HOC and location driving demand for developers

While most of them posted a decline in profits, many make higher revenue in 2Q19 compared to 2Q18


DESPITE bearish property market fundamentals, property development companies listed on Bursa Malaysia continue to post profits according to their respective second quarter (2Q) ended June 30, 2019 filings.

While most of them posted a decline in profits in the recent quarter, many made higher revenue compared to the same corresponding period last year.

Some of the developers indicated that the improved sales during the three-month period were supported by the government’s Home Ownership Campaign (HOC), 2019.

The Malaysian Reserve looks at the three-month performance of the top developers in the country.

Sunway Bhd
Sunway’s property development segment’s profit before tax (PBT) in 2Q19 declined 25.62% year-on-year (YoY) to RM37.28 million, while revenue increased 28.05% YoY to RM113.58 million on higher sales and progress billings from local development projects.

Sunway in its exchange filing noted that the segment’s PBT in 2Q18 was higher as it benefitted from the foreign-exchange gains realised from the accumulated profits distributed from the group’s property development projects in Singapore.

It added that PBT would have been higher by RM26.8 million if not for the adoption of the Malaysian Financial Reporting Standards 15 accounting standards.

IJM Corp Bhd
IJM Corp’s property development business recorded a PBT of RM45.85 million in the three months, slightly higher than RM44.9 million it made in 2Q18.

Its quarterly revenue jumped 38.15% YoY to RM462.38 million.

IJM Corp said the improved financial results were mainly due to the higher sales recorded and the completion of some development projects during the quarter.

IOI Properties Group Bhd
IOI Properties Group’s property development segment posted a marginal decrease in operating profit to RM107.42 million for the period from RM108.25 million it made in 2Q18.

The segment’s quarterly revenue also dropped 25.3% YoY to RM352.97 million from RM472.54 million it recorded for the April to June 2018 period.

IOI Properties Group said the segment’s lower financial performance in the recent quarter was mainly due to lower sales from The Trilinq project and lower project completion during the current year quarter.

The group recorded total sales of RM548.7 million in 2Q19 — which is RM145.1 million higher than it did in the same quarter last year — mainly contributed by its projects in the Klang Valley and IOI Palm City in China.

SP Setia Bhd
The developer’s net profit for the quarter fell 68.7% to RM138.73 million from RM442.74 million in 2Q18 due to lower contribution from its property development segment.

The company’s property development segment reported a RM214.9 million profit in the three months, 60.5% lower YoY from RM544.47 million profit recorded in 2Q18.

In addition, SP Setia had a one-off provisional fair value gain of RM343.8 million in 2Q18, contributed by the remeasurement of existing equity stake value in Setia Federal Hill Sdn Bhd as SP Setia acquired the remaining stake in the company.

SP Setia’s quarterly revenue, however, rose 44.1% YoY to RM1.34 billion, largely contributed by the disposal of the former British Embassy land for RM449.2 million.

Sime Darby Property Bhd
Sime Darby Property’s net profit for 2Q19 improved more than fourfold to RM205.26 million from RM46.57 million in the previous corresponding period.

Apart from higher contribution from its property development segment, the growth in profit was supported by lower losses at its leisure and hospitality segment.

Gains were also made from the disposal of a parcel of land in Selarong, Kedah, for RM81.1 million as part of the group’s non-core asset monetisation plan. Quarterly revenue rose 40.26% to RM865.9 million from RM617.37 million in the same period last year.

Sime Darby Property said the HOC 2019 contributed to half of its RM1.4 billion sales in the first half of 2019 (1H19).

UOA Development Bhd
UOA Development’s net profit for 2Q19 rose 5.98% YoY to RM125.09 million, mainly on progressive recognition of its ongoing development projects and sale of inventories.

Demand remains strong for certain location such as UOA Development’s South Link Lifestyle Apartments, Sentul Point Suite Apartments, Desa Green Serviced Apartment and United Point Residence projects

Despite the residential market flooded with almost RM25 billion worth of unsold units, demand remains strong for certain location and it reflected in sales made by companies like UOA Development.

The group noted in its recent exchange filing that new property sales during the three months were RM318.8 million contributed mainly by projects such as South Link Lifestyle Apartments, Sentul Point Suite Apartments, Desa Green Serviced Apartment and United Point Residence.

Its quarterly revenue also increased 12.91% YoY to RM344.33 million.

Malaysian Resources Corp Bhd (MRCB)
MRCB’s property development and investment segment recorded a 63.17% YoY decline in revenue to RM71.24 million during the quarter due to no revenue being recognised from the sale of completed unsold units.

In addition, the group’s key high-rise residential development projects are in the early phase of construction and contribute minimal revenue recognition.

The main revenue contributors were its ongoing development projects including Sentral Suites in Kuala Lumpur Sentral, the 9Seputeh in Jalan Klang Lama, office towers in Petaling Jaya Sentral Garden City and completed Kalista Park Homes in Bukit Rahman Putra.

MRCB’s property segment’s profit, however, increased 42.28% YoY to RM43.98 million due to property sales.

The group’s investment holding in MRCB-Quill real estate investment trust also continued to contribute recurring income of RM8.6 million in the period.

UEM Sunrise Bhd
The company’s net profit for the 2Q plunged 81.12% to RM40.36 million from RM213.79 million in the corresponding quarter last year.

The fall in net profit was largely due to the absence of contribution from land sales that was present in the preceding year’s corresponding period. The land sales carry a significantly higher margin and cushioned the partial settlement income of the Aurora Melbourne Central and Conservatory project in Australia.

Revenue for the quarter, however, rose 74.51% to RM1 billion compared to RM573.35 million in the same quarter a year ago, attributed to the partial settlement of the Aurora Melbourne Central and Conservatory projects.

Mah Sing Group Bhd
Mah Sing’s net profit in 2Q19 fell 34.76% YoY to RM50.32 million, while revenue fell 18.33% YoY to RM481.25 million.

The company’s property development segment recorded a revenue of RM748.2 million in 1H19 compared to RM1 billion in the previous year corresponding period, while operating profit was RM130.9 million compared to RM168 million in 1H18.

Mah Sing noted that the result is mainly attributable to a higher proportion of new sales secured from new projects where contribution to revenue is expected to pick up once the projects pass the initial stages of construction.

It also added that higher revenue and profit contribution are expected from such projects when construction momentum starts to pick up.

Paramount Corp Bhd
Paramount Corp saw its net profit for 2Q19 fall 32.7% to RM28.47 million from RM42.3 million a year ago when it booked gains from the disposal of industrial land in Kota Damansara (KD) in Petaling Jaya, Selangor.

It added that the industrial land contributed revenue and PBT of RM92.1 million and RM43.2 million respectively in 2Q18.

The company stated that excluding the profit from the KD land sale, it would have increased its PBT by 81% YoY from RM35.6 million in the first six months of 2018 to RM64.4 million in 1H19.

Revenue from its property division increased by 12% to RM338.8 million in 1H19 from RM301.3 million in 1H18 as a result of higher sales from its project Sejati Residences in Cyberjaya, Selangor, coupled with the completion of its Phase 3A in 2Q19.

Paramount Corp said its projects registered under the HOC 2019 have contributed about 70% of the RM310 million total sales it did in the 1H of the year.