Diversified real estate developer SLB Development debuts on SGX’s Catalist board today. SLB is a spin-off from Mainboard-listed Lian Beng Group, one of Singapore's major home-grown building and construction groups.
SLB undertakes small to large scale residential developments, mixed-used projects, as well as industrial and commercial developments. Its portfolio comprises a S$892 million gross development value with an estimated development profit of S$136 million.
SGX lists 16 Catalist stocks under the GICS® Real Estate and Development sub-industry, which has a combined market capitalisation of S$1.6 billion. With an IPO market capitalisation of more than S$220 million after its trading debut, SLB ranks as the third-largest real estate developer by market capitalisations on Catalist, after Astaka Holdings and Hatten Land.
SLB Development (SLB), a diversified property developer, debuts on SGX Catalist today. SLB is a spin-off from Mainboard-listed Lian Beng Group, one of Singapore's major home-grown building and construction groups. Lian Beng will continue to hold 73.9% of SLB post-IPO.
SLB is a real estate group that undertakes small to large scale residential developments, mixed-used projects, as well as industrial and commercial developments. Currently, SLB’s projects include the Gaobeidian project in the People’s Republic of China (PRC), as well as other development projects mainly located in Singapore.
Its portfolio comprises a S$892 million gross development value with an estimated development profit of S$136 million. Its pipeline of projects includes the following:
- Three residential projects: 20% stake in Serangoon Ville, 20% stake in Rio Casa and 42% stake in a few odd numbered properties in Lorong 24 Geylang
- Two industrial projects including Khong Guan Industrial Building and 50 Lorong 21 Geylang
- Up to a 10% stake in Sino-Singapore Health City, an overseas mixed-use development project in Gaobeidian, Hebei Province, PRC.
Real Estate Developer Stocks Listed on Catalist
SGX lists 16 Catalist stocks under the GICS® Real Estate and Development sub-industry, and they have a combined market capitalisation of S$1.6 billion. The five largest real estate developers on Catalist by market capitalisation are: Astaka Holdings, Hatten Land, World Class Global, Aspen Group and Pacific Star Development.
With an IPO market capitalisation of more than S$220 million after its trading debut, SLB ranks as the third-largest real estate developer by market value on Catalist, after Astaka and Hatten Land.
The table below details the 16 Catalist stocks under the GICS® Real Estate and Development sub-industry, sorted by market capitalisation. Click on the stock name to view its full profile in StockFacts.
|World Class Global||1E6||215||0.235||-4.1||-9.6||N/A||2.2|
|Aspen Group Hldgs||1F3||191||0.215||10.0||-4.3||5.9||2.0|
|Pacific Star Development||1C5||90||0.180||-30.8||-9.5||N/A||N/A|
|Asia-Pacific Strategic Investments||5RA||35||0.003||-25.0||-40.0||N/A||N/A|
|Ocean Sky Intl||1B6||28||0.085||-8.6||1.2||N/A||N/A|
|Emerging Towns & Cities Sing*||1C0||N/A||0.079||N/A||-19.4||N/A||N/A|
* Note Emerging Towns & Cities Sing has been suspended on SGX.
Source: Bloomberg & SGX StockFacts (Data as of 19 April 2018).
Domestic Property Outlook
The residential segment of Singapore’s real estate market has firmed in recent quarters, according to preliminary flash estimates released by the Urban Redevelopment Authority (URA) earlier this month.
The URA’s overall private home price index climbed 3.1% QoQ in the first three months of 2018, its steepest QoQ gain since the second quarter of 2010, when the index rose 5.3%. For the full statement on the 1Q 2018 private residential property price index, click here.
The flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up till mid-March. The statistics will be updated on 27 April, when the URA releases its full set of real estate statistics for the first quarter.
SLB Development’s IPO
SLB Development bills itself as a property developer with extensive experience and track record in property development projects spanning the residential, mixed-used, industrial and commercial segments. It believes its diversified portfolio enables effective management of exposure to the industry’s fluctuations in demand.
Key Investment Highlights:
SLB Development has identified the following business strategies in its offer document:
- Diversifying across various development types through small to large scale residential developments, mixed-use developments, industrial and commercial developments.
- SLB has established a presence in China through joint ventures and intends to continue expanding in both Singapore and overseas, by participating in joint ventures with other property developers to undertake larger property projects and manage risks.
- Adding value through innovative ways for property development projects – SLB highlighted that Hexacube, its commercial development project, has managed to achieve cost and time savings with partial demolition on the land site whilst retaining both basement and first floors.
Competitive Strengths by Management:
- Established track record undertaking various types of property development with 17 years of industry experience under Lian Beng Group.
- Established network of business relationships with other property developers and contractors through joint ventures.
- Experience venturing into overseas markets such as United Kingdom, Australia and Vietnam.
- Experienced and dedicated management team capable of making prompt decisions.
Key Risks (page 38 of offer document shows complete list of risk factors):
- SLB is affected by the political, economic and social conditions in the countries in which the Group operates.
- SLB will be affected by the performance of the property industry in the countries it operates.
- License requirements are subjected to different legislation rules. There is no guarantee that SLB will be able to obtain all necessary licenses for its property development projects.
- Risks associated with debt financing.
Financials from Offer Document
SLB generated profit before taxation of S$19.6 million in FY 2017, down 71.5% YoY. Decline in profit was due to decreased share of profits of joint ventures and the decreased share of profits of associates.
- SLB did not record any revenue for FY 2016 from the sale of development properties as none of the development projects held by its subsidiaries were completed and handed over to purchasers.
- Revenue of S$87.6 million recorded in FY 2017 was due to development property at Mandai Foodlink, which was completed and handed over to purchaser.
- SLB currently does not have a fixed dividend policy.
- According to the offer document, SLB’s NAV per share based on unaudited pro forma combined statement of financial position as at 30 November 2017 was SGD 13.68 cents (before adjusting for estimated net proceeds of the IPO and based on pre-Invitation share capital of 675,000,000 shares) and SGD 15.74 cents (after adjusting for estimated net proceeds of the IPO and based on post-Invitation share capital of 913,000,000 shares).
- This implies a price to NAV ratio of 1.7x and 1.5x respectively
- In the offer document, SLB’s estimated development profits (based on SLB’s shareholding interests in the companies undertaking the respective projects) stands at S$135.6 million.
- SLB has only one operating segment and revenue is substantively derived from the sale of development properties.
- The Group operates in Singapore and all revenue and assets are derived from Singapore.
- Offer price at S$0.23.
- 238 million new shares – comprising 8 million offer shares and 230 million placement shares
- Estimated IPO market capitalisation of S$210 million
- Use of IPO gross proceeds of S$54.74 million will be as follows:
- S$18 million – Acquisition of new land sites and buildings for development, redevelopment and overseas expansion of its business
- S$18.4 million – Funding of existing property development projects and for general working capital purposes
- S$15 million – Repayment of bridging loan
- S$3.4 million – Listing and professional fees, underwriting and placement commission and miscellaneous expenses