Malaysia Business Report 2017

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Discovery Reports

Construction company and property developer GBG plays important development role in nation-building

One of Malaysia’s fastest-growing construction and property development companies transforms management, boosts orders and draws institutional investors

PUBLISHED : Wednesday, 27 December, 2017, 10:23am
UPDATED : Wednesday, 27 December, 2017, 10:50am

Azizan Jaafar sees great opportunities ahead for Gabungan AQRS (GBG) with construction and property development booming across Malaysia. Having seen tremendous successes since he became group CEO in April last year, Azizan expects further growth for the company, considering its significant involvement in the government’s ongoing infrastructure and property development programme.

From Sabah in the east to Pahang in the west, GBG is one of the country’s fastest-growing all-around construction and property development companies. But GBG stands out in the industry because it has been successfully upgrading Malaysia’s property landscape using its own brand of excellent workmanship.

“It is an exciting time for the country and we are proud to be involved in many special development projects. These engagements have enabled us to help the nation transform its dreams into reality,” Azizan says.

One cannot get a closer glimpse of Malaysia’s infrastructure development than from the vantage point of GBG. In only 18 months, the group managed to increase the overall value of its book orders and projects 15-fold to 2.9 billion Malaysian ringgit (HK$5.34 billion) from only about HK$366 million in April last year.

Some of GBG’s involvement is in building more than 3,000 units of affordable high-quality homes under the government’s PR1MA project in key urban centres in Malaysia’s Pahang and Selangor states. On the infrastructure side, the civil engineering expert is also involved in a HK$1.1 billion road project in partnership with China Communications Construction in Kuala Lumpur. One of the biggest investments made by the Chinese government, the collaborative venture will construct a 600km railway east of Kuala Lumpur.

Transformation on track

When Azizan took over the management of GBG Group, he formed TEAM GBG. With his vision and leadership, the team has successfully gone through the group transformation.

In line with the group’s monetisation exercise to reduce its gearing ratio, profit after tax and non-controlling interests improved as a result of the reduction in finance cost due to gradual repayment of loans. Finance cost went down to 3.4 million ringgit in the second quarter this year compared to 3.9 million ringgit in the first quarter of the same year. Gearing dropped from 0.79 in the first half of last year to 0.73 in the first half of this year and is expected to further go down to 0.4 by the end of this year.

As part of measures taken to improve operational efficiency under the transformation, operating costs as a percentage of revenue dropped from 17.6 per cent last year to 16.3 per cent in the first quarter of this year and subsequently to 12.4 per cent in the second quarter of this year.

“We looked at the old business model and came out with a new direction for the group,” Azizan says. “We managed to create a strong team that is able to perform and deliver while creating value for the shareholders.”

After managing a turnaround last year, GBG is forecasting a 100 per cent earnings growth for all of this year. Investors are quick to take notice of the company’s good showing. In only 12 months, shareholdings of institutions such as pension and insurance funds have grown from zero to 47 per cent of total equity.

“For a company of our size, that is a very big percentage share,” Azizan says. “This is truly a big milestone for us.”

The goal of the group’s restructuring programme, however, goes beyond securing GBG’s long-term financial strength. Drawing on its rich experience and technical capabilities, the company also aspires to build a reputation for exceptional value creation through its infrastructure and property development projects.

Malaysian brand of excellence

“We have been developing the company to have this particular complexion, or reputation for excellence and want the people to associate GBG with the creation of exceptional values,” Azizan says. “The whole organisation, from the board members and senior managers through to the employees, is focused on making that complexion or branding clearer to everyone.”

Azizan recalls a time when Malaysia did not yet have such engineering expertise to build skyscrapers and other complex structures.

“Take the Petronas Twin Towers. One of its buildings was built by the South Koreans, while the other was constructed by the Japanese,” Azizan says. “Malaysian engineers and contractors, however, now have the capability to do all these demanding projects. As far as GBG is concerned, it has proven time and again that it is quite capable of delivering what is required by its business partners and clients.”

