1 moving ahead · ground floor, mct tower, one city, jalan usj 25/1, 47650 subang jaya, selangor...
TRANSCRIPT
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Annual Report
2018
MovingAhead
Our Annual Report theme this year encapsulates the corporate positioning and vibrant mindset of an evolving corporation with a bright future.
This strategic direction is guided by our Vision and Mission to excel as an integrated property developer shaping the future with a commitment to sustainable ecosystems and affordable housing for the community.
Driven by our Core Values of ‘Positive’, ‘Proactive’ and ‘Innovative’, backed by a highly professional and experienced team, we will continue to add shareholder value and enhance quality of life as a benchmark in every future endeavour.
Embracing sustainable ecosystem ideas in our properties to make our communities healthier, safer, greener, more liveable and more prosperous.
To build the perfect sustainable community.
Vision
the Rationale
Mission
MovingAhead
at a
Glance
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Estimated Gross Development Value (“GDV”) of
RM15.6 billion from ongoing and future developments
RM1.4 billion
as at end of financial year 2018 (“FY 2018”), secured revenue stream until 2020.
unbIllED sAlEs
Total Landbank
acres514.7
sIzEAblElAnDbAnk
First land acquisition since 2013 in prime locations within Subang Jaya and Petaling Jaya.
Estimated combined GDV of
RM1.5 billion to be recognised over the next 6 years.
sTRATEgIC lAnDbAnk
ACquIsITIOns
Future Projects(372.5 acres)
Ongoing Projects(142.2 acres)
79%
21%
sAlEs sTATus (As at 30 June 2018)
CYBERSOUTH
100% Sold O
ut
100% Sold O
ut
99.2% Sold
37.1% Booked (9
3 units)
Casa Green
Casa View
Casa Bluebell
Casa Wood
L AKEFRONT
90.1% Sold
82.3% Sold
86.2% SoldLF Residence T1 & T2
LF Residence T3 & T4
LF Residence Total
96.3% Converted
PR1MA Homes
02 Mission and Vision
03 2018 at a Glance
07 Corporate Profile
09 Corporate Information
10 Corporate Structure
11 Calendar of Events
15 Financial Highlights 2018
47 Board of Directors
49 Board of Directors’ Profile
57 Key Senior Management and Management Team
59 Key Senior Management Profile
02 47Highlights leadership
Table of Contents
17 Chairman’s Statement
21 CEO’s Statement
31 Management Discussion & Analysis
17Management’s Perspective
87 Corporate Governance Overview Statement
99 Additional Compliance Information
100 Statement of Directors’ Responsibilities in Respect of the Statutory Financial Statements
101 Statement on Risk Management and Internal Control
104 Audit and Risk Management Committee Report
192 List of Properties
194 Analysis of Shareholdings
196 Notice of Annual General Meeting
200 Form of Proxy
87 192Corporate governance Other Information
65 Sustainability Statement 107 Financial Statements
65 107sustainability Financial statements
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Corporate Profile
CYBERSOuTH SALES GALLERY
3 2
LAKEFRONT @ CYBERJAYA
SKYPARK @ CYBERJAYA
8
Established since 1999. listed since 2015.
Moving ahead in 2018.
O N g O i N g A N d U N d E v E L O p E d L A N d B A N K S i z E
514.7 acres
E S T i m A T E d g d v
rm15.6 billion
MCT Berhad (“MCT” or “Company”) was established in 1999 with a paid-up capital of RM250,000. Today, it is one of the larger property counters listed on Bursa Malaysia Securities Berhad (“Bursa Malaysia”) with a market capitalisation of RM1.2 billion as at 30 June 2018. This success has largely been due to our integrated business model that allowed us to keep major development processes in-house. We have our own design, construction and purchasing teams as well as pre-cast and ready-mix concrete plant. The results: saving time, managing costs and adapting fast to market changes and demands.
Our focus now is on developing affordably priced projects at strategic locations where our remaining landbank of 514.7 acres are. With an estimated GDV of approximately RM15.6 billion, our ongoing and future projects are spread across Cybersouth in Dengkil as well as Skypark and Lakefront in Cyberjaya. 2018 also marks the first time since 2013 where we acquired new parcels of land in Subang Jaya and Petaling Jaya for future development.
Our Mission is to embrace sustainable ecosystem ideas in our properties to make communities healthier, safer, greener and more liveable. In line with this and leveraging on our core competencies in integrated developments, we strive to deliver well-designed, quality enhanced, sustainable and affordable homes that will bring about social, economic and environmental benefits to the communities and the areas around them.
We will continue to uphold our Positive, Innovative and Proactive core values to push boundaries in creating sustainable and connected communities. We are confident of drawing on the expertise of our founders and our strategic investor, Ayala Land, Inc. (“Ayala”), together with the wide-ranging experience of our team, to face the challenges of the future and position ourselves to deliver strong financial performance as well as shareholder value in the years ahead.
