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With the property market trending towards low-cost and mid-tier housing as consumers avoid luxury properties, more developers are tightening their belts in anticipation of the lower profit margins found in these segments.

This is seen in LBS Bina Group Bhd’s recently announced 2019 outlook, in which the construction-cum-property player set a sales target of RM1.5 bil for the coming year, a 17% downward revision of its 2018 target of RM1.8 bil.

Sales growth to moderate

The figure duplicates its 2018 sales performance of RM1.53 bil. Properties in Klang Valley accounted for 90% of these sales, with 63% priced below the RM500,000 mark. It also follows on four consecutive years of sales revenue growth for the developer, rising from RM645 mil in 2014 to RM1.43 bil in 2017.

Launches above RM1 mil comprise just 1% of LBS Bina’s portfolio, says Lim.

“It was a challenging year both locally and globally in 2018, due to factors such as the general election, fluctuations in crude and palm oil and the ongoing US-China trade war as well as a weakened ringgit,” says LBS Bina group managing director Tan Sri Lim Hock San.

“However, there is still strong underlying demand for quality and affordable units. Our strategy to focus on more affordable units within self-sustaining and matured townships continues to be well-received by the market and has helped us ride through the challenging market conditions.”

In addition to segmentation, the developer also shared that profit margin management would be a core part of its strategy moving forward, as a corollary to the defensive sales target it has set for itself in 2019.

Some of the initiatives LBS Bina has taken to maximise margins amid moderating sales include investments into precast concrete factories and project design optimisation as well as careful management of land costs.

Optimising operational costs

Developers adopting IBS include Gamuda Land, with its Gamuda IBS plant in Sepang.

According to Lim, the group will invest up to RM30 mil into a seven-acre permanent precast plant producing concrete panels in Nilai, Negeri Sembilan this year, via a joint venture between China’s Sany (M) Group and Malaysian Generation Builder (MGB) Bhd, in which LBS Bina has a 55% stake.

The plant will produce 2,000 precast concrete panels a year, bringing the group’s total output to 4,000 units per year in combination with an existing factory in LBS Alam Perdana, Selangor.

Also known as industrialised building systems (IBS), precast elements can bring down costs and enhance safety standards for developers by reducing manpower, material and transportation requirements. Other developers who have adopted precast or IBS elements in include SP Setia Bhd and Gamuda Land Sdn Bhd.

“In line with managing our margins, we have asked our construction arm to maximise the design aspects of our projects in terms of materials and so on, without cutting corners and while considering engineering factors such as loading,” Lim shared with PropSocial.

“In terms of land costs, much of our land was acquired many years ago when prices were cheaper, and this is what allows us to offer lower prices.”

Moving forward, the developer anticipates these measures will assist in meeting its RM1.5 bil sales target, in addition to some RM1.75 bil in unbilled sales it carried over into 2019.

LBS Bina will also be launching projects with an estimated gross development value (GDV) of RM1.82 bil in the coming year. These include double-storey terrace homes in LBS Alam Perdana, Selangor and Bandar Putera Indah, Batu Pahat, as well its Residensi Bintang Bukit Jalil condominium and affordable housing in Cyberjaya.

Launches in Klang Valley will account for 88.4% of these launches, with launches in Perak and Johor accounting for 7.0% and 4.6% respectively. At present, the company has 17 ongoing projects nationwide, with a total GDV of RM3.7 bil.

(By Aliff Yusri, 8 Jan 2019)

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@admin_ps thank you for sharing