Besides rising costs, the challenge for local developers is to compete with new entrants who are likely to have considerable resources and experience, says Bandar Raya Developments CEO Datuk Jagan Sabapathy. Wah Seong is embarking on its global vision after achieving its aim to become an Asian oil and gas service provider by 2007, according to its managing director and group CEO Chan Cheu Leong. Minority Shareholders Watchdog Group CEO Abdul Wahab Sidek reminds corporate Malaysia that it has to send out the right signals and promote investor confidence to maintain high standards and professional integrity
DATUK JAGAN SABAPATHY
Bandar Raya Developments Bhd
Your outlook for the property market next year?
The outlook for the property market, specifically at the high-end, is bullish, and this can be attributed to the recent easing of rules by the Government on foreigners owning residential properties.
The abolishment of real property gains tax, active promotion of Malaysia My Second Home (MM2H) programme, attractive valuations and rental yields viz-a-viz our regional peers have led to strong interest from foreign buyers.
The prospect of a stronger ringgit that may lead to an asset reflation benefits prime residential and commercial properties. The multiplier effect from the implementation of Ninth Malaysia Plan projects, especially for the Johor and Penang property markets, also bodes well for industry players next year.
Strong gross domestic product growth, coupled with an expected increase in liquidity due to lower interest rates and stock market wealth, will positively impact purchasing power of domestic consumers.
What are some of the opportunities and challenges for industry players going forward?
Some of the key opportunities and challenges will surface from the relentless pace of globalisation. Private FDI is now predicted to expand by 10.5% next year. These factors are driving investor confidence.
International developer interest in the city is intensifying with many desirable and attractive residential and commercial projects coming up. The challenge would be for local developers who will now have to compete with these new entrants who are likely to have considerable financial, technical and marketing resources, expertise and experience.
Conversely, globalisation and the robust regional property markets also offer great opportunities for innovative developers to compete in the international arena.
Expanding their presence in the global market will spur greater earnings growth for developers and give them an opportunity to break out of their comfort zone and in the process, shore up their credibility as international property players.
BRDB has already embarked on a highly successful integrated development project in Lahore, Pakistan and is currently evaluating opportunities in the emerging economies of the Indian sub-continent, the Middle East and South-East Asia.
Which property sector and development types offer the best potential for your company?
As a market leader and one of the top developers in Malaysia, we continue not only to strive for quality to meet the increasing expectations of our purchasers, but also to invent iconic and innovative development concepts. At BRDB, we strive to create developments that are the first of their kind in the market, which differentiates us increasingly ahead of our competitors.
Again, with globalisation and the introduction of the MM2H programme, we are taking advantage of opportunities to market BRDB to foreign buyers (with about half the purchasers of our signature project, The Troika, being foreigners).
We now have a very strong footing in the high-end local residential sector, but we are also diversifying our developments into other sectors, ranging from premium offices to retail malls, as well as growing our recurring income business via leasing and asset management.
What are the challenges and prevailing issues being faced by the industry and what is the possible impact on your company?
The rising cost of oil, steel and labour will impact costs. Additionally, with so much choice available in the market, buyers are increasingly demanding the very best in product offering, quality and service standards. These will lead to rising cost of delivery, which will inevitably be passed on to the consumer.
The possible impact on BRDB:
·We have built a strong brand over the past 43 years. In that time, BRDB has demonstrated resilience and creativity in delivering quality living to our customers. We will continue to translate these innovative ideas into quality homes to stay ahead of the competition.
·This is where we need to be aware of the increasingly sophisticated demands of our purchasers. BRDB has always been committed to enhancing the quality of life of our homeowners. Careful thought and planning goes into ensuring all needs and comforts are readily available for the discerning purchaser.
What are some of the interesting property launches that can be expected from your company in coming months?
We will be launching three new developments in the Klang Valley in 2008:
CapSquare Residences II – An integrated commercial, retail and residential enclave, the second 32-storey tower features 176 units of Manhattan inspired condominiums and is expected to be launched in the second quarter of 2008.
Bangsar – This luxurious condominium development in Bukit Bandaraya is divided into eight blocks of low- and high-rise residences featuring open private lobbies with outstanding views of KL and Damansara.
