CEO OUTLOOK 2007
SP SETIA, already enjoying good salesof its medium- to high-end homes,sees potential for further take-up ofits homes priced between RM700,000and RM2mil.
Group managing director and CEO TanSri Liew Kee Sin proposed that apartfrom liberalisation of ForeignInvestment Committee rules, theGovernment should look into easing ofother rules to spur brisk sales ofMalaysian properties to foreigners.
In the auto and cigarette consumersegment, Naza group’s Tan Sri SMNasimuddin SM Amin and BritishAmerican Tobacco’s Bart Alkemade areputting their resources and efforts tofight slowing industry sales.
Nasimuddin credits his group’s abilityto buck the trend through itsdedication and passion for the carbusiness. Alkemade continues thebattle to maintain market share brandbuildinginitiatives.
Tan Sri Liew Kee Sin
Group managing director/Chief executive officer
HOW would the easing of Foreign Investment Committee (FIC) rules benefit your company? Are there other rules standing in the way?
We greatly welcome the Government’s move to lift the FIC ruling on foreigners’ purchase of properties in our country. This sends a positive signal that the Government is ready to hasten the opening of our property market to further encourage foreign investments. For SP Setia, the removal of restrictions will definitely increase foreign interest across the whole spectrum of our housing products.
We believe the biggest beneficiaries will be our high-end Duta range, priced from RM2.2mil and our mid high-end Eco Park range, priced between RM700,000 and RM1.5mil. Even before the relaxation, we had been actively marketing our Duta and Eco Park products to foreigners via participation in overseas exhibitions, which have seen encouraging interest. Moreover, our more affordable Setia range costing between RM150,000 and RM600,000 will also probably see more foreign interest, especially among Singaporeans in our Johor projects. Penang has always been a choice property investment and migration destination among foreigners.
Hence, we are confident that our first project there, Setia Pearl Island, will greatly appeal to them. This project features landed properties priced from RM600,000 onwards. To further complement the easing of the FIC rules, the Government should consider revising downward the real property gain tax rates for foreigners. State-level approvals for certain states can also be further relaxed.
How is the market rally benefiting your company and do you see increased foreign fund support for your stock?
Investors have always seen SP Setia as a fundamentally strong proxy to the Malaysian residential sector. Renewed interest in the Malaysian stock market coupled with improved prospects for the property sector have therefore strengthened demand for our shares considerably. Notwithstanding the current market rally, we have always shared a strong and sustained relationship with both local and foreign institutional funds. Hence, our foreign shareholdings have held steady even when times were not so good. We are pleased with investors’ confidence in our company, but this also means we must continually work hard to deliver on market expectations.
What are the factors for success in the medium- to high-end sector?
From our experience, the ingredients for success in the medium to high-end sector are not significantly different from those for any other properties. In today’s increasingly crowded and competitive market, criteria such as good location, concept, quality products and delivery track record are common expectations of all house buyers.
Nevertheless, we have observed that consumers in the medium- to high-end market have much higher expectations. This group of select consumers demand only the best that money can buy. Novel concepts and themes, luxurious masterpieces that are in tune with their lifestyle, top-notch service, security and promising investment returns are paramount for up-market purchasers. We are thankful that our high-end Duta Nusantara and Duta Tropika projects are runaway successes, and are currently fetching good prices in the secondary and rental markets. Our mid-high-end Setia Eco Park project, targeted at the upgrader market also did tremendously well, due in no small part, to its unique eco-theme.
This sprawling enclave features exclusive semi-detached houses and bungalows set amid a lush ecologically-balanced environment. Creative features such as a Paddy Terrace, Wind Chime Walk, Rainbow Creek and Aroma Canopy were woven into the landscape, welcoming residents home to their private eco sanctuary every day. Reflecting the market’s recognition of our efforts, Duta Nusantara was voted the Best Low-Rise Residential Development, while Setia Eco Park was voted the Best Master Plan Development in Federation of Real Estate (FIABCI) Malaysia Property Award 2006. Having these world-class awards have enhanced the profile of our high-end projects among the international community and will complement our marketing efforts targeted at foreigners.
