Another bumpy year for local property developers as glut continues to worsen

To alleviate the sluggish performance, listed developers are expected to dispose of their parcels of land, chase unbilled properties and clear the ‘old stocks’ to boost their revenues


Local property developers continue to bear the brunt of soft market sentiment last year, amid rising numbers of unsold residential units and homebuyers’ affordability issues.

The government and developers are finding ways to resolve the glut, as is evident from a slew of initiatives announced in Budget 2019 and promotional campaigns to entice more buyers.

Last week’s announcement in the local bourse saw mixed results from major industry players.

To alleviate the sluggish performance, listed developers are expected to dispose of their parcels of land, chase unbilled properties and clear the “old stocks” to boost their revenues.

Below are recaps for the performances of some of the biggest property developers for 2018.

Sime Darby Property Bhd
Sime Darby Property (SD Property) posted a net loss of RM347.4 million in the second quarter ended Dec 31, 2018 (2Q18), compared to a net profit of RM138 million during the same period a year before.

The loss was largely due to impairment of aged inventories and receivables of RM110.8 million and RM26 million respectively, write-offs of capitalised development expenditure of RM99.8 million for deferred projects and additional tax provisions of RM177.5 million.

However, revenue for the quarter rose to RM788.8 million compared to RM703.6 million a year ago.

SD Property hopes to benefit from the recent introduction of new policies and incentives aimed at the property market, which are expected to encourage greater homeownership and improve the current lending constraints, thereby boosting the property sector.

The company remains resilient with demand for residential products at reasonable price points and in strategic locations, despite the weaker confidence in the market.

SD Property is on track for completion of the proposed disposal of the Phase 2 Commercial Assets by Battersea Power Station Holding Co Ltd, to Permodalan Nasional Bhd and the Employees Provident Fund by end of 1Q19.

It would ease the company’s funding commitment for the remaining phases of the Battersea Power Station project in the UK.

SP Setia Bhd
SP Setia’s net profit for 4Q18 declined 32.47% to RM101.55 million from RM276.03 million a year ago due to lower contributions from the property development, construction and other operations segments.

Revenue for the quarter fell 23.41% to RM1.02 billion from RM1.33 billion a year ago, attributed to higher volume of development phases completed and handed over in 4Q17, and profit recognition on the completion of Phase 1 of the Battersea Power Station.

For the full year, SP Setia posted a cumulative financial year 2018 (FY18) net profit of RM670.96 million, a 32.48% drop from RM993.7 million a year ago, while revenue fell 16.19% to RM3.59 billion from RM4.29 billion.

The company plans to launch RM6.8 billion worth of properties, comprising RM6.66 billion from local launches, whi le internat ional launches comprise of new phases in Eco Lakes and Eco Xuan in Vietnam amounting to RM139 million.

The local launches will be concentrated in the central region with planned launches of RM4.98 billion. Launches from southern region are planned at RM1.17 billion, whereas for the northern region, the planned launches are RM349.3 million, while the planned launches from the Aeropod in eastern region are RM163.5 million.

“Budget 2019 focuses on promoting homeownership with many initiatives in place to help homebuyers. SP Setia hopes that these initiatives may be a strong catalyst to revive the property market,” the company stated.

The group declared a final dividend of 4.55 sen per share, bringing the total dividend payout to 8.55 sen and a payout ratio of 70.1% for FY18.

IJM Corp Bhd
IJM Corp’s net profit for its 3QFY18, was marginally higher at RM93.42 million against RM93.39 million it registered a year ago, lifted by improved earnings from its property development and infrastructure divisions.

This was achieved despite a decline in its operating revenue to RM1.51 billion, which fell 2.7% from RM1.55 billion it posted in the corresponding period in the previous year, dragged by lower income from the group’s construction, manufacturing and quarrying, as well as the plantation division.

