Financial Highlights

The following table sets out the key financial highlights of the historically combined financial statements for the Financial Years and Period Under Review: -

Major customer and Supplier

Major Customers

The company’s customers are individual buyers or companies who generally purchase one or a small number of units. The company was not dependent on any single customer during the Financial Years and Period Under Review.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

The company's main suppliers primarily comprise main contractors appointed to construct its project, and other professional consultants such as architects and engineers to assist in its development operations. The company also appoints property agencies to sell and market its properties. The management discloses they are not dependent on any major suppliers as they appoint the contractors through tenders by invitation and consultants through direct appointment. The company's major suppliers are project specific as the appointment of the contractors and professional consultants varies every year depending on the requirements of the Group’s projects. As such, it is easy for the Group to switch the suppliers/main contractors for different projects.

Industry Overview

As Radium Group has high-rise residential properties in mukim Batu, mukim KL, mukim Petaling, mukim Setapak, and mukim Ampang, and intend to expand into Selangor, the performance analysis in this section will focus on mukim in KL, if available, and Selangor.

Between 2019 and 2021, in KL, there was an increase in the number of high-rise residential property transactions but a decline in the value of transactions, which resulted in a decline in the average price per unit from RM0.79 million to RM0.76 million at a CAGR of -1.92%. Over the same period, in Selangor, both value and number of high-rise residential property transactions increased which resulted in an increase in the average price per unit from RM0.38 million to RM0.39 million at a CAGR of 1.31%. In 2022, in KL and Selangor, both value and number of high-rise residential property transactions increased which resulted in the increase in the average price per unit at YOY rates of 12.21%from RM0.76 million to RM0.86 million in KL and 2.55% from RM0.39 million to RM0.40 million in Selangor. The increased number of high-rise residential property transactions in KL and Selangor was mainly driven by improved economic conditions in 2021 and 2022 and various Government initiatives to boost the property market, which was sustained by demand for properties in KL and Selangor, especially for properties which are strategically located and competitively priced. Please refer to Section 1.2 for further information on the key market drivers.

In KL, the total supply of high-rise residential properties increased from 540,802 units, comprising an existing stock of 309,716 units and future supply of 231,086 units in 2019, to 590,031 units, comprising an existing stock of 355,828 units and future supply of 234,203 units in 2021, at a CAGR of 4.45%. In 2022, the total supply of high-rise residential properties in KL increased YOY by 1.57% to 599,317 units, comprising an existing stock of 389,650 units and future supply of 209,667 units. In Selangor, the total supply of high-rise residential properties increased from 573,563 units, comprising an existing stock of 441,474 units and future supply of 132,089 units in 2019, to 615,988 units, comprising an existing stock of 471,552 units and future supply of 144,436 units in 2021, at a CAGR of 3.63%. In 2022, the total supply of high-rise residential properties in Selangor increased YOY by 3.45% to 637,227 units, comprising an existing stock of 494,308 units and future supply of 142,919 units.

Key Market Drivers

• The revenue increased from RM 472 mil (FYE 2019) to RM 588 mil (FYE 2020) and decreased to RM 563 mil (FYE 2021).
• The gross profit margin is consistently above 28% which is above the average benchmark of 20%. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin decreased from 28.47% (FYE 2019) to 19.33% (FYE 2022).
• The gearing ratio is 0.24 times, and the company’s debt is under a healthy ratio. This also indicates that the company is not highly leveraged, which means it is better equipped to handle crises. (A good gearing ratio should be between 0.25 – 0.5).

• Urbanization drives the growth in demand for high-rise residential properties in KL and Selangor
• Established infrastructure and availability of urban amenities drive the demand for high-rise residential properties in KL and Selangor
• Economic growth signifies growth opportunities in the property market in KL and Selangor
• Government initiatives on affordable housing will boost the growth of high-rise residential properties

Key Market Risk and Challenges

• Adverse economic conditions may negatively impact the demand for properties
• Unfavorable changes in Government policies may affect property sales
• The completion and quality of development projects are dependent on the services of contractors

Source: SMITH ZANDER

Business strategies and prospects for RADIUM DEVELOPMENT BERHAD

The Group’s future plans and business strategies are summarized as follows:-

1. The company intends to expand its business through the acquisition of landbank(s) and joint venture arrangement(s) for future projects in Klang Valley to meet the demand of the residential property market in Klang Valley.
2. The company intends to develop a hotel and expand into the management and operations of the hotel.

MQ Trader View

Opportunities

1. The company's debt situation is good, with its current assets being higher than its current liabilities. As property developers often require large amounts of cash to buy land and build properties, many companies fully leverage themselves by taking out loans to expand their business. This can lead to high levels of debt and liquidity risk. However, Radium Development Berhad is very good at controlling its debt.
2. The company’s projects are strategically located in prime areas with well-developed infrastructure, amenities and good accessibility. All the projects are surrounded by well-developed infrastructure and amenities such as public transportation systems (e.g., KTM station, MRT station, LRT station and/or city bus services), educational institutions, healthcare facilities, shopping malls, and recreational parks.

Risk

1. The company is subject to the prevailing market conditions in the property market in Malaysia and specifically, in Klang Valley. As all the property development projects are located in Kuala Lumpur, the company is dependent on the prevailing market conditions of the property market in Malaysia and specifically, in Klang Valley, for the sales performance of the properties as well as the development planning of the future projects. The performance of the property market and value of properties in Malaysia and Klang Valley are affected by amongst others, the supply and demand of properties, rate of economic growth, interest rates, and inflation in Malaysia.
2. The company’s business is capital-intensive and is dependent on the ability to secure adequate financing. The company’s developments require substantial capital investment and as such, may cause them to generate negative operating cash flow when the cash outlay for land acquisition and construction expenditures during a particular period, after taking into account changes in other working capital items, exceeds the cash inflow from property sales over the same period.

Click here to refer the IPO - Radium Development Berhad (Part 1)

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