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Friday 8 July 2016

Tan Sri Leong Hoy Kum

Leong: ‘I’m training my children so that they will be hands-on.’

Deloitte has come up with ways for the group to improve efficiency, cost and execution.
Developer sitting on cash of RM1.1bil and negligible borrowings.
Group positions itself for recovery of property market that it feels will happen next year.

Leong: ‘I’m training my children so that they will be hands-on.’
An artist impression of Mah Sing's The Loft development in Penang.
The Icon Residence Mont Kiara in Kuala Lumpur.
Meridin@Medini is located right next door to Legoland Malaysia.

By EUGENE MAHALINGAM
Leaving a Legacy  -  Mah Sing's Leong speaks on the transition happening in the group and the relevance of the 'iconic' developments
IT’S actually hard to believe that Tan Sri Leong Hoy Kum, group managing director and chief executive - as well as the man that’s practically spearheading property developer Mah Sing Group Bhd - has been doing it for over two decades.
At 58, Leong is showing no signs of slowing down. He’s sharp as he is witty... But none of those traits are as profound as his energy to want to keep steering the company to new heights.
“I’m not leaving or retiring any time soon. I’m empowering more, and now is a good time. The market is slow and it’s a good time to consolidate, transform and grow to the next level,” he tells StarBizWeek.
According to Leong, the company had actually put in place strategies for its “next level of growth” since the property market started slowing down last year.
‘Two years ago, we started a business cycle improvement plan. So it’s ongoing and there are a few cycles.”
He adds that Mah Sing had also appoint­ed consultancy firm, Deloitte, to assist in improving the way the company is con­ducting its business.
“We appointed them to better manage our cost control, to reduce any red tape, improve our business process flows and our delivery systems. This is so that when l the market picks up - hopefully next year we’ll be better prepared.
I “We’ve also implemented more training ; now - more than double what we used to provide.
Leong emphasises that he still feels “very energetic” and he has a lot of plans for the company before he ever decides to step down.
“We have a strategy that has been out­lined for the company over the next 20 years. I don’t think that is an unrealistic strategy.
In the past, Japanese companies would outline 100-year strategies. But today, with technology evolving so fast, it’s hard to predict what can happen over the next century. Having a plan for 20 years - that’s quite realistic.
Leaving a legacy
Leong’s three children are already working in the property developer under different roles. However his vision is for a set of professional managers to run the company and his children to play a strate­gic role as members of the board.
“My three children contribute to the company, but they don’t have to be execu­tive officers. They will sit on the board one day and set the right direction for the chief executive officer to run the business. I want a professional to run the company,” says Leong.
The plan, he says, is to have a team of professional managers, headed by a CEO, just like how the company operates right now.
“I’m training my children so that they will be hands-on, and also so that one day when I hand over and they sit on the board, the board will set the right direc­tion.”
Mah Sing was incorporated in 1965 as a plastics manufacturer before venturing into property development in 1994.
The group was listed on the second board of Bursa Malaysia Bhd in October 1992 under manufacturing before it was transferred to the main board under prop­erty in 2004.
The company’s early developments include the Taman Desa Ulu Yam, Mah Sing Integrated Industrial Park in Bandar Pinggiran Subang, and Sungai Petani Business Centre.
According to Leong, the company’s plas­tics division is still making profits.
“We made a net profit of RMlSmil from the plastics division. We have factories in Jakarta (Indonesia) and Port Klang,” he says, adding however that the group’s emphasis will still be on its property divi­sion.
For the moment, the main focus is on managing and further improving Mah Sing’s cashflow, says Leong.
“We want to focus on improving our cashflow. If you plan wrongly, you end up with no cashflow and it’s my top priority. That’s why our gearing is very low. We have a war chest to buy more land.”
Leong says the company is currently sit­ting on a cash pile of RMl.lbil and has a net gearing of 0.09 times.
For its current financial year, the com­pany is targeting sales of RM2.3bil, nearly half of what it usually hits when the prop­erty market is on an upturn.
“When the market turns, we will ramp it up to between RM3bil and RM4bil. It’s pointless to force it (higher earnings) in a downturn,” he says.
Leong says the company is ramping up promotions for its properties and plans to have new launches on a monthly basis.
Next month, the company will be launching its Bandar Meridin East devel­opment in Iskandar Malaysia, Johor.
“All of our land is located in prime loca­tions. Our biggest plot of land, which totals 1,400 acres, namely Bandar Meridin East, will be launched on Aug 6 and comprises residential, commercial and industrial units,” says Leong.
Mah Sing currently has 46 development projects under its belt with 35 already in various stages of development. It current­ly has 2,522ha of existing land bank, which will keep the company busy for the next eight years.