For the cumulative nine-month period, IJM’s net profit stood 45.8% lower at RM178.11 million compared to RM328.79 million over the same period last year. Overall revenue also declined 7.6% year-on-year (YoY) to RM4.26 billion from RM4.61 billion.

The group expects its current financial year to continue to be challenging.

Its construction division is expected to end on a satisfactory note, based on an outstanding orderbook of RM8.4 billion.

It said the local property market will remain challenging due to key issues of price affordability, overhang of highpriced properties, rising cost of living and tight financial arrangements.

However, with unbilled sales of about RM2.2 billion, the division is expected to maintain a satisfactory performance in the current financial year.

UEM Sunrise Bhd
UEM Sunrise posted a net profit of RM20.08 million in 4Q18, against a net loss of RM50.95 million a year ago, attributable to higher revenue, lower operating expenditure, and a favourable share of associates and joint ventures (JVs).

The developer’s revenue for the three months surged 148.21% YoY to RM752.79 million, largely due to the partial settlement of Conservatory and Aurora Melbourne Central in Australia.

For the FY18 ended Dec 31, UEM Sunrise’s net profit rose 165.54% to RM280.33 million from RM105.57 million a year ago, on the back of higher revenue, cost savings and higher margin from land disposal in Iskandar Puteri.

Its revenue increased 9.68% to RM2.04 billion from RM1.86 billion, attributable mainly to its overseas projects as contributions from domestic projects drifted lower.

UEM Sunrise targets to launch a total gross development value of RM1.2 billion this year, focusing on mid-market and reasonably sized pocket launches in mature locations.

The company also plans to continue with its asset divestment plan in 2019, and has earmarked several non-strategic assets for divestment amounting to RM300 million.

IOI Properties Group Bhd
IOI Properties recorded a net profit of RM214.6 million in 2Q18 ended Dec 31 compared to a net profit of RM97.4 million during the same period a year before, due to higher operating profit in China and higher share of profit in Singapore.

Revenue for the quarter fell 4.2% to RM666.15 million from RM695.41 million a year ago.

The property developer recorded a revenue of RM519.2 million in the current quarter which is RM38.1 million, or 7%, lower than the preceding year corresponding quarter due to lower progress billing from ongoing projects in Malaysia.

The company’s operating profit of RM222.2 million for the current quarter was RM91.5 million, or 70%, higher than the preceding year corresponding quarter mainly due to higher profit contribution from its development projects in China.

“Although the property market in Malaysia continues to be subdued in the short term, the group remains cautiously optimistic that demand for properties in strategic locations integrated with good transportation infrastructure and close proximity to amenities will continue to draw prospective buyers,” the company noted.

With a sizeable landbank in strategic locations both in Malaysia and overseas, IOI Properties is well-positioned to adapt to market conditions domestically and abroad.

Mah Sing Group Bhd
Mah Sing posted a drop in net profit of RM66.01 million in the 4QFY18, against a net profit of RM88.77 million a year ago, while its revenue for the quarter fell to RM514.64 million from RM760.84 million.

For the full year, Mah Sing posted a cumulative FY18 net profit of RM271.58 million, a drop from RM361.89 million a year ago, due to lower revenue contribution from its property development business.

Its revenue fell to RM2.19 billion from RM2.91 billion, due to a higher proportion of new sales secured from new projects and where contribution to revenue from these projects is expected to be more significant once the initial stages of construction has been surpassed.

The company proposed a 4.5 sen dividend in 4Q18, bringing total dividends for FY18 to 6.5 sen.

Moving forward, the company will be launching campaigns throughout the year which offer rewards and other incentives to delight buyers, in conjunction with its silver jubilee which marks the group’s 25th anniversary as a property developer.

The company has also planned new launches of affordable projects in the Klang Valley, Johor and Penang.

“With our net cash position and cash and bank balances of RM1.22 billion as at Dec 31, 2018, the group is in a good position to lock in any strategic landbank when opportunity arises and we are also open to good JVs and investment opportunities,” the company noted.