Message To Our Shareholders
(extracted from Annual Report 2018)
2018 was a year of reflection, re-strategising, perseverance and follow-through, amidst a challenging operating environment domestically. The fruits of our labour, being a net profit after tax of some RM63.4mil as compared with a net loss after tax of RM180.5mil in 2017 have once again proven that with hard work and team work, nothing is impossible.
Key contributors to performance
This achievement was primarily due to the following:
- Increased work progress from existing housing and construction projects;
- Higher property sales of about RM133mil achieved during the year, which was 26% higher than that achieved in 2017;
- Recovery of additional claims of about RM27mil for a completed project, which was higher than the initial expected sum;
- Improvement in the share of results from Dayang Enterprise Holdings Bhd. (DEHB) and its subsidiary, Perdana Petroleum Berhad (PPB), from a loss of RM40.6mil in 2017 to a profit of RM38.7mil in the year under review.
- Sustaining the performance
Although there is no way of looking into the ‘crystal ball’, we believe we have built the right foundation in moving forward, as follows:
- Continued focus on medium affordable properties;
- Enhancement of the service value chain for properties;
- Completion of order book on time, with quality and within budget;
- Realignment of operating structure to be regionally-focused to facilitate better execution of responsibilities, and faster decision making and problem solving;
- Constant improvement in cost management;
- Continued efforts in talent development and management creating a positive work culture and environment for our workforce.
Besides the above, our recent fund raising exercise (i.e. rights issue) which managed to raise funds of up to RM118.7mil will further support our property development activities and par down our borrowings.
Looking ahead in 2019
We expect the outlook, operating environment and challenges for 2019 and the immediate term to be as follows:
The property market remains challenging due to factors such as hike in costs of borrowing, huge property overhang, strict lending policy and persistent lukewarm buying sentiment.
It has also been observed that the housing affordability threshold of the average urban household in Sarawak generally remains below RM350,000, a factor which may drive the demand for affordable properties, but could also adversely affect the demand for higher-priced properties. While the Government has implemented various policies to drive home ownership such as stamp duty waivers and other incentives, the outcome of these policies remains to be seen amidst the strict lending policies which may result in intending purchasers failing to obtain loans to purchase residential properties.
Taking stock of the above, we expect the demand for our medium affordable properties to be sustained and at the same time, continue to face challenges in terms of take-up of our high-end properties. Nevertheless, despite these challenges, our Group will embark on various sales and marketing initiatives to sell existing, on-going and completed units, while adopting a cautious approach towards news project launches moving forward. Our Group expects to launch more affordable and medium-range properties as we strive to tailor our products in meeting the changing customer demands due to the existing economic sentiment. We will also schedule our launches based on market dynamics. In addition, various easy and flexible property ownership schemes have been introduced to help sustain demand for these properties.
Besides property sales, we will continue to strengthen our leasing functional unit in an effort to secure tenants for our unsold commercial and residential properties for temporary recurring income. Ultimately, units on lease present better value proposition for property investors, which can help drive the sale of these units.
We remain hopeful on the Sarawak Corridor of Renewable Energy (SCORE), a long term development plan designed to accelerate Sarawak’s economic growth by attracting some RM300billion worth of investments by 2030 (Source: Borneo Post, 25 August 2018) in continuing to create a bustling business environment to help sustain market demand in the State, including property and construction segments. Some of SCORE’s upcoming mega projects such as the estimated RM8.4bil and RM12.65bil methanol and steel plant respectively are also something to look forward to. (Sources: https://www.thestar.com.my/business/business-news/2018/01/24/rm84bil- and https://www.thestar.com.my/metro/metro-news/2017/10/12/china-firm-to-invest-rm1265bil-in-bintulu-proposed-steel-plant-offers-plenty-of-jobs-and-economic-sp/)
Besides SCORE, the 342 Sarawak-centric projects initiated by the State Government which include infrastructure projects such as coastal roads, bridges and utilities will augur well for the local economy by presenting opportunities in the construction sector and increasing employment opportunities, adding value to the creation of a vibrant business environment. (Source: http://www.theborneopost.com/2019/01/14/rm6-2-bln-worth-of-sarawak-centric-projects-on-track/)
Another welcomed initiative is the State Government’s intention in spearheading a digital economy initiative that aims to revolutionise the State’s economy and industries, and spur socioeconomic growth and advancement – the State has committed to a fund of RM2bil towards boosting internet connectivity and capacity throughout Sarawak by setting up the necessary infrastructure. (Source: http://www.theborneopost.com/2019/01/13/the-rise-of-sarawaks-digital-economy/). With the anticipated greater global outreach, job creation and increase in business opportunities, it is hoped that such economic enhancement will accelerate growth and increase wealth, leading to a vibrant business environment generally.
