Leong: ‘I’m
training my children so that they will be hands-on.’
Deloitte has come up
with ways for the group to improve efficiency, cost and execution.
Developer sitting on
cash of RM1.1bil and negligible borrowings.
Group positions
itself for recovery of property market that it feels will happen next year.
Leong: ‘I’m
training my children so that they will be hands-on.’
An artist
impression of Mah Sing's The Loft development in Penang.
The Icon
Residence Mont Kiara in Kuala Lumpur.
Meridin@Medini
is located right next door to Legoland Malaysia.
By EUGENE MAHALINGAM
Leaving a Legacy - Mah
Sing's Leong speaks on the transition happening in the group and the relevance
of the 'iconic' developments
IT’S actually hard to believe that Tan Sri Leong Hoy Kum, group managing director and chief executive - as well as the man
that’s practically spearheading property developer Mah Sing Group Bhd - has
been doing it for over two decades.
At 58, Leong is showing no signs of
slowing down. He’s sharp as he is witty... But none of those traits are as
profound as his energy to want to keep steering the company to new heights.
“I’m not leaving or retiring any time
soon. I’m empowering more, and now is a good time. The market is slow and it’s
a good time to consolidate, transform and grow to the next level,” he tells StarBizWeek.
According to Leong, the company had
actually put in place strategies for its “next level of growth” since the
property market started slowing down last year.
‘Two years ago, we started a business
cycle improvement plan. So it’s ongoing and there are a few cycles.”
He adds that Mah Sing had also appointed
consultancy firm, Deloitte, to assist in improving the way the company is conducting
its business.
“We appointed them to better manage our
cost control, to reduce any red tape, improve our business process flows and
our delivery systems. This is so that when l the market picks up - hopefully
next year we’ll be better prepared.
I “We’ve also implemented more training ;
now - more than double what we used to provide.
Leong emphasises that he still feels “very
energetic” and he has a lot of plans for the company before he ever decides to
step down.
“We have a strategy that has been outlined
for the company over the next 20 years. I don’t think that is an unrealistic
strategy.
In the past, Japanese companies would
outline 100-year strategies. But today, with technology evolving so fast, it’s
hard to predict what can happen over the next century. Having a plan for 20
years - that’s quite realistic.
Leaving a legacy
Leong’s three children are already working
in the property developer under different roles. However his vision is for a
set of professional managers to run the company and his children to play a
strategic role as members of the board.
“My three children contribute to the
company, but they don’t have to be executive officers. They will sit on the
board one day and set the right direction for the chief executive officer to
run the business. I want a professional to run the company,” says Leong.
The plan, he says, is to have a team of
professional managers, headed by a CEO, just like how the company operates
right now.
“I’m training my children so that they
will be hands-on, and also so that one day when I hand over and they sit on the
board, the board will set the right direction.”
Mah Sing was incorporated in 1965 as a
plastics manufacturer before venturing into property development in 1994.
The group was listed on the second board
of Bursa Malaysia Bhd in October 1992 under manufacturing before it was
transferred to the main board under property in 2004.
The company’s early developments include
the Taman Desa Ulu Yam, Mah Sing Integrated Industrial Park in Bandar Pinggiran
Subang, and Sungai Petani Business Centre.
According to Leong, the company’s plastics
division is still making profits.
“We made a net profit of RMlSmil from the
plastics division. We have factories in Jakarta (Indonesia) and Port Klang,” he
says, adding however that the group’s emphasis will still be on its property
division.
For the moment, the main focus is on
managing and further improving Mah Sing’s cashflow, says Leong.
“We want to focus on improving our
cashflow. If you plan wrongly, you end up with no cashflow and it’s my top
priority. That’s why our gearing is very low. We have a war chest to buy more
land.”
Leong says the company is currently sitting
on a cash pile of RMl.lbil and has a net gearing of 0.09 times.
For its current financial year, the company
is targeting sales of RM2.3bil, nearly half of what it usually hits when the
property market is on an upturn.
“When the market turns, we will ramp it up
to between RM3bil and RM4bil. It’s pointless to force it (higher earnings) in a
downturn,” he says.
Leong says the company is ramping up
promotions for its properties and plans to have new launches on a monthly
basis.
Next month, the company will be launching
its Bandar Meridin East development in Iskandar Malaysia, Johor.
“All of our land is located in prime locations.
Our biggest plot of land, which totals 1,400 acres, namely Bandar Meridin East,
will be launched on Aug 6 and comprises residential, commercial and industrial
units,” says Leong.
Mah Sing currently has 46 development
projects under its belt with 35 already in various stages of development. It
currently has 2,522ha of existing land bank, which will keep the company busy
for the next eight years.
The company has 22 projects within the
Klang Valley; seven in Johor; four in
Penang and two in Sabah.
