigger than 400 acres. Its strategy was always to roll out what buyers wanted and at the right location.

Township developer

So moving forward, what is Leong's strategy?

For starters, he's expanding Mah Sing's township portfolio. Mah Sing has been developing townships since year 2000 in both Klang Valley and Johor Baru.

Projects like Garden Residence in Cyberjaya, Kinrara Residence in Kinrara, M Residence in Rawang and Sierra Perdana in Johor are mixed townships which have been received good take up rates. So now, Mah Sing is venturing into bigger acquisitions to meet market demand.

This is already evident in the sizes of land it has been buying of late. While its two projects in Rawang is about 400 acres, its Bangi land which will house its Southville City development is over 400 acres with a GDV of RM2.2bil.

Mah Sing will also bid for the Rubber Research Institute Land in Sungai Buloh, where it is hoping to get a bigger portion from the carved out parcels.

When asked for his outlook on the property market, Leong says he is selectively optimistic, especially on the middle income market.

“We have to tailor our property products to the needs of the market. From what I can see, mid to high end developments will still be in demand if they are in good locations. I am still bullish on certain market segments, For example, the market wants landed properties. Buyers don't mind driving 15 minutes to 30 minutes to work, as long as they have a good sized link house, semidee or a bungalow. That is why my Southville City and M Residence in Rawang will cater for this need. Landed properties for the middle income group,” said Leong.

On this note, he will continue to focus on linked houses in a gated and guarded concept priced below RM1mil.

Leong is extremely excited over the launch of Southville City, as this sizeable land will provide housing which is within the reach of many middle income earners in the Southern part of KL. Southville City has prime frontage of 2km along both sides of the North South Highway, providing value enhancing branding opportunities for project.

Mah Sing is planning to seek approval from the government for a new interchange on the North South Highway just 2.5km from the existing Bangi interchange to allow direct access to Southville City. Currently, registration for Southville City has reached close to 2,500 registrants.

Leong sees Southville City changing Bangi. He feels that presently, despite the rising trend of urbanisation, locals are largely underserved.

It is on this note that the township of Southville will comprise of landed residential units, and some 30% of the landbank will be allocated for commercial properties. Leong is targeting the upgraders and new buyers from Bangi and surrounding townships of Kajang, Semenyih, Putrajaya, Cyberjaya, Nilai and Seremban. Leong adds that for serviced apartments, there is demand for units between 500 and 700 sq ft. This was especially popular among new household formations and singles.

“Nowadays people buy properties to match their lifestyle. Property is acknowledged as the best hedge against inflation, and people buy properties as a form of wealth preservation and not speculation,” said Leong.

By The Star

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