Bank Negara Builder SBC: Storied yet Boutique

Sia Tiong Heng, the Managing Director of SBC Corp., the Bursa-listed family controlled property development and construction company incorporated in 1954, answers the following questions:

- SBC is one of Malaysia’s oldest property and construction firms - among the iconic buildings it has built: Bank Negara headquarters, Empire Tower, Wisma Lim Foo Yong, Wisma HLA and Bangkok Bank headquarters.
But despite your storied history, SBC is today not a behemoth.
You have chosen to stay small. And tightly controlled by the family.

WHY

- Nor have you apparently courted the big institutional funds, preferring to stay under the radar.
If that is the case why suffer the hassle of public listing and quarterly reporting?

- One key SBC strategy has been connectivity: transport-themed buildings - with three of your five projects to be handed over this financial year what are your strategy experts proposing the next theme to be?

- Another interesting strategy has been your development of non-Peninsula cities - Kota Kinabalu specifically.
WHY?

- Many of the properties you have developed and purchased through the years have been retained for income - some examples include;
The lower floor units of Shah Tower in PJ
A couple of units in Intan Kenny in Bukit Tunku
At least a dozen each of residential and commercial units at The Peak Suites in KK
How valuable have these investment units been in propping up income during the low season and periods in between launches?

- We see that you also have about 50 acres in Batang Kali and 5.5 acres in Ulu Yam reserved for future development -- what is the strategy there?

- BNM moves to curb speculation - upping LTVRs, loan computation of net, not gross income - how have these tighter lending conditions affected the types of developments you will choose to develop in future

- The ‘easy money’ days brought on by a surfeit of cheap Western-originated liquidity also seems to be coming to an end.
Again - how is a small firm such as yours preparing for these conditions?

- Higher fuel costs - construction costs -

- Undocumented workers - labour shortage

- You’ve previously had projects in Thailand in the past
Why did you exit this mkt?
Any plans to re-ventured overseas? If so, where?

- SBC has undergone something of a turnaround in recent years, with net income improving to RM26.8mn in the last FY, from a loss back in FY07
What's led to this turnaround in SBC's fortunes?
Has there been a change of strategy?

- Your ROE (return on equity) has been relatively low - consistently in the single digits - do you have any plans to improve this metric?

- Flattish revenues - though margins and profits are good -- whether intend to stay at these levels

- SBC looking to renew its share buyback programme:
>> Why do a share buyback programme when you’re also looking to make a cash call??

- Plans 3-for-5 rights issue, 1-for-2 bonus shr issue, aims to raise as much as RM49.5m
Mkt hasn't liked this news with shr px falling from RM1.785 at time of announcement to c. RM1.42 currently

- SBC's liquidity is reasonable at about RM1mn ADT (average daily turnover) over the past 3mths...
But why does your share price still remain relatively depressed?
Market cap / visibility issues?
Mkt cap - 118 million ringgit

- It’s been a bit of a rocky ride this year: down 18% in August alone but still up 36% on the year; how do u explain these gyrations for such an illiquid stock?

- A revaluation might give your share price a boost: in June Kenanga pegged a revised Net Asset Value of RM5.86. And even after applying their maximum 60% discount to RNAV they still arrived at a target price of RM2.35: some ways north of your current share price of RM1.44