For its first quarter ended March 31,
2016, the group’s remaining gross development value and unbilled sales stands
at about RM32.26bil.
The company registered a 3.9% lower net
profit of RM95.04mil during the quarter, while revenue fell 9.5% to
RM709.17mil compared with a year ago.
According to MIDF Research in a report,
Mah Sing’s RM2.3bil sales target for this year represents a flatfish
year-on-year growth, and the research house has maintained a neutral call on
the company.
“As a result of the flatfish sales trend,
we believe that earnings growth momentum should slow down in 2016 and 2017. As
it is, we expect 2016 earnings growth to slow down to 4% from 11% expected in
2015.
“Having said that, we believe that Mah
Sing’s target is prudent considering the challenging outlook for the sector.”
UBS Securities Malaysia meanwhile has a
“buy call on the property developer, with a 12-month target price of RM1.75.
“Our price target is based on a 20% discount
to our sum-of-the-parts revalued net asset value. We value each project using
discounted cash flow basis, using a weighted average cost of capital of 8% and
a riskfree rate of 4%.
“We believe the main risk for Mah Sing is
if property demand falls. This could be caused by macroeconomic factors - interest
rates, policy, the external environment and economic growth,” it says.
UBS adds that the company also operates
in a highly competitive market in which many developers compete for customers
and land.
It however says that Mah Sing’s first quarter
results were in line with expectations, equivalent to 26%-25% of UBS’ and
consensus’ full-year estimates.
As part of the company’s aim to remain
relevant, Leong says Mah Sing had embarked on developing a number of
“architectural masterpieces” with one goal to
reshape the Kuala Lumpur skyline.
He says these projects, called the “Iconic
Series,” represent innovative developments known for their revolutionary
design and exceptional quality.
And his mission is for Mah Sing and he
himself be remembered for such architectures.
Mah Sing has four iconic developments.
They are the The Icon Tun Razak @ Jalan Tun Razak, followed by Icon Residence @
Mont Kiara, Icon City, Petaling Jaya and M City, Jalan Ampang.
Leong says the projects are part of his
personal mission to ‘leave behind a legacy. The designs of the projects were
inspired by structures and even landscapes during Leong’s travels to other
countries.
“With architects, you have to give them
ideas. You must know what you want. It’s like going to a doctor. You have to
tell them where it hurts, first.
“When I travel I personally try to spot
new designs and structures to be incorporated into the Iconic series,” says
Leong.
“Structures, or buildings, will always be
around. In the future, when people pass by the Iconoic developments, they will
know that it was done by Mah Sing and I was responsible for it.”
The company’s Icon Tun Razak, which has a
gross development value (GDV) of RM452mil, comprises grade-A offices that have
been folly taken up and occupied by a number of companies such as Astro,
Samsung and Huawei among others.
Its design theme is based on a dynamic,
seamless flow known as the “wave”, says Leong, adding that the project has
become one of the main landmarks in the centre of Kuala Lumpur with its unique
design and strategic location.
“Both the east wing and west wing of Icon
Tun Razak were sold in 2007 and 2008 respectively,” he says.
“It made history when the building
became Malaysia’s first en bloc sale of a
commercial property. Since 2007, seven other en bloc units have been sold,
setting the bar for Grade-A offices in the country.”
Mah Sing’s Icon Residence, Mont Kiara,
which has a GDV of RM389mil, meanwhile, takes its architectural inspiration
from the Mediterranean.
“I visited Greece on holiday and was
inspired by the Santorini layers,” says Leong.
Comprising luxury service apartments, 90%
of the 260 units have already been taken up, with rental yields averaging
between 4.5% and 5%.
Leong says the units are occupied by the
higher-end market comprising a mix of locals and expatriates.
“Expatriates see Icon Residence as an
investment especially for those that travel to Malaysia often.”
The company’s M City development, which
has a GDV of RM1.6bil, meanwhile comprises boutique retail shops, designer SoHo
and serviced apartments.
Leong says the project was conceived for
garden city living within its finely crafted architecture, with thematic hanging
gardens at various levels spanning over four acres.
He says the first two towers had already
been fully sold, while 92% of the third tower had already been taken-up.
Mah Sing’s fourth project under its Iconic
Series, Icon City, has a GDV of RM3.2bil. The project, says Leong, was inspired
by the chiselled characteristics of mountain rocks, particularly in Las Vegas.
“It features state-of-the-art infrastructure
and architecture; elements infused with landscaping in the form of forest and
water-themed plazas, sky pool and a roof garden,” he says.
Leong says a fifth addition to its prestigious
Iconic Series development is a possibility.
“It very much depends on a number of factors,
among them will be the architectural theme of the development, the location
and how we plan out the development.
“We will evaluate our options on adding to
our Iconic Series but currently we do not have any plans.”
