Property developers tweak marketing strategies to push sales

  • Property Premium
  • Saturday, 01 Dec 2018

Boosting sales: People viewing a model of a township development by Sime Darby Property in Shah Alam. The company is looking at undertaking a tactical price review of its unsold units.

WHILE the current property market slowdown has seen many developers pulling back or postponing their launches, it has not however deterred some companies from tweaking their marketing strategies and finding unique avenues to push sales and clear their inventories.

Recently, Sime Darby Property Bhd announced that it is looking at undertaking a tactical price review of its unsold units, after net profit for the three months through September dropped 93% to RM28.8mil.

The company’s strategy is to be expected, given the high level of unsold inventory units. Coupled with low absorption rates due to the current economic uncertainties and tight lending conditions, this has resulted in very competitive marketing promotion and price discounting by property developers.

In a filing with Bursa Malaysia earlier this week, Sime Darby Property said it is currently undertaking a “tactical price review” of all unsold inventories, particularly the completed development units.

“Budget 2019 has provided a number of initiatives to support home ownership. The group envisage that these positive developments would provide a boost to the property market,” it says.

Kenanga Research, in a report, says Sime Darby Property’s inventories declined by 9% quarter-on-quarter to RM2.22bil due to recently completed units at Rimbun Sanctuary, Bukit Jelutong and Serini 1 & 2, Taman Melawati – which implies that recent product offerings are well received by the market. “The group is targeting to lower existing inventory levels by 6% and 10% by end-2018 through targeted marketing and has completed its strategic pricing review.”

Kenanga Research adds that unsold units have also declined by 10% quarter-on-quarter to 4,469 units, of which only 21% comprise completed projects.

Meanwhile, CGS CIMB, which has maintained an add call to the stock, notes that the company launched a “Rediscover Our Hidden Gems” campaign from September to November 2018 to promote its new and completed development.

The campaign will help reduce its existing inventory level, the research house adds.

Kenanga Research, meanwhile, says Sime Darby Property’s strategic price review is unlikely to impact its margins.

“In efforts to clear inventories, rebates, discounts, freebies and other incentives have been offered. However, this does not necessarily mean that it will erode project margins significantly from current levels, as certain phases of each project have also been reviewed to be closer to market prices.

“We are currently assuming gross profit margins of 23% for the group’s property projects vis-à-vis their first-quarter 2018 property development margins of 20%.”

Sime Darby Property’s net profit for the three months through September dropped 93% to RM28.8mil compared with RM421mil made in the same corresponding quarter a year ago.

Revenue was little changed at RM480mil. The weaker performance was largely due the share of loss of at Battersea project of RM5.7mil against a profit of RM86.8mil a year ago, as well as the lack of several one-off gains that boosted its results previously.

“Excluding the share of results of joint ventures and associates, property development performance registered a marked increase of 69.6%, mainly contributed by higher sales and development activities at Serenia City and Denai Alam townships, Cantara Residences and Melawati Corporate Centre,” the company said in a filing with Bursa Malaysia.

On the company’s projection for the fourth quarter, Kenanga Research says it expects stronger earnings trajectory on estimated disposal of non-core assets amounting to pre-tax profit of RM100mil, in addition to the usual billings from ongoing projects and clearing of inventory efforts.

Another developer that has tweaked its marketing strategy is Mah Sing Group Bhd, which recently tied up with e-commerce company Lazada Malaysia to become the first developer in South-East Asia to sell its properties online.

To attract buyers, the company is also offering cash incentives of up to RM30,000.

The move to offer its products online certainly makes sense, given the fact that the majority of the Malaysian public are already shopping online, says Mah Sing chief executive officer Datuk Ho Hon Sang.

“Over half of the Malaysian population are shopping online, so being the first developer to sell units online on an e-commerce platform such as Lazada, gives us a competitive edge against other developers in Malaysia,” he says in a statement.

In the same statement, the company says home buyers that shop for its homes on Lazada will receive an exclusive 5% Lazada Incentive, worth between RM20,000 and RM30,000 which is the biggest online incentive ever to be offered on Lazada.

“Malaysian shoppers are looking for more digital solutions for all their lifestyle needs, and we believe that this collaboration will make affordable homes more accessible to young home buyers.”

The 5% incentive is one of the biggest incentives a property developer can offer.

Last month, Mah Sing also launched its Easy Home Ownership Campaign, where buyers can enjoy Budget 2019 stamp duty incentives immediately.

“For completed properties priced RM300,001 to RM1mil, eligible buyers can immediately enjoy the memorandum of transfer’s (MoT) absorption. Buyers must sign the sales and purchase agreement (SPA) and have their home loan approved between Nov 15, 2018 to Dec 31, 2018,” it says in a statement.

“Mah Sing will also absorb the stamp duty on MoT and loan agreement for the first RM300,000 of residential properties valued up to RM500,000, for home buyers who sign their SPA, with loan in place from Nov 15, 2018 until June 30, 2019.”

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