CONSTRUCTION will lead the way as the future growth drivers of the restructured and revitalised Sunway Holdings Inc Bhd (SunInc) group.
“In line with our vision to become a leading construction conglomerate, we have harnessed our strengths in design-and-build capabilities with core competencies in cost efficiency and M&E (mechanical and electrical) capabilities,” SunInc managing director Yau Kok Seng said.
He said Sunway Construction Bhd (SunCon) was named “Builder of the Year” by the Construction Industry Development Board (CIDB) at the Malaysian Construction Industry Excellence Awards 2003.
The company specialises in high-rise commercial buildings, airport facilities, highway systems, residential homes and regional development programmes.
SunCon’s current projects include the KLCC Convention Centre (worth RM555mil), various projects in Putrajaya including the Entrepreneur Development Ministry and National Registration Department (RM519mil), SILK Highway (RM936mil) and four national highway projects in India.
“With its good track record in infrastructure and building works, SunCon is a highly competitive construction outfit. Most of the contracts were won through open tender,” Yau said.
SunCon has an outstanding order book of RM1.5bil and is bidding for RM8bil worth of new construction jobs in Malaysia.
Yau said infrastructure privatization still held tremendous potential in light of the government’s thrust to maintain the pace of infrastructure development to spur growth.
Under the 8th Malaysia Plan, the government has allocated RM160bil for development expenditure. A further RM50bil has been earmarked for spending, of which 40% to 50% were for infrastructure (excluding privatisation projects).
“We expect that with greater transparency, the number of government project tenders will increase and a greater number of companies will benefit.
“We will further build on the privatisation strategy and tender for these projects,” he said.
Yau said that to spearhead further growth, SunCon would also be venturing into infrastructure and building projects in Asean, China and India.
“In two years' time, we expect 20% of the company’s revenue to be from overseas projects, with margins expected to average 15%.
“This will contribute to SunCon’s earnings growth of 15% to 20% per annum,” he said.
To achieve a well-balanced earnings base for SunInc, he said contribution from the construction division was expected at 34%, building materials 33%, property development 18% and trading 12%.
Yau also foresees 33.3% owned Sunway Infrastructure Bhd (SIB) - the concessionaire of the Kajang Dispersal Ring Road (SILK) - to be a strong recurring earnings contributor.
The 36-year highway concession is expected to derive an investment rate of return (IRR) of 20% and contribute about 15% to group earnings from 2006.
“We will leverage our strength on the privatisation of other toll roads and are bidding for two to three other projects in the Klang Valley.
“We are hopeful of being awarded at least one or two more toll concessions and look forward to get into projects which offer an IRR of at least 12% to derive value for shareholders,” he said.
On property development, Yau said SunInc’s wholly-owned unit Sunwaymas Sdn Bhd currently had a landbank of 1,200 acres that would offer a gross development value of RM1.2bil over the next three to five years.
“In the last two to three years, our property division has performed well, with strong take-up rates of 87% for Sunway Mas Commercial Center in Petaling Jaya and 70% for the Batu Caves development,” he said.
Yau said Sunwaymas achieved sales of about RM169mil this year. He projected next year’s turnover and profit for the company to more than double this year’s level.
“The company’s future growth in property will come from new potential developments in Kuala Lumpur city centre, Shah Alam and Cyberjaya.
“Plans are afoot to launch 130 acres of mixed development in Shah Alam and 260 acres in Cyberjaya,” he added.
Given the SunInc group’s improved financial condition, Yau said: “We are now in a better position to secure new landbank. Our strategy remains focused on joint venture with landowners, to conserve cash flow. We are close to completing deals for land of between 50 and 100 acres in Selangor and Johor.”
According to Yau, the group’s building materials division has also benefited from the sectoral rebound in the property and construction sectors.
As one of the key players in the industry, its unit Sun-Block Sdn Bhd has a 40% market share in terms of sales of interlocking concrete pavers (ICP) and 95% of Eurotiles market.
“By next month, we will increase our capacity in ICP by 1.5 times through an acquisition.
“With an almost monopolistic position, we expect 2004 profits to increase significantly,” he said.
Yau said most of the ICP and Eurotile demand were for infrastructure works, especially ports and airports, as well as property development.
He said SunInc’s expertise in the quarry and asphalt businesses would also enable the group to quickly regain its market leadership in the industry when it venture back into the business by 2005.