This article first appeared in City & Country, The Edge Malaysia Weekly on November 14, 2022 - November 20, 2022

No. 7 | IOI Properties Group Bhd

It has been a productive year for IOI Properties Group Bhd, the property arm of IOI Corp Bhd. Upon arriving at the group’s headquarters in Puchong, the team excitedly showed City & Country their name tags, which are emblazoned with the slogan “Trusted.”.

“Trusted. is something that we have been nurturing across our company’s ecosystem and among our consumers and stakeholders,” says IOI Properties Group CEO Datuk Voon Tin Yow.

In line with its ethos, the developer has been instilling confidence in its consumers and focusing on delivering its bread-and-butter products. In recognition of its steadiness and consistency, the group is ranked in the Top 10 of the Top Property Developers Awards.

Voon observes, “We saw an improvement across all sectors and we are on track to achieve our targets. We have flexibility in [determining] our product range to meet the demand and catchment across the entire spectrum of the market. Moving forward, 47% of our product launches in FY2023 will fall within the range of RM500,000 to RM1 million.”

For over three decades, and since being listed on Bursa Malaysia in 2014, IOI Properties has been hailed as one of the country’s leading public-listed developers with a strong reputation and proven track record in property development, property investment, leisure and hospitality.

With a total landbank of 9,000 acres, its portfolio of projects include townships such as IOI Resort City in the Klang Valley and Bandar Putra Kulai in Johor, as well as developments in Singapore and China.

“We have prepared a five-year product launch plan at the group level across all our townships to better coordinate and monitor the trajectory of overall sales revenue generation. This allows us to be nimbler in reacting to changes in the market,” says Voon.

He shares with City & Country the group’s plans and strategies. The following is an excerpt from the conversation.

Datuk Voon Tin Yow: It was a challenging year as we were faced with uncertainties in the market environment during the initial recovery phase of the pandemic. Despite the challenges, the group continued to deliver resilient results. Our surge in net profit was driven by improved financial performance across all of the group’s business segments.

The property development segment accounted for 81% of the group’s total revenue, recording RM1.93 billion in property sales and RM2.1 billion in revenue. Driven by higher sales of completed units, the successful inventory clearance rate was 27%. This segment was powered by the Home Ownership Campaign (HOC) and IOI Xtend campaign. Meanwhile, IOI Palm City in Xiamen, China, accounted for 28% of the group’s revenue.

Our property investment segment has contributed RM77.6 million (about 14%) to the group’s revenue, representing a 27% increase from FY2021. The property investment side has been driven by strong footfall and recovery in the retail sector supported by the reopening of our borders and the economy.

The strong recurring income is due to the step-up in rental rates and an increase in the rent percentage from the malls in Malaysia. Operations at IOI Mall in Xiamen also commenced at the end of last year. During the lockdown period, we provided rental relief to support our tenants, which is part of our pragmatic tenant retention strategy.

Since the relaxation of restrictions, our malls have seen brisk recovery due to pent-up demand, resulting in record quarters in terms of the malls’ footfall and revenue. The completion of IOI City Mall Phase 2 has made IOI City Mall the largest mall in Malaysia, adding more than 300 retail outlets to Phase 1 with a total net lettable area (NLA) of 2.5 million sq ft.

Our hospitality and leisure segment has also seen improvements. Apart from our malls, the relaxation of restrictions and the reopening of borders enabled our hotels to make a healthy recovery as well.

We capitalised on the emergence of domestic staycation trends by offering staycation promotions and increased our sales through the Marriott International Travel Programme known as Marriott Bonvoy. In the coming financial year, we anticipate a stronger recovery for our hotels.

Looking ahead, we are optimistic that all our business segments are well positioned for sustained growth in the long term.

For our property development side, we are a township developer with a portfolio of existing well-established townships.

We intend to enhance our product offerings in terms of design and functionality, the infrastructure and amenities in our townships. At the same time, we continue to build our team by strengthening the corporate culture and work ethic to ensure effective execution.

For our property investment side, we will continue to accumulate assets for recurring income. For example, we completed the Phase 2 expansion of IOI City Mall in IOI Resort City, Putrajaya, this year and IOI Mall Xiamen at the end of last year.

In Singapore, IOI Central Boulevard Towers — a Grade A, Green Mark Platinum office in Marina Bay — will contribute significantly to the group’s revenue when completed.

We also have two hotels under construction, namely the Grand Sheraton in Xiamen, scheduled to be completed at the end of 2023, and Moxy Hotel in IOI Resort City by mid-2024. Our property investment segment will be accretive in contributing to the group’s revenue over time.

