Property developer with a manufacturing heart

PHOTO: Property developer with a manufacturing heart

Listening to chairman Cheng Wai Keung's telling of Wing Tai's founding is similar to getting a history lesson of modern Singapore told through the lens of the company.

Most investors will be familiar with Wing Tai as an established property developer listed on the Singapore Exchange, with a market capitalisation of $1.7 billion.

But few would realise that the company recently celebrated its half-century anniversary or that it started life making garments.

In the early 1960s, Mr Cheng's father and uncle in Hong Kong needed to find a new manufacturing location for its jeans after hitting the maximum export quota there. Back then, Hong Kong was a major textile manufacturing centre whereas Singapore had not even gained its independence.

With the fledgling Economic Development Board (EDB) pulling out all the stops to woo the firm to kick-start Singapore's manufacturing sector, Wing Tai eventually started here in 1963.

Mr Cheng, 63, who arrived here in 1974 to take over the business, cites EDB's support as an example of how the Government has been business-friendly.

EDB rolling out the welcome mat may have provided a smooth start here for Wing Tai but it was not all plain sailing after that.

By the late 1970s, garment manufacturing was already being regarded as a "sunset industry" by the Government as it was a labour-intensive industry, Mr Cheng notes wryly. Current buzzwords like productivity were equally a concern of the Government back then. An export quota tendering system was eventually implemented in the late 1980s.

Mr Cheng was undaunted.

He says the way challenges are handled is what defines a successful company: "Confront the constraints and overcome them."

Wing Tai eventually moved its garment manufacturing operations into Malaysia, Myanmar and various other countries. Meanwhile, Mr Cheng also made the major decision to venture into property.

"With Singapore growing, I believed that the export garment industry was going to decline. An export business has an international price and as wages rise when a country develops, you will lose competitiveness."

Mr Cheng may quip that property is in the blood of every Chinese but his belief is that property is a bellwether of the economy. If one believes the country will grow, property prices will rise in the medium term.

So having survived some three decades in the property business and its various cycles, he is invariably asked the question in some form or another: "Should I sell (or buy) property now?"

Mr Cheng wisely refrains from offering any black and white answers but is happy enough to give his views.

He says there are two groups: property investors and home buyers. The considerations are similar but the emphasis is different.

"For an investor, timing and cost are important to make a decent return on investment within a short period."

Therefore, this may not be the best time in the cycle; after seven rounds of cooling measures plus the introduction of the total debt servicing ratio framework, the investment cost has increased.

The current property boom has lasted around nine years, although there are signs that the market is weakening. When will the boom end? No one can tell, but Mr Cheng's view is that the longer the cycle lasts, the higher the probability that the cycle will turn.

He points out that the ratio of prices between the upgrader market and the luxury market is 1:2. In 2007, the ratio stood at roughly 1:3.5. In other words, the lower end of the market has run ahead far more quickly.

This means that either the luxury market will rise or the upgrader market will edge down. Either way, if the market does not correct this year, there is a higher probability that it will decline next year.

But home buyers can afford to be less fixated about property cycles and they should have a different set of priorities: location and the right product.

"If it is the right product, in the right location, buy it. I'm not saying you should not look at price or timing, but if you can afford it, if you are not financially over-leveraged, you will not have to sell it in a downturn, so price is less relevant than getting what you like," Mr Cheng notes.

Assuming home buyers have a long-term horizon, of say 10 years and more, prices are likely to trend upwards due to inflation and the country's growth.

Wing Tai offers luxury projects such as Helios Residences at Cairnhill and the upcoming Le Nouvel Ardmore. But it also has its more down-to-earth offerings such as The Tembusu, which is rising in place of the company's old garment factory. Priced at an average of $1,500 per sq ft, The Tembusu is now 70 per cent sold.

The Crest - not quite super- luxury but still a high-end project in the Jervois Road area - will soon be launched.

Mr Cheng regards Wing Tai as similar to investors in the sense that the company has to time the market in terms of buying land and launching projects.

But it is not all about watching the bottom line.

As Wing Tai marks its 50th anniversary, it is giving back to society. It has set up an initial $10 million endowment fund in Wing Tai Foundation to support both the young and elderly in need.

It has formalised its community giving by committing a percentage of its annual net profit towards the fund, which will be built up to $20 million as part of its corporate social responsibility efforts.

Mr Cheng says: "This is to recognise the contribution the elderly have made to Singapore's progress and nation-building, and to nurture the younger generation, to enrich lives."

Going into the next half-century, Wing Tai has a hefty war chest. "It is a happy problem," says Mr Cheng. Wing Tai already carries very little debt compared to many other property firms.

The challenge, he says, comes in fact from trying to make the best use of resources and seeking out new opportunities.

There is growing competition from players which have entered the market, such as those from China while more domestic players have also emerged, such as contractors turned developers.

Unusually for a property developer, Wing Tai is also in retail. In Singapore, it is behind international brands such as Topshop and Uniqlo.

But Mr Cheng points out that property and retail are more related than what it might first appear to be. As with property, a retail outlet needs to have the right location. Retail, as well as property, are closely tied to Singapore's fortunes.

But even there, retail is also looking increasingly tough. Costs have risen, in terms of rents and labour costs. Most top foreign brands already have a presence here, so there is competition for the spending dollar.

In fact, retail in Singapore is almost like operating in an international market. "We can't raise prices as we have to look at the global traveller," says Mr Cheng.

But diversifying into yet another business is not on the cards for the moment, he adds, "unless I find suitable alternatives".

"We faced difficult situations in the past and overcame them. Now we have even more resources. The important thing is to bring Wing Tai to a different level."

Wing Tai may no longer be churning out jeans, but Mr Cheng is determined that it still retains its manufacturing heart.

He says that in the early days of Hong Kong, the Shanghainese industrialists were the last to venture into property as they regarded it as a speculative business. Manufacturers create value whereas property can be seen as being a one-off transaction.

"As with manufacturing, we try and retain customers because we want repeat business. This is a philosophy we try and bring to our property and retail business, to create value and be a long-term player."

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