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Tan sri Dato’ sri Abi Musa Asa’ari bin Mohamed norChairman
Jose Juan z. JugoChief Executive Officer
BOARD OF DIRECTORS
Corporate Information
AUDIT AND RISK MANAGEMENT COMMITTEE
Lao Chok Keang (Chairman)Tan Sri Dato’ Sri Abi Musa Asa’ari Bin Mohamed NorTan Sri Dato’ Hj. Abd Karim Bin Shaikh Munisar Anna Maria Margarita Bautista Dy
REMUNERATION COMMITTEE
Tan Sri Dato’ Sri Abi Musa Asa’ari Bin Mohamed Nor (Chairman)Tan Sri Dato’ Hj. Abd Karim Bin Shaikh MunisarBernard Vincent Olmedo Dy
NOMINATION COMMITTEE
Tan Sri Dato’ Hj. Abd Karim Bin Shaikh Munisar (Chairman)Tan Sri Dato’ Sri Abi Musa Asa’ari Bin Mohamed NorBernard Vincent Olmedo Dy
COMPANY SECRETARIES
Chan Sau Leng (MAICSA 7012211)Ruzeti Emar Binti Mohd Rosli (LS 0009965)
REGISTERED OFFICE
Level 8, Symphony House,Pusat Dagangan Dana 1,Jalan PJu 1A/46,47301 Petaling Jaya,Selangor Darul Ehsan, MalaysiaTel No. : +603-7841 8000Fax No. : +603-7841 8199
HEAD OFFICE/PRINCIPAL PLACE OF BUSINESS
Ground Floor, MCT Tower, One City,Jalan uSJ 25/1,47650 Subang Jaya,Selangor Darul Ehsan, MalaysiaTel No. : +603-5115 9988Fax No. : +603-5115 9995Website : www.mct.com.my
REGISTRARSymphony Share Registrars Sdn BhdLevel 6, Symphony House,Pusat Dagangan Dana 1,Jalan PJu 1A/46,47301 Petaling Jaya,Selangor Darul Ehsan, MalaysiaTel No. : +603-7849 0777Fax No. : +603-7841 8151
AUDITOR
Messrs. Deloitte PLTChartered AccountantsLevel 16, Menara LGB,1, Jalan Wan Kadir,Taman Tun Dr Ismail,60000 Kuala Lumpur,Wilayah Persekutuan, Malaysia
SOLICITORSMessrs. Rajes Hisham Rahim & Gopal6th Floor, Yee Seng Building,15, Jalan Raja Chulan,50200 Kuala Lumpur,Wilayah Persekutuan, MalaysiaTel No. : +603-2026 6606Fax No. : +603-2026 6607
Messrs. Low & LeeSuite A-05-07, Block A, Level 5,Sky Park @ One City,Jalan uSJ 25/1,47650 Subang Jaya,Selangor Darul Ehsan, MalaysiaTel No. : +603-5115 0007Fax No. : +603-5115 0020
Messrs. Skrineunit No. 50-8-1, 8th Floor, Wisma uOA Damansara, 50, Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur,Wilayah Persekutuan, MalaysiaTe No. : +603-2081 3999Fax No. : +603-2094 3211
PRINCIPAL BANKERS
Malayan Banking BerhadAmbank (M) Berhad
STOCK EXCHANGE LISTING
Main Market of Bursa Malaysia Securties BerhadStock Name: MCTStock Code: 5182
INVESTOR RELATIONS
Email: [email protected]
Tan sri Dato’ sri goh Ming Choon
Tan sri Dato’ Hj. Abd karim bin shaikh Munisar
bernard Vincent Olmedo Dy
Anna Maria Margarita bautista Dy
lao Chok keang
Ching Hong seng(Alternate Director to Tan sri Dato’ sri goh Ming Choon)
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Corporate Structure
Notes:(1) 70% held by Cherish Properties Sdn. Bhd.
Except as otherwise expressly stated, all companies in this structure are wholly owned by their respective holding companies.
USJ •One Avenue S/B
The Place •Properties S/B
MCT Homes •S/B
Lakefront •Residence S/B
Eco •Green City S/B
Next •Delta S/B
Cherish •Properties S/B
Vista Global •Development
S/B (1)
• Sky Park Properties S/B
• Undersea City S/B
• MCT Property Management S/B
• One Residence S/B
• MCT Properties S/B
• Subang Residency S/B
• SPCJ Green Tech S/B
• One City Development S/B
MCTbERHAD
MCT COnsORTIuM
bHD.
100%
100%
70%
Property Developer
Project/Property Management
Property Investment
Hospitality
TradingHouse
Energy &utilities
Contractor
Ecolake •Residence S/B
Premium •Cinema S/B
MCT •Store S/B
Solid •Benefit S/B
Leisure •Event S/B
Solid •Interest S/B
Nexus •Advertising S/B
• Solid Recommendation S/B
• Skypark Fitness S/B
• MCT Construction Materials S/B
• Modular Construction Technology S/B
• MCT Green Technology S/B
• Timeless Hectares S/B
• Roaring Gain S/B
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Calendar of Events
We hosted and organised a wide array of activities
throughout the year to engage and foster stronger relationships with our stakeholders and the
communities in which we operate in.
The following list of events were held throughout the year:
January ‘18
October ‘17
Completed disposal of OCP realising net gain of
RM17.9 million
PR1MA Open Day at MCT Tower - One City
on 14 & 15 Oct.Turnout of
607 visitors with
417 bookings closed
Grand opening of Lakefront @ Cyberjaya sales gallery
with turnout of
250visitors.
Annual Dinner 2018 — Wild Wild West Party
was held at Le Meridian Putrajaya Hotel
for our employees
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February ‘18
Ayala increased stake in MCT to
66.3% after MGO
Annual Dinner 2018 — Wild Wild West Party
was held at Le Meridian Putrajaya Hotel
for our employees
Chinese New Year celebration @ Cybersouth and Lakefront sales gallery with lion dance performance & lucky draw
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Calendar of Events C O N T d .