There were numerous challenges faced by the real estate industry [although some were transient] such as the persistently high level of unsold stock, elevated building material cost, labour shortages and rising interest rates and inflationary pressures, which have affected the sentiment of potential buyers. In the face of rising material costs, the group implemented the Industrialised Building System (IBS) for more efficient use of raw materials and a reduction in manual labour.

To address rising interest rates, the group leveraged digital marketing and aggressive promotion campaigns to drive sales of our mid-priced range of products to cater for market demand. For example, we offered sales packages with attractive financing aid (IOI Finance) under selected projects to assist homeowners with their purchases.

We saw a strong recovery in the footfall of our malls in Malaysia. The retail sector was the main contributor at 83% of total property investment revenue, and our commencement of IOI City Mall Phase 2 operations will continue to support recurring income and generate healthy margins for the group.

In China, IOI Mall Xiamen achieved an occupancy rate of more than 92% against a backdrop of economic uncertainties and turbulence in the aftermath of the pandemic.

In Malaysia over the past 12 months, the group’s sales of RM1.93 billion was anchored mainly by sales contributions from our condominiums, two-storey landed homes and shopoffices.

Among our top performing projects in Malaysia during the period in review included Gem Residence in IOI Resort City, Sky Condominium in Bandar Puchong Jaya, Avens 2 in 16 Sierra, Cello 2 in Bandar Putra Kulai and Arena Exchange in Warisan Puteri Sepang.

In Xiamen, our condominium projects at IOI Palm City and IOI Palm International Parkhouse contributed about 23% to our total group sales for FY2022.

For FY2023, we will focus on various strategies to continue our stock clearance and launch products that meet the growing demand in the mid-tier product range. Our property investment segment is anticipated to continue to do well, especially with the recent opening of IOI City Mall Phase 2 and the boost in the tourism industry. In China, we are poised to complete the commercial offices and hotels and are preparing to meet the demand once confidence is restored.

In the Klang Valley, we look forward to launching affordable serviced apartments, double-storey terraced houses, townhouses as well as cluster semi-detached and bungalow homes.

In FY2024, the group is looking to launch a 368-acre industrial park in Bukit Changgang. The industrial land offers various industrial and commercial properties that are either ready to use or built to suit.

We are expecting a busy year ahead with the planning of two transit-oriented developments (TODs), one in Bandar Puchong Jaya and the other in 16 Sierra, Puchong South. In Johor, we have just launched three phases of landed homes comprising single- and double-storey terraced homes, which were launched in conjunction with the grand opening of the new sales gallery in Kulai. We received a very encouraging take-up rate of 80%.

Apart from various product offerings in Malaysia, the group is anticipating exciting developments abroad. In Xiamen, we look forward to the addition of a new five-star Sheraton Grand Hotel. Slated for completion in 4Q2023, it will offer 370 rooms.

In Singapore, we anticipate the completion of IOI Central Boulevard Towers in Marina Bay by the end of 2023. It offers an NLA of 1.29 million sq ft of office space along with amenities such as F&B outlets, wellness spaces, childcare facilities as well as 120,000 sq ft of green landscaping, an urban sky park with a dedicated 200m jogging track, and rooftop planting.

We also aim to launch a residential and hotel development at Marina View in 2023. We are optimistic that the uptrend and strong property cycle in Singapore will augur well for us.

We still have a landbank of about 9,000 acres, with an estimated GDV of RM61 billion. The group took on a sizeable expansion into Singapore last year and we will focus on the completion of our investment properties there and in Xiamen before embarking on any sizeable land acquisitions for the time being.

Construction costs comprise labour, material costs authority-compliance costs. We have been focusing on these three areas to mitigate the rising cost of construction. Currently, labour cost is the number one contributing factor to the high construction cost. Hence, we are increasing the adoption of IBS to mitigate acute labour shortages and the high labour cost. Second, we use cost-effective materials that are practical yet aesthetically pleasing. We source materials locally to reduce the logistics cost and hedge against foreign exchange risks.

Our sustainable goals involve delivering excellence in our products and services, caring for the environment, creating value for all of our stakeholders and developing sustainable communities. In order to achieve our sustainability goals, we are guided by our Sustainability Strategic Framework, which focuses on three pillars — economic, environment and social. We closely monitor our sustainability performance as well as implement initiatives to continually enhance our performance.

We have also adopted a Task Force on Climate-Related Financial Disclosures (TCFD) framework to address climate-related risks and opportunities that cut across our business segments, hence accelerating our sustainability journey.

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