By Khairie Hisyam
Now into its seventh project in Johor, Mah Sing is not too concerned about talk of a property slowdown in Iskandar Malaysia. In this part of the series, KiniBiz talks to Mah Sing chief Leong Hoy Kum on various subjects including the coming implementation of GST, merger prospects and overseas expansion.
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Despite growing concern of a property slowdown in Iskandar Malaysia, Mah Sing Group Bhd feels what the region needs is time.
The Iskandar Malaysia region is more of a medium- to long-term play, said Mah Sing group managing director Leong Hoy Kum adding that while certain areas such as Danga Bay are facing oversupply, others like Medini are still doing well.
Oversupply in property offerings in the region at present is more apparent in mixed-use and high-rise residential units, said Maybank in a research report last month, amid an increasingly crowded development scene.
Among others, the entrance of aggressive developers from China into Iskandar Malaysia had seen massive launches that dwarfed what most local players were doing — for example in June 2013 Guangzhou-based Country Garden Holdings Co Ltd launched 9,000 units in Danga Bay.
“I think it’s scary,” said Leong, referring to the massive scale of developments undertaken by the Chinese developers. “I think they took the Chinese way of delivering and launching units but actually this was not viable because our population is not that big.”
In comparison to four-digit units per launch being undertaken by the foreign developers, local developers were doing several hundred properties per phase, which Leong thinks is more manageable for the Malaysian market.
However despite the glut of high-rise properties on offer in Danga Bay, Leong feels that the market will still be able to digest it, though the timeframe is longer. “Give it a bit of time.”
Danga Bay aside, however Leong thinks there are other areas in Iskandar Malaysia which are still promising. The key, though, is to know what products would do well in the current climate.
“You must cater with the right products if you are in Iskandar,” said Leong to KiniBiz. “I won’t say Iskandar is disappointing.”
Going with landed down south
For Mah Sing, its focus lies in landed properties at present when it comes to Iskandar Malaysia.
“We’ve got to be selectively optimistic in Iskandar,” said Leong to KiniBiz. “So we have to focus more on landed, industrial development and affordable small-sized commercial units including serviced — these will still do well.”
That is the direction of Mah Sing’s latest project in the region. Having completed the acquisition of the 1,352-acre land parcel in Plentong, Pasir Gudang early last month, the developer is working towards unveiling its proposed development on the site, Bandar Meridin East, by the end of this year.
Bandar Meridin East, slated to offer landed residential units and some shop offices, would be Mah Sing’s largest township project yet, targeted for launch by the second quarter of 2015.
Prior to Iskandar Malaysia, however, Mah Sing had been around in Johor for quite a while. Its first foray into Johor was in 2000 with a mixed township project called Sri Pulai Perdana — coincidentally the year Mah Sing was redesignated as a property counter on Bursa Malaysia following its diversification into property in 1994.
Since then Mah Sing had undertaken six projects totalling roughly RM4.2 billion in GDV, with Bandar Meridin East set to be the seventh and more than matching that value at RM5 billion in GDV.
Other than Bandar Meridin East in Iskandar, Mah Sing is also eyeing two more launches this year.
For Klang Valley, the developer is aiming to launch its Canal Link @M Residence, Rawang, the latest addition to its M Residence township, while in Penang the developer is targeting to launch Ferringhi Residence in Penang by December.
Eye on Klang Valley, still
That said, however, the Klang Valley remains Mah Sing’s focus for now, with the bulk of its sales this year expected to come from the region.
“We are still positive on the property market in the medium- to long-term,” said Leong to KiniBiz, “especially in the Klang Valley as our number one destination because the population is projected to grow from seven million to 10 million in 2020.”
Notably Mah Sing’s land acquisition deals announced this year had all been for the Klang Valley area. While only half as many deals as announced in 2013, the total GDV acquired in 2014 far outstrips the land acquisition deals in 2013, amounting to nearly RM20 billion in three deals compared to RM9.72 billion in six deals last year.
This expanded Mah Sing’s land bank to 3,890 acres will total potential GDV and unbilled sales rising to roughly RM66 billion. This would sustain the developer’s growth for about eight to ten years,” said Leong.
In terms of contribution, Leong expects the Klang Valley to make up 60% of Mah Sing’s sales this year, while Iskandar is tipped to bring in 23%. Another 10% would likely come from Penang with Kota Kinabalu contributing the remaining 7%.
For the current financial year ending Dec 31, 2014, Mah Sing is targeting some RM3.6 billion in total sales, 20% higher than its RM3 billion sales target last year. As of June 30, it has raked in sales amounting to some RM1.55 billion for the first half of the year.
Market still promising
The positivity comes as Mah Sing is apparently not too concerned on the coming imposition of the goods and services tax (GST) in April 2015. In contrast several property players had already sounded concerns of rising costs as a result of the new tax system.
At present housing will be exempted from GST, though the Real Estate and Housing Developers Association (Rehda) had repeatedly reiterated its stance that it should be zero-rated as this would allow developers to claim input tax from building materials used in developments, alleviating some cost pressure.
“I think you can’t escape, come April 1 everyone will have to face it,” said Leong. “What we need to do is while we are preparing for GST, we have to continuously be on the lookout for ways to enhance our efficiency.”