With Bali, Thailand and other regional spots vying for foreign buying of properties, what must Malaysia do to further increase its attractiveness?
The Government’s plan to woo foreigners to invest in Malaysian properties under the Malaysia, My Second Home (MM2H) programme is a good initiative. Nevertheless, the programme has not really yielded the desired results due to a variety of reasons. As a country, we have a lot to offer foreign investors as well as retirees. We have one of the most affordable living standards in the region, stable politics and comprehensive infrastructure.
The authorities would do well to step up efforts to publicise what Malaysia has to offer. Given the generous allocations that have been made for tourism, we should take full advantage of the Visit Malaysia Year theme next year to “sell” Malaysia as a truly international destination for tourists and investors. Apart from that, ensuring a hassle-free application and approval process and making sure that it is both easy and convenient for foreigners to set up home, bring their families and personal belongings here with minimum fuss or red-tape would also enhance the attractiveness of Malaysia to foreign property investors.
Looking forward to 2007, what are some of the major programmes coming up at SP Setia?
We are upbeat about our prospects in 2007, based on the robust GDP projection of 6%. Additionally, the stable interest rate environment and stock market run-up will drive wealth creation and increase spending power. This will in turn create feel-good sentiments and encourage purchases of big-ticket items such as properties. We are well placed to capitalise on the projected upswing in demand for landed residential properties, given our strong presence in three major growth centres – Klang Valley, Johor Baru and Penang.
Our diverse range of strategically located properties, from the affordable to the mid- and high-end segments, will enable us to capture a sizeable share of the market demand.
Apart from our ongoing Setia Alam and Setia Eco Park projects in Klang, we plan to launch Setiahills in Ampang featuring 45 spavillas priced from RM2.2mil. We are also looking forward to making our presence felt in Penang with the imminent launch of our first project, Setia Pearl Island, which looks set to be a hit based on our registration drive.
To date, we have 4,200 registrants vying for 291 terrace homes slated for the first launch some time in early 2007. This enthusiastic market interest can be attributed to the traditionally strong demand for landed properties in land-scarce Penang.
In the second part of 2007, we also aim to launch Setia Vista, our second project in Penang. In Johor Baru, we are also confident that our three current projects, Setia Tropika, Bukit Indah and Setia Indah, will continue to benefit from the increased demand and spill-over benefits generated by development plans for the Wilayah Pembangunan Iskandar and integrated resorts in Singapore.
Tan Sri SM Nasimuddin SM Amin
Group managing director
Naza group of companies
WHAT has been your most outstanding achievement this year?
I believe the most outstanding achievement for this year has been our ability to deliver strong results in a year, which has been rather challenging for the automotive market. We have been able to buck the trend in Malaysia and continue to grow positively as a company. That is the result of our dedication, desire and passion for the car business.
We have also launched several new models, including the Naza Bestari 206, Naza Suria and Naza Sutera this year.
In addition, we also have launched our new concept showroom in Kampung Pandan. This has re-defined the way we engage in the market and bring new products to Malaysia.
When you started your company, what was your vision? Has it changed now?
The vision has not changed since our inception. However, it has grown, evolved and developed over the years to become a bigger vision of what we originally set out to do. We wanted to deliver quality and innovative products to the Malaysian consumer with a very strong customer centric service. At the time of our founding, we were importing premium marques and supporting them with superior after-sales care.
Today, we have not only introduced innovative Malaysian-made products in the compact car segment but also our Malaysia-assembled sport utility vehicle (SUV), the Naza Sorento. It was recently recognised as the Car of the Year in the mid-sized SUV segment at an industry event. Furthermore, our new concept showroom in Kampung Pandan and service centres in Juru, Penang and across Kuala Lumpur, focus more on the customer experience than mere service.
