SDB’s Five Stones in SS2, Petaling Jaya was selling at the price of RM450 psf when launched in 2009. Today, the same unit can command a price of RM 760 psf even in the current environment.
Selangor Dredging Bhd tin-mining days are long behind it but its evocative name is a reminder of its resilience through the ups and downs of the Malaysian economy.
Now known as SDB, the low-key company has successfully remade itself into a property developer known for its niche lifestyle developments in choice locations.
Its forte are small-scale developments which focus on quality, good planning and modern aesthetics. Unlike many developers, it does not own a large land bank but SDB has put its small parcels to thoughtful use.
As an analyst with a foreign research house says: “Under the stewardship of CEO Teh Lip Kim, SDB has always over-achieved in its commitment to deliver quality homes. The company is very focused on its business strategy and always goes the extra mile to building lifelong relationships with purchaser – and this stance is its most powerful driver which is why I have never heard a complaint about Selangor Dredging properties but plenty of compliments.”
“What’s more, although SDB properties tend to command a premium over competitors, majority of purchasers have enjoyed huge capital appreciation in their investments.”
A good example is Five Stones in SS2, Petaling Jaya which was selling at the price of RM450 per square foot when it was launched in 2009. Today, the same unit can command a price of RM 760 per square foot even in the current environment.
“As a banker (prior to becoming an analyst), I have dealt with Public Bank in many instances. I have come across a few companies that Public Bank are very supportive of. These companies have always proven to be well run companies with high integrity and professionalism in the way the carry out business. Selangor Dredging is one of these elite few,” the analyst further said.
Strong fundamentals and financials
SDB’s first development was launched in 2004. Today, property development now accounts for more than 80% of its revenues, with the rest coming from property management and leasing.
SDB’s completed projects include the exclusive Park Seven in KLCC, 20Trees in Taman Melawati, Dedaun on Jalan Ampang and Five Stones in Petaling Jaya, and ongoing ones include Windows on The Park in Cheras and By The Sea in Penang.
Since 2008, it also expanded to Singapore to build similarly exclusive developments in desirable locations. Its current on-going development, The Village at Pasir Panjang (pic), is nearly fully sold.
So far, SDB has built 18 projects, with 13 in Malaysia and five in Singapore.
This diversification, especially to Singapore just ahead of the property boom there, has made SDB one of the more successful Malaysian companies operating largely under the radar.
Last year alone, it achieved new sales of RM840 million, with RM206 million from Singapore. As at September 2014, SDB has total unbilled sales of RM 967 million which will become part of the group’s profits in the next few years.
Its net profit of RM62.16 million for the financial year ended March 2014 is a healthy increase from RM17.24 million just five years ago.
The company now targets to increase its turnover to RM1 billion within the next decade.
When contacted, SDB managing director Teh Lip Kim said: “We are always looking for various pieces of land because we are financially sound and have financial headroom. We are also consistently prudent with our dividend policy and have conserved capital for acquisition of land when the right opportunity arises.”
A Malaysian success story flying under the radar
SDB’s story is a fascinating one of grit, as it rode out the fluctuating fortunes of Malaysia. Incorporated as a tin-mining company in 1962, it was listed two years later. It soon became a front-runner in the tin business when it became the first Malaysian company to buy a tin dredge in the 1960s.
But then came the 1980s when the tin market collapsed. Almost overnight, tin companies floundered. SDB hung on until 1992 before it decided to call it a day as far as tin mining goes.
It ventured into new areas, from sand dredging to diamond mining, but none really took off. It took almost a decade before SDB finally hit onto a winning formula when it moved into property development.
It was a challenging yet exciting period for the company at that time. It didn’t own large tracts of land. Thus, instead of developing townships, it focused on building niche housing that are well designed, exclusive and beautiful on small plots of land – and that formula has been a huge success in the Klang Valley and across the causeway in Singapore.
The company is realistic about the current property environment, though, and acknowledges that the next few years will be challenging ones. The new Goods and Services Tax and a possible increase in interest rates could also drive up the cost of owning property in the coming months if the ringgit continues to slide.
SDB will have to call on its long experience of riding out economic storms to weather the upcoming years.
As Teh says: “A resilient company knows how to ride out the storm in the challenging times, while making the best out of good times. One should always stay grounded and not be in denial when challenging periods occur.”
With its proven track record coupled with its strong balance sheet and savvy management, SDB is likely to remain one of the more resilient companies in years to come with its reputation of always punching above its weight.