Taman Duta – These condominium residences embrace a natural valley in the middle of a tropical forest. Surrounded by breathtaking views of the Kuala Lumpur City Centre and the lush greenery of Kenny Hills, this low-density development marries the beauty of the natural landscape with the luxuries of modern living.
We will also be rejuvenating our presence in Permas Jaya, Johor with a series of launches aimed at introducing an exclusive lifestyle living concept to this integrated township.
What is your expectation on project take-up rate, sales revenue and earnings for the company next year?
We expect the high-end and niche market to continue flourishing as the demand-supply situation is more favourable. BRDB has a very strong brand and unblemished track record in delivering quality homes to satisfied purchasers.
Our enthusiasm results from the fact that our launches next year are in very much sought after locations.
Based on our previous experience and current high demand for such properties, we anticipate a good take-up rate.
With the favourable market conditions, maturing projects and new launches, BRDB expects strong earnings growth next year.
CHAN CHEU LEONG
Managing director and group CEO
Will there be more mergers and acquisitions in your industry and company?
The oil and gas (O&G) industry is a global business and requires critical mass.
It also requires substantial technological investment as well as talent in order to sustain competitive growth within the industry.
For Wah Seong Corp (WSC), we believe, mergers and acquisitions (M&As) is one of the many ways to help achieve this.
In 2002, when WSC was a medium-sized enterprise, our aim then was to become an Asian O&G service provider by 2007, which has been achieved ahead of schedule.
We are now embarking on a grand vision, which is to become a global O&G/energy group by 2012.
Going forward, we plan to geographically expand our core operations as well as to further strengthen our technological and operational capabilities.
We are constantly looking out for M&A opportunities with companies that can complement and add value to our existing businesses.
However, we have been focusing on integrating all our acquisitions made so far to enhance shareholder value.
How will these M&As help develop the sector and your company?
As mentioned before, M&A is one of the factors that can help develop the company.
However, one of the many challenges faced by the industry is the shortage of human capital.
Nevertheless, these challenges can be avoided through the creation of critical mass by widening operations through globalisation of the business. This will then attract and retain new talent.
Will you also be investing in property as part of your infrastructure?
Our plans are to solely focus on being an O&G service provider.
Therefore, our main focal point would be to invest in branding and technology and strengthening our distribution capabilities.
Human capital is our asset.
Our prime investment would be on intellectual property and not physical assets. We would indeed focus on building intangible assets.
How can you ensure long-term profitability when you embark on this major trail of O&G business?
Sustainability and profitability are crucial to the survival of any business.
In that sense, our strategy to this effect is to invest and focus on matters that we believe are absolutely critical to our business, such as systems that would continuously and unfailingly provide products and services that are of high quality and which adhere to internationally recognised standards of health and safety and the protection and preservation of the environment.
How will you ensure that a win-win situation, especially for Malaysia, prevails at the end of day?
WSC is lucky enough to be able to play an important role in nation building and contribute to the growth of Malaysia by way of its direct exposure to the global O&G industry.
A major part of our businesses and operations are today situated in regions around the world.
Furthermore, our market leader position, especially in the pipe coating business, has enabled us to attract good and experienced international talent to join our team.
These international talents would in turn be able to train and share their expertise and knowledge with our local personnel, thereby effectively raising the bar and closing the gap in terms of creating a new pool of high quality local experts in the O&G industry.
In as much as we as a country should further liberalise and attract foreign talent to work in Malaysia, we should also seek ways to retain our local talent to help develop Malaysia’s management capability.
Why is the O&G sector so important to drive the economy?
The O&G sector is a key driver in many economies of the world.
Energy is a basic commodity. Demand for O&G will continue to remain strong although the price of oil is expected to remain high going forward.
Alternatively, natural gas is known to be a cheaper option in comparison to crude oil.
Malaysia, and Asia in general, have substantial gas reserves, which give us a lot of potential for growth and opportunities, particularly in that sector.
ABDUL WAHAB JAAFAR SIDEK
Minority Shareholder Watchdog Group (MSWG)
Last year was a year of increased awareness of accounting standards and professional integrity for corporate Malaysia. In your view, what will the trend be, moving forward?
Going forward, the trend will be enhanced regulatory surveillance and enforcement, given that the regulators have an important mandate beyond the Capital Market Masterplan and the Financial Sector Masterplan, and vigorous in progress of the Company Law Reform.