Launched Casa Wood @ Cybersouth
Acquired9.1 acre land in Subang Jaya
for RM143.0 million
Disposed Ecity realising net gain of
RM 21.5 million
April ‘18
May ‘18
14Ramadan break fast charity event with children from Rumah Amal
Limpahan Kasih and donation in cash and in kind
Hari Raya Celebration with MCT Family
Hari Raya celebration @ Lakefront sales gallery with
Malay traditional dance performances and cooking workshop
by Chef Zam
May ‘18
June ‘18
July ‘18
Kidzania Go @ Cybersouth sales gallery,
orphans from Joy to the World Community Services were invited
for a day of fun
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Financial Highlights 2018
YEAR EndEd 2016 2017 2018
FinAnciAl REsults (RM’000)
Revenue 654,908 589,708 436,426
Total Expenses 151,950 109,944 121,949
Profit Before Tax 119,295 110,263 116,233
Profit Attributable to Equity Holders 77,367 63,660 78,810
FinAnciAl Position (RM’000)
Total Cash and Bank Balances 93,292 88,206 186,696
Total Current Assets 906,813 674,668 967,799
Total Debts 188,417 243,861 234,691
Total Current Liabilities 608,868 374,014 522,934
Total Equity 720,854 784,512 863,302
FinAnciAl RAtios
Basic Earnings per Share (sen) 5.80 4.77 5.76
Net Asset per Share (RM) 0.54 0.59 0.63
Current Ratio (times) 1.49 1.80 1.85
Net Debt-to-Equity Ratio (%) 13.2% 19.8% 5.6%
Return on Equity (%) 10.7% 8.1% 9.1%
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35,400
84,006
2,543
29,393
115,582
6,975
19,494
87,684
2,766
NET dEBT-TO-EqUiT Y R ATiO(%) in FY 2018
5.6%
pROFiT AT TRiBUTABLE TO EqUiT Y HOLdERS(RM’000) in FY 2018
RM 78,810
2016 2017 2018
11.8%
10.8%
18.1%
77,3
67
63,6
60
78,
810
Profit attributable to equity holders margin
2016 2017 2018
Sales & Marketing
Direct Operating & General Admin
Finance Cost
121,949
NET ASSET pER SHARE(RM) in FY 2018
RM 0.63
2016 2017 2018
0.5
4
0.5
9
0.6
3
TOTAL CASH ANd BANK BAL ANCES(RM’000) in FY 2018
RM 186,696
2016
2017
2018 5.6
13.2
19.8
2016 2017 2018
93,2
92
88,2
06
186,
696
TOTAL EXpENSES(RM’000) in FY 2018
RM 121,949
109,944151,950
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A YEAR OF ENCOUR AgEmENT ANd CHANgEIn FY 2018, we saw great milestones come forth not only for our Group, but also for our country. Despite the headwinds facing our economy, our gross domestic product is expected to expand by 5.0% by the end of 2018. Our inflation rate remains controlled, hovering between 0.8% and 2.7% in 2018. unemployment and poverty rates in Malaysia are at 3.3% and 3.8% respectively, which are among the lowest in Southeast Asia. Government expenditure on national infrastructure accounts for 16.4% of our national budget. Such expenditure will increase connectivity, both locally and internationally, which can only further spur business growth. The average age of our country’s population is a young 27 years, where we are well-positioned to harvest demographic dividends for decades as young Malaysians become more productive. All these statistics reflect the strong fundamentals set in place in the past and are now carrying us through as our nation competes at and contributes to the world stage.
Notwithstanding, as a nation, people came together on 9 May 2018 at the 14th Malaysian General Election (“GE14”) and decided that it was time to start doing things differently. During GE14, Malaysians turned the page and embraced national change for the first time in over six decades. What now lies ahead for our country can only be a future that we can all face together with even more confidence.
Chairman’s Statement
It is with delight that I present to you MCT’s annual report for FY 2018 – our third full year as a property development firm listed on Bursa Malaysia.
The past year has been one of trials at both the macro industry level, as well as at the Group level with MCT undergoing rapid and positive transformation. With the financial year now ended, I am pleased to say that it has been a year of victories for our Group.
Tan sri Dato’ sri Abi Musa Asa’ari bin Mohamed norChairman
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pOSiTiONEd WiTH CONFidENCE Over the past year, our Group has positioned itself well to ride the crest of change. We looked at ourselves from the outside and decided to pursue only what we can truly grow in meaningfully. With this approach, we dedicated all resources to build only on our core competencies. That decision was right and we have been able to unlock substantial value which is now being reinvested to grow our Group in the right areas. Just as importantly, it has allowed us to secure more land – our raw material, and pipeline new projects to feed our clear plans to increase shareholders’ value.
Ayala – our single largest shareholder from the Philippines, has likewise demonstrated its increased confidence in our nation and our Group. In January 2018, Ayala acquired an additional 17.2% of equity from Tan Sri Dato’ Sri’ Goh Ming Choon and initiated a mandatory general offer that was extended to all shareholders, which was our Group’s first major corporate exercise since listing (“MGO”). What started out in 2015 as a 9.2% equity investment by the Philippine-based conglomerate is now at 66.3%. This now makes MCT a subsidiary of a true titan in Southeast Asia.
As we are now part of Ayala, it is all the more incumbent on the Board of Directors of our Company (“Board”) and on Management to further strengthen our Group’s corporate governance practices. Serious emphasis shall be placed on instituting policies, procedures and practices to bring our standards to the world class levels of our parent company.
Chairman's Statement C O N T d .
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OUR OUTLOOKWe will continue reaping steady gains for years to come from our existing landbank. Our landbank for ongoing and future developments remains at a healthy 514.7 acres. From these properties, we will realise GDV of RM15.6 billion over the next 15 years.
As our Management is embarking on a plan to grow our Group many times over, new parcels of land were secured in new and separate locations to have multiple sources of income happening together. We are off to secure even more development land to deliver the growth targets for our Group through our own operating cash, debt, and strategic partnerships.
Our Board has seen our Management’s growth targets over the next five years and is supportive of the initiatives. We are positioning ourselves well in an industry that has stronger days coming towards it.
ACKNOWLEdgEmENTSAs MCT’s Chairman, I extend my thanks first and foremost to all employees who have worked tirelessly to make our Group continuously better and more competitive. We had undergone rapid change over the last two years and it is remarkable how the organisation has resiliently adapted to, and taken on new demands.
I likewise thank my fellow Board members for their contributions and cooperation in corporate governance. FY 2018 has been one out of the ordinary because of the MGO and I am proud to chair a Board that boldly stepped-up during such a critical corporate exercise. The MGO was a turning point for our Group and our Board truly played its role in protecting the interests of both the majority and minority shareholders.
And to the shareholders – all of you – I express my sincerest gratitude for staying with us. We are still a very young public listed company but we have our eyes and minds set firmly on growth. It is with your continued trust and support during this period of national and organisational change that our objectives will be met.
BOARdROOm CHANgES During the MGO, Dato’ Sri Tong Seech Wi, our Group’s co-founder decided to divest most of his shares and pursue other fields of interests. While he still remains as a minority shareholder, he has since stepped down from the Board. Datuk Lim Kok Boon has also decided to leave the Board to pursue personal interests. For their dedicated service to our Group all these years, I truly thank them on behalf of all Directors and shareholders.
“ We had undergone rapid change over the last two years and it is remarkable how the organisation has resiliently adapted to, and taken on new demands. ”
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Jose Juan z. JugoChief Executive Officer
CEO’s Statement
pROTECTiNg OUR BAL ANCE SHEETFY 2018 saw us aggressively defend our balance sheet. We defined who we are as an organisation and what our core is all about. As a property firm well-grounded in the development segment, we exited businesses that we felt were preventing us from moving faster in our arena. In January 2018, we completed the sale of One City Properties Sdn. Bhd. (“OCP”), our subsidiary which owns the commercial space for lease as well as our carpark and ballroom operations. In May 2018, we followed through by selling our hotel and cinema operations via the disposal of ECity Hotel Sdn. Bhd. (“Ecity”). Both transactions unlocked a net gain of RM39.4 million for us to use in growing our core business operations.
