Back
Unlocking the next phase of growth
04 December 2023
Earlier this year, the developer put a portfolio of its KL assets — comprising hospitality, retail, parking bays and district cooling systems — up for sale. Among these were Hyatt House and Publika Shopping Gallery.
UEM Sunrise CEO Sufian Abdullah tells City & Country that the company is rebalancing its asset portfolio as part of its “Triage” phase of its three-phase strategic turnaround plan, which was introduced towards the end of 2021 in anticipation of an improving economy as the nation adjusted to the endemic environment.
The plan was to implement curated measures in the mid to long term and transform the company into an effective and balanced real estate player. While Triage is the first phase of the plan, slated to take place from 2022 to 2023 (followed by Stabilise in 2024 to 2025 and Sustain in 2026 and beyond), its impact has been evident as reflected in the company’s latest financial results.
In the financial year ended Dec 31, 2022 (FY2022), UEM Sunrise has successfully returned to the black, posting a net profit of RM80.54 million and revenue of RM1.47 billion, of which 72% was from property development, 21% from land sales and asset divestment and 7% from property investments and others.
On Nov 15, the company announced its financial results for the first nine months ended Sept 30, 2023 with a reported revenue of RM917 million and property sales of about RM1.8 billion, driven mainly by its Central region developments — namely Residensi AVA in Kiara Bay, Residensi Allevia in Mont’Kiara and Serene Heights in Semenyih — and supported by its Southern region developments such as Aspira ParkHomes, Senadi Hills and Aspira Gardens in Iskandar Puteri, Johor.
The company has also exceeded its full financial year gross development value launch target of RM2.5 billion and sales target of RM1.5 billion in the first six months of its FY2023. In the excerpts below, Sufian shares his game plan for the company’s next phase of growth and his mid- and long-term targets.
City & Country: Please share with us the progress on the three-phase strategic turnaround plan.
Sufian Abdullah: It is going pretty well. We are now in the second stage of our first phase, which explains why you have seen us disposing of some of the assets from which we have been unable to extract additional value. Although the market has a lot of say in it, we think it is a really straightforward corporate exercise that is in line with our long-term business sustainability plan. We know what we are doing and are very transparent about it.
Our priority now is to stabilise our revenue streams, which will require some careful planning due to the huge land bank and upcoming projects we are holding. To guarantee the business will have consistent and sustainable earnings over the next 10 years, it is imperative that this is done.
We are not seeking a short-term fix, not even for the next three to five years, but rather for the long-term future, which is why the market speculation did not really upset us. It involves more than just starting new projects; it also entails making the entire internal system more effective. As seen by the significant increase in our gross profit margin from 27% to 37% in the first half of this year compared to the same period in 2022, we have already felt the effects.
Please tell us your developments down south.
Johor has always been a challenging market, especially when it comes to housing affordability issues. As a responsible developer, we have been working very closely with the state government, providing ideas on how to make housing more equitably accessible.
Recently, there has been exciting news regarding the possible revival of the Kuala Lumpur-Singapore High-Speed Rail (HSR) project. We also know that construction of the Rapid Transit System (RTS) has been going well. That will help UEM Sunrise because we have a vast land bank down south. We have been making infrastructure investments in our Johor projects for the last 10 to 15 years. Now is the right moment to activate our major master plans in Johor.
We have seen increasing demand not only for housing, but also from the local businesses for industrial and commercial products. We are now fine-tuning the Puteri Harbour master plan and upgrading the infrastructure to accommodate such market demand.
UEM Sunrise recently acquired land in Subiaco East in Perth, Australia. What is your outlook for the Perth market?
Yes, we acquired our first residential development site in Subiaco East in Perth for A$22.185 million (RM68 million) and will deliver two landmark apartment buildings.
The purchase involved Lots 1 and 2 of The Oval precincts at Subiaco East from DevelopmentWA as part of the state’s most significant urban redevelopment project at the iconic former Subiaco Oval. Subiaco is a verdant suburb known for its eclectic architecture, quaint, leafy residential streets, premier shopping and multicultural dining scene.
