By SHAHEERA AZNAM SHAH / Pic By MUHD AMIN NAHARUL
Mah Sing Group Bhd is setting aside some RM1 billion to buy land this year as it focuses its property development activity in the Greater Kuala Lumpur area.
Founder and group MD, Tan Sri Leong Hoy Kum (picture), said the company is seeking a higher exposure to industrial property development as trade diversion as a result of the US-Sino trade war present an opportunity for developers in the country.
“We have about RM1 billion to spend on land acquisition. It is the right time to lock in land in good locations that meet our business model as our cash flow now is healthy and we face less competition from other developers.
“Industrial land is an area we are exploring as our residential business makes up about 60% of our portfolio. The US-China trade dispute is leading many Chinese manufacturers to consider relocating to places like Malaysia,” Leong said at Mah Sing’s 27th annual general meeting in Kuala Lumpur yesterday.
Greater Kuala Lumpur extends beyond the boundaries of Kuala Lumpur to Selangor, comprising 10 municipalities governed by local authorities.
Due to scarcity of land in urban centres, Mah Sing’s projects in central business and commercial centres will be targeted pocket-size developments while the township projects will be undertaken where the land cost is lower, he said.
As at end March, Mah Sing’s land bank stood at about 2,099 acres with an unbilled gross development value (GDV) of RM25 billion, which provides an earning visibility for the next eight to nine years.
Its cash and bank balances stood at RM1.3 billion, of which half is free cash flow.
“At the moment, we still continue to replenish our landbank,” Leong said.
Some 67% of Mah Sing’s unbilled projects are in the Greater Kuala Lumpur, 22% in Johor and the remaining 11% in Penang and Sabah.
“About 61% of our remaining GDV comprised of residential property developments while 32% in commercial segment and 6% is industrial development.
“We don’t mind a bigger exposure in Greater Kuala Lumpur. We will focus on areas with a growing population and see the demand is in this area,” he said.
Mah Sing’s ED, Datuk Steven Ng, said the impact from a possible increase in cement price will be low, at 1% to 2% of developers profit margin.
“If the cement price is increased by 40%, it will impact about 2% of our margin…. but we do a lot construction engineering specifically to bring the cost down such as use modular layout and industrialised building systems (IBS),” he said.
Several developers have expressed their concern over the possibility of cement makers wanting to increase cement price by up to 40%.
The price hike threat has been played down by Domestic Trade and Consumer Affairs Minister, Datuk Seri Saifuddin Nasution Ismail, who said cement remains a controlled item under the Control Of Supplies Act.
For its first quarter ended March 31, Mah Sing posted a net profit of RM55.01 million, 14.2% lower year-on-year (YoY) due to the higher proportion of new sales. Revenue for the period dropped 23% YoY to RM450 million.