Capital World aims to score with maiden project

AS the new kid on the block, Malaysian property developer Capital World must build out-of-the-box offerings to stand out among the big boys, its executive director and chief executive Siow Chien Fu believes.

That ambition is encapsulated in the Catalist-listed company's maiden project, Capital City.

The integrated development includes a 1.2 million sq ft complex housing MCM Studio, Malaysia's biggest indoor theme park concept, and Capital 21 mall.

MCM, which stands for movies, cartoons and music, will feature Hollywood sets and a petting zoo for the little ones, along with exhibits about Malaysian P Ramlee and rides featuring popular Malaysian cartoon Didi and Friends.

The mall and theme park are set to open in August 2018, while a 315-room Hilton Garden Inn, 630 units of hotel-style serviced suites will begin operations in 2019. Another 690 units of serviced apartments are expected to be completed by 2020 (see amendment note).

Capital City project, which has a gross development value of RM2.4 billion (S$804 million) and is located in the heart of Johor Baru, will just be the start for Capital World.

Higher percentage of works completed from Capital 21 and the serviced suites helped revenues in the second quarter ended Dec 31, 2017 jump 155.6 per cent to RM46 million, while net profit rose 90.2 per cent to RM17.4 million.

It listed on the Catalist board in May 2017 after Mr Siow's Capital City Property engaged in a S$300 million reverse takeover of marble company Terratech Group.

Mr Siow, a veteran architect, began managing property development projects such as the Eco Tree Hotel in Hong Kong and Malacca. He started Capital City Property in 2013.

The company proposed to Malaysia-listed developer Gadang Holdings that they enter a joint venture to develop the Capital City plot, owned by Gadang.

Capital World would fund construction and pay Gadang in installments as the project is completed.

That asset-light business model is the way Mr Siow decided Capital World would operate with future projects.

He believes he is the first in the market to not own land and develop via such joint ventures as a key part of its business model, although some other developers may do so on a by-project basis.

"It helps the company avoid high capital outlays and pay less upfront," he said. Traditional developers in Malaysia typically pay part of the land cost upfront to build up landbanks, then finance it with borrowings.

Mr Siow said the company strikes such deals without having to pay a premium for the land, and the joint venture partner benefits from knowing upfront how Capital World will develop the land.

He is unperturbed by the idea of other upstarts adopting the same business model, given the size of the property market in Malaysia.

"There are so many other things a developer can do to surpass the market," he said.

To stand out in a market dominated by local property giants like SP Setia and Sime Darby, Mr Siow believes Capital World must deliver by identifying joint venture opportunities in strategic locations where it can build niche products that offer something unique to the market.

Mixed-use is the way to go, he believes, as it will give it more flexibility to come up with creative concepts that will give it an edge in the market.

"We are a small company competing against so many established developers," he said. "To distinguish ourselves, we have to do something very unique and innovative, and something the market can accept and afford."

For instance, Mr Siow hopes the indoor theme park at Capital City is a unique selling point that will blunt the blow digital disruption has dealt to retail.

"The transformation is here and we cannot run away from it," he said. "We have to think of something different, more innovative to counter this. The key is to create an experience."

Capital City will also cash in on the rush of theme parks in the area such as Legoland Malaysia Theme Park, Hello Kitty Indoor Theme Park @ Puteri Harbour, Angry Birds @ JBCC and Mount Austin water theme park.

Mr Siow hopes to attract both local and international tourists who will travel there either from the upcoming Johor Baru-Singapore Rapid Transit System (RTS) or through Senai International Airport.

Other projects in the pipeline also showcase that desire by Mr Siow to wow the market with unique offerings.

Project Austin in Tebrau, Johor Baru will comprise a retail mall, office suites, hotel and residential apartments spanning 27,670 sq m in land area.

F&B will be heavily emphasised given its vicinity to a mature, above-average income estate, and Capital World is also considering proposals for healthcare-related services given Austin's proximity to Sultan Ismail Hospital.

Another upcoming project is the 207.5-acre landed housing township development project at Pengerang. Capital World secured the joint development rights in November 2017 through the acquisition of a subsidiary.

Plans are also in the works for a wellness hub on 188,062 sq m of land in Pengkalan Baharu, Perak, for tourists seeking health and wellness services, particularly residents from nearby Ipoh and Kuala Lumpur.

While it is the company's aim to venture abroad to neighbouring Asean countries, it will not do so yet until it has completed at least its first few projects, said Mr Siow.

Sales of products from Capital World's marble business, from the reverse takeover of Terratech, took up less than 5 per cent of its turnover in its 2017 financial year.

Some of the marble will be used in Capital City. The company is currently coming up with ways to market the marble products to a wider base than the China market.

Capital World shares traded at S$0.069 on Friday, far below its opening price of S$0.198 at its trading debut. But Mr Siow is undaunted and believes that investors are simply holding their breath to see how Capital City will fare.

"We're still a very young company, with less than one year in the market," he said. "We know what we are doing and we are confident we can deliver."

Amendment note: An earlier version of the story said that a 315-room Hilton Garden Inn, 630 units of hotel-style serviced suites and 690 units of serviced apartments will open in 2019. This has been changed to reflect the fact that the Hilton Garden Inn and hotel-style serviced suites will begin operations in 2019, while the development's serviced apartments will expected to be completed by 2020.