Business

Wednesday January 28, 2009

Best of both worlds

CEO OUTLOOK 2009


Sunway City Bhd has mapped out plans to not only withstand the current tough market conditions but also to seize opportunities when the market bounces back, says Ngian Siew Siong, managing director for property development division

How has the global financial meltdown impacted the performance of the local property market?

Ngian Siew Siong

History has witnessed Asia’s resilience during global financial crises and Malaysia is reasonably well-placed in the region in terms of its economic stability.

The current construction costs are relatively cheaper. Steel bar and crude oil prices have shown a downward trend to about RM1,800 and US$40 per barrel respectively.

We see the current situation as a good sign, preventing the overheating of the market and an overly competitive market.

It is also to some extent, a challenging time for property developers as they must deliver best-in-class developments without compromising on product quality and specifications.

This is the time when only the most credible and experienced players will survive the weak economy and sustain their track record of excellence.

How has the market slowdown affected the company’s new project launches and take-up rate?

Sunway City is not insulated from the complex economic conditions brought about by the global financial crisis.

But our business model of multiple and strategically located developments (from middle, middle-upper to high-end properties) has made us agile to plan our launches on a sub-phase basis that can provide us with immediate development potential based on the need, market and choice of locations.

Most of our middle to high-end residential properties are located in choice prime locations, which will further help to mitigate the impact of the economic slowdown in terms of slower sales and take-up rates.

We have also seen increased demand for middle and middle-upper residential categories.

We are going full swing in our best-selling ongoing projects in prime locations that have a large international community and expatriates. The projects include:

● Sunway Palazzio - luxury condominium in Sri Hartamas;

● BayRocks Garden Waterfront Villas in Sunway South Quay at Sunway Integrated Resort;

● Villa Manja — a single development of semi-Ds in Sunway SPK Damansara; and

● Challis Damansara - an exclusive Garden Townhouse development in Sunway Damansara.

As for new launches in the pipeline, it is pertinent for us to strategise our launch plans by reducing and sub-phasing new launches in terms of locations.

Besides a good spread of middle to high-end property developments in multiple locations, the propelling factor for Sunway City is its portfolio of high-yield investment assets that provide a sustainable income base. They are also recession-proof.

This again reflects our financial strength and brand resilience towards maximum customer benefits.

What are the company’s strategic plans to face the challenging market conditions?

Sunway City is well-placed with the best of both worlds: high-growth property development and high-yield property investment assets — two crucial elements in building and sustaining a healthy business momentum in the property market.

On the property development segment, the company’s unbilled sales of RM1bil will sustain its bottom line over FY09 and FY10. It also has RM1bil worth of projects in the pipeline from recent launches that will be planned in sub-phases over next year.

On property investment, the 50% contribution of multiple investment properties to Sunway City’s bottom line will continue to expand the stable property investment income base and will also provide a buffer against a soft market.

The redesigning and expansion of Sunway Pyramid, especially the enlarged mall, is now attracting more than 2.5 million visitors monthly compared with only 1.5 million previously.

Meanwhile, Sunway City’s hotel portfolio has also been expanded to five hotels with a total of 1,234 rooms from just a single property, the 431-room Sunway Resort Hotel & Spa, previously.

We have also been very positive about the company’s stronger foray into the international property market by exporting our experience and expertise in property development and providing consultancy and management services to hotels and retail/shopping malls regionally.

While our strategies to withstand the current economic situation seem to be sound, we are also attempting to re-engineer our current plans to strengthen and prepare ourselves for the boom time: to be able to optimise the opportunities in the future.

This is a good time for us to revisit our customer loyalty programmes and service initiatives to make them even more efficacious. We will allocate time and resources to make improvements to existing processes for greater efficiencies.

Likewise, human resource and human capital management through skills training, talent retention and brand loyalty remain one of the areas of focus.

We devise strategies to capitalise on the prevailing low construction costs and to grab opportunities in local real estate when the market bounces back. Hence, it would be a natural and prudent decision to embark on newer opportunities and construction work for our high-yielding investment assets. These include developing a commercial hub in Sunway Integrated Resort that will house a 28-storey block of small-office/home-office (SOHO) and commercial tower with net lettable area (NLA) of 300,000 sq ft, adjacent to Sunway Pyramid.

Also, we plan to expand Sunway Corporate Precinct with NLA of 550,000 sq ft next to Menara Sunway.

What is your outlook for the local property market in the next 12 months?

It will be a challenging period as a whole.

Players like Sunway City, which has sound cash-flow management and financial performance and the expertise to withstand the challenges posed by the troubled economy and fluctuating financial markets, will continue to deliver high-quality products and keep up with customers’ needs.

Sunway City survived three market downturns, and our endurance in difficult times in the past is a testimony to our track record of excellence and strong brand that is associated with not only “product-quality focused” but also “customer-focused product” that keeps us ahead of the pack.

Amid the global financial crisis, property companies such as Sunway City with its strong brand and premium properties that are in multiple strategic locations, especially at the Integrated Resort address, will be well placed to weather the challenging market ahead.

Sunway City currently has undeveloped landbank of 1,063.6ha with an estimated gross development value of RM15bil. It also has more than 12 ongoing projects locally and abroad, which will continue to contribute positively to the company’s balance sheet.

What will be the main income drivers for Sunway City for the coming one to two years?

Sunway City’s RM539mil cash reserves as at Sept 30, 2008 (Q1 FY09) will allow seamless delivery of innovative, high-quality and high-end developments.

Our growth in the coming one to two years will be primarily triggered by our ongoing and proposed projects in Malaysia – in the Klang Valley, Ipoh and Penang - as well as our overseas ventures in Australia, India, and China.

● This is the last article under StarBiz 2009 CEO Outlook series

 
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