The company has 22 projects within the Klang Valley; seven in Johor; four in
Penang and two in Sabah.
For its first quarter ended March 31, 2016, the group’s remaining gross develop­ment value and unbilled sales stands at about RM32.26bil.
The company registered a 3.9% lower net profit of RM95.04mil during the quar­ter, while revenue fell 9.5% to RM709.17mil compared with a year ago.
According to MIDF Research in a report, Mah Sing’s RM2.3bil sales target for this year represents a flatfish year-on-year growth, and the research house has main­tained a neutral call on the company.
“As a result of the flatfish sales trend, we believe that earnings growth momen­tum should slow down in 2016 and 2017. As it is, we expect 2016 earnings growth to slow down to 4% from 11% expected in 2015.
“Having said that, we believe that Mah Sing’s target is prudent considering the challenging outlook for the sector.”
UBS Securities Malaysia meanwhile has a “buy call on the property developer, with a 12-month target price of RM1.75.
“Our price target is based on a 20% dis­count to our sum-of-the-parts revalued net asset value. We value each project using discounted cash flow basis, using a weight­ed average cost of capital of 8% and a risk­free rate of 4%.
“We believe the main risk for Mah Sing is if property demand falls. This could be caused by macroeconomic factors - inter­est rates, policy, the external environment and economic growth,” it says.
UBS adds that the company also oper­ates in a highly competitive market in which many developers compete for cus­tomers and land.
It however says that Mah Sing’s first quarter results were in line with expecta­tions, equivalent to 26%-25% of UBS’ and consensus’ full-year estimates.
As part of the company’s aim to remain relevant, Leong says Mah Sing had embarked on developing a number of “architectural masterpieces” with one goal to reshape the Kuala Lumpur skyline.
He says these projects, called the “Iconic Series,” represent innovative develop­ments known for their revolutionary design and exceptional quality.
And his mission is for Mah Sing and he himself be remembered for such architec­tures.
Mah Sing has four iconic developments. They are the The Icon Tun Razak @ Jalan Tun Razak, followed by Icon Residence @ Mont Kiara, Icon City, Petaling Jaya and M City, Jalan Ampang.
Leong says the projects are part of his personal mission to ‘leave behind a lega­cy. The designs of the projects were inspired by structures and even land­scapes during Leong’s travels to other countries.
“With architects, you have to give them ideas. You must know what you want. It’s like going to a doctor. You have to tell them where it hurts, first.
“When I travel I personally try to spot new designs and structures to be incorpo­rated into the Iconic series,” says Leong.
“Structures, or buildings, will always be around. In the future, when people pass by the Iconoic developments, they will know that it was done by Mah Sing and I was responsible for it.”
The company’s Icon Tun Razak, which has a gross development value (GDV) of RM452mil, comprises grade-A offices that have been folly taken up and occupied by a number of companies such as Astro, Samsung and Huawei among others.
Its design theme is based on a dynamic, seamless flow known as the “wave”, says Leong, adding that the project has become one of the main landmarks in the centre of Kuala Lumpur with its unique design and strategic location.
“Both the east wing and west wing of Icon Tun Razak were sold in 2007 and 2008 respectively,” he says.
“It made history when the building
became Malaysia’s first en bloc sale of a commercial property. Since 2007, seven other en bloc units have been sold, setting the bar for Grade-A offices in the country.”
Mah Sing’s Icon Residence, Mont Kiara, which has a GDV of RM389mil, mean­while, takes its architectural inspiration from the Mediterranean.
“I visited Greece on holiday and was inspired by the Santorini layers,” says Leong.
Comprising luxury service apartments, 90% of the 260 units have already been taken up, with rental yields averaging between 4.5% and 5%.
Leong says the units are occupied by the higher-end market comprising a mix of locals and expatriates.
“Expatriates see Icon Residence as an investment especially for those that travel to Malaysia often.”
The company’s M City development, which has a GDV of RM1.6bil, meanwhile comprises boutique retail shops, designer SoHo and serviced apartments.
Leong says the project was conceived for garden city living within its finely crafted architecture, with thematic hang­ing gardens at various levels spanning over four acres.
He says the first two towers had already been fully sold, while 92% of the third tower had already been taken-up.
Mah Sing’s fourth project under its Iconic Series, Icon City, has a GDV of RM3.2bil. The project, says Leong, was inspired by the chiselled characteristics of mountain rocks, particularly in Las Vegas.
“It features state-of-the-art infrastruc­ture and architecture; elements infused with landscaping in the form of forest and water-themed plazas, sky pool and a roof garden,” he says.
Leong says a fifth addition to its prestig­ious Iconic Series development is a possi­bility.
“It very much depends on a number of factors, among them will be the architec­tural theme of the development, the loca­tion and how we plan out the develop­ment.
“We will evaluate our options on adding to our Iconic Series but currently we do not have any plans.”