As part of our long term plans, we will continue to increase the size of our land bank by acquiring land at strategic locations in Sarawak, Sabah and Peninsular Malaysia, which will further strengthen our property segment. The slowdown in the economy, which is expected to continue in the next few years, could also give rise to the opportunity in acquiring land at bargain price.
We are encouraged by the allocation of RM11bil worth of projects by the State Government for the construction of road-related and utility infrastructure throughout Sarawak within the next 2 years, namely the RM6bil coastal highway project, RM2.8bil water supplies project and RM2.3bil electricity supplies project.* As an experienced contractor in such infrastructure projects, our Group sees the potential to leverage on these opportunities, which can boost our short-term and long-term earnings.
(*Sources:https://www.theedgemarkets.com/article/advancecon-plans-big-strides-sarawak and https://www.malaymail.com/news/malaysia/2018/10/23/cm-sarawak-to-spend-rm11b-on-infrastructure/1685756)
Operationally, we remain focused on project implementation and monitoring to facilitate the completion of works on time and within budget, namely the Pan Borneo Highway (Pantu Junction to Batang Skrang section), SPNB affordable housing projects in Miri and Kuching, KPJ Miri Specialist Hospital, Tanjung Manis housing project, and UCTS Phase 2 project, our joint-venture project with Hock Peng.
Our total outstanding construction order book in the sum of about RM1.4bil is expected to contribute to our short term and medium term earnings.
We will push on with our efforts to maintain our existing tenants and attract new tenants in order to create a good tenant mix for our retail properties, such as Naim Permy Mall, Miri and part of Naim Street Mall, Bintulu. Some of these efforts include the introduction of exciting leasing packages and organising of interesting community-related events on a continuous basis to boost traffic to our retail properties.
Besides the above, the upcoming launch of the Fairfield by Marriott upscale business hotel at Naim Bintulu Paragon in Q4 2019 is expected to enhance the value of our development in time to come.
We may also look into divesting non-performing businesses to realise some funds.
Associate Company – Dayang Enterprise Holdings Bhd.
Premised on Dayang’s order book replenishment of more than RM1bil for the next five years due to the award of maintenance, construction and modification (PM-MCM) contracts by Kebabangan Petroleum Operating Company Sdn Bhd and Murphy Sarawak Oil Co Ltd and Murphy Sabah Oil Co Ltd, bringing its total order book to more than RM3bil which are call out orders to last until 2023, we expect this to contribute positively to its financial performance. (Source: https://www.thestar.com.my/business/business-news/2018/08/28/dayang-order-book-crosses-rm3bil-mark/).
Now that we set in motion our recovery plan, we would like to assure all shareholders of our continued commitment to see things through. We are honoured for your confidence and support in us and we greatly hope for your continued support in time to come.
Finally, we would like to record our appreciation to all our stakeholders: our shareholders, customers, clients, team members and their families, Directors, joint venture partners, subcontractors, consultants, financiers and associates for their dedication, concerted effort and faith in us.
Our heartfelt gratitude also goes to Ministries, Departments, Statutory Bodies and Regulatory Agencies for the support extended to our Group.
We value and look forward to your continued support and dedication as we undertake new challenges and opportunities ahead.
Once again, thank you and our warmest regards.
Datuk Amar Abdul Hamed Bin Haji Sepawi
Datuk Hasmi Bin Hasnan