“Needless to say that will help on the cost-saving side,” said Leong.
Looking at the big picture, Leong feels there may be a temporary adjustment period following the implementation of GST, but the market will stabilise eventually, he added.
“Our fundamentals are still quite healthy for the property market because we still have a very stable gross domestic product (GDP) growth, low unemployment rate, and so on,” said Leong. “And we still have a very young population with supply shortage of properties in key growth locations due to increasing urbanisation.”
“That will make the property market post-GST stable, I would say,” opined Leong.
As for rising interest rates following a period of depressed rates, Leong feels the impact of further upward revisions would be quite minimal as far as the property landscape is concerned. In July Bank Negara Malaysia raised its overnight policy rate (OPR) by 25 basis points to 3.25%, the first increase in three years.
Looking back, the interest rates for the past decade or so had been very favourable, said Leong, and gradual increases going forward would be reasonable.
“It will still not deter genuine buyers who buy to stay, and investors will also still buy,” said Leong, “as property is a very good option to hedge against inflation.”
From houses to townships
As with many other developers, Mah Sing had gone bigger in recent years in terms of the scale of its development projects. This is a conscious decision, said Leong.
“Today we are not just talking about building a few rows of houses but we are talking about lifestyle, nice township… it’s about building communities,” said Leong to KiniBiz. “And lifestyle is about how to make changes, adapting to the latest market needs.”
Among its bigger projects recently is the coming Bandar Meridin East, which on its own more than matches the entire GDV of Mah Sing’s previous six projects in Johor. In addition last August Mah Sing acquired 1,400 acres in Seremban for an upcoming gated-and-guarded township project, with an estimated GDV of RM7.5 billion.
It comes down to what the community wants, added Leong, from quality construction work, good layouts to good landscape planning and more greenery in the community area by cutting less trees or even replanting them.
“Today we are also talking about maintenance-free communities — trying to avoid having your buyers from continuously spending money to maintain their houses,” said Leong. “All these are the lifestyle of today and the buyers are chasing the lifestyle they want.”
At the end of the day, Mah Sing works towards customer delight and satisfying the customer, said Leong. As part of its efforts, the developer has established a loyalty programme called MClub as well as a customer service called MCare for its buyers.
“I keep saying that the customers must be happy,” said the Mah Sing chief. “These are the ingredients to further improve your branding.”
A Mah Sing merger someday?
While going strong at present, would Mah Sing be a stronger player should it clinch a merger with another developer to strengthen its position in the market?
Speaking to KiniBiz, Mah Sing chief Leong is open to such possibilities but it has to be on his terms, he added.
Notably in 2012 talk surfaced of a potential tie-up between Mah Sing and Tropicana Corp, which was then known as Dijaya Corp. Roughly similar in asset size back then, such a merger between Leong and Tropicana boss Danny Tan would create an entity that may withstand consolidation moves of state-linked players in the property sector.
At the time Permodalan Nasional Bhd (PNB) had just taken over SP Setia, while the UEM Group had successfully merged its UEM Land with Sunrise Bhd to form what is known today as UEM Sunrise.
But such a deal was not possible, said Leong. “That’s not feasible,” laughed Leong in response to KiniBiz.
On the mergers and acquisitions (M&A) front, Leong said he is open to such possibilities but any exercise must be favourable to Mah Sing.
“It has to be win-win for all, something that serves a purpose,” said Leong. “At the moment it had not crossed my mind because I want to retain control and I want to keep managing the company.”
In addition Mah Sing is already among the bigger boys of Malaysian property at the moment, said Leong, so there is no reason for him to lose control over the brand and the company.
Eyeing overseas expansion
Having tasted success after 20 years in the Malaysian property scene, Leong is now setting his sights on overseas markets. But he isn’t in any sort of rush.
“Of course, planning to be a major global player has to be a long-term goal,” said Leong, noting the limitations of the Malaysian market with a population of just 29 million. “We can’t grow very big if we do not diversify into new markets one day.”
The developer had already taken tentative steps towards this goal. It has a sales office in Shanghai, China as well as a property sales gallery in Singapore, said Leong, which acts as a one-stop centre for international buyers interested in Mah Sing’s property offerings in Malaysia.
Eventually, however, Leong wants to undertake overseas projects in the future when the developer finds an attractive opportunity. “We are looking at more developed nations such as Australia, United Kingdom,” said Leong, because there are more issues to deal with in developing nations in comparison.
Clarifying further, Leong points to China as an example of a developing nation. While he acknowledges the huge population of China to tap into as an attraction, going into this sort of market requires much caution, he said.
“The China market is growing, but risk is also very high because land costs are not cheap,” said Leong. “And of course the China market faces a lot of uncertainty, even more so due to the cooling measures recently.”
In comparison, developed nations are more settled in terms of regulations and processes, said Leong, in addition to being more mature market-wise.
“Application for permit for example is also very transparent,” said Leong. “So we have less hassle, less problem.”
However it is a long-term goal, stress Leong, given that Mah Sing is undertaking 40 projects at the moment in Malaysia. At present the developer is content undertaking studies to find viable opportunities for development projects overseas for an eventual expansion.
“There’s no hurry,” said Leong. “But we are taking steps in our journey towards this goal.”
Yesterday: After two decades, Mah Sing not slowing down
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