Sunway grooms for changes

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Sunway grooms for changes

Post by Cals on Mon 14 Apr 2014, 00:06

Published: Saturday April 12, 2014 MYT 12:00:00 AM 
Updated: Saturday April 12, 2014 MYT 11:01:13 AM

[size=40]Sunway grooms for changes

BY B.K. SIDHU
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Jeffrey and likely successor Sarena.
AFTER decades of building a township in Sunway, tycoon Tan Sri Jeffrey Cheahknows that determining who will take the Sunway group forward will be crucial.
His daughter Sarena Cheah, 40, looks to be the anointed successor, given her 18 years with the group getting involved in different facets of the business. His son Evan, 35, is learning the business by getting involved in its international operations.
Whoever is picked will have big shoes to fill once Jeffrey calls it a day.
But that isn’t happening anytime soon. Jeffrey seems to have a new drive as the group, which has just a morsel of land at its prized Sunway when it first started developing it 30 years ago, has started expanding into the property sector elsewhere
Developments in Iskandar Malaysia and abroad, along with a makeover of sleepy Tambun, Perak, has seen Sunway not only up its potential in gross development values, but the group is sizing up lucrative jobs through its construction arm.
“There is a lot going on out there and I am up to my nose with work. We have to do our jobs first,’’ he adds.
The Sunway group once had seven listed companies but it’s now down to two –Sunway Bhd and Sunway Reits Bhd – after the structure and shareholding was streamlined. The boom in the property and construction sectors saw the group chalk up its best ever net profit in 2013 with RM1.5bil, though boosted by non-recurring fair value gains.
Analysts are expecting the group to launch RM1.9bil worth of property launches, of which RM300mil will come from its maiden launch in Iskandar Malaysia in Johor where it has 1,800 acres for development.
And Jeffrey is on the lookout for more land in the Klang Valley as only 50 acres of the 700 acres development in Sunway are left for development. Sunway’s construction unit is also eyeing RM2.5bil new jobs this year, of which 70% of the new contracts will be external jobs. Last year it had RM2.3bil new jobs that helped boost its order book to RM3.9bil as at the end of 2013. The construction arm is keen to take on more jobs for the elevated packages for MRT2, after landing jobs for MRT 1.
“We are very confident of getting at least RM2.5bil new construction jobs. They should be in the bag within this year,’’ he tell StarBizWeek.
Jeffrey, a self-made tycoon, is not handing plum positions to his children unless they go through the grind. They have to justify their positions.
Though they have the benefit of a university education, Jeffrey feels they need practical training to understand what it takes to manage an organisation.
Sarena has taken 18 years to be joint MD, despite working in various units and going back to university for her MBA a few years ago.
“Sarena knows my style, but when my team says she is ready, then she will take over as MD of Sunway Bhd,’’ says Jeffrey.
As for Evan, Jeffrey says “we are still paying tuition fees in China and Evan has been put to test to learn to swim with the sharks. China and India are big economies, so this learning process is good training as things are changing very fast there. They may make mistakes but they will learn from them.’’
Jeffrey adds that the stint in China will do Evan a lot of good. He also does not expect the China operations, where Sunway is building some high-rise residential blocks, to be a major contributor to earnings but the knowledge learnt will be useful.
“I am very concerned and hope that whoever takes over can grow the company into a much bigger organisation, hence, all these training that Sarena and Evan are being put through will put them on their toes,’’ he adds.
There is going to be an abundance of incoming supply in Johor Baru where Sunway has a joint venture with Khazanah Nasional Bhd and Iskandar Investment Bhd to develop 1,800 acres. The question raised by many is... will it be able to attract buyers for its high-rise units?
Jeffrey agrees, but contends that “Johor is a crowded market, but we have to create a unique selling point and we have the sea, the forest and the connectivity to offer at Medini.”
CIMB Research says that although property demand of late has been relatively muted, margins are likely to be good given the Sunway group’s low land cost.
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[size=12]Evan is learning the business by getting involved in its international oper ations.

Sunway’s holding cost is lower than many other developers in that area. It bought 700 acres for RM25 per sq ft (psf), and another piece of 1,100 acres, also known as the Pendas land for RM12 psf.
In comparison, it only paid RM1 psf for the Sunway land in Bandar Sunway, which now fetch valuations of RM100 psf to RM500 psf.
The 1,800 acres add more landbank to Sunway and the Medini Iskandar development is projected to have a GDV of over RM30bil. Jeffrey says “we are also confident that the take-up rate of our property launches in Iskandar would be good and the RM30bil GDV is a very conservative figure.’’

Bandar Sunway and beyond
Jeffrey is contented that the 50 acres at Bandar Sunway will take sometime to develop. On top of that, there is the Iskandar land that will keep the group busy.
“We are always looking for new land. As for the Klang Valley, there are parties courting us to buy their land or even enter into joint ventures. The landowners want to have a joint venture with us probably because they know we can deliver. We are working on developing 500 acres and since the negotiations are still under way, we cannot share more information at this juncture,’’ he says.
“The next big township development that we may undertake will be at least 500 acres,’’ he says.
There are also plots in several locations in Malaysia and overseas. Sunway is developing residential and commercial units and has construction jobs in China, India, Cambodia, Vietnam and Singapore. It has morphed from pure property into construction, hospitality, retail, medical, leisure and commercial properties group.
“We have so many things planned out and that will keep us busy for a long time,’’ Jeffrey adds.
Developing the 800 acres in Sunway has taken Jeffrey 30 years and although it has limited land there, Sunway thinks the infrastructure improvements, such as the LRT extension that will cut through Bandar Sunway and the bus rapid transit known as the Sunway Line, will add to traffic at its theme park.
Jeffrey hopes visitation to the Sunway Resort City will increase dramatically from the current 40 million with such infrastructure upgrades.
Construction is also a huge business earner, and when combined with property and property investment, contribution to core earnings for the full year is 75%. That equation will remain for a long time, adds Jeffrey. Having rode through two economic crisis, he feels there “are bubbles in some areas in the property market.’’
“It is simply because there are no entry barriers. A plot owner of 10 acres wants to be a developer and when he can’t sell, the banks tighten the screws on lending and that makes it difficult for the players in the industry,
“There are bubbles in commercial property, malls and even in some areas in the residential property market. It just needs one developer to come down and there will be a snowball effect,’’ he adds.

Philanthropic work
The Jeffrey Cheah Education Foundation is now managed by a group of trustees and offers a sizable number of scholarships every year.
“We started when there were not many places to study at our universities and that was in the mid-1990s. Then the ringgit had dropped to a level where it was difficult for parents as they had to send a lot of money to their children studying overseas. We then came up with our twinning programmes, as we had tied up with universities in Britain, Australia and the Nursing college,’’ he says.
A decade later, he has added several universities for the twinning programs to the list and the group has 16,000 students and two universities.
“And a decade later, to avoid shareholders demand for dividends so that the institutions can focus on delivering quality education we have set up a foundation for perpetuity. The foundation has nine trustees. The idea is not to make money but plough back the surpluses of about RM50mil from fees into giving out scholarships. This year we will award RM15mil worth of scholarships. The foundation is self sustaining and has tie-ups with Australia’s Monash UniversityHarvard University, and Lancaster University,’’ he adds.
The next thing on his list is to look for possible tie-ups with Cambridge and Oxford, and also more Asian and South Asian universities.
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