Leong: Gradually I may contribute in a different role
The corporate office of Mah Sing at Sungai Besi belies the position of Mah Sing as a builder of Iconic projects in the city.
However Tan Sri Leong Hoy Kum, the founder and prime mover of property developer, is not ready to move out yet of his six-storey mediocre building in Sungai Besi.
He foresees the property group staying at the corporate office for the next five years as he charts the next phase of development for Mah Sing. He has three children working with him in the group but hopes to have in place of team of professional managers to under- ta*ke the day-to-day management of the property developer in the future.
“That is how I want to position Mah Sing in the future... the own­ers being separated from the man­agement of the company. It has to be that way of the company is to move forward,” he says in an interview. Below are the excerpts:
When you say you want to leave a legacy, it sounds like you want to call it a day and hand over the business?
No, I’m not. Yes, it’s true that one day, ultimately, everyone has to go. But the buildings will always be there. I’m 58 - I’m still young. Gradually, I may contribute in a different role. But not now. I still have a lot of plans and ideas to transform the group and take it to another level.
When the market slows down, it’s a good time to acquire more land and start to plan. In two years’ time, we may come up with another Iconic development.
How did you first come up with the idea for your Iconic Series developments?
In 2006, we felt that the market was about to pick up. The timing was right to acquire the first land (for the Icon Tun Razak) and con­vert it into an office space. There was demand for office spaces then.
I’ve visited many great cities in the world, Tokyo, New York, Singapore. I also received inspira­tion from buildings in Dubai. I interviewed some of the good architects. I got the idea to develop architectural masterpieces. We wanted it to be unique, with revo­lutionary designs and exceptional quality - and we wanted and to reshape the KL skyline.
Each development has its own unique identity.
How has your iconic series developments impacted the market?
We have even taken initiatives to improve the surroundings of our projects such as Icon City’s traffic dispersal system. The first vehicular ramp of this system was completed in early 2016, will help ease the traffic flow within the area. Upon the completion of the overall traffic dispersal system with multiple interchanges, it is set to benefit the 700,000 people around the surrounding area.
Who is your target market for the Iconic Series developments?
We are targeting investors, young professionals and expatri­ates with our projects. With these Iconic Series developments, we want to leave a legacy. It is also to further strengthen our branding.
Now that the market has slowed down, what are your plans?
We’re looking very far, for the next 20 years - what Mah Sing can achieve by then. We have to plan ahead. Development takes 10 to 20 years. Five years is very fast.
This is what I learnt from Panasonic, when I was running my manufacturing plant. The Japanese, they plan 100 years. Of course, today, technology has advanced so fast, 100 years is not so realistic. About 20 years is good enough. This is all part of our cor­porate strategy planning. We want to make sure that Mah Sing can become a respectable, world class developer.
There will be a lot of changes. Even our facade here (at Wisma Mah Sing) has changed. We’ve done a lot of renovations here. Before we move out in five years time, we’re already planning our new tower. Environment is very important. It makes a person happy to come to work. If you’re not happy, you can’t contribute. I received feedback from various departments when we made changes to our office here.
You have children working with you. How do they contrib­ute?
They all contribute differently. They don’t have to be CEOs. They , will sit on the board one day and set the right direction for the CEO to run. I want a professional to run the company.
We will have a team of profes­sional managers headed by a (pro­fessional) CEO - just like how we have a professional CEO now. I’m training my children, so that they will be hands on, so that one day when I hand over and they sit on the board, the board will set the right direction.          '
I will pave the way for my chil­dren for the CEO and the team to lead. You have to empower.
Do you see the market picking up next year?
It’s about confidence. This year, the market is still a bit cautious.
Next year, it should be improving. Unemployment rate is still low.
Banks are also prepared to lend, provided the buyer is eligible. So the products that you launch should be in line with what the market wants. If you approach the right buyer with the right product, you should still be able to grow.
Is that why you intend to have a joint venture with the Government.
Yes. We’re talking to both the , federal and state governments.
They are also looking for a good partner. Nowadays it’s all about your reputation and your brand­ing.
You have been through a lot since starting business as a prop­erty developer back in 1994. I’m sure you were affected by the 1998 Asian financial crisis?
It’s not easy. But one thing -1 never lost money in my property development history. Over our 22-year history, even with reces­sion, we still made money, albeit lesser.
Is there anyone that you idol­ise?
I admire Li Ka-shing (Hong Kong business magnate, investor, and philanthropist) and Jack Ma (founder and executive chairman of Alibaba Group). But we can even learn from the Wanda Group (China’s largest commercial prop­erty company). I learn from inspir­ing people like them.

Adapted from The Star / July 9, 2016 / StarBizWeek (Cover Feature)

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