Property developers benefit from one-off gains in recent quarter

This is despite the slower period between April and June 2018 post-GE14 on May 9


SOME property developers managed to achieve good sales which resulted in higher net profits during the recent quarter despite the slower period between April and June 2018 that was affected by the 14th General Election (GE14) on May 9.

SP Setia Bhd’s net profit for the second quarter ended June 30, 2018 (2Q18), surged 76.7% year-on-year to RM442.7 million from RM250.56 million posted a year ago.

The company attributed the better performance to the sales of completed properties including Setia Alam, Setia Eco Park and Temasya Glenmarie in Shah Alam; Setia EcoHill and Setia EcoHill 2 in Semenyih; Setia Eco Glades in Cyberjaya; Setia Eco Templer in Rawang; and Alam Sutera in Bukit Jalil.

In addition, the developer noted there was RM343.8 million in one-off provisional fair value gain arising from the re-measurement of existing equity stake in Setia Federal Hill Sdn Bhd, which was previously a joint venture and now a wholly owned subsidiary of the group.

Meanwhile, UEM Sunrise Bhd recorded a net profit of RM213.79 million in the quarter against a net loss of RM9.84 million a year earlier.

The company’s earnings were mainly from land sales, projects’ development cost savings and lower operating expenses.

“The group recorded a higher profit for the current quarter driven by higher contribution from land sales which carry a significantly higher margin, gain from projects’ development costs savings and lower operating expenses,” it noted in an exchange filing.

UEM Sunrise added that the higher revenue in the quarter was mainly due to recognition of land sales; good construction progress from the Almas, Melia, Sefina and Estuari projects; as well as the sales of completed units driven by its inventory monetisation campaign.

On another note, Malaysian Resources Corp Bhd’s (MRCB) net profit for 2Q18 rose 39.09% to RM33.45 million from RM24.05 million in 1Q18, mainly attributed to the property development and investment segment, as well as the engineering, construction and environment segment.

“In the first half of 2018 (1H18), the property development and investment division recorded a revenue of RM413.9 million, which was mainly contributed by the group’s ongoing development projects, namely the 9 Seputeh mixed residential development in Jalan Klang Lama; office towers in PJ Sentral Garden City; Sentral Suites in KL Sentral; and Kalista Park Homes in Bukit Rahman Putra.

“Revenue was also booked from the sale of completed units from Sentral Residences, the Q Sentral office block and Eastern Burwood in Melbourne, Australia.

“The sale of a parcel of development land in Penang in 1H18 had contributed to a profit before tax of RM31.3 million to the division, while the group’s investment holding in MRCB-Quill REIT (real estate investment trust) continued to contribute a recurring income of RM9.5 million,” it told Bursa Malaysia.

MRCB also noted a higher profit before tax recorded in the quarter compared to 1Q18, which was mainly due to the sale of the land in Penang.

Moreover, Sime Darby Property Bhd (SD Property) plans to continue to dispose of its non-core assets in an effort to manage its resources more efficiently.

CFO Datuk Tong Poh Keow said the company’s latest sale was the Glengowrie Estate in Selangor in its financial year ended June 30, 2017.

“There are certain non-core assets that we are planning to dispose of including a 300-acre (121.4ha) parcel of land in Bukit Selarong, Kedah, and some in Jerai (also in the state). There are probably good local developers who would be interested, but our focus is on managing our resources.

“We also have a small estate in Sabah that we are planning to sell,” she told a press conference recently.

Moving forward to the year-end, most property developers are shifting their focus to sell affordable, medium-range landed homes.

For example, SD Property aims to stick to its focus on launching affordable and medium-range landed properties at townships such as Serenia City, Bandar Bukit Raja, Nilai Impian and the City of Elmina where the demand for these properties is strong.

In the meantime, SP Setia said the group will focus on the local market with emphasis on mid-range landed properties in the Klang Valley for project launches in 2H18.

The planned major launches are in Setia Alam, Setia Ecohill, Setia Ecohill 2, Setia Eco Templer, Setia Eco Glades, Setia Sky Seputeh (Tower B), Temasya Glenmarie, Set ia Alamsari and Setia Alaman with a combined gross development value (GDV) of RM2.23 billion.

Taking cognisance of the market dynamics and consumer affordability, UEM Sunrise has also been diversifying its product launches with a focus on the mid-market segment.

The company has launched Serimbun, a double-storey housing project near Bukit Indah in Iskandar Puteri, Johor, as well as Kiara Kasih, its first Rumah Wilayah Persekutuan project in Segambut, Kuala Lumpur, in 1Q18.

These projects commanded a respectable take-up of 66% and 55% respectively as at Aug 13, 2018.

In addition, UEM Sunrise plans to launch Eugenia — another double- storey housing project — in Serene Heights, Bangi, with an estimated GDV of RM54.8 million in 3Q18.

In Iskandar Puteri, the group plans to launch a similar development in 4Q18 in Gerbang Nusajaya with an estimated GDV of RM95.3 million.