NOTHING above RM500 per sq ft that's the strategy that's been driving
property developer Hua Yang Bhd's business for the last 35 years.
And it looks set to remain its strategy for the next four years, at least.
“We've got a couple of milestones we need to achieve first before we
re-look the market and re-strategise,” says chief executive officer Ho
Wen Yan.
For the current financial year ending March 31, 2014, Hua Yang aims to
generate sales of RM500mil and then grow that to reach RM800mil by
financial year 2018.
That's not too far-fetched, if current numbers mean anything. In the
latest fiscal year ended March 31, the company which brands itself as an
affordable property developer generated sales of some RM409mil and a
net profit of RM70.5mil.
Its net profit margin is about 17%, quite typical of property developers of its size, according to Ho.
Still, the plan to improve net margins is not necessarily a priority, he says.
“We do work very hard to control our costs but the priority is to drive sales, that's what is most important to us,” says Ho.
Ho, 39, is a second-generation chief of Hua Yang. His father, the late Ho Mok Heng founded the company on Dec 28, 1978.
Perhaps a good example of an average Joe who dreamt big, the senior Ho made a switch from a 9 to 5 job to property development.
What prompted this switch, according to his son, was perhaps the
exhilaration of owning their own house when his parents got married.
“In the 1970s, there was a great shortage of good, quality and
affordable housing and my father had a new, young family then,” he says.
After pooling together whatever savings they had and obtaining a
government loan, his parents managed to buy a small terrace house in
Perak, where the family is from.
“My father really believed that owning his own house was a major
milestone in his life and wanted to help others achieve that dream as
well.”
Together with his siblings, Ho's father started the business of building
affordable homes, made possible by being very conservative. The
business was small at first, getting by on single projects at a time.
Thanks to the growing economy in the early 1990s, the business continued
to flourish helped by increasing demand. In 2002, Hua Yang was listed
on Bursa Malaysia, sealing its reputation as one of the more reputable
players in town.
A year later, Ho came back from London where he had been studying and later, practising architecture.
“My father had passed on and I came back to continue growing our family business.”
The Hua Yang today is a far cry from what it was in the early years. It
generates money from three main places the Greater Klang Valley, Johor
Baru and Perak.
For this financial year, the plan is to launch more than RM1bil worth of mostly residential property.
These will include new phases in its ongoing projects namely One South,
its mixed development project in Seri Kembangan, Taman Pulai Indah and
Taman Pulai Hijauan townships in Johor Baru as well as the Bandar
Universiti Seri Iskandar township in Perak.
There are six more new project launches in these key regions.
Hungry for more land
After all these have been launched, the company will still be left with some RM2.9bil worth of undeveloped land.
“We already have plans for most of these.”
In the meantime, Hua Yang is still hungry for more land. Its most recent
deal was to buy a 30-acre piece of land in Puchong for RM158mil where
it will have a mixed development project.
Ho says it will close one more land deal very soon in the Greater Klang Valley area but refuses to divulge more.
“All our land deals will be financed internally and also with bank
borrowings. We have plenty of room to gear up, so there's no worry
there. ”
Its unbilled sales stand at RM523mil.
In the Greater Klang Valley area, Hua Yang does not build any landed property due to the high land cost in the city, says Ho.
All are apartments and are priced to cater mostly to first-time young
adult buyers and newly-married couples with young children.
Priced at under RM500 per sq ft, these units are quite obviously not
located in the more prime areas such as Petaling Jaya or in the Golden
Triangle area of Kuala Lumpur.
Hua Yang's strategy is to build their homes a little further way from such areas and perhaps, form satellite centres of its own.
“A lot of people don't work in the city centre nowadays, for example
places like Kajang, Cyberjaya and Putrajaya these have become satellite
towns on their own with everything there, people don't need to venture
out to get their things done.”
This is a strategy that Hua Yang believes in.
Already, its One South project in Seri Kembangan, Serdang is a whole
development comprising shop offices, service apartments and office
towers.
One South is also by far, its “best-selling product”, priced at about RM420 per sq ft, Ho says.
Whatever that has been built for that development project has been sold.
The fifth phase of One South will be launched by year-end.
“I think we have been focusing on buying good land, we go to areas that
we know there is demand but where developers don't supply,” says Ho.
“Having said that, good land is very hard to come by.”
Hua Yang also hopes to participate in some of the Government's
initiatives such as the 1Malaysia People's Housing (PR1MA) project which
aims to build affordable homes for locals.
“We hope to participate but currently we are still looking at how this will come along.
“For now, we are quite happy with focusing on our core states although
we do have plans to venture into Seberang Prai and Kota Kinabalu.
As for spreading its wings overseas, there are plans on the cards but that's at least 3 years away.
“If we do, we would most likely build in Singapore and Australia, these are destinations where Malaysians feel comfortable in.
“We believe in building homes for Malaysians, even when we go overseas,
we are likely to target Malaysian buyers - that would be a natural
advantage for us in a foreign country.”
Outlook still looks good
The property sector is still active and envisaged to remain active for a
while, even as more young people come to the bigger cities to find
work, Ho opines.
“Generally, post-general election, a lot of people have become much more
confident about the Malaysian economy, so that' s why we have recently
seen a lot of foreign money flowing in.
“Malaysia is seen to be a laggard... comparatively, our property prices are still low compared to some of our neighbours.”
Ho goes on to say that “although we may not feel it”, a 5% economic
growth actually means that the local economy is growing quite well.
“As more and more people come into the labour force, a lot of people are
looking for their first homes, we are capturing that market. On the
whole, I believe the property market will remain strong, at least over
the next two to three years.”
While some bankers have raised their concerns about declining demand as a
result of more stringent banking requirements, Ho insists that banks
are still very willing to lend consumers funds for property priced below
RM500,000, which is what most of their properties are priced at.
“Price increases are currently the strongest in the RM800,000 to RM1mil
category, it used to be the RM500,000 to RM800,000 segment.
“Any concerns about stringent loan requirements do not affect us.
“But growing construction costs, which is about 40% to 50% of total
costs and managing inflation will always remain a challenge, he says.
Hua Yang's cheapest homes are those found in Perak where land and operation costs are much lower than the Klang Valley.
While a single-storey house there is priced at about RM160,000 each, its
houses in Perak also afford Hua Yang the highest margins among the
group's stable of properties.
Still compelling?
Along with most of the property stocks, Hua Yang's share price has risen about 40%, post-GE.
At its current price of RM3.21, it is still trading at a 19% discount to
its revised net asset value of RM3.96, TA Securities points out.
The house has a “buy” call on the stock with a target price of RM3.96.
Kenanga Research, meanwhile, has a target price of RM3.52 on it.
“On the whole, the entire property sector has been re-rated, everyone has gone up, funds are busy buying - buying us included.
“On our part, our results have been quite good for past three years but
if you ask me, taking into consideration our potential, I think out
stock is still very undervalued,” says Ho.
He is not coy about the company's secret to growing sales.
“We build on time and always deliver as promised, we do not believe in
the build-and-sell concept, there is no need for that for as long as the
developer is reputable.”
Hua Yang also has no plans to jump on the bandwagon in Iskandar Malaysia.
“That (development region) is purely targeted at investors, we want to
serve the local people who are looking for homes to live in.”