By unloading these operations, we are now much nimbler. These two businesses that we have worked very hard to build in the previous years are now in the hands of new owners who are better equipped to take those organisations to greater heights.
FY 2018 was a year of many challenges but ultimately, of success. Our year-end punctuates a period of change that paved the way for a now more agile Group that posted considerable bottom line growth over the previous financial year.
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23A YEAR OF dELivERY ANd gROW THThe resources generated from the disposals of our non-core assets were immediately deployed to operations with better value generation for our Group. As a first priority, we ensured that projects experiencing construction delays were brought back on track. For FY 2018, RM329.2 million was spent to fast-track the completion of 2,452 units across our main growth engines of Skypark @ Cyberjaya, Lakefront @ Cyberjaya and Cybersouth. As we moved ahead with the construction of these projects, we have been able to drawdown RM226.0 million in sales proceeds. This cash is now being cycled back into our operations to sustain our growth plans. Another RM495.7 million in sales proceeds will soon be ready for drawdown by the end of 2018 because we have been able to bring construction back on schedule.
“ While FY 2018 has been a year of construction completion, it has also been a year of new launches. ”
CEO's Statement C O N T d .
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Project completion means that we are now in the midst of turning over the finished units to our customers.
We started turning over 86 units of Lakefront Villa in August 2017. A year after, we turned over 898 residential and office units in Skypark @ Cyberjaya. 97.9%% of these units have been accepted as of 30 September 2018. By the end of calendar year 2018, another 948 units in Cybersouth from Casa Green and Casa View, and 606 units in Lakefront Residence are to be turned over to our purchasers. As a property firm, we are delighted to see the projects that we started a few years ago are now transforming into living communities.
The results of our aggressive moves to complete and deliver projects are evident. We ended FY 2018 with RM78.8 million in profit after tax (“PAT”), a 23.8% increase versus FY 2017. While we are now posting growth in our net income, our liquidity position is likewise in a good state. Our unbilled sales as at 30 June 2018 stood at RM1.4 billion, ensuring us a stable source of cash inflows. Among our ongoing projects, 70% of all major contract packages have been awarded, locking-in RM450.0 million in construction costs thereby abating risks in price fluctuations of materials. Our now stronger balance sheet reflects opportunities for us to leverage more as an avenue to raise capital for future projects to sustain our growth.
While FY 2018 has been a year of construction completion, it has also been a year of new launches. We launched a total of 251 units with GDV of RM188.5 million at Cybersouth’s newest phase Casa Wood in May 2018. There will be more launches in 2019 and the investments we are making through these launches will be our sources of rewards in future years.
“ There will be more launches in 2019 and the investments we are making through these launches will be our sources of rewards in future years. ”
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AYAL A’S SUBSidiARYIn January 2018, Ayala through its wholly-owned subsidiary Regent Wise Investments Limited (“RWIL”) bought an additional 17.2% equity in MCT from Tan Sri Dato’ Sri Goh Ming Choon, one of our Group’s co-founder. The additional equity acquisition triggered the MGO. During the MGO, our Group’s co-founder, Dato’ Sri Tong Seech Wi decided to sell 14.7% of his shares to Ayala via RWIL, thus making him a minority shareholder. As of today, Ayala owns 66.3% of our Company, making us a subsidiary of the Philippine-based property giant, the second largest property developer in Southeast Asia by market capitalisation.
“ Ayala owns 66.3% of our Company, making us a subsidiary of the Philippine-based property giant, the second largest property developer in Southeast Asia by market capitalisation ”
Ayala’s increased shareholdings in our Company is a strong vote of confidence for our organisation. Our parent company is known for its long-term vision, strong corporate values, relentless pursuit of excellence and drive to champion environmental sustainability and sustained growth. As an integral part of the Ayala group, we will now strive even harder to grow our business here in Malaysia – to align ourselves as a subsidiary of a much larger organisation and to become a major contributor to Ayala’s bottom line in the years ahead. Our strategic plans and initiatives are now being tightened to meet aggressive targets set to do just that.
CEO's Statement C O N T d .
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CONFidENCE iN THE mARKETOur Group’s growth plans are reflective of our confidence in the property market and in the economy. While we acknowledge that the property market has been stronger in the past, we remain confident and optimistic that stronger days for the industry are coming. The property market has always been cyclical. While we are not yet at the peak of industry recoveries, winning organisations will take advantage of this period of correction and properly position themselves to be ahead of the curve when the time comes. This is precisely what we are doing.
At the national stage, GE14 saw an entire nation come together for the change it wanted. For the first time in sixty-one years, the unprecedented change happened. As the nation has positioned itself for growth in the years to come, so shall our Group. The overall growth in Southeast Asia, the strong fundamentals in Malaysia’s economy, a resilient currency, confidence of Malaysians in the government, a predominantly young population that will continue to have demands for homes and a sizeable market in Klang Valley - these are the key backdrops underpinning our positive outlook for our industry and our organisation.
The time to plant the seeds for our future harvest has come.
gROW TH pL ANS, 5-IN-5The gains from FY 2018 allowed us to position ourselves in the market for sustainable growth. In April 2018, we made our first land acquisition as a public listed company. We secured 9.1 acres of prime development land in Subang Jaya, Selangor. The acquisition was made for RM143.0 million and will generate a GDV of RM1.0 billion for our Group over the next 6 years. The project team has been in the planning process since the purchase was made, and we intend to launch the project in the first half of 2019.
In August 2018, we closed a second acquisition for a strategic 1.8 acres development land in Petaling Jaya, Selangor. This development is expected to generate RM456.6 million in GDV for our Group. The transaction will be completed before the end of 2018. The planning process for that project has also started, with intention to launch the project by the end of 2019.