Such genuine commitment to quality will be one of the highlights of GBG’s One Jesselton Waterfront project. A mixed residential and commercial property development in collaboration with Suria Capital Holdings with a gross development value of 1.83 billion ringgit, the undertaking includes a premier lifestyle mall, luxury hotel, serviced suites, condominium, the new Suria Capital corporate office and the Jesselton Point Ferry Terminal. Construction will commence in the second quarter of next year with completion slated for 2022.

“It will be a ‘destination within a destination’,” Azizan says. “We welcome high-net-worth individuals and other property buyers from Hong Kong, mainland China, Taiwan and elsewhere around the world to experience fine living by the Kota Kinabalu seafront.”

Designed partly by globally renowned architects and urban planners JERDE of the United States and GDP Architects of Malaysia, GBG envisions One Jesselton Waterfront as the new city centre of Kota Kinabalu. GBG will complement the condominium and luxury hotel complex with other support infrastructure. One Jesselton Waterfront will be strategically located between the international cruise terminal and the regional ferry terminal. These segments will showcase a 30-metre wide waterfront boardwalk overlooking South China Sea and will offer a panoramic view of Kota Kinabalu’s renowned sunset.

Malaysian engineers and contractors, however, now have the capability to do all these demanding projects
Azizan Jaafar, group CEO, Gabungan AQRS (GBG)

GBG has entered into a memorandum of understanding with Tera Capital on a strategic partnership in July of this year. The two companies will invest, construct and develop the hotel, serviced suites and condominium within the 2.5-hectare One Jesselton Waterfront mixed integrated development. Tera Capital is a Singapore-based investment firm with interests in hotel, real estate, and technology businesses. Together with the Frontier Group of Companies, Tera Capital operates Days Inn China with a portfolio of more than 190 hotels across more than 102 cities in 23 provinces in China. Its brands include the five-star Days Hotel and Suites.

Accredited under the Tourism Oriented Development and Transport Oriented Development of the Ministry of Tourism and Culture Malaysia, One Jesselton Waterfront will be only 400 metres from the proposed light railway transit. Further 800 metres north within the integrated Jesselton Masterplan will be the Sabah International Convention Center (SICC). Upon completion, SICC will be the main venue for meetings, incentives, conferences, and events in Southeast Asia.

Across the sea on the west side of Malaysia, GBG is also being awarded a 362 million ringgit design-and-build contract for the state administrative centre Pusat Pentadbiran Sultan Ahmad Shah in the new city centre Kota Sultan Ahmad Shah (KotaSAS), in Kuantan, Pahang. Covering more than 600 hectares, the KotaSAS township project forms part of the government’s East Coast Economic Region Master Plan, which centres on Kuantan.

“We are first movers in lesser-known areas that nonetheless possess strong underlying growth potentials,” Azizan says. “This was our reason for choosing Kota Kinabalu and Kuantan, which exhibit highly promising business outlooks.”

More promising opportunities ahead

Such an optimistic business development strategy seems feasible. For one thing, the local construction industry is expected to continue expanding in real terms through to the year 2020. The uptrend would likely develop as the government further improves on the country’s transport network and tourism infrastructure while addressing the housing shortage.

To capture these opportunities, GBG is embarking on the second phase of its business plan. Aimed at further expanding its book orders, the company will continue to systematically work to acquire a strong pipeline of construction projects, grow its landbank for property development and explore collaborative partnerships to develop property products designed to capture the market’s attention and imagination.

GBG welcomes partners with vast underlying potentials. Its investment in SEDCO PRECAST, for instance, is well aligned with GBG’s long-term goal of becoming a one-stop centre in the construction and property development verticals. As a leading precast concrete provider in Sabah, SEDCO PRECAST has been enabling GBG to pass on to clients the competitive advantages brought on by having among the best and most efficient facilities and processes for fabricating a whole range of precast concrete products. It will be a direct beneficiary of the Pan Borneo Highway Sabah starting next year.

“We are always open to engaging with organisations and people who share our core values and who are willing to grow with us for the long term,” says Ow Chee Cheoon, GBG’s deputy group CEO. “GBG is a company that does not only look after its own interests, but also after those of its partners. It is always a win-win.”