Sunway going strong

Chong Chang Choong

KUALA LUMPUR: Sunway Group’s growth trajectory in the last 40 years has been remarkable, with six of its key segments now established in nine countries around the world.

In Malaysia, the group is spread across 12 industries namely property, construction, retail, hospitality, leisure, commercial, trading and manufacturing, building materials, quarrying, healthcare, education and real estate investment trust.

Outside of Malaysia, the former tin-mining company is now in property development in Singapore and China, construction in Singapore, India and the United Arab Emirates, trading and manufacturing in Singapore, China, Indonesia, Thailand, Australia and India, building materials in China, hospitality in Vietnam and Cambodia, and education in China.

All of Sunway’s business divisions are performing well while the performance in most of its overseas subsidiaries is satisfactory although some may fall short of their budget this year due to the weaker environment in which they operate, Sunway Bhd chief financial officer Chong Chang Choong (pic) tells StarBizWeek.

The success of Sunway’s overseas ventures is largely due to the prudential approach adopted by the group, which is underpinned by robust due diligence and financial feasibility studies before any overseas investments are made.

“The investment prospects may look attractive initially but after taking into account of the sovereign and currency risks premium, the business case may not be strong enough to support it,” he says.

Besides Malaysia, Sunway also has a strong trading and manufacturing businesses in Singapore and a smaller presence in China, Thailand, Indonesia, Australia and India.

As with many Malaysian firms, Sunway has ventured into China in recent years.

“Given the size of China, there are ample opportunities to grow and expand our businesses there if we can execute well,” Chong says.

Sunway is currently in talks with a Chinese manufacturing entity on a merger and acquisition (M&A) exercise, where it would strengthen its trading and manufacturing arm in the country.

The potential deal has good prospects as it has a strong competitive advantage, which will enable it to become a strong regional player.

On the new venture, Chong says, “Any expansion plans have to be justified by the investment returns and risk premium of that country. This particular case is no different and so far the feasibility has provided a strong investment case.”

Currently, Singapore contributes almost 30% to Sunway’s trading and manufacturing profit as a whole, while its China’s operations in this sector is still fairly small.

From its signature township, Sunway Resort City, to its latest masterplanned development Sunway Iskandar in Iskandar Malaysia, Sunway is famed for its integrated township developments in Malaysia.

Moving forward, Sunway has identified property development as its key business segment to strengthen its existing overseas presence.

It recently launched its Tianjin Eco City project in China, a RM100mil gross development value (GDV) high rise apartment project developed through a 60:40 joint venture with Sino Singapore Tianjin Eco City Investment and Development Co Ltd.

“Our maiden foray into property development in China was via a joint venture with a local Chinese developer – a six block residential condominium project in Jiangyin launched four years ago. But now that we have established our presence there, we are aiming for full control in future development projects,” Chong says.

Meanwhile, in Singapore, Sunway plans to launch Sophia Hills, a S$800mil (RM2.07bil) GDV residential condominium project located in the central region District 9.

The 493-unit development, which comprises 12 blocks of 4-to-7 storey condominiums, is developed via a 30:70 joint venture with Hoi Hup Realty Pte Ltd.

“We are particularly excited by this development as it combines several unique selling points. First, it has a great location just minutes away from the Orchard shopping belt and is located next to the Dhoby Ghaut MRT station. Secondly, it will be low rise and low density. It would be a rare opportunity to acquire such a property in Singapore today,” Chong says.

Another Sunway development in Singapore with units available for sale is the three-in-one S$770mil (RM1.99bil) GDV mixed commercial development in Novena, which comprises 171 units of medical suites catered to doctors for specialist clinics as well as 51 retail units on the retail podium and a hotel to be operated by Courtyard Marriott.

Almost 60% of the the medical suites and retail lots have been taken up.

Sunway’s other projects in Singapore, which have been 100% sold and are currently contributing to profits include Miltonia Residences, Lake Vista @ Yuan Ching, Arc @ Tampines and Sea Esta, which have a GDV of S$380mil (RM979.8mil), S$365mil (RM941mil), S$465mil (RM1.2bil) and S$360mil (RM928mil), respectively.

For the financial year ended December 31, 2013, Sunway’s property development division recorded net profit attributable to shareholders of RM243mil, up 19.7% from RM203mil the year before.

Revenue for the division was RM1.17bil from RM910mil the year before.

“Close to 20% of Sunway’s profit is derived from its property projects overseas in 2013,” Chong says, adding that Sunway’s long-term strategic goal is to achieve 30% profit contribution from its overseas property projects.

“We will continue to grow our property business in Singapore and China. While the current property market sentiment in these two countries is soft at the moment, it presents an opportunity for us to look for land bank at more attractive terms.”

“China is a market we need to continue to have a good handle on. Our initial foray into China was in Tier-2 and Tier-3 property markets but now that the market is undergoing a correction, we can explore the Tier-1 cities as well for opportunities,” Chong said.

Despite Sunway’s presence in nine countries, Chong says for now, Sunway will focus its efforts on Malaysia, Singapore and China.

“As human capital is very important, we don’t want to spread ourselves too thin. These will be our core markets for the foreseeable future.”