Mah Sing Group Bhd says that despite its move to glove manufacturing, it will still focus on property development and acquiring strategic landbank for quick turnaround.
"We will remain focus on our fast turnaround business model and carry out development projects," said its group managing director Tan Sri Leong Hoy Kum.
Mah Sing is well-known for its nimble and fast turnaround business model with fast execution and is quick to adapt to the changing market conditions.
The group tries to launch newly acquired lands within seven to 12 months of acquisition.
It has currently 50 projects across property hotspots in Malaysia and 32 are on-going developments.
"Our asset turnover ratio is at 39 per cent on average for the past five years as compared to 19 per cent for our comparable peers. This will continue to be part of our corporate culture as it has contributed to our previous and existing success, and is one of the important elements for us to continue to excel," he told NST Property.
Leong said Mah Sing will continue to practice the same business model in both the group's property development and proposed glove manufacturing venture.
Increasing land bank and fast-tracking its diversification
Backed by a healthy balance sheet with cash and bank balances at about RM1.13 billion as at June 30, 2020, Leong said that Mah Sing is well-positioned to focus on increasing land banks in the Klang Valley and offer affordably priced homes to cater to the market demand.
"Similar to our property development's fast-turnaround business model, we are fast-tracking our diversification into gloves, as our first glove manufacturing factory in Kapar, Klang has already commenced piling works to accommodate 12 units of new, high-speed glove dipping machines," Leong said.
Leong said the piling works are expected to be completed by November 2020, to be immediately followed by installation of the machinery in order to meet its targeted production date of April 2021 to meet the pent-up demand.
He said the first six production lines are expected to be ready for operation as early as the second quarter of 2021, and another six production lines by the third quarter of next year.
"As the Kapar factory is expected to start its operation with six production lines as early as the second quarter of 2021, we are in a good position to take advantage of the high spot price of gloves," he said.
Leong said that Phase 1 of the Kapar factory could house 12 new production lines with a maximum capacity of up to 3.68 billion pieces of gloves per annum, running at a speed of 38,000 pieces of gloves per production line per hour.
Based on the amount awarded or Mah Sing is committed to currently, the capital expenditure for the first phase of the gloves business which includes, amongst others, 12 new gloves production lines, other plant, and machinery as well as building refurbishment work is estimated to be about RM160 million.
Converting RM1.6 billion sales bookings and planning new launches
Mah Sing has achieved property sales of about RM418.6 million as of June 30, 2020, with an additional RM1.6 billion sales bookings on hand.
Leong said the group is focused on converting the RM1.6 billion in sales bookings, clearing the existing stocks, and to catch up with the construction progress of its development projects.
He said besides the existing projects, Mah Sing will have new launches lined up in the fourth quarter of its financial year, which are expected to attract the interest of homebuyers who are looking for their ideal home.
"This will help us to achieve the balance of our 2020 sales target. We are offering incentives and rebates to potential homebuyers. On whether giving incentives will affect our profit margin, we believe there is a need to strike the balance between setting an attractive price point for the homebuyers, while addressing expenses such as land costs, compliance costs, and overhead costs, for instance.
"One of the ways we try to address this is that we have been leveraging on digital technology to drive productivity gains through quicker decision-making and better workforce management, as part of our ongoing transformation journey," Leong said.
Leong said that home buyers are not only looking at the affordable price points but also the location of the projects.
"We have taken this into our consideration, even when we acquire our new land and this enables us to create more affordably priced developments in strategic locations that suit the target market," he said.
Leong believes that the multiple incentives offered by the government in the Penjana plan will attract first-time home buyers who have been adopting a 'wait and see approach.
"We understand that difficulties in securing maximum loan margins continue to plaque potential home buyers, causing a high rate of withdrawals.
"Based on Bank Negara statistics, the residential loan approval rate was still low at 33.9 per cent for the first nine months of 2020, compared to 43 per cent for the full year of 2019.
"To address specific pain points in customers' home-ownership journey, we have worked with Maybank Islamic to offer HouzKEY, as an alternative financing scheme under our Eazy To Own Campaign to provide buyers with easy entry of up to 100 per cent financing and lower monthly installments.
"We hope that the government can continue to work with financial institutions to relax lending requirements and any new financial assistance schemes from the government to aid home buyers would act as a catalyst to the property sector," he said.
As at June 30, 2020, the group has a remaining GDV of about RM23 billion, and unbilled sales of RM1.64 billion.
Leong said the unbilled sales for landed properties can be realised over two to three years while high-rise properties will be realised between three to four years.
"The projects are at different stages of construction. This allows us to have sustainability in terms of profit and cash flow. Two of our projects in Kuala Lumpur, M Centura, and M Vertica's Tower A are scheduled to have their topping up ceremony in the next few months, which symbolises the completion of the structure of the development and building," he said.