Leong: Gradually I may
contribute in a different role
The corporate office of Mah Sing at Sungai
Besi belies the position of Mah Sing as a builder of Iconic projects in the
city.
However Tan Sri Leong Hoy Kum, the founder
and prime mover of property developer, is not ready to move out yet of his
six-storey mediocre building in Sungai Besi.
He foresees the property group staying at
the corporate office for the next five years as he charts the next phase of
development for Mah Sing. He has three children working with him in the group
but hopes to have in place of team of professional managers to under- ta*ke the
day-to-day management of the property developer in the future.
“That is how I want to position Mah Sing
in the future... the owners being separated from the management of the
company. It has to be that way of the company is to move forward,” he says in
an interview. Below are the excerpts:
When you say you want to leave a legacy,
it sounds like you want to call it a day and hand over the business?
No, I’m not. Yes, it’s true that one day,
ultimately, everyone has to go. But the buildings will always be there. I’m 58
- I’m still young. Gradually, I may contribute in a different role. But not
now. I still have a lot of plans and ideas to transform the group and take it
to another level.
When the market slows down, it’s a good
time to acquire more land and start to plan. In two years’ time, we may come up
with another Iconic development.
How did you first come up with the idea
for your Iconic Series developments?
In 2006, we felt that the market was about
to pick up. The timing was right to acquire the first land (for the Icon Tun
Razak) and convert it into an office space. There was demand for office spaces
then.
I’ve visited many great cities in the
world, Tokyo, New York, Singapore. I also received inspiration from buildings
in Dubai. I interviewed some of the good architects. I got the idea to develop
architectural masterpieces. We wanted it to be unique, with revolutionary
designs and exceptional quality - and we wanted and to reshape the KL skyline.
Each development has its own unique
identity.
How has your iconic series developments
impacted the market?
We have even taken initiatives to improve
the surroundings of our projects such as Icon City’s traffic dispersal system.
The first vehicular ramp of this system was completed in early 2016, will help
ease the traffic flow within the area. Upon the completion of the overall
traffic dispersal system with multiple interchanges, it is set to benefit the
700,000 people around the surrounding area.
Who is your target market for the Iconic
Series developments?
We are targeting investors, young
professionals and expatriates with our projects. With these Iconic Series
developments, we want to leave a legacy. It is also to further strengthen our
branding.
Now that the market has slowed down, what
are your plans?
We’re looking very far, for the next 20
years - what Mah Sing can achieve by then. We have to plan ahead. Development
takes 10 to 20 years. Five years is very fast.
This is what I learnt from Panasonic, when
I was running my manufacturing plant. The Japanese, they plan 100 years. Of
course, today, technology has advanced so fast, 100 years is not so realistic.
About 20 years is good enough. This is all part of our corporate strategy
planning. We want to make sure that Mah Sing can become a respectable, world class
developer.
There will be a lot of changes. Even our
facade here (at Wisma Mah Sing) has changed. We’ve done a lot of renovations
here. Before we move out in five years time, we’re already planning our new
tower. Environment is very important. It makes a person happy to come to work.
If you’re not happy, you can’t contribute. I received feedback from various
departments when we made changes to our office here.
You have children working with you. How do
they contribute?
They all contribute differently. They
don’t have to be CEOs. They , will sit on the board one day and set the right
direction for the CEO to run. I want a professional to run the company.
We will have a team of professional
managers headed by a (professional) CEO - just like how we have a professional
CEO now. I’m training my children, so that they will be hands on, so that one
day when I hand over and they sit on the board, the board will set the right
direction. '
I will pave the way for my children for
the CEO and the team to lead. You have to empower.
Do you see the market picking up next
year?
It’s about confidence. This year, the
market is still a bit cautious.
Next year, it should be improving.
Unemployment rate is still low.
Banks are also prepared to lend, provided
the buyer is eligible. So the products that you launch should be in line with
what the market wants. If you approach the right buyer with the right product,
you should still be able to grow.
Is that why you intend to have a joint
venture with the Government.
Yes. We’re talking to both the , federal
and state governments.
They are also looking for a good partner.
Nowadays it’s all about your reputation and your branding.
You have been through a lot since starting
business as a property developer back in 1994. I’m sure you were affected by
the 1998 Asian financial crisis?
It’s not easy. But one thing -1 never lost
money in my property development history. Over our 22-year history, even with
recession, we still made money, albeit lesser.
Is there anyone that you idolise?
I admire Li Ka-shing (Hong Kong business
magnate, investor, and philanthropist) and Jack Ma (founder and executive
chairman of Alibaba Group). But we can even learn from the Wanda Group (China’s
largest commercial property company). I learn from inspiring people like
them.
Adapted
from The Star / July 9, 2016 / StarBizWeek (Cover Feature)
No comments:
Post a Comment