In view of what we have accomplished in FY 2018 and with the land acquisitions that we have made, we plan to embark on a series of project launches in our existing bastions and in new growth areas. While our Group has competed mainly in the Cyberjaya and Dengkil areas for several years now, we will soon be present in more areas that will serve as springboards for our growth. Our Group will have multiple projects ongoing at the same time compared to only two in past years. We will have more engines running simultaneously to move us forward faster.
These acquisitions and coming launches are the beginnings of our aggressive plans to grow our Group’s bottom line five times in five years. By expanding our Group’s geographical footprint in Klang Valley, and becoming present in different areas with different projects ongoing at the same time, this plan will come into fruition. Our 5-in-5 plan will entail being present in more growth centres, forging new strategic partnerships and preparing the organisation for the demands to launch, market and deliver multiple projects on a continuous basis.
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pREpARiNg THE ORgANiSATiONAs we plant these seeds of growth, our organisation must likewise be prepared. Human capital and talent management shall be the backbone of a stronger organisation as we are working hard towards even greater professionalisation, especially now that we are part of a much larger conglomerate.
Our talent management processes have been made more stringent for hiring wherein we scout for talents that bring value to our Group. We hone our employees for greater opportunities within the organisation that truly fit their personal goals and career development. We think twice before hiring more people because we prefer giving more responsibilities, ownership and fulfillment to the talent we already have. We want our people to have meaningful careers that they can excel, flourish and grow in.
We are taking extensive measures to strengthen teams. First and foremost, the Property Development team has been streamlined as a business-oriented nerve centre focused not only on simply implementing projects, but also in ensuring that the projects deliver the multi-dimensional commercial, organisational and social results committed when they were planned and launched.
In Design and Construction, we have made intentional, sharp deviations from past practice and started tapping into external designers for new market-facing ideas. While we have true strength in having our in-house design teams, we are not precluding ourselves from looking outwards to develop better projects. Execution in these groups will be a focal point as we complete projects and launch new ones. It is through the thoughtfulness in our designs and in the quality of our end products that we will be appreciated and remembered by our customers and trusted by the market.
“ We hone our employees for greater opportunities within the organisation that truly fit their personal goals and career development. ”
CEO's Statement C O N T d .
28We also continue to restructure Sales and Marketing in anticipation of greater demands from them in the coming months. We have been placing great emphasis in building-up a much stronger, more dedicated and prouder sales force to promote and sell our existing projects and to come front and centre as ambassadors of our Group when we launch our new projects. It is only through our sales team on the ground that we can have a true pulse for the market and develop the right products.
At the corporate level, we are going through great lengths to build the capabilities of our Human Resources and Organisational Development team. They will need to support the different Heads of Department as stronger teams are unified and built throughout our Group. The demands ahead will be high and it is only with a well-prepared, professional forward looking organisation that those demands will be met.
“ I thank my colleagues in MCT – my fellow employees with whom I go through each day trying to make our organisation better – one step at a time. “
gR ATiTUdEIn closing, I wish to thank a series of people without whom our Group would not have come this far.
Firstly, I thank Dato’ Sri Tong Seech Wi, our Group’s co-founder and former Executive Director for his many contributions to our Group. As he decides to turn a new chapter, I wish him only the best on behalf of the entire organisation. I likewise thank Datuk Lim Kok Boon, our former Executive Director who at this time of restructuring, has also decided to leave our Board and pursue his personal interests. The contributions of both gentlemen continue to be felt and appreciated.
Secondly, I express my thanks to our Board for their collective knowledge in strategy and policy setting – especially during the past year that saw our Group go through a very important restructuring. Their overall guidance has been integral to our success.
Thirdly, to all shareholders of MCT. I thank you all for the trust you continue to place on our vision and our mission. It is with your belief in us that we embark on our journey towards growth.
A special note of appreciation: I thank my colleagues in MCT – my fellow employees with whom I go through each day trying to make our organisation better – one step at a time. The past year gave us many challenges and many trials. For having risen to all of them, my gratitude to you is deep.
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We are committed to strengthen our position with a concrete and strategic growth plan.
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Management Discussion & Analysis
MCT was listed on the Main Market of Bursa Malaysia on 6 April 2015 following the completion of a reverse takeover exercise. An integrated builder, our Group consists of three key segments, namely property development, construction and complementary businesses.
In FY 2018, MCT went through a corporate exercise with the MGO by Ayala, our single largest shareholder and one of Southeast Asia’s biggest property developer in terms of market capitalisation. Pursuant to the MGO, MCT became a subsidiary of Ayala via RWIL who currently owns a 66.3% stake in MCT.
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OUR BUSiNESS mOdEL We are a fully integrated property developer armed with capabilities to undertake every aspect of the property development value chain, from land acquisition and project development to design and construction as well as complementary businesses which services the residents and locators within our completed developments.
Based on our core values and vision, we believe we can enrich the lives of the residents and locators in our communities to which we have built a framework that clearly defines our business model:
coRE BusinEss coMPonEnt WhAt WE do
Property Development We currently have 514.7 acres of landbank for our ongoing and future projects throughout the Klang Valley. We are focused on delivering quality homes to the broader market segment across all our developments. Drawing on our Management’s collective expertise and experience, we are focused on securing more landbank at strategic areas and expand beyond our current footprint.
Construction We adopt an integrated development philosophy centred around modular construction technology. For any products, we are well-positioned to be flexible, agile and evolve with changing trends. We blend in-house expertise together with ideas from external consultants which will not preclude us from looking outwards to develop better projects.
Complementary Businesses We undertake complementary businesses to service residents and locators at our completed developments. Such businesses currently include the leasing of office and retail space, provision of utilities and property management services as well as a fitness centre at One City.
Despite the challenges in the property market, we are set to deliver our commitments by taking actions to strengthen our business and competitive advantage in the long term. We are focused on expanding our footprint within the Klang Valley through strategic acquisitions and product enhancement, backed by operational excellence and efficiencies. We have started on this venture in FY 2018 with observed improvements throughout the organisation.
FiNANCiAL REviEWWe ended FY 2018 with RM436.4 million in total revenue, lower than FY 2017’s RM589.7 million by 26.0%. This is because most of our projects are nearing completion and thus leading to lower revenue recognition. Despite the dip in revenues, PAT for FY 2018 stood at RM78.8 million, a 23.8% increase from FY 2017’s RM63.7 million.
