I-Bhd looking forward to a record financial year

SHAH ALAM: I-Berhad (I-Bhd) is confident of a record financial year ending Dec 31, 2016 (FY16) and sees its good performance continuing for the next two years.
Its deputy chairman Datuk Eu Hong Chew said the confidence stems from its unbilled sales of RM691.7 million for property development as at December 2015, as well as recognising revenue following the completion of its high-rise properties’ foundation stage where it can start billing customers.

“We’ve reached a stage in construction where we can do a lot of revenue recognisation, so contribution for property development (this year) will easily be double of what it was last year, both in terms of revenue and bottom line,” he told SunBiz in an interview.
The group’s activities continued to be centred on i-City in Shah Alam, a 72-acre freehold ultrapolis that has commercial, residential and leisure components. I-City has an approved gross floor area (GFA) of 13 million sq ft. As at end of 2015, only 1.3 million sq ft of the approved GFA has been completed. Under construction is another 6.3 million sq ft, leaving the balance of 5.4 million sq ft as a strong development pipeline for the next 10 years.
This year, the group has launched Hyde Tower in i-City and 8KiaPeng in Kuala Lumpur City Centre, but does not expect significant sales contribution from these two projects until 2017 onwards. It expects sales to hit RM500 million this year from i-City and 8KiaPeng.
Eu said the group is building the pipeline for the future.
“(Property) sales will give us the confidence that although 2016 is going to be a record year in terms of profit, we’re saying that in 2017-2018, this will continue.
“In the past, a lot of construction was still in the basement stage where we couldn’t recognise the revenue. Today, a lot of the projects in i-City have gone beyond the basement stage so we can recognise more revenue contribution for construction. So even though (if) there are no sales, revenue will still go up,” he explained.
Property development and leisure operations contributed 80.2% to the group’s pre-tax profit for FY15. It does not see any major contribution from property investment until 2018.
Eu said the group is aiming for its property development to hit RM500 million in revenue in two to three years, from about RM250 million last year.

“This year, we think (property development revenue) will touch RM300 million, and next year RM400 million. This is all because of the groundwork we’ve done in the past two to three years.
“We think by 2018-2019, the property investment side will grow and overtake leisure. By then, 50% of the business will be from property development, 30%-35% from property investment and the rest from leisure.
“We should have RM500 million revenue every year from property development, RM1 billion worth of investment properties and RM100 million from leisure. Take 5%-6% yield – that’s RM50-60 million of profits. That’s how we’re building our business model.”
Eu said this is an ideal ratio as it wants to have half the revenue from a recurring income stream, which is property investment and leisure, to mitigate any downturn in the property cycle.
Positioned as an “urban centre developer”, I-Bhd focuses on high-rise development instead of townships.
“We focus on GDV, not on landbank. When we started (i-City) it was a RM3-4 billion development and we managed to increase the GDV, both in terms of increasing the plot ratio and developing new concepts. The GDV has more than tripled since we first started 10 years ago.”
The group opined that it still can enhance the GDV of i-City, as the government has announced projects like LRT3 and Bus Rapid Transit.
“Our focus is still trying to enhance the GDV of i-City, which is a slightly different development focus from other property developers. Because we’re an urban centre, we don’t talk about land size but GDV size and approved area size.
“Looking for landbank could be a distraction, as the enhancement of GDV gives us better opportunity to enhance the properties of the group,” explained Eu.