This article first appeared in City & Country, The Edge Malaysia Weekly on November 11, 2019 - November 17, 2019

Sime Darby Property Bhd (SDP) has made a name for itself in developing large-scale townships. However, with the challenging times it is creating new revenue streams for itself by moving into developing industrial property, according to acting CEO Datuk Wan Hashimi Albakri. He says SDP hopes to move into the managed industrial park segment, most likely with developments in Nilai, Bandar Bukit Raja and City of Elmina in Selangor and in Johor. The group is also keeping a close eye on its cash flow to ensure it weathers the soft period.

Wan Hashimi points to various international situations — the US-China Trade War, the Hong Kong political situation, the UK’s Brexit and the numerous military skirmishes in the Middle East and India — that will have an impact on the global economy and, in turn, will affect Malaysia’s economy.

Nonetheless, Wan Hashimi and his team are putting into place strategies to deal with the market situation. The following is an excerpt from our interview with Wan Hashimi, who speaks about SDP’s performance, strategies and future plans.

City & Country: How has SDP performed for the financial year ended Dec 31, 2018 (FY2018)?

Datuk Wan Hashimi Albakri: We did very well. With regards to property development, there was a marked increase in performance. The revenue came from the flagship township developments such as City of Elmina and Bandar Bukit Raja. We also have Serenia City and, of course, Bandar University Pagoh in the southern region. We did better in FY2018 than we did in the previous year. We had some one-off disposals. We also did better in the property investment sector because we disposed of an asset in Singapore and some hospitality assets in Australia.

From June to December last year, operationally, we actually made a profit but because we had a lot of repayments and provisions, especially tax provisions and payments on some of our stocks, we registered a loss. But we have come back very strongly and in FY2019, as at June, we have done much better than the previous three financial years. So I am very happy about our performance and results.

And I would like to say that this is all down to the strong team effort from everyone from operations, sales and support services. We anticipate that FY2019 will be a good year for SDP.

Since SDP’s listing in 2017, what have been some of the biggest challenges the company has had to deal with? And how did you handle them?

Since Sime Darby Bhd’s demerger in 2017, [when SDP became a listed entity], it has been better because we became more focused and agile. But there were challenges in the way we operate. We had to look at how to improve processes so we would be more efficient, nimble and execute plans more quickly. These are some of the challenges we are tackling right now, which is to improve SDP’s business practices so we are prepared to take on future challenges.

It is important for us to look at new business models. We need to change, we need to innovate and transform because the future of the real estate industry is not going to be what we see today. I think we have to make sure that we are well stocked and prepared for the challenges in a volatile, uncertain and competitive new environment.

Of course, what is happening in the world today is not encouraging. With the global economic situation and the uncertainty about possible warfare, the US-China trade war and Brexit are not helping. These are going to be economic battlefronts that will affect the whole world. I personally believe that the recession is already hitting globally and it is just a matter of time before we all feel the effects.

What strategies do you have in place to weather the global and local storms?

We are building up recurring income strategies and streams that will hold us steady in the challenging times ahead. At least, whatever recurring income we make will cover our overheads and operational expenses.

We will be moving into a sector that we believe will hold steady even during a recession — the consumer e-commerce logistics market — so we are looking at logistics and warehousing. SDP is blessed because our land bank is strategically located either near a port or an airport. From an e-commerce or logistics perspective, we are well placed to provide the fulfilment centres for last-mile delivery.

We have a joint venture with Mitsui & Co Ltd and Mitsubishi Estate Co Ltd in Bandar Bukit Raja, which is for about 39 acres of industrial land. There are 10 plots and we have secured tenants for eight. So that is going very well.

Property development is the company’s main contributor. What plans do you have to ensure that this performance is sustainable?

We are not like other developers as we develop economic corridors. We do not look at a township as a township, we do not look at a phase as a residential neighbourhood. We look at the whole ecosystem. So, when Sime Darby Property embarks on something, it is big. We actually look at the quadruple helix, which means the fourth element is the customer, the people. We bring them into the planning process as well. We started this through our co-creation online platform called dto [pronounced ditto]. We do not design and produce products that we think the customer wants. Instead, we go out there, we build a platform and customers come back and tell us what sort of products they want and how they want it — right down to the colour — and then we produce it for them. That is what we mean by getting our customers involved.

Going forward, that is how SDP is going to approach the business. We will listen to the customer and all stakeholders; we will work very closely with the federal government, the state governments and with the local authorities. It is a three-pronged approach and we engage with all of them. We believe we will play a major role in the nation’s economy. So the government can actually look upon us as an economic partner because we have a huge land bank, we have the resources, we have the expertise and we have done it before. It is not like we are novices. We believe that as long there is Malaysia, there will be SDP.

What is the company’s strategy in dealing with the soft market in the meantime?

Everybody has to hunker down and consolidate, and watch the costs. Do not spend frivolously. Be more austere, especially with the fear of a recession coming, so it is best to conserve cash. Cash is king, to ride [the soft market].

As far as SDP is concerned, management is watching the cash flow very closely. We are also watching our gearing, although we do have a threshold. And we have got some funding and strategies in place to make sure that we are okay cash-wise.

What is SDP doing in the area of affordable housing?

We have our “affordable collection” priced at RM300,000 to RM500,000. In Bandar Bukit Raja, we have been rolling out homes priced below RM500,000 and they have been selling like hotcakes. We have products that will be in the market on an annual basis. Next year, there will be few more products below RM500,000.

Any new land acquisitions or joint ventures in the future?

If we talk about land acquisition it will be through the option agreements we have with Sime Darby Plantation and Sime Darby Bhd. We have option agreements for over 20,000 acres with both parties that will be exercised within the next three-plus-two years. We are targeting a huge tract that we believe is the next growth corridor. We have sort of already secured that area, which we will reveal in due course. Right now, we are focusing on part of that option in Sungai Kapar in Bandar Bukit Raja, which is about 1,000 acres. We believe that area is primed for industrial development.

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