Gross profit margin improved to 44.3% for FY 2018 from 34.2% in FY 2017 with savings from construction cost realised across all projects. We have also optimised the ratio between spend and earnings through our cost rationalisation and operating efficiencies initiatives. Direct operating expenses was at RM31.0 million with one-off liquidated ascertained damages (“LAD”) of RM24.0 million. If the LAD of RM24.0 million was excluded, direct operating expenses would only be RM7.0 million, an all-time low for our Group. General and administrative expenses were also lower for FY 2018 at RM53.0 million as compared to RM65.0 million for FY 2017. On the other hand, sales and marketing expenses increased to RM35.4 million for FY 2018 from RM19.5 million for FY 2017 as total sales for FY 2018 stood at RM705.7 million as compared to RM344.5 million for FY 2017.
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FiNANCiAL REviEW CONTd.
In FY 2018, we completed the disposal of OCP and Ecity, the subsidiaries which owns the commercial space for lease as well as our carpark, hotel and cinema operations. Accordingly, we recorded a gain on disposal amounting to RM39.4 million for FY 2018. There were also no further impairment of assets in FY 2018 whereas a RM13.6 million impairment was recognised in FY 2017 for our Group’s chiller plant used to provide utilities services.
PAT margin for FY 2018 was 18.1% as compared to 10.8% for FY 2017. Effective tax rate for our Group was at 25.8%, 1.4% lower than the 27.2% recorded for FY 2017. Tax efficiency measures are being implemented as we are in the midst of a comprehensive tax review and planning exercise across our entire Group.
Our total borrowings decreased to RM231.3 million in FY 2018 from RM237.6 million in FY 2017 due to the redemption of loans related to OCP and Ecity. Our net debt-to-equity ratio remains at a healthy 5.6% which reflects our ability to further leverage for landbanking purposes.
pROpERT Y SECTORReal estate activity picked up during the first half of 2018 as sentiments shifted to active inquiries versus speculation, whilst property developers revised marketing approaches to sell existing inventories and launch new projects. This positive outlook in the market cushioned the effect of oversupply experienced in previous years at certain locations in Malaysia. The industrial property sector also emerged as a promising alternative asset class for developers apart from the traditional residential and commercial markets.
Liquidity within the property development market remain tight as stringent lending rules were enforced and approval rates remain low as household debt remain high.
Though market and economic conditions during FY 2018 proved challenging, it was also opportunistic for MCT as our strategies on sales and launches have been optimised. We benefited from the resilient demand for products priced below RM700,000 per unit as most of our inventories and launches were priced below RM700,000. Without affecting expenditure, extensive marketing and selling efforts also effectively pushed our products into the market.
Our Group’s total sales of 2,115 units for FY 2018 proved that we were able to ride the market with a holistic approach in product positioning and marketing.
Management Discussion & Analysis C O N T d .
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Our strategy to capitalise on opportunities and positioning ourselves as an integrated property developer proved to be an effective means to thrive in the sector amidst challenging conditions.
busInEss REVIEw
pROpERT Y dEvELOpmENTOur strategy to capitalise on opportunities and positioning ourselves as an integrated property developer proved to be an effective means to thrive in the sector amidst challenging conditions. Evolving with the trends of the market, we strategically placed our focus on the affordable market segment which is well received by the general public despite the slow growth in the overall property sector. The property development segment remains the key revenue driver for our Group, contributing RM422.0 million in revenue, or 96.7% of our Group’s revenue, down from 97.9% for FY 2017.
Being cognisant that accessibility is a major consideration when purchasing a new property, our projects and landbanks have direct access to major highways as well as existing and future LRT and MRT stations. Putrajaya-Cyberjaya Expressway, North-South Expressway Central Link (ELITE) and Lebuhraya Damansara-Puchong (LDP) are just one of the many highways connected to our developments.
Besides having good accessibility, our developments in Cyberjaya and Cybersouth are situated at southern Klang Valley’s Golden Triangle consisting the three main economic hubs namely Putrajaya, Cyberjaya and the Kuala Lumpur International Airport. In addition, our developments are strategically located near the matured residential and commercial areas of Subang Jaya, Shah Alam, Putra Heights and Klang with many facilities such as shopping malls, schools, universities, and hospitals surrounding the area. This ensures the long-term sustainability of our townships and will also bring in a higher population over time.
We remained focused on launching products priced below RM700,000 per unit and on the continued disposal of existing inventories. We are in our second year of expanding our sales network, streamlining our construction sector for better productivity and improving efficiencies in our operating sectors. Synergies between us and Ayala have been effected starting with initiatives in processes, supply chain management and human resources.
We currently have 514.7 acres of landbank for our ongoing and future projects with RM15.6 billion in total GDV. We also expanded our footprint in Subang Jaya and Petaling Jaya via two land acquisitions which will contribute GDV of approximately RM1.5 billion that will be recognised over the next six years as part of the project pipeline for launch.
Our marketing efforts have proven effective with our existing inventory kept to a minimum with 264 units left amounting to a GDV of RM163.6 million as at 30 June 2018. We sold 2,115 units with GDV of RM705.7 million during FY 2018, or an average of 176 units or GDV of RM58.8 million per month during FY 2018. The favorable take-up rates were reflected in the healthy unbilled sales of RM1.4 billion as at 30 June 2018 which effectively secured our revenue stream for the coming financial years.
Over the course of FY 2018, we successfully unlocked the values of our developments by completing Skypark @ Cyberjaya. Casa Green and Casa View at Cybersouth and Towers 1 and 2 of Lakefront Residence are also targeted for handover by the end of 2018. With the completion of these projects, we will be moving into an exciting phase with the launching of several new projects in the pipeline.
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Cybersouth@ Cyberjaya
Cybersouth is a sprawling 417-acre township located in Dengkil which is a mere 6km south of Cyberjaya. Boasting beautiful homes with affordable prices and spacious built-up areas, it is suitable for families who are looking for properties with more space and lush greenery. At the heart of the integrated township is a 25-acre central park which features a jogging track that doubles as a cycling track surrounded by nature and a playground nestled within the grounds.
