SLB Development Builds on Property Market Upswing

Date: July 12, 2018

kopi-C: the Company brew
SLB_Development SLB Development Ltd

SGX Code 1J0
Mkt Cap S$M 191.7
Last Price S$ 0.210
% Change vs IPO Price -19.2
% Change MTD -4.6
Historical High Price  0.25
Historical High Date 20/4/2018
Historical Low Price 0.21
Historical Low Date 23/5/2018
% Div Yld N/A
% ROE 23.0
P/E 9.3x
P/B 4.4x

Source: SGX StockFacts (23 May 2018)
Listing date: 19 April 2018

Property and construction specialist Matthew Ong has a penchant for all forms of real estate – whether it be land, buildings or architecture.

The Executive Director and Chief Executive Officer of SGX-listed SLB Development Ltd flexes his creative muscles by tinkering with colourful, plastic bricks to construct models or recreate iconic landmarks, such as the Sydney Opera House and Shanghai’s Oriental Pearl Tower.

“I enjoy using Lego blocks to design and build my projects,” said the Bachelor of Science graduate in Business and Management Studies from UK’s University of Bradford.

“Being able to create and shape something that you can call your own – there’s nothing quite like that. That’s why real estate is so dear to my heart.”

Ong is the son of Ong Pang Aik, Executive Chairman and Managing Director of SGX-listed construction company Lian Beng Group Ltd. The junior Ong began his career in the construction division of Lian Beng in 2006, and has accumulated more than a decade of experience in the real estate and construction sectors.

Prior to his appointment as Executive Director and CEO of SLB, Ong was the director of Lian Beng’s property development division, where he oversaw the strategic planning, overall management, execution and development of the real estate business.

Parent Lian Beng, which was established in 1973 and listed on SGX’s Mainboard in 1999, ventured into property development in 2000. The wholly owned property unit was spun off as SLB Development on the Catalist Board last month. Post-listing, Lian Beng holds nearly 74% of SLB, which is an acronym for Sing Lian Beng, where “Sing” means “new” in Mandarin.

“The spin-off was necessary because of identity issues, and now, each company has a clear focus and purpose,” said Ong.

The diversified real estate developer has a current market capitalisation of nearly S$200 million. Compared with its initial public offer (IPO) price of 23 Singapore cents, the stock has traded between 21.5 and 25 cents since its 19 April trading debut.

Peaks and Troughs

SLB develops and sells residential, mixed-use, industrial and commercial properties, mostly in Singapore. Its portfolio comprises five residential and mixed-use developments, including Spottiswoode Suites, KAP and KAP Residences at King Albert Park, and NEWest at West Coast Drive. It also has three industrial properties – Eco-Tech @ Sunview, Mandai Foodlink and the Hexacube freehold commercial project.

Development projects in the pipeline include three residential sites – Serangoon Ville, Rio Casa and Lorong 24 Geylang – as well as two industrial properties – Khong Guan Industrial Building and 50 Lorong 21 Geylang. In China’s Hebei province, SLB owns a stake in the Sino-Singapore Health City mixed-use development project.

As at 31 January 2018, its ongoing and pipeline projects totalled S$892 million in gross development value, with estimated development profits of S$136 million.

Differences between the construction and real estate businesses are quite stark, said Ong.

“In construction, where I started off, I was exposed to the more technical aspects of the business, including cost controls and design engineering. There, you’re basically building for developers,” he said.

“But in property, you can actually build something of your own. And that’s where you learn financial prudence, and what it means to manage the peaks and the troughs of the industry cycle,” Ong said.

In Singapore, property market cycles are becoming shorter. “To ride these cycles, you need to act fast and be very precise in your execution. Holding power is important in the real estate business, and that’s why financial strength plays such a key role,” he added.

Ong remains optimistic about prospects in the domestic real estate sector, noting that the spate of record-setting site purchases by developers last year and recent sales of residential projects have been encouraging.

