Changing for the better

This article first appeared in City & Country, The Edge Malaysia Weekly, on June 5, 2017 - June 11, 2017.

Wisma Mah Sing, also known as [email protected], with its new look

The newly renovated meeting rooms and work space on Level 2

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I am not afraid of change,” declares Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum, which does not come as a surprise as the company has been reorganising to future-proof itself.

“We understood back in 2014 that there was a need for Mah Sing to transform. That is why we started with our process improvement to ensure the systems were in place,” he says. “We appointed Deloitte as our adviser, and in the meantime, our [organisation] underwent a cultural transformation. We also announced a new logo and a new tagline: Reinvent Space, Enhance Life. And we needed to improve our workplace.”

As a result, Wisma Mah Sing, which will also be known as [email protected], has had a facelift with its exterior clad in silver-grey panels for a modern look. Mah Sing is also renovating the internal spaces, and though only Level 2 is ready for viewing at present, its colourful meeting rooms exude a palpable vibrancy.

“By this month, every floor [of Wisma Mah Sing] would have been renovated,” Leong says, adding that the transformation is necessary because the majority of the company’s employees are below the age of 40. Evidently, embracing new ideas and using technology to make the work space more conducive to doing work are important to the future of the company.

Amid this hectic activity, Mah Sing is busy planning six new launches this year and acquiring new land bank. It is also looking at building affordable housing over the next two years.

“We still need another two to three years to get back to the days when we launched mid-high and high-end products. Until then, we will focus on affordable housing,” says Leong. “I am thinking less than RM500,000 for apartments and between RM500,000 and RM1 million for landed properties. We will target the mass market and plan future acquisitions.

“We are in the final stages of acquiring land in Greater KL and the Klang Valley, with a gross development value ranging from RM500 million to RM5 billion. Some of the parcels are small while the rest are midsize or large.”

Though Leong could not reveal the exact size and location of the land because negotiations are still underway, Mah Sing’s latest acquisitions made the headlines recently. A 3.56-acre freehold parcel that was bought in Titiwangsa for RM60 million fronts the Titiwangsa Lake Gardens along Jalan Beserah, off Jalan Tun Razak. The plan is to build a RM650 million condominium offering units with built-ups of 850 sq ft and indicative prices of RM485,000 onwards. At the time of writing, a competing claim on the ownership of the land had yet to be settled.

Next to be acquired was an 8.5-acre freehold parcel in Sentul that will feature a condominium block called M Centura with an estimated GDV of RM1.3 billion. The 650 sq ft residential suites in the project have an indicative pricing of RM326,000.

Leong says information on the other parcels will be revealed next month. “Strategic locations with good connectivity and accessibility are among the features we consider before we purchase new land as we want to create developments that will benefit our buyers.”

He adds that now is the right time for Mah Sing to lock in land in Malaysia for future development, with a focus on the Klang Valley and Greater KL.

The group has undeveloped land bank of 2,255 acres with a combined GDV and unbilled sales of RM31.5 billion as at May 31, 2017. This will sustain it for at least eight years. Moreover, says Leong, the group had a strong balance sheet with low net gearing of 0.02 times and RM837.6 million cash.

This year being Mah Sing’s 23rd anniversary, the developer has launched a “RM23 million Celebration Rewards” campaign with RM23 million worth of giveaways for customers until end-June.

“Instead of organising lavish events, we are giving the money directly back to our customers with luxury cars like Mercedes-Benz and BMW, Signature Kitchen vouchers and complimentary furnishing packages. The rewards also come in the form of deferred payments, lucky dips, cash back, complimentary service charges, GST subsidy, foreign levy absorption, guaranteed rental return, rental subsidy, free stamp duty on the memorandum of transfer and more. At the end of the day, we want our customers to be able to afford a home,” explains Leong.

 

Opportunities for the taking

The local property market seems to have stabilised because developers have been launching new projects in recent months. Mah Sing itself has six on its plate.

In its Rawang township, which has yet to be named, Mah Sing will launch 565 two-storey linked houses with built-ups of 1,680 sq ft onwards. Their indicative pricing starts at RM550,000 and they are scheduled to be unveiled in 3Q2017.