Given its strategic location, this development is well-connected to major highways such as the Maju Expressway (MEX), SILK Highway, ELITE, KLIA Expressway, South Klang Valley Expressway (SKVE), LDP and the Putrajaya-Cyberjaya Expressway. It is also serviced by the Express Rail Link (ERL) and the future MRT Line 2.
Management Discussion & Analysis C O N T d .
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Key updates during the year are as follows:
Casa green
Casa View
LAUNCH YEAR 2015
NO. OF UNITS 418
TYPE DOUBLE-STOREY LINK HOUSE
GDV RM239.8 MILLION
UNITS SOLD 100%
Casa Green which was our maiden project in Cybersouth was launched in 2015 comprising 418 units of two-storey link houses with a combined GDV of RM239.8 million. The project is 100% sold and is expected to be handed over to buyers by the fourth quarter of 2018.
Casa View was launched in 2015 and received a favourable response from consumers as evidenced by its sold-out status. Comprising 530 units of two-storey link houses with a combined GDV of RM392.4 million, this project is expected to be handed over to buyers by the fourth quarter of 2018.
LAUNCH YEAR 2015
NO. OF UNITS 530
TYPE DOUBLE-STOREY LINK HOUSES
GDV RM392.4 MILLION
UNITS SOLD 100%
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Casa bluebell
Casa wood
After a break of two years, the third phase in Cybersouth, Casa Bluebell was launched in May 2017. Originally slated to be two-storey link houses with larger built-up area and a higher price tag, we adapted to market needs and changed the development plan to build townhouses instead. Comprising 264 units of townhouses with a total GDV of RM136.0 million, this lake-fronting project is targeted at families as all three generations can live under one roof together. Each residence comes with a private roof garden for the upper unit and a 30-feet-wide pedestrian friendly back lane with landscaped gardens. This phase of townhouses proved popular with buyers and is 99.2% sold as at 30 June 2018.
Casa Wood which is the latest phase in Cybersouth was launched in May 2018 with 37.1% of bookings received as at 30 June 2018. Featuring 251 units of two-storey link houses with a GDV of RM188.5 million, this phase offers modern equipped homes designed with a tropical garden concept.
LAUNCH YEAR 2018
NO. OF UNITS 251
TYPE DOUBLE-STOREY LINK HOUSES
GDV RM188.5 MILLION
BOOKINGS 37.1%
LAUNCH YEAR 201 7
NO. OF UNITS 264
TYPE TOWNHOUSES
GDV RM136.0 MILLION
UNITS SOLD 99. 2%
Management Discussion & Analysis C O N T d .
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For FY 2018, Cybersouth contributed 47.3% or RM199.6 million to the property development segment as compared to RM157.1 million in FY 2017. Casa Green and Casa View are expected to be handed over to buyers by the fourth quarter of 2018 with slower completion rates with the projects being at the tail-end of the development phase.
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lakefront @ Cyberjaya
Nestled on a 60-acre freehold land is Lakefront @ Cyberjaya, a mixed development consisting of high rise condominiums, villas and commercial outlets. Situated by the lake with lush greenery and beautiful landscaping, the development comes with resort-styled facilities such as themed recreational gardens, jogging paths, outdoor workout stations, rooftop infinity pool and a clubhouse which comes with complete amenities.
To add on to the numerous conveniences already found at Lakefront @ Cyberjaya is a newly opened Chinese school, SJK(C) Union which is situated within the Lakefront @ Cyberjaya development. The school was completed at the end of 2017 and enrolment started in March 2018. The school is expected to increase the population and foot traffic at Lakefront @ Cyberjaya moving forward.
Management Discussion & Analysis C O N T d .
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LAUNCH YEAR 201 7
NO. OF UNITS 3, 243
TYPE CONDOMINIUM (7 TOWERS)
GDV RM1.1 BILLION
UNITS SOLD 96.3% (PR1MA HOMES)
LAUNCH YEAR 2013
NO. OF UNITS 2,424
TYPE CONDOMINIUM (8 TOWERS)
GDV RM1.4 BILLION
UNITS SOLD 90.1% 82.3% (T1 & T2) (T3 & T4)
Key updates during the year are as follows:
lakefront Villa lakefront Homes lakefront Residence
Spread across 16 acres with a GDV of RM207.0 million, the 110-unit Lakefront Villa focuses on comfortable, green and healthy living, showcasing well-landscaped spaces and recreational facilities exclusively for residents. In August 2017, we completed and handed-over Phase 1 of Lakefront Villa, which consists 86 zero-lot units of two to three-storey bungalows. 96.5% of the 86 units have been sold as at 30 June 2018.
Lakefront Homes is a vertical development which caters to the affordable housing segment and comprise 3,243 units with a combined GDV of RM1.1 billion. Phase 1 of the Lakefront Homes development is the PR1MA Homes which is a residential project under collaboration with Perbadanan PR1MA Malaysia (“PR1MA”). It was sold en-bloc to PR1MA as part of the Government’s initiatives to provide affordable housing for the general public. With an average price tag of RM280,000, PR1MA Homes is targeted to be completed by 2020. Phase 2 of the Lakefront Homes development is the Market Homes which comprise 1,311 units with an average price tag of RM450,000. It is slated to be launched by the fourth quarter of 2018.
Lakefront Residence is a high-rise condominium project fronting the lake with eight towers comprising 2,424 units with a combined GDV of RM1.4 billion. Phase 1 comprising the first two towers was launched back in 2013 is 90.1% sold as at 30 June 2018 and will be ready for handover by the end of 2018. Phase 2 comprising towers 3 and 4 have received positive responses from the market as seen from its conversion status of 82.3% as at 30 June 2018 and shall be completed by 2020.
LAUNCH YEAR 2013
NO. OF UNITS 1 10
TYPE BUNGALOWS
GDV RM207.0 MILLION
UNITS SOLD 96.5 %
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For FY 2018, Lakefront @ Cyberjaya contributed 52.6% or RM221.8 million to the property development segment as compared to RM308.7 million in FY 2017. This is largely contributed by construction progress for Lakefront Homes and Lakefront Residence who will continue to be the major contributors for FY 2019.
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skypark @ Cyberjaya
Standing tall in Cyberjaya with a sky bridge at the 23rd floor is the iconic Skypark @ Cyberjaya which was launched in 2013 with an estimated GDV of RM479.8 million for the components for sale. This mixed development is built on an 11.1 acre freehold land, boasting six towers which includes serviced apartments, offices, retail and hotel components.
