By Khairul Khalid
The mass migration of talent — from board members and top management to frontline staff — from SP Setia to Eco World since the PNB takeover of the former in 2012 has stunned industry observers. Is upstart Eco World’s rising fortunes directly at the expense by the SP Setia?
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A RHB analyst report last May estimated that around 80% of new property developers Eco World’s 350 staff — 280 of them — came from industry giant SP Setia. It is an astounding figure and given the fact that this talent drain was happening to one of Malaysia’s hottest property developers in the last decade makes it all the more extraordinary.
An industry insider said that the number now may have swelled significantly due to the rapid expansion of Eco World in recent months.
“It is very worrying. The number one question is – who is behind the wheel in SP Setia? PNB should have executed the succession plan ages ago. SP Setia is a multibillion ringgit company. Big projects all over the world. The never ending appointment of acting CEOs is becoming a farce,” said an industry observer who did not want to be named.
Eco World is the property company that former SP Setia CEO Liew Kee Sin helped set up behind the scenes in 2013, after the PNB takeover of SP Setia. Liew was still officially in SP Setia but it was an open secret in the industry that he was luring SP Setia staff into his new vehicle.
Recently, acting CEO Voon Tin Yow announced his resignation effective January 1st 2015, less than nine months into the job after replacing Liew last May. Rumours are already swirling that Voon will soon be joining Liew at Eco World.
“With his experience, Voon will be a wanted man. We have a long history together. I will have to talk to him to find out what went wrong in (SP Setia),” said Liew in a recent interview with BFM radio shortly after Voon announced that he was stepping down.
Is PNB’s indecisiveness in appointing a long-term CEO for SP Setia and stopping the talent drain to Eco World jeopardising the SP Setia brand? Is Eco World benefiting from the leadership uncertainties in SP Setia?
Although Eco World is still relatively new on the block (RM157 million revenue in financial year 2013) compared to SP Setia (RM3 billion revenue FY13), it is getting a lot of buzz due to the presence of ex-SP Setia stalwarts in its management team.
Arguably, it is now being considered for major projects due to the perception that it has a reliable team on board, despite the company itself lacking any track record of big scale developments.
A good example is its participation in the Pudu Jail redevelopment project in Kuala Lumpur called the BBCC (Bukit Bintang City Centre) estimated to be worth RM7 billion – RM10 billion in GDV (gross development value). Eco World is in a consortium with Uda Holdings and EPF (Employees Provident Fund) for the project in which Eco World will have a 40% stake.
Johari Abdul Ghani
UDA chairman Johari Abdul Ghani cited Eco World’s “excellent record in developing projects” as a major reason for the joint venture between UDA and Eco World, despite the latter’s obvious lack of historical track record as a company.
This would imply that the big project was awarded to Eco World solely based on the experience and track record of the management at their previous employers SP Setia, not Eco World.
Eco World is also said to be a frontrunner to purchase 190 hectares of prime land worth an estimated for major development in Batu Kawan, Penang from the state government. The deal could be worth around RM1 billion.
“Despite being a relatively new property developer, Eco World has been able to sell properties at an unprecedented pace, reflecting property buyers’ confidence in the management team’s strong brand name,” said a AllianceDBS Research report.
Eco World seems to have overshadowed SP Setia in terms of deal making in recent months and many attribute this to the uncertainties about top leadership in the company.
“What incentive would an acting CEO have to cut any major deals when he knows that he will be out of the company in a few months? Although it is still highly regarded in the industry, PNB’s indecision in appointing a permanent CEO leaves SP Setia in a kind of limbo,” added the industry observer.
A roll call of “who’s who” in Eco World currently is virtually a “who was who” in SP Setia. A quick run through the board of directors and management team of Eco World reveals familiar names and faces.
Chang Kim Wah was formerly executive director of SP Setia. He is now chief executive officer (CEO) of Eco World.
Abdul Rashid Abdul Manaf was appointed director of SP Setia Bhd in 1996 and became chairman of the board of SP Setia Bhd from 1997 to 2012. Now, he is chairman and main shareholder in Eco World.
Eddy Leong Kok Wah
Eddy Leong Kok Wah was formerly director of SP Setia and is now deputy chairman and shareholder of Eco World.
Heah Kok Boon was head of corporate affairs in SP Setia. He is now executive director and chief financial officer of Eco World.
Despite the exodus, there has been nothing to suggest anything untoward or unprofessional in their departures from SP Setia, but the fact that PNB has tolerated the managerial musical chairs for so long after their 2012 take over has confounded many.
Even though it is plain to see for everyone else, PNB has been extremely slow to react to halt the talent drain to Eco World. Many analysts who had initially given SP Setia the benefit of the doubt about the succession plan are now worried about PNB’s inertia. Some say it may have an adverse effect on SP Setia’s bottom line.
“In our opinion, frequent changes in leadership could hamper the development of SP Setia’s strategy direction, which may in turn affect the group’s project execution and profit margin,” said TA Securities in an analyst report.
“We believe until there is a clear direction of the company’s strategy i.e. starting by stability of key management at the top, the discount given on the stock might persist, if not widen despite the good fundamentals,” said Public Bank.
Although it is puzzling that PNB’s succession plan remains vague after two years, some have speculated that PNB might have underestimated Liew’s strong friendship and professional bond that he had cultivated with his management team over many years in building SP Setia.
“Maybe initially PNB wanted continuity with the old management team, which would have made sense considering their success. But if that were true, they should either have offered them permanent positions or swiftly severed ties with the old regime,” said the industry observer.
Yesterday: Can SP Setia afford the cost of PNB’s dawdling?
Tomorrow: PNB’s options
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