Developers go on affordable housing path to achieve sales

Group Managing Director LBS Bina Group Berhad Tan Sri Lim Hock San giving the post 20th AGM media briefing KAMARUL ARIFFIN/The Star

ALTHOUGH the pandemic continues to pose challenges and create uncertainties, property developers have been able to maintain solid performances.

Several listed companies, in announcing their earnings during the latest corporate results season, say their sales targets for 2021 are either are on track, have been achieved or revised upwards.

An analyst says many property developers, following a tough 2020, have stuck with what had worked best for them.

“Digitalisation has been a big part of their marketing strategies and it has worked wonders. Nevertheless, the property market is about physical products and many developers have churned out units that are best catered to customer needs.”

Another property analyst says many developers have been focusing on affordable homes, adding that the strategy has worked for numerous players.

“The ongoing Home Ownership Campaign (HOC) is also playing a big part in spurring the market,” he says, adding that the overall positive sentiment can be reflected in the performance of the KL Property Index over the past 12 months.

On a one-year basis, the KL Property Index – which is made up of listed shares of property companies – has risen more than 11%, thus reflecting the resilience of the local property industry.

Overcoming challenges

At the group’s annual town hall meeting last month, LBS Bina Group Bhd executive chairman Tan Sri Lim Hock San said the company is optimistic of achieving its sales target for 2021, despite anticipating a challenging year ahead.

Group Managing Director LBS Bina Group Berhad Tan Sri Lim Hock SanGroup Managing Director LBS Bina Group Berhad Tan Sri Lim Hock San

“The road ahead may be challenging but if we continue to do what we do best, which is to provide quality yet affordable homes and improve our services, we will definitely achieve our 2021 sales target,” he says.

LBS Bina’s net profit for the second quarter ended June 30, 2021 surged to RM16.28mil from RM736,000 in the previous corresponding period, while revenue rose to RM265.92mil from RM166.89mil a year earlier.

For the second half of 2021, the group plans to launch properties with an estimated gross development value (GDV) of RM1.22bil, mainly in the Klang Valley.

Currently, the group has 19 ongoing development projects with an estimated GDV of RM5.67bil. It has a total land bank for future development of 3,343 acres with an estimated GDV of RM27.2bil and unbilled sales of RM2.25bil.

JF Apex Securities, in a recent report, says LBS Bina’s earnings in the first half of 2021 are a “positive surprise.”

“The group has implemented greater precautionary measures on cost management, careful rationalisation of new project launches and a disciplined approach to cash management amid the pandemic.

“We favour the stock for its commendable sales amid the prevailing soft property market; sound business strategy of concentrating in selling affordable landed housing especially in the Klang Valley, strong earnings visibility underpinned by its healthy unbilled sales and unlocking potential land bank values in Zhuhai International Circuit, China, in the immediate future.”

Optimistic outlook

Another developer that is optimistic about hitting its sales target for this year is S P Setia Bhd.

With almost RM3bil sales achieved in the first half of this year, president and chief executive officer Datuk Khor Chap Jen (pic below) says the group is confident it can hit its sales target of RM3.8bil for 2021.

SP Setia Khor Chap JenSP Setia Khor Chap Jen

“We remain optimistic yet cautious, underpinned by the strong pent-up demand from home buyers under the pandemic backdrop,” he says in a statement following the announcement of the group’s earnings performance for the first half of 2021.

UOB Kay Hian, in a recent report, says S P Setia’s 2021 sales will likely exceed the RM3.8bil target.

“We expect the group to exceed its sales target for the year, given the RM954mil in bookings recorded during the first quarter; the potential reopening of the economy in the fourth quarter and the extension of the HOC.

“Unbilled sales as of June 30, 2021 stood at RM10.30bil, representing 2.8 times of 2021’s turnover.”

S P Setia registered a stellar sales performance of RM2.71bil in the first half of its current financial year ending Dec 31, 2021, in spite of the adverse impact of the pandemic on the local property sector.

Local projects contributed RM2.07bil or 77% of total sales during the period, while the remaining RM639mil or 23% was contributed by international projects, mainly from Daintree Residence in Singapore.

The group achieved a revenue of RM2.14bil and pre-tax profit of RM301.4mil in the first half of 2021.

The latest corporate earnings season also saw Sunway Bhd returning to the black with a net profit of RM70.52mil for the second quarter ended June 30, 2021, compared with a net loss of RM20.38mil in the previous corresponding period.

Revenue in the second quarter rose to RM967.92mil from RM556.64mil a year earlier.

Sunway said the overall improvement in the group’s financial performance in the second quarter was mainly due to its business units being able to adjust and adapt their business operational process to continue operating, albeit at a lower capacity, when the movement control order was reinstated due to the resurgence of Covid-19 cases.

RHB Investment Bank says while earnings growth will see some hiccups due to the pandemic, it likes Sunway’s strategic business and geographical diversification.

The research house says Sunway’s Singapore projects are seeing strong demand and that its healthcare segment provides earnings resilience, adding that the group should be able to meet its new RM2.2bil sales target.

“Management revised upwards its sales target to RM2.2bil from RM1.6bil previously, given the strong sales momentum seen in the first half of 2021.

“Despite the pandemic, the management is committed to launch other projects including Sunway Artessa and Velocity Two Tower D. The soft launch of Sunway D’Hills in Kota Damansara started in July.”

Surpassing targets

Meanwhile, IOI Properties Group Bhd chief executive officer Datuk Voon Tin Yow says the group achieved sales of RM2.3bil during its financial year ended June 30, 2021, surpassing its target of RM2bil.

“IOI Properties will leverage on the ongoing HOC, its digital marketing capabilities and aggressive sales campaigns to drive sales with a focus on its well sought-after, mid-priced range of products,” he says in a statement accompanying the group’s latest financial results.

IOI Properties Group Bhd’s net profit rose to RM660.21mil in its financial year ended June 30, 2021, compared with RM504.70mil in the previous corresponding period.

Revenue improved 18% to RM2.5bil, mainly due to better sales performance from its operations in Malaysia that was driven by its dynamic sales and marketing campaign.

MIDF Research in a recent report acknowledged that IOI Properties’ earnings for the period ended June 30, 2021 ended on a strong note.

“Sequentially, fourth quarter 2021 core net income was higher at RM293.4mil, mainly driven by higher contribution from a joint venture as a result of the reversal of write down value of Cape Royale in Singapore. That brought 2021 cumulative income to RM799.4mil, in line with higher revenue.

“The earnings growth in 2021 was mainly supported by higher contribution from the property development division, which offset the lower contribution from the property investment and hospitality and leisure segments.”

A property analyst says the ongoing HOC has helped developers mitigate the impact of the pandemic this year.

“The numerous incentives under the campaign, such as the stamp duty exemption for residential homes priced between RM300,000 and RM2.5mil, has helped sustain consumer interest and sentiment amid the challenging, uncertain environment,” he says.

The HOC was initially kicked off in January 2019 to address the overhang problem in the country.

The campaign, which was initially intended for six months, was extended for a full year.

It proved successful, having generated sales totalling RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.

The government reintroduced the HOC in June last year under the Penjana initiative to boost the property market after it was adversely affected by the Covid-19 pandemic.

The campaign has been extended to the end of this year, with property consultants and developers fully supporting the move.

In March this year, during the Real Estate and Housing Developers’ Association’s briefing on the property market for 2021, its president Datuk Soam Heng Choon revealed that since the HOC was reintroduced last June, a total of 34,354 residential units valued at RM25.65bil had been sold as at Feb 28, 2021.

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