KSL’s quiet transformation

FOR years, KSL Holdings Bhd has been something of an anomaly in the Malaysian property sector – a Johor-based developer delivering record profits and strong margins, yet largely absent from institutional radar screens.

That is now changing.

Since mid-September, KSL has stepped up investor engagement, formalised dividend intentions and sharpened its growth narrative as it seeks to reposition itself as a more institutionally investable name.

The shift comes against the backdrop of two consecutive years of record earnings, rising recurring income and an increasingly ambitious sales pipeline.

“We haven’t been active for quite some time,” says executive director Khoo Lee Feng, who took on the investor relations (IR) portfolio recently.

“So we only started the IR effort in mid-September ... with more helping hands from the second generation and the new energy from the younger generation.”

KSL’s origins are deeply family-run. Decision-making has historically been swift, informal and trust-based, a competitive advantage in land deals and execution, but a structure that can make institutional investors uneasy.

“Any land deal comes in, one phone call, and the deal can be signed the same day,” Khoo tells StarBiz 7.

“That’s why we are very proud of our speed of execution.”

But with a growing second generation spanning several families, the company is now formalising processes and governance, not to slow itself down, but to future-proof decision-making.

“I volunteered for this portfolio of IR with the intention to set up a more transparent and more fair structure among the shareholders,” Khoo says.

“With proper structure in place, we will have a better environment to work together that helps us bring our company to the next level.”

To that end, KSL has begun regular briefings with institutional funds. “We are prepared to do this on a frequent basis, at least quarterly,” she adds.

Earnings strength

The renewed engagement comes as KSL posts its strongest financial performance yet.

For financial year 2024 (FY24), net profit climbed 12.8% to a record RM470.36mil, while revenue rose 21% to RM1.38bil.

Fourth-quarter revenue alone surged 45%, driven by strong sales across Johor Baru, Kluang and Klang.

Khoo is confident the earnings momentum is not a one-off.

“Our fundamentals are very strong. Our business model has been like that for a few decades,” she says.

“We have a very strong balance sheet. We maintain it all the time with no gearing.”

A key differentiator is KSL’s land bank, much of which was acquired decades ago at prices that look almost implausible today.

One Johor township bought at about RM4 per sq ft in the early 2000s now sits beside major highways and carries a potential gross development value (GDV) of RM1.5bil.

By contrast, a recently acquired converted parcel near KSL City Mall cost about RM630 per sq ft.

“That was 22 or 23 years ago,” Khoo shares. “And we have quite a number of townships like this sitting in our land bank.”

Low historical land costs, combined with in-house construction capabilities, have enabled KSL to consistently target at least a 30% profit margin on new launches.

“We normally expect at least a 30% profit margin for any launches,” Khoo says.

“Because we are contractors ourselves, we can control costs more effectively compared to other developers.”

With demand remaining resilient post-pandemic, KSL is turning more aggressive on volumes.

Projects such as D’Secret Garden 2 in Kempas, Taman Bestari Indah and Pulai Bestari have driven recent sales, while a sizeable pipeline is lined up for the coming years.

The first phase of its Setia Alam commercial-residential project – Haus Residences and Blossom Square – carries a GDV of RM463mil and is slated for launch in the first quarter of next year.

In Johor, an industrial park and multiple township phases are also in the works.

Total launches planned for FY25 amount to about RM3.7bil in GDV, with management indicating an even higher figure ahead.

Against this, KSL is targeting property sales of RM1.6bil this year, up from RM1.2bil last year, a target it has already met.

“About 80% still comes from Johor,” Khoo said. “Our main customers are locals – young professionals or young couples living in Johor Baru but earning in Singapore dollars.”

Recurring income and dividend revival

Beyond development, recurring income has become an increasingly important pillar. Retail and hotel assets, anchored by KSL City Mall, now contribute about 20% of revenue and close to 30% of operating profit.

“Our recurring revenue has grown more than 10% year-to-date, and recurring profit has grown more than 15%,” Khoo reveals. “We are on track to achieve another record high.”

This stability has underpinned KSL’s decision to resume dividends. After years of absence, the company restarted dividend payments and is now openly discussing a more formal policy.

“Moving forward, our aim is to distribute up to 30% of core profit, subject to cash in hand and opportunities to grow the company,” Khoo says.

“People look for yield as well. It’s not just capital gains.”

She adds that the founding generation is supportive of institutionalising dividends, a signal that the governance shift is gaining internal buy-in.

Despite a sharp rally late last year, KSL still trades at valuation multiples well below listed peers.

Management estimates its price-earnings ratio at about 7.5 times, versus low-teens multiples for comparable pure-play developers.

“I believe it’s due to the fact that we have not been engaging the investment community for quite some time, despite delivering one of the best results in the industry,” Khoo says.

“Hopefully with improved transparency and IR activities, they will realise our value.”

For now, management is ruling out big-ticket moves such as a real estate investment trust spin-off or data centre pivot, preferring to let assets appreciate organically.

“We don’t have the need for cash urgently,” Khoo points out. “Our investment properties still have potential to appreciate further.”

As KSL opens its doors to fund managers, the story it is selling is one of discipline rather than reinvention: deep land banks, strong margins, rising recurring income and now, clearer communication and shareholder returns.

After years of operating quietly, the company appears ready to be judged not just on execution, but also on valuation.