The upcoming mixed-use residential precinct will comprise the delivery of sleek dual towers with about 430 apartments across Lots 1 and 2, subject to development approval with further details to be firmed up. The project will include up to 12% affordable housing as well. Construction is expected to commence in 2026. The acquisition in Perth signifies our plans to expand our presence in Australia after Melbourne.
Even though the Perth market is smaller than Melbourne’s, we have been scrutinising it over the past few years because it has higher potential. It has always been linked to mining and is a cyclical market. Due to iron ore, Western Australia saw a boom 10 years ago. However, it eventually waned.
Western Australia has now become a good supplier of lithium, a chemical element that is essential to the batteries used in electric vehicles. This is likely to have significant economic effects that reach beyond the mining and automotive industries. Indeed, the ripple impact on the local real estate market has already been observed. Demand, rents and property prices are increasing. We predict significant changes to Perth’s market situation during the next five to six years. We have a fairly optimistic prognosis for the market.
In Melbourne, the demand for housing remains strong but we are probably not going to the same project scale like how we did for Aurora Melbourne Central and Conservatory. We are looking at something slightly scaled down, which could provide us a quicker project turnaround.
Apart from Australia, we are not discounting expansion to other countries. We are always working towards something new because we don’t want to stay stagnant. But for the foreseeable future, our top priorities are locations that we are familiar with, including Malaysia and Australia. We are prepared to take more chances in order to travel beyond Melbourne, Johor and the Klang Valley. In 2024, maybe we would be able to share with you some new market initiatives or movements.
UEM Sunrise achieved the full-year sales target in the first six months of 2023. What about 2024? What are your key performance indicators and sales target?
We are indeed pleased that we have achieved our sales target for 2023 earlier than expected. For next year’s target, it is not that I don’t want to share, but the team is still working on it. We have been evaluating and modifying the number in the last couple of weeks. However, it is not that we are fickle about it — it is because of the uncertain regional and global factors.
We need to modify our risk appetite in light of these external factors since they will undoubtedly have an impact on the state of the economy and the real estate market as a whole in the near future. Ensuring that we can achieve the figures we committed to our stakeholders is another duty we have.
As for whether we are launching more products next year, I believe eventually the market will tell you whether it wants more new projects or not. This is why, rather than launching everything that we have in our arsenal, we want to stay focused on activating our existing master plans.
Nonetheless, you will see UEM Sunrise launching more products in our Rise series under our Happy+ Product Series, if not Kasih.
Rise is going to be our bread and butter because it has been designed as a series that offers flexible and agile spaces able to shape and shift to suit the homebuyer’s lifestyle with limitless value propositions. These attainable homes embody practical living with an environment that exudes simplicity, recreation and convenience.
The Connaught One is a transit-oriented development in Cheras - Photo by UEM Sunrise
Residensi ZIG is the second phase of Kiara Bay - Photo by UEM Sunrise
All in all, we are going to be busier in 2024. In addition to ongoing projects like Kiara Bay, The MINH and The Connaught One, we will be working on a development in Kelana Jaya, the specifics of which are being worked out.
In addition, we can’t wait to talk more about our intentions for Johor — particularly with regard to the industrial master plan — and redevelopment of the Dutch Lady site in Petaling Jaya, the master plan for which we are seeking approval from the authorities.
What is your property market outlook for 2024?
Before answering the question, I have to say that Malaysia hasn’t reached a level of transparency that allows us to see better what is going to happen in the near future. We need a more liberated exchange of housing information, especially in terms of transactions, for us to have a less murky industry outlook and anticipate the direction in which we are heading.
In my humble opinion, the property industry is going to be challenging, mainly because the escalating cost of living has influenced market sentiment and property purchasing decisions. I mean, when people go bankrupt because they can’t afford to pay off a car loan, a depreciating asset, it is a strong indication that things are not going very well.
Source: The Edge, City & Country
Source: The Edge City & Country
