World Class Global, a real estate company in property development and property investment in Australia and Malaysia, made its trading debut on Catalist today. The company intends to distribute annual dividends of up to 50% of net profits attributable to shareholders in FY2019 and thereafter.
Rising prices and increasing foreign investor appetite in Australia’s property market are some of the growth drivers that World Class Global has identified. For Malaysia, it also recognises Penang as a hotspot for property growth and investment.
SGX lists 63 stocks under the Real Estate Management & Development GICS® Industry with a combined market capitalisation of more than S$112 billion. These 63 have a market capitalisation-weighted average total return of 23.1% in the year-to-date.
Overview of the Real Estate Market in Australia and Malaysia
In its offer document, World Class Global notes that apart from local demand from Australian residents,demand for two of its Melbourne properties (Australia 108 and AVANT) from non-Australians has been strong amidst a current low interest rate environment and favourable exchange rates against the Australian Dollar. As at 31 Dec 2016, more than 97% of the 1,103 apartment units in Australia 108 and more than 94% of the 456 units in AVANT have been sold.
World Class Global has also identified prospects and trends for the Australian and Malaysian property markets, which include (page 136 of offer document shows full discussion of prospects):
Rising Property Prices – Based on statistics released by the Australian Bureau of Statistics (ABS), the residential property price index (RPPI) for the weighted average of the eight capital cities (Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Darwin and Canberra) rose 4.1% QoQ and 7.7% YoY for the Dec quarter 2016.
Foreign Investor Appetite – Despite additional fees and taxes such as state-based stamp duty surcharges for foreign purchasers of property introduced recently and tightened lending environment, foreign investors are expected to continue to look for a longer term return in Australia and are expected to place emphasis on access to good education institutions and a transparent property ownership structure.
Penang is a hotspot of property growth and investment – According to a Henry Butcher (Penang) Sdn. Bhd market research report, Penang continues to be the top hotspot of property growth and investment and is well-placed geographically in the Indonesia-Malaysia-Thailand growth triangle and the Bay of Bengal. In 2016, Penang recorded the highest foreign direct investments of RM4.5 billion compared to other states in Malaysia.
World Class Global’s Catalist IPO
World Class Global, a real estate company in property development and property investment in Australia and Malaysia, makes its trading debut on Catalist today. Some key extracts from the Offer Document include:
Business Strategies and Future Plans
- Keeping abreast of developments in consumer needs and preferences.
- Launching new projects, commencing construction on launched projects and increasing portfolio of development sites.
- Entry into strategic alliances or partnerships for existing or new projects.
- Expansion of Group’s business into property investment.
- Management has an established track record of developing quality and well-designed residential properties in sought-after locations.
- Able to manage exposure to volatility in property prices.
- Able to respond and adapt to changing consumer needs and preferences.
- Experienced management team comprising Non-Executive Chairman, Executive Director and CEO as well as Executive Officers.
Key Risks (page 37 of offer document shows complete list of risk factors)
- Business is subject to the performance of the property industry in the countries of operation.
- Financial performance including revenue and profit may be volatile and fluctuate from period to period.
- The Group has a short operating history and limited experience in Australia and Malaysia (incorporated in Oct 2013).
- The Group experienced negative operating cash flows and net losses in FY2014, FY2015 and FY2016 as no revenue was recorded from the sale of development properties (under completed contract method revenue recognition policy).
Financials from Offer Document
- According to the audited financial statements, the company has not reported any revenue for FY2014 to FY2016 from the sale of development properties as none of the development projects are completed and handed over to purchasers (revenue is recognised using the completed contract method). The company reported a loss before tax of S$6.8 million in FY2016.
- While the company currently does not have a fixed formal dividend policy, management intends to declare an annual dividend of up to 50% of its net profits attributable to shareholders in the financial year ending 31 Dec 2019 (FY2019) and thereafter.
- According to the Offer Document, World Class Global’s audited NAV per share in FY2016 was at 9.8 cents Singapore dollars (based on the pre-invitation share capital of 805 million shares). The adjusted NAV per share in FY2016 was at 11.4 cents (based on the post-invitational share capital of 905.7 million shares and assuming the over-allotment option is not exercised).
- SGX lists 63 stocks under the Real Estate Management & Development GICS® Industry with a combined market capitalisation of more than S$112 billion. These 63 have a market capitalisation-weighted average total return of 23.1% in the year-to-date and a market capitalisation-weighted average price-to-net asset value (P/NAV) ratio of 1.0x. The 10 largest companies by market capitalisation has an average market capitalisation-weighted average P/NAV ratio of 0.8x and are listed in the table below.
List of 10 largest Real Estate Management & Development (GICS®)
|Hongkong Land Hldgs||H78||25.1||10.635||5.4||0.6||2.5||18.3||33.3|
|Global Logistic Properties||MC0||13.7||2.930||13.0||1.1||2.0||33.2||69.4|
|United Industrial Corp||U06||4.8||3.360||16.8||0.8||0.9||22.5||21.2|
|Yanlord Land Group||Z25||3.6||1.870||5.3||0.9||2.3||45.0||66.5|
|Market Cap Weighted Average||11.8||0.8||25.3||36.7|
Source: SGX, Bloomberg & SGX StockFacts (data as of 14 Jun 2017)
Additional Information from Offer Document (click here)
World Class Global is a real estate company that undertakes property development and property investment in major cities in Australia and Malaysia. It was incorporated in Oct 2013 to focus on Aspial Corporation Limited’s overseas property development business in Australia and Malaysia. Some of their development projects include Australia 108 and AVANT in Melbourne, Australia and land parcels comprising of mainly shophouses in Penang, Malaysia.After the IPO, Aspial Corp will own up to 80% in the company (assuming over-allotment option is not exercised).
World Class Global may in future expand their business to include property development in other sectors, including the industrial and hospitality sectors, and may acquire new properties in Australia, Indonesia, Malaysia, New Zealand and the Philippines. It also intends to acquire or develop properties for investment purposes in these countries. The company and its subsidiaries cannot (under a non-compete undertaking with Aspial Corp) engage in property development and property investment businesses in territories outside of these countries.
- Offer price at S$0.26
- 136 million invitation shares (comprising 100 million new shares and 36 million vendor shares)
- 3.98 million offer shares to the public
- 132.02 million placement shares
- Estimated IPO market capitalisation at S$235.5 million (assuming the over-allotment option is not exercised)
- Use of placement gross proceeds assuming the over-allotment option is not exercised (S$26.0 million)
- S$18.80 million – Acquisition of properties and construction and other related costs (including marketing, corporate, admin and finance expenses) in connection with the development properties
- S$4.05 million – Listing expenses
- S$3.15 million – Working capital
In connection with the Invitation, the company has granted the over-allotment option to the Underwriter and Placement Agent to subscribe for up to an aggregate of 10.8 million over-allotment shares, to cover the over-allotment of Shares (if any) made in connection with the Invitation. The Underwriter and Placement Agent may exercise the over-allotment option in full or in part, on one or more occasions, only from the Listing Date until the earliest of
- the date falling 30 days from the Listing Date; or
- the date when the Underwriter and Placement Agent has bought an aggregate of 10.8 million shares to undertake stabilising actions.