In July 2018, Tower 1, 2, 3 and 5 consisting 296 service apartment units, 224 SOFO studio units, 192 duplex SOFO units and 186 office suites units respectively were handed over to their respective buyers. Tower 6 which was sold en-bloc to Pelaburan Hartanah Berhad was handed over in October 2018.
Management Discussion & Analysis C O N T d .
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busInEss REVIEw C O N T d .
CONSTRUCTiON Our in-house construction arm shall remain as the backbone of our property development projects by servicing our Group’s requirements either through full contractor or project management arrangements. An optimised mix between in-house contractor and outsourced services are to be reviewed to keep up with the expected project pipeline with optimised capital and human resources requirements.
We are cautiously optimistic about the prospects of the hotel and retail segments given a dampened sentiment in retail space and consumer spending. We are reviewing our plans for the development of these spaces to address market demands and in alignment with our growth plans.
COmpLEmENTARY BUSiNESSWe maintained our property management, fitness centre and utilities services operations to service completed developments. In FY 2018, we disposed OCP and Ecity, the subsidiaries which owns the commercial space for lease as well as our carpark, hotel and cinema operations. We are currently reviewing our operating plans for the remaining operations under the complementary business for operational efficiency and excellence.
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busInEss REVIEw C O N T d .
HOW WE mANAgE OUR RiSKS Our risk management procedures are reviewed at least once a year to address and mitigate internal and external risks. This ensures that we are able to deliver on our committed growth plans and maintain our competitiveness in the property development segment over the longer term.
RisK hoW WE MAnAGE ouR RisKs
Declining landbank size We currently have 514.7 acres of landbank for our ongoing and future projects throughout the Klang Valley with a GDV of RM15.6 billion that will sustain our project pipeline for the next 15 years. Our landbank is concentrated at strategic areas and we are expanding our landbank footprint to other strategic areas within the Klang Valley as we continue to grow MCT. This was evidenced by our acquisition of two new landbank at Subang Jaya and Petaling Jaya respectively. These two new projects will be launched in 2019 and is expected to contribute RM1.5 billion in GDV and 1,682 units over the next six years.
As part of our growth plans, we are actively scouting for at least two land acquisitions per year over the next three years either through direct acquisitions or joint ventures.
Market competition and conditions especially in the affordable segment
As an integrated developer with a commitment to deliver, we are doing a 360 degrees review of our operations, products, quality management systems as well as customer service and experience. The transformation shall be targeted towards product excellence and value creation for our buyers.
uncertain macro-economic outlook and weaker Ringgit
Synergies between our Group and Ayala as well as within our organisation allows us to increase efficiencies and cost-savings as everything is done in-house. This also enhances our flexibility and agility to change and adapt rapidly to market evolution. We have also streamlined operations within the construction segment, supply chain management and human capital to optimise operating, general and administrative expenses.
sTRATEgIC DIRECTIOn
Being the first large international investment in Southeast Asia by Ayala, we have been on the verge of growing the business exponentially, riding cautiously the Malaysian market and hitting the sweet spots in terms of strategy, pricing, location and product.
Our business portfolio has been strategically streamlined with the sale of shares in OCP and Ecity in January 2018 and May 2018, respectively. The divestments of our investment assets and hotel operations unlocked RM199.3 million in cash for our Group. There will also be savings in direct operating expense moving forward pursuant to the disposals. The proceeds from our divestment were reinvested via strategic acquisitions and working capital into our property development business which is where our strength lies.
Management Discussion & Analysis C O N T d .
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In FY 2018, we also launched our 5-in-5 internal campaign throughout our organisation with the target of growing our Group’s bottomline by five times in five years. One of the strategies we will implement to meet the 5-in-5 target is to acquire strategic landbanks within the Klang Valley with an aggressive acquire-and-launch model. In April 2018, we announced the acquisition of a 9.1 acre land at Subang Jaya - our first land acquisition since we were listed in April 2015. In August 2018, we announced the acquisition of a 1.8 acre parcel of land in Petaling Jaya – our first land acquisition outside of the Subang Jaya and Cyberjaya region. Both acquisitions with a combined GDV of RM1.5 billion are slated to be launched in 2019, as part of our growth plans.
In line with our 5-in-5 campaign, we have introduced various initiatives to improve operational efficiencies in FY 2018.
We enhanced our supply chain management by streamlining procurement procedures and sourcing, realising additional savings and obtaining favorable credit terms from our partner suppliers. In addition to in-house initiatives, we aligned with Ayala’s supply chain network to centralise and boost our procurement and supply chain efficiency.
Direct operating expenses (excluding LAD) and general administrative expenses were optimised as illustrated through the 31.6% dip from FY 2017 and prior years’ levels. Head count strength was kept at approximately 500 people with streamlined processes in operational policies without sacrificing operational efficiencies.
As we consider our people as our biggest asset, we undertook various human capital initiatives via group-wide organisational campaigns to bring our Group to the next level in terms of staff productivity and efficiencies. As property development is considered to be a local play, we have capitalised on our Malaysian talents by deploying them at key management positions to steer and manage our Group.
Initiatives from FY 2017 for sales and marketing have been maintained and even raised to the next level with 2,115 units being sold during FY 2018 as compared to 478 units in FY 2017. Our internal sales force have been strengthened with the formation of MCT Properties Sdn. Bhd., where our sellers are rewarded based on successful sales conversion and are dedicated solely to selling MCT’s products. Sellers are provided with support and requisite tools to push our products to the market. Customer service is likewise being upgraded across all business segments. This models will not only allow us to train a seller-base that is well-versed with our products and loyal to the MCT brand, but will build a larger base of repeat buyers.
Corporate governance has been further strengthened as we implemented a more comprehensive Enterprise Wide Risk Management procedure with regular updates across our organisation. The whistleblowing system was enhanced through an extensive policy backed by a whistleblowing hotline to encourage improvements in current governance and business practices across the organisation. We will continuously review our operating procedures and remain committed to constantly improving our governance policies and practices. We will also uphold ourselves to prudent financial management practices and the highest governance standards, even as we embark upon our growth story.