“The industrial property segment continues to remain very stable, while the office sector is seeing declining vacancy rates. All these indicators are pointing in the right direction in terms of the uplift in the market,” he added.

Gathering Momentum

This year, Singapore’s property market is expected to extend its recovery from a four-year slump. After hitting a record high in the third quarter of 2013, domestic home prices have slumped for 15 consecutive quarters through to the second quarter of 2017, largely due to a slew of government cooling measures.

Home prices have rebounded over the last three quarters, prompting aggressive land bids from developers, even as most of the government’s property curbs remain in place.

In the January to March quarter, private residential property prices jumped 3.9% from the previous quarter, surging the most since 2010 and building on the previous quarter’s 0.8% increase, data from the Urban Redevelopment Authority (URA) showed.

The momentum continued in April, with developers selling 729 units, more than the 716 units sold in March, and the highest since November, according to URA data.

Analysts from Goldman Sachs, Morgan Stanley, Credit Suisse, OCBC and DBS have forecast a 5% to 10% recovery in domestic home prices this year. Real estate redevelopment deals – or en bloc sales – are set to surge this year to S$12.8 billion, the highest in more than a decade, according to data from Cushman & Wakefield Singapore.

Other segments of the property market are also improving. Colliers International has predicted that Grade A office rents in the city-state could pick up by 5% to 7% this year, following higher demand for office space from new tenant segments like co-working operators, as well as technology and media companies.

A stronger manufacturing sector, coupled with government initiatives to transform industry and encourage adoption of new technologies, will also drive the growth of the business and industrial park segments, it noted.

Branching Out

For SLB to capitalise on the market’s upswing, diversity is key. Its projects span different market segments, including small- to large-scale residential, mixed-use, as well as industrial and commercial developments. As a result, it is able to manage its exposure to demand fluctuations and changes in regulations for each project type.

“We branched out into industrial properties during the residential market downturn,” Ong recalled. “It wasn’t easy, but it provided us with many valuable lessons, and changed the way we thought about the real estate industry.”

Coming up with a creative twist also adds an edge. SLB developed its commercial project, Hexacube, through partial demolition of the original building on the land site by retaining the basement and first floors. It also undertook retrofitting works and created a new façade to refresh the exterior of the property.

“By doing so, we were able to save time and cost, resulting in increased efficiency levels in the project,” Ong noted.

The company also forms joint ventures with other established property developers to manage risks and undertake larger projects.

Its partners in Singapore include home-grown developer Oxley Holdings Ltd, construction and property group KSH Holdings Ltd, boutique developer Heeton Holdings Ltd, and Apricot Capital Pte Ltd, the private investment firm of Super Group’s Teo family.

“Our preferred business model is a JV,” said Ong. “Some say this means lower profits, but it actually opens up more opportunities to invest in a wider variety of projects in a single cycle, and it is this model that has opened doors for us in China, Australia and the UK.”

Expanding Horizons

SLB has set its sights firmly beyond the city-state, with plans to penetrate the markets of Myanmar, Cambodia, Japan, South Korea, Hong Kong and Malaysia.

Under the property development division of the Lian Beng Group, the management team has already ventured into China and explored opportunities in UK, Australia and Vietnam. These initial forays have yielded a wealth of insight and experience.

“We had to be very disciplined in terms of what we bought, we also needed to monitor our cashflows to maintain our financial health, and we learnt to deal with different cycles in these markets,” Ong noted.

Ong aims to morph SLB into an international property player, with a 50:50 split between domestic and overseas revenues.

“We’re paying more attention to gateway cities like Shanghai, Tokyo and Seoul because of robust population growth. Today, the world is getting smaller and closer, and we need to avoid reliance on any single geography or business segment.”

SLB plans to cater to its target customers by using innovative designs and lifestyle themes, monitoring the market for new preferences among potential home buyers and other emerging trends, so it can adjust its land acquisition strategy accordingly. It may also venture into hospitality developments – including hotels – if suitable opportunities arise.

