Singapore Companies
Published October 26, 2006

Sim Lian banks on property development

Construction accounts for just 35% of revenues

SINGAPORE construction and real estate firm Sim Lian Group expects to generate most of its revenue from property development within five years, as it roughly doubles the number of individual homes it builds.

Landmark homes: Sim Lian is behind The Premiere@Tampines, the first public housing project undertaken by a private developer

Diana Kuik, executive director of Sim Lian Land - the firm's property development arm - told Reuters in an interview yesterday that the company hopes to develop 500 units of private residential property annually within five years, up from the current 200 to 300 units.

The firm is also branching into Malaysia.

'When we listed in 2000, we felt a real need to broaden our revenue stream and not just rely on construction,' said Ms Kuik, the daughter of company founder Kuik Ah Han.

'At that point, we decided to capitalise on our in-house construction expertise and move up the real estate value chain.'

The Kuik family controls 75 per cent of the company's stock.

With a market value of $207 million, Sim Lian is a small player compared to Singapore property giants such as CapitaLand and City Developments, but it is one of the few property developers with construction capabilities.

The firm expects to derive 70 per cent of revenues from property development by 2011, from 56 per cent now.

Sim Lian shares have doubled in the past three months, making them the best performers in the Singapore construction index during that period and the second-best performers in the All Singapore Index.

Earlier this month, Sim Lian launched the first public housing project undertaken by a private developer in Singapore.

The Premiere@Tampines was about 9.6 times oversubscribed as Sim Lian received nearly 6,000 applications for the 616-unit development, Ms Kuik said.

Sim Lian acquired the plot through a tender bid of $82.2 million, beating other property cum construction firms like Chip Eng Seng and Hor Kew Corporation to clinch the project.

Sim Lian, which started off as purely a construction firm in 1976, branched out into the Singapore property market in 2001.

Since then, it has developed six properties, ranging from public housing to freehold condominiums.

'Currently, Sim Lian is still a very small developer, it's not very well known in the market. Many people don't really know we are doing property,' said Sim Lian Land's managing director, Kuik Sing Beng, eldest son of the founder.

The firm is negotiating to develop two residential condominiums in the suburban parts of Singapore, Mr Kuik said.

Sim Lian's construction arm accounts for 35 per cent of the firm's revenue. It builds mostly Housing and Development Board (HDB) flats.

Last year, Sim Lian ventured into the Malaysian property development market, building condominium apartments in Kuala Lumpur and landed properties in Johor Baru.

Prime locations in Kuala Lumpur cost about $50 per sq ft - a whopping 22 times cheaper than in Singapore, said Kuik Sin Pin, Sim Lian's executive director and another Kuik sibling.

But he added that the firm's Malaysian operations will only account for 20 per cent of its total revenues within the next three to four years.

Sim Lian's net profit surged 63.6 per cent to $19.4 million for its fiscal year ended June 2006.

'We expect to remain profitable,' Ms Kuik said.

Brokerage firm Kim Eng Securities expects Sim Lian's net profit to rise 13.9 per cent to $22.1 million for the 2007 financial year. - Reuters