The third quarter will also see the launch of OLO Residence tower at  integrated development D’sara Sentral in Sungai Buloh, featuring 197 serviced apartments with built-ups of 782 sq ft and indicative pricing of RM624,000 onwards. The estimated GDV of the project is RM186.9 million.

In Johor, two types of 2-storey linked houses will be offered for sale in Meridin East, Pasir Gudang, on July 8. Some 90 units of one type will sit on 13.4 acres and have built-ups of 2,333 sq ft and indicative pricing of RM535,500 onwards. The second type, comprising 394 units, will sit on 30.7 acres and have built-ups of 1,622 sq ft and an indicative pricing of RM403,750 onwards. The combined GDV of the two projects is RM251 million.

Also in Johor, Caspian @ Meridin Bayvue will be launched at end-July and feature 294 serviced apartments with built-ups of 980 sq ft and indicative pricing of RM450,000 onwards. The new tower’s estimated GDV is RM341 million.

At its Southbay City development in Penang, the company will launch M Horizon, a tower with 237 serviced apartments with built-ups of 538 to 1,201 sq ft and indicative pricing of RM330,000 onwards, this September. This project has an estimated GDV of RM140 million.

Most developers launch one project at a time but why is Mah Sing launching six in such a short span of time?

“Current market sentiments may be cautious but there are still opportunities for us to launch this year. There is a shortfall of 2.5 million in the supply of homes as there is a mismatch between the growth in supply and the number of households, according to the 2015 Bank Negara Malaysia report,” says Leong.

“The demand-supply gap is quite wide as only 80,000 new homes are coming into the market each year compared with more than 166,000 new marriages registered annually. Malaysia also has a very young population, with 31% of it being between 20 and 39 years of age. This is also the age group that is actively seeking homes. In fact, 70% of our buyers are below the age of 40 and are eligible for loans.”

A key issue in the construction of new homes is the cost of building materials. This is something Leong has considered carefully to ensure costs do not escalate. “We are fully aware of the impact of cost on the company. We are cautious in our cost management, which includes labour, commodities and other construction areas.”

On labour matters, Leong stresses that Mah Sing only works with reputable contractors and teams that have gone through a pre-qualification process. In other words, they must be financially stable, have acquired Conquas accreditation of a minimum of 75 points and be registered with relevant government bodies like the Construction Industry Development Board (CIDB).

“The prices of most of the commodity items involved in construction, such as steel, diesel and cement, are semi-controlled by the government. Hence, we don’t have much say on pricing. What we do is work with our contractors on a fixed price for these items for the duration of construction. Thus, any changes in the market will not immediately affect us.

“However, we can see that with China slowing down, the demand for commodities like steel has dropped. Prices have stabilised or are even on a downward trend. So, cost is still manageable.”

Moreover, Leong is guiding Mah Sing towards embracing Building Information Modelling (BIM) and prefabrication technologies. “We are moving towards BIM to make our planning crystal-clear in terms of cost control,” he says. As for prefab technology, he says some forms of prefab are used in some of the company’s developments, such as the aluminium thrust for 2-storey linked houses in its Greenway and Eden projects in Meridin East.

“As new advancements continue to be made, Mah Sing will explore them and we will look to develop homes with more efficiency and at a lower cost.”

Leong, who ran a successful plastic manufacturing business, which continues to be profitable, before he became a property developer, understands processes and is using his experience to push them in his property division. “We do a lot of value engineering to deliver a comfortable home without compromising on the quality of the materials.”

 

Market outlook

When it comes to the outlook for the property market, Leong is optimistic and believes the worst is over, citing positive GDP numbers. Bank Negara recently revealed that GDP in the first quarter of the year grew 5.6%.

Moreover, he believes the current cautious market sentiment is temporary. “The mid and long-term prospects are healthy and positive because of strong fundamentals such as a young population, stable employment, healthy GDP growth and the continued development of public transport infrastructure. We are hoping to see a pickup in momentum in the second half of the year that will continue into 2018.

“The group is in a good position to address the shortage in affordable homes catering for the middle-income group with its diversified range of properties. Demand will continue to be strong among owner-occupiers and those buying for investment.”

Leong believes Mah Sing will eventually evolve into a holistic property developer. “Mah Sing is considering moving into education, healthcare and aged care as other business options. This is the future of property development,” he concludes.