Eco World out to make an impact in property sector

by **Cals** Tue 17 Sep 2013, 03:12

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The EcoWorld Gallery at Jalan Ipoh in KL.

THE entrance of Eco World Development Sdn Bhd’s showroom along Jalan Ipoh in Kuala Lumpur breeds of familiarity. With manicured gardens and an appealling look and feel to draw in prospective buyers, one could be mistaken to think that they are walking into a showroom of a developer that has been around for years.
It’s almost that the fingerprints of one of the country’s top developers are all over the new kid on the block, and rightly so.
Eco World was built by former directors and executives of S P Setia Bhd. Its main shareholders are Tan Sri Abdul Rashid Abdul Manaf and Datuk Eddy Leong Kok Wah, a former chairman and director at S P Setia.
“We cannot deny that the DNA of Eco World is not related to S P Setia. It is because of the many years together with Tan Sri Liew Kee Sin (president and CEO of S P Setia),” says EcoWorld CEO Datuk Chang Khim Wah.
“This is a competitive world. We cannot lose sight of SP Setia’s DNA and values and we have decided to build on values that we already have.” Chang has been with S P Setia for around 20 years. Eco World chief operating officer Datuk S. Rajoo too worked with SP Setia for 25 years and many of the top management of EcoWorldhave at one point of their career had roots in S P Setia.
Eco World took its form shortly after Rashid left S P Setia in October last year. Leong followed him out the door in February. After leaving the company, Chang says both still had the passion for property development.
They engaged Chang and sought his input on what can be done next. After exchanging ideas, Chang felt that after 20 years, the time was ripe to head off to greener pastures.
“I talked with Liew and said I wanted to try this together with the ex-directors, to do things much the same way but with a bit of a difference. Liew was happy to hear that and after 20 years, he found his way to rearrange the manpower within S P Setia. He wished us all the best,” he says.

Vehicle for Liew?

Chang points out that the managers that left to start up Eco World were from different managerial tiers at S P Setia. The executive vice-presidents at S P Setia still remain with the company but a number of the next level of senior management decided to go their own ways.
“It’s senior management but those who have done a lot of the groundwork,” says Chang of the people who left for Eco World.
Chang was also quick to quell talk the team at Eco World is getting the foundation ready and warming the seat for Liew when he leaves S P Setia.
He says Tian Xiong, the eldest son of Liew, has no equity in Eco World.
“Xiong is a promising young man and we feel he has the potential to excel in the future. What he really wants to do we don’t know. At least as a favour for my old boss, we can show him the ropes of development,” says Chang on the decision to bring Tian Xiong on board.
Chang says Tian Xiong is a director in name but is not picking up the phone and giving instructions to others to execute.
“It’s not easy and there are lots of things to learn. He is doing things at ground level, working on planning, sales and marketing, and reading legal documents,” he says.
Tian Xiong agrees with him. “I grew up with property and after graduating, I wanted to try the property business, like actually doing the work. Datuk (Chang) gave me the opportunity to work with him.”
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Management team: (from left) CFO Heah Kok Boon, COO Datuk S. Rajoo, CEO Datuk Chang Khim Wah and director Liew Tian Xiong.

Getting things moving

For a company that was conceptualised a short time ago in property timelines, Eco World has amassed some 3,000 arces in quick step.
Funding for the land has come from the shareholders of the company and from bank borrowings. Name association and reputation certainly has helped the company as it has found it not an issue to work with banks to raise project financing.
The company has bought land from private owners and from DRB-Hicom Bhd as it pooled together 3,000 arces in Penang, KL and Johor.
Eco World has in its books 5.26ha in Air Itam, Penang and 24.28ha in Seberang Prai; 433ha in Semenyih, Selangor; 497.76ha in Tebrau and 154.99ha in Senai, Johor.
In April, Eco World paid RM534.7mil to DRB-Hicom for 248.48ha in Johor.
“Rashid and Eddy had been with S P Setia for many years. They are not without resources and not unknown. They are respected in the property sector,” says Chang.
Eco World has leveraged off its two main shareholders when it came to accumulating property. Rashid, a long time chairman of S P Setia, has many friends who have land, says Chang, and that has helped facilitate the quick accumulation of landbank.
Chang says that Eco World has submitted plans to authorities to get their projects off the ground. It does not have the luxury of sitting on the land to wait for a better time to launch, like how other large property companies do.
Due to its age, it needs to get things off the ground quick. Urgency is also needed as the company needs to generate cashflow to pay for the land it has acquired, one example being incremental larger progressive payments to DRB-Hicom for the land it purchased in Johor.
“We are developers and we need to catch cycles. We cannot commit to one or two pieces of land and wait for maturity to come in. The minute we commit to land, I ask all our colleagues when are we launching.
“There is no time to hold on to it. We plan very fast. It’s a big numbers game. The minute you commit, you have to go. It may seem to be in a hurry to others outside the industry but some developers may even want to do it faster.
“We are in a rush. We are a new development company. We want our marketing and images to come out in double quick time. Development is a race,” he says.
The first of its developments that will get off the ground is a township in Nusajaya called EcoBotanic. The township with over 270 acres will comprise cluster and semi-detached houses and the launch of the project is slotted for next Saturday.
Thereafter, it will be launching the EcoSky project in Kuala Lumpur along Jalan Ipoh. That will be a commercial and residential development on a 10-acre plot of land. That will be launched at end October of early November.
Another project Eco World will launch in 2 months is factories in Tebrau, Johor. The semi-D and cluster factories will be on a 600-acre site.
It’s also gated and guared and designed with the environment in mind.
Projects that are on the cards next for launch will be residential developments in Penang, both on the mainland and on the island.
Altogether, the projects are estimated to have a gross development value of RM30bil and will be enough to sustain the company for the next 10 to 15 years.

Risks of doing so much

With so many projects set to be launched, execution risk will be something Eco World will need to be aware of.
Chang says that execution risk is something the company is well aware off and is prepared for.
It has enough staff to handle each of the projects that will be launched and more will be hired as the projects gets off the ground and when the company needs to deal with buyers.
Chang says although Eco World is a new company, it has ties with experienced contractors and partners. Many in the company’s management has got to know them when doing business at S P Setia and Chang says Eco World has enough linkages with support partners.
A testament of sort to the confidence in Eco World has been the property jobs it has won from Salcon Bhd, where Leong, a shareholder of Eco World, is currently a director.
“We have been in this business for 20 years and I have been in 5 or 6 rounds of a roller-coaster cycle. There is no such thing as a right timing. You must believe in your product and your product must be in a good location. Plus the design must be good,” Chang says.
One buffer Eco World does not have is the advantage of buying land at a cheap price years ago like many of the developers. Plus with the property market at a high and the possibility of more cooling measures when Budget 2014 is announced, there is a risk that the market will cool off and so will property prices.
Chang says its not an issue. “Luckily, a lot of our land is purchased at a reasonable price. Most of our deals were done late last year, it’s not at exceptionally high prices,” he says.
He feels that it will be hard for prices to come down as prices are not inflated because of speculation but as a result of land prices. “Land is expensive and material cost is high. It’s the same with labour cost. These are ongoing challenges everyone has to meet, not only us.”