“Our IPO was not a destination – we’re still a work-in-progress,” Ong noted. “The listing just shows we’re moving in the right direction in the course of our journey.”

With this many irons in the fire, it’s not surprising that group strategy is always at the forefront of Ong’s mind.

“I do worry about sustaining growth in the business,” he admitted.

“We’re doing well so far this year, but we must make sure we do better next year. I hate getting stuck in a comfort zone,” added the father of two girls, aged two and five.

One major challenge is finding and retaining the right talent to sustain that growth. “SLB is looking for people with the right mentality,” he added.

“As the world is evolving quickly and in so many different ways, we need to be able to think out of the box and break new ground – I’m not afraid of doing things that others haven’t done yet.”

Financial Results

Year ended 31 May (S$ ‘000) FY2017 FY2016 FY2015  

Revenue 87,631

Gross profit 14,931

Profit attributable to owners of company 15,847 69,413 29,866

Half-year ended 30 November (S$ ‘000) 1H 2018 1H 2017    

Other operating income 805 371  

Profit before taxation 7,127 7,636  

Net profit 7,356 7,631  

Source: Offer document

Broker Ratings – Not Rated Price Chart

Buys NA

Holds NA

Sells NA

PT  (S$) NA

Source: SGX StockFacts

Outlook & Risks

  • SLB is affected by the political, economic and social conditions in the countries in which it operates. Other than Singapore, it has a business presence in the PRC. It may also expand into other countries in which it does not have a business presence currently.
  • SLB is affected by the performance of the property industry in the countries in which it operates. It currently has property development projects in Singapore and the PRC. The financial performance and profitability of the Group may be affected if the Singapore or PRC governments introduce more stringent or new measures which affect the property market’s performance.
  • The Group may not be able to obtain all necessary licences for its property development projects. It may not have control over the board of directors or a majority shareholding interest in its joint venture companies, and will be dependent on its joint venture partners to ensure compliance with the applicable laws and regulations.
  • SLB is subject to risks associated with debt financing. Its acquisition of land sites and buildings and the development of properties are usually financed by internally generated funds, loans from banks and financial institutions, and deposit monies from purchasers. To fund certain development expenses relating to its pipeline of property development projects, it has entered into the LB Loan Agreement to obtain shareholders’ loans from its Controlling Shareholder, Lian Beng. Its future financial performance and business operations could be materially and adversely affected by a decrease in the amount of banking facilities available to the Group, or an increase in interest expenses on its bank borrowings.

Source: Offer document

SLB Development Ltd

Spun off from SGX Mainboard-listed Lian Beng Group Ltd, SLB is a diversified property developer with extensive experience and track record across the residential, mixed-use, as well as industrial and commercial sectors. With development projects ranging from small to large scale, the diversified nature of its quality portfolio allows effective management of exposure to the fluctuations in demand and/or changes in regulations for each type of property development. Led by an experienced management team, SLB has built strong networks of business relationships with other property developers and contractors, and has expanded its presence beyond Singapore to the People’s Republic of China.

The company website is:

Click here for the company’s Stockfacts page.

For the company’s offer document, click here; for the company’s product highlights sheet, click here.

First published on 25 May 2018 on

Text: Jennifer LH Tan
Photo: Company file

kopi-C is a regular column on SGX’s My Gateway website that features C-level executives of leading companies listed on the Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.

For previous editions of kopi-C: the Company brew, please click here.

Property and construction specialist Matthew Ong has a penchant for all forms of real estate – whether it be land, buildings or architecture.

The Executive Director and Chief Executive Officer of SGX-listed SLB Development Ltd flexes his creative muscles by tinkering with colourful, plastic bricks to construct models or recreate iconic landmarks, such as the Sydney Opera House and Shanghai’s Oriental Pearl Tower.