By Khairie Hisyam
Tiger’s magnificence very naturally lends itself to a superb brand. Since Tiger’s other efforts to make it big are not going that well so far, maybe it’s time Tiger started offering some consultancy services on branding, because Sime Darby Property for one may have a need for it.
Land is a funny thing. While creatures of the jungle, Tiger included, are content with a certain area on which to live and hunt, humans apparently are never satisfied with the amount of land they have and fall all over themselves wanting more. This mysteriously strong lure for dirt amuses Tiger no end.
Although sometimes it becomes less amusing when we remember that Tiger’s ilk has lost about 93% of our historic range, according to the World Wildlife Fund. But let us put that sad fact aside for roars (or maybe cat tears) over a good sambar deer pie some other time.
The recent news that Sime Darby is selling a piece of land in the middle of its own property arm’s development to Eastern & Oriental (E&O) raised Tiger’s magnificent eyebrow. On the surface, the stated rationale makes some sense — E&O’s luxury brand will push up the value of Sime Darby’s own development in the area.
“The proposed disposal will enable Sime Darby to continue its strategy of collaborating with branded and quality developers and partners to support and strengthen its strategic development objective and value enhancement,” said the group in its statement. “It will also enhance the combined branding and value of the larger Elmina West and City of Elmina through E&O’s expertise and reputation as a niche luxury lifestyle developer.”
But on closer inspection the proposed sale raises questions. For one, why sell land to another developer when you have your own property development arm that is already developing so much around said land?
It brings to mind another recent land injection by Danny Tan, who is selling five parcels of land in Iskandar in exchange for a controlling stake in Singapore-listed Albedo. In this case, the main question was why the Tropicana Corporation (formerly Dijaya Corporation) boss injected land into another company when he has his own property outfit already undertaking projects in the same area.
However, in Tan’s case Tiger thinks it makes sense, because Tropicana Corporation’s stomach was too full to take on more food, er, assets.
To recap, Tan pumped in land and other assets worth around RM1 billion into Tropicana last year and Tropicana is now too highly geared to take more. In comparison, Tan’s land going into Albedo is estimated to be worth about RM3 billion.
So it is logical that Tan’s move ensures timely development of his land without having to wait for Tropicana to de-gear sufficiently to take more land. And to be fair Tropicana will work with Albedo in Iskandar for mutual benefit, so Tan sidesteps conflict of interest issues for now.
In comparison, the land that E&O is buying already belongs to Sime Darby Property, so the same issues leading to Tan’s land injection into another company instead of his own property outfit does not arise in this case.
In fact Sime Darby Property is doing very well financially, exceeding expectations by doubling its 4Q13 profits from the corresponding period last year by recording profits before interest and tax (PBIT) of RM301.5 million in that quarter. The group as a whole leaned on its property and industrial arms, as well as the part-disposal of its healthcare division, to prop up 4Q13 earnings as its other core sectors saw their numbers decline.
For FY13, Sime Darby Property grew its PBIT by 22% year-on-year (y-o-y) to RM571.5 million, Sime Darby’s only core business arm to see substantial PBIT growth — the only other segment to see PBIT growth in FY13 was the group’s motors division, but said growth was just 1% y-o-y.
So it is clear to Tiger that the land sale to E&O is not about money. It’s not like Sime Darby is having problems selling their properties in Elmina, so Tiger rather thinks that whatever money Sime Darby makes from selling the land is going to be less than what the group would have earned from developing it themselves.
Again, to be fair, the group did say they wanted to improve their Elmina brand by having E&O’s township on the 135-acre land piece. After all E&O is a very good brand.
And those in the property investment jungle can attest that having a top-notch property brand next to your own property will drive up your property’s value. So this does make sense to Tiger, especially since Sime Darby also owns a 32% stake in E&O.
Why it needs to own part of another development entity when it has its own property arm is beyond Tiger, but that is a jungle tale to paw through another time.
Back to brands, unfortunately Sime Darby trying to leverage on E&O’s branding in Elmina also carries an underlying implication — getting another brand in to push yours up is akin to admitting that your product is not chic enough for the more discerning creatures in the jungle.
If your brand is not up to the standards you want it to be at then that is a problem that needs to be addressed at the fundamental level.
A brand is a promise to customers, informing them what they can expect from the brand and why the brand is unique. Tiger can’t wrap its head around the implication that the Sime Darby Property brand’s best promise to their customers is merely that the properties they buy from Sime Darby Property will be next to other, better brands.
Because propping up your own brand with a better brand, though may work in the short-term, still doesn’t improve your own brand. The way forward is to relook at what sort of promises your brand is making and how you can up the ante on that. Then deliver on those promises — that means building your own properties.
And Tiger must point out that Sime Darby is not exactly a cub when it comes to development, too, having seen its heyday as one of the leading property players in the couple of decades leading up to the late 1980s property market crisis. (Although of course Sime Darby was wearing different stripes then, only being re-born in its current incarnation in 2007.) Think Putra Heights, UEP Subang Jaya, Melawati…Sime Darby definitely has the know-how when it comes to developing, whether township-scale or smaller.
And as a full-fledged — and once the top — developer with such a massive land bank, probably the largest in Malaysia if you count plantation land with development potential, it is about time it wakes up and stops making quick bucks by unnecessarily selling land to others, as it has been doing for years now.
What’s the point of being a developer if you’re not going to develop your own land yourself to maximise your profits?
GRRRRR!
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