We are of the view that a well-functioning corporate Malaysia must be seen to be effective as well as efficient and, as such, the corporate sector needs to measure up and hold its head high to best practices.
To maintain high accounting standards and professional integrity, corporate Malaysia has to send out the right signals (or messages) to deter wrongdoers and, at the same time, promote investor confidence.
Of late, our regulators have done better on enforcement issues relating to transparency and accountability.
Furthermore, we have one of the best regulatory frameworks in the world that will facilitate us successfully going after wrongdoers more than ever.
The trend, I foresee, will be to possibly look at disqualifying directors, whom we feel, are not fit and proper, or have not discharged their duties appropriately towards shareholders and other stakeholders.
The trend will be to raise greater awareness of directors and management against civil and criminal liabilities. They need to conduct themselves well, not to misbehave by abusing their positions, especially misappropriating company funds or assets.
What are some of the improvements already in place and how should these put the corporate sector in a stronger position?
The revised Malaysian Code on Corporate Governance, new Guidelines on Due Diligence Conduct, whistle-blowing provisions under the Companies Act 1965, the Capital Market and Services Act 2007 in force and the setting up of the Public Companies Accounting Oversight Board reflect the continuing enhancement of the regulatory framework for more effective surveillance and swift enforcement.
All these moves are strategic to reinforce corporate conduct that company directors make informed and reasoned decisions, acting with due diligence and in good faith to pursue business proposals that they believe, will add to shareholder value.
At the same time, they should comply with financial reporting requirements in promoting not only the interests of the company but also of shareholders and stakeholders.
What should companies do to further enhance corporate responsibility and transparency?
Public-listed companies (PLCs) should annually review their internal controls and social responsibility with greater efficacy to enhance corporate Malaysia’s image as a financial hub of choice for the capital market as well as the Islamic capital market.
PLCs have to be more open and transparent in providing more disclosure and details about their reviews of internal control system, corporate governance and risk management.
Bursa Securities Listing Requirements has stressed that PLCs must report on their reviews annually.
The revised code mandates that directors review annually the effectiveness of their companies' internal controls for financial reporting, compliance issues and operational matters as well as risk management functions and a truthful report of corporate governance statement to shareholders.
What are some of the practices companies in Malaysia have already put in place that will benchmark them among the best in the world?
Corporate governance has undoubtedly improved among Malaysian PLCs, as reflected in the findings of the MSWG-NUBS Corporate Governance Survey launched on Nov 20 covering the top 350 main board PLCs.
The next step is to instil high standards of corporate conduct and ethical behaviour of directors, market players and participants. Accountability is crucial for the efficiency of the capital market.
If accountability works like it should, then best practices would underpin ethics in financial reporting, internal audit as an important board’s support function, true independence of auditors, effectiveness of audit committees and effectiveness of non-executive directors, including independent directors, enhanced disclosures in annual reports and financial statements, particularly voluntary disclosures, and improving investor relations and/or shareholder dialogues in governing corporate affairs.
PLCs need to understand that adopting internationally-benchmarked corporate governance best practices is the only way to benchmark them among the best in the world.
Is MSWG planning any events or additional measures to boost monitoring of companies?
For continuing credibility and sustainability, MSWG has an enhanced programme of activities, events and seminars for shareholders and investing public that will help develop their thinking and approaches to raise shareholder activism to the next level.
MSWG was established primarily to promote shareholder activism and protect minority interest. Since its inception, MSWG has become the voice of minority shareholders. MSWG is also instrumental in market-driven shareholder activism.
Moving into 2008, MSWG will continue to enhance and focus on the following four areas:
·Proxy advisory services at general meetings of shareholders of PLCs;
·Publication of strategic value for directors, shareholders and investors, such as corporate governance survey, dividend survey and directors’ remuneration survey;
·Quarterly shareholder dialogues and seminars for retail shareholders and investors; and
·Website dissemination of information and news to shareholders and investing public through subscriptions and later on, memberships.
MSWG’s response to events during the past three years reflects its modest beginning of championing and advocating the development and advancement of shareholder activism.
This is the best way to continuously promote and monitor PLCs and their corporate governance policies and practices.
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