From loss to RM7 billion GDV within 8 years

I have bought a shirt from Yong Tai before, many years ago. It was attractively priced and the material was good. Thus, when I read about Yong Tai having property developments with a gross development value (GDV) of RM7 billion, my interest was piqued. Garment manufacturer also a property development? These are two very different businesses, aren’t they? Well, according to its executive director Ng Jet Heong, the group currently has 60:40 (property development: garment manufacturing) and this would change with the new projects to 80:20 It means currently, Yong Tai is already a property developer. In the near future, Yong Tai would be known as more of a property developer than a garment manufacturer. According to Ng, these developments would help Yong Tai to be back in black after suffering many years of losses.
Actually, it’s not easy for clothing manufacturers nowadays. There’s just way too many brands and then again, there are brands that I would never consider to buy. Maybe because of its design, maybe because of its general branding. Many times, I would not want to pay a premium for them. Yong Tai may not have the pricing attractiveness vis-a-vis it’s brand compared to local brands such as Padini or even international ones such as Uniqlo. Even Padini’s performance has been affected by Uniqlo. Thus, losses may be expected when the competition gets tough. As a sector, the “Textiles and Clothing” has also weakened based on the latest available data from the Purchasing Managers’ Index (PMI). To be objective, when times are uncertain, no one is going to shop for clothes…..
Of course, on another note while the profit margin for property development is still healthier than garment manufacturing based on Yong Tai’s current result, I think it is important to note that this is not the best time for property development. Last year, sub RM500,000 properties was quite well received but this year, many friends are telling me that even this segment is slowing down. Perhaps one major reason is because the number of units for these are getting larger. 1,200 units are considered on the low side these days. Some mixed developments can offer over 2,000 units! As usual, more units equals to cheaper price per unit but more units meant it will take longer to sell too. Reminder, if buying for own stay, the cheaper the better. However, if buying for investment, the many units meant that it will need some time to ‘digest’ once the keys are handed over and you want to put it up for sale. Happy buying.
written on 4 Aug 2015
Next suggested article: Need more profits? Just become a developer!