What do you find most challenging in current times?
The biggest challenge we face as a company is continuing our strong growth in Malaysia and the region. We have out-performed industry expectations and, today, to continue that growth in a manner that is profitable to all our stakeholders, including our partners and employees, is the key.
I am very confident that we will find solutions and growth areas to support our expansion into new markets and segments. We recognise that the global economic climate and the Malaysian automotive market have provided a major challenge, but the biggest challenge is the rapid maturation of the Malaysian consumer market. That means that demands made are increasingly sophisticated and challenging.
Do you find any obstacles in your way?
There were and will continue to be many obstacles in our way. However, working together to address the challenges and problems would be the way to overcome them.
For example, when the National Automotive Policy was introduced, the market suffered with repercussions on price and import of automobiles into Malaysia. By working together to develop solutions and new Naza products, we were able to ride the way to secure some stability for our business.
HOW has the consumer market been in 2006?
The rising inflationary pressures and interest rates, higher oil prices and tariff hike on electricity in 2006 have elevated the cost of living, which has had a dampening effect on general private consumption. Specifically for the tobacco industry, with the consecutive tax-led price increases of legal cigarettes, many consumers have down-traded to cheaper illegal cigarettes and the exceptionally low priced cigarettes.
What are the challenges your company faces in getting more sales?
The legitimate tobacco industry has been and still is under a lot of pressure as industry volume continues to decline year on year. With cigarette tax-led price increases of legitimate cigarettes driving consumer down-trading, the illegal cigarette segment had escalated to an unprecedented high of 21.5% as at March 2006. In addition, a new segment in the form of the exceptionally low priced cigarettes has emerged and is rapidly filling the market space.
Illegal tobacco trade not only hurts our industry sales and volumes, but also deprives the Government of taxation revenue, promotes criminality, harms legitimate brands, reduces the demand for Malaysian grown tobacco and misleads consumers into buying tobacco products of dubious quality.
We are encouraged by efforts of the enforcement authorities, particularly the Royal Malaysian Customs, in the fight against the trade in illegal cigarettes, which had successfully brought down the market share for illegal cigarettes from 21.5% in March to 19.1% in June 2006, according to a recent survey commissioned by the Confederation of the Malaysian Tobacco Manufacturers (CMTM).
Nevertheless, the numbers are still high, especially with the influx of new illegal brands coming into the market. BAT Malaysia remains firmly committed to collaborating with the Government and authorities on measures to counter this problem.
Which market segment is your priority? Are you going for new segments?
BAT Malaysia will continue to put our resources behind building the brand equity of our global drive brands Dunhill in the premium segment and Pall Mall in the Value-For-Money (VFM) segment. In 2006, we launched Dunhill D360, an addition to the House of Dunhill, solidifying our footing in the super premium segment. In 2007, Dunhill, the leading premium brand in the country, will be celebrating its 100th anniversary globally – a true testament to the brand’s strength. We are pleased to note that in Malaysia, Dunhill was able to retain a strong share of the market in 2006, despite high incidences of illicit tobacco trade and consumer down-trading.
On the same note, we will continue to sustain and strengthen the performance of Pall Mall, our VFM brand. In just two years since its launch, Pall Mall is quickly gaining traction in the marketplace, and is now one of the dominant players in the VFM segment.
What are the consumer trends nowadays? What do people look for and why?
The growing inflationary pressure driven by increasing oil prices and electricity tariffs has impacted consumer confidence and trends. For the tobacco industry, the recent change in consumer trend is evident. Tax-led cigarette price increases have compelled some consumers to opt for cheaper alternatives like illegal cigarettes or cigarettes from the exceptionally low-priced segment.
Moving forward, BAT will continue to battle to maintain market share with brand-building initiatives, step up implementation of innovative productivity and efficiency enhancement programmes.