News & Articles Top developers hit by weak mart
Top developers hit by weak mart
27 Jun 2016
KUALA LUMPUR: The country’s leading listed property companies have seen their sales retreat from the peak in 2013, falling at double-digit rates in 2014 and last year, said RAM Rating Services Bhd. The companies were expected to remain challenged by the subdued market, although they would be supported to some extent by their still-robust locked-in sales, it added.
“Our assessment of the five-year performance of the 10 leading listed property companies shows that aggregate sales for eight of them have retreated from the peak in 2013, even falling at double-digit rates in 2014 and last year,” said RAM head of agribusiness, real estate and construction ratings, Thong Mun Wai.
He did not name the companies. The poor showing was in tandem with the slower property market and lack of any significant boost from international projects, which had propped up their sales in the 2011-2015 period, added Thong. He said the aggregate revenue for the eight players had increased at strong double-digit rates between 2012 and 2014, before slowing to six per cent last year. The revenue growth was sustained by progressive recognition of locked-in sales and completion of foreign projects. “Their unbilled sales levels are still robust (despite easing by seven per cent year-on-year last year) and should sustain most of their top lines over the next one to two years.” Despite appreciating revenue, profitability had been narrowing since 2013, with the mean margin on operating profit before depreciation, interest and tax thinning from 24.5 per cent to 16.6 per cent last year.
Thong said the more competitive operating landscape amid the softer market had necessitated more concerted marketing initiatives to promote new launches and clear existing inventory. He said land acquisitions and working capital needs had pushed up the debt levels of most of the 10 developers in the last two years, with some at a rather fast clip. “The collective debt burden of the entire sample expanded a respective 20 per cent and 31 per cent in 2014 and last year, shrinking most of their debt-coverage ratios to the bottom of their five-year range.”
Thong said despite the weakening credit indicators of some of these developers, this was balanced by their strong market positions and reputations, good products, geographical and business diversity, and a vast landbank to sustain their future growth. “Expansion plans are deemed aggressive for about half of the sample, thereby warranting extra caution amid the subdued environment,” he said.
“Our assessment of the five-year performance of the 10 leading listed property companies shows that aggregate sales for eight of them have retreated from the peak in 2013, even falling at double-digit rates in 2014 and last year,” said RAM head of agribusiness, real estate and construction ratings, Thong Mun Wai.
He did not name the companies. The poor showing was in tandem with the slower property market and lack of any significant boost from international projects, which had propped up their sales in the 2011-2015 period, added Thong. He said the aggregate revenue for the eight players had increased at strong double-digit rates between 2012 and 2014, before slowing to six per cent last year. The revenue growth was sustained by progressive recognition of locked-in sales and completion of foreign projects. “Their unbilled sales levels are still robust (despite easing by seven per cent year-on-year last year) and should sustain most of their top lines over the next one to two years.” Despite appreciating revenue, profitability had been narrowing since 2013, with the mean margin on operating profit before depreciation, interest and tax thinning from 24.5 per cent to 16.6 per cent last year.
Thong said the more competitive operating landscape amid the softer market had necessitated more concerted marketing initiatives to promote new launches and clear existing inventory. He said land acquisitions and working capital needs had pushed up the debt levels of most of the 10 developers in the last two years, with some at a rather fast clip. “The collective debt burden of the entire sample expanded a respective 20 per cent and 31 per cent in 2014 and last year, shrinking most of their debt-coverage ratios to the bottom of their five-year range.”
Thong said despite the weakening credit indicators of some of these developers, this was balanced by their strong market positions and reputations, good products, geographical and business diversity, and a vast landbank to sustain their future growth. “Expansion plans are deemed aggressive for about half of the sample, thereby warranting extra caution amid the subdued environment,” he said.
Source: Business Times