Singapore Initiating Coverage
20 October 2017 Property | Real Estate Buy Aspen (Group) Holdings Ltd Target Price: SGD0.31 Price: SGD0.22 The Batu Kawan “IKEA” Transformation Play Market Cap: USD140m Bloomberg Ticker: ASPEN SP
We initiate coverage on Aspen – which focuses on affordable residential Share Data and mixed-use property projects in Penang – with a BUY and SGD0.31 TP Avg Daily Turnover (SGD/USD) 0.14m/0.10m (41% upside). Aspen is an early mover in the emerging Batu Kawan 52-wk Price low/high (SGD) 0.21 - 0.24 market with its flagship AVC project, which is jointly developed with Ikano. Ikano is also opening northern West Malaysia’s first IKEA store in Free Float (%) 24 AVC, which we expect to be a re-rating catalyst for property prices and Shares outstanding (m) 867 demand. Despite targeting middle-income buyers, its projects come with Estimated Return 41% quality infrastructure and a cost-effective fully-furnished unit option – we believe this is its key differentiating factor. Shareholders (%) Dato’ M. Murly 55.7 An early mover in Batu Kawan’s transformation. Aspen’s flagship project is Aspen Vision City (AVC), a mixed-use project jointly built with Ikano Pte Ltd Setia Batu Kawan SDNSB 26.9 (Ikano). The development sits on 245 acres of freehold land at Bandar Cassia, Batu Kawan, an upcoming growth area in Mainland Penang. AVC has an Share Performance (%) estimated GDV of MYR11bn. It is envisioned to become an eco-metropolis with a mix of residential, office, commercial and retail spaces, as well as hotels, YTD 1m 3m 6m 12m hospitals, international schools, and parks. Key attributes are its attractive Absolute (2.2) pricing and good location, ie its close proximity to the Penang Second Bridge. Relative (5.4) Strategic relationship with Ikano a key growth driver. Ikano, which owns the Source: Bloomberg franchise rights to own and operate IKEA stores in South-East Asia, is developing the first IKEA store in northern West Malaysia within AVC. The store Aspen Group (ASPEN SP) is expected to be open by 1Q19. Based on past observations, the opening of Price Close Relative to Straits Times Index (RHS) IKEA outlets in Malaysia has boosted population density, property demand and 0.240 108 0.230 103 real estate values in the surrounding areas. We expect a similar effect on Batu 0.220 99 Kawan property prices once the store opens. 0.210 94 0.200 90 Unique business model. Aspen currently has four ongoing launched projects 14 12 in Penang and three more in its pipeline. It differentiates itself from competitors 10 8 on three fronts. Firstly, it is an early mover in affordable housing, where demand 6 is growing. Secondly, the group offers packages that add value, ie buyers can 4 2
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Aug Sep Aug Sep Formula to follow the IKEA mixed development model overseas. One of Aspen’s key strengths is its partnership with Ikano. Ikano currently operates five Source: Bloomberg stores in Singapore, Thailand and Malaysia, with three more under construction. It also plans to double its business in the coming years. Aspen Table Of Contents could grow along by replicating its strategy of building neighbouring projects in Financial Exhibits 2 other parts of Malaysia and overseas (via potential JVs with local developers). Valuation 3 MYR1bn in unbilled sales = strong earnings visibility. We estimate the Financials 5 group to rake in a healthy 2017 net profit of MYR70m (2016: net loss). Earnings Key Risks 7 can further grow by 74% and 45% in 2018F-2019F respectively, as earnings Company Highlights 8 Batu Kawan Transformation 13 are progressively recognised upon project completion. Aspen’s policy is to Details Of Projects 15 distribute at least 20% of the group’s PATMI as dividends from 2018 onwards. Company Structure 20 BUY, with a TP of SGD 0.31 based on a 45% discount to our RNAV estimate Management Team 21 of MYR1.5bn. The higher discount (typically 20-30%) reflects its smaller size, Market Overview 22 shorter track record and concentration risks. Key risks are its execution ability, Appendix 27 Penang market concentration and a high reliance on the IKEA partnership. SWOT Analysis 29
Forecasts and Valuations Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F Total turnover (MYRm) 53 100 395 700 1,025 Reported net profit (MYRm) 5 (0) 70 122 176 Recurring net profit (MYRm) 5 (0) 70 122 176 Recurring net profit growth (%) 0.0 (106.5) 0.0 73.6 45.0 Recurring EPS (MYR) 0.01 (0.00) 0.08 0.14 0.20 DPS (MYR) 0.00 0.00 0.00 0.03 0.04 Recurring P/E (x) 126 na 8 5 3 P/B (x) 19.0 14.5 5.3 2.8 1.7 Dividend Yield (%) na na na 4.1 5.9 Analyst Return on average equity (%) 18.0 (0.8) 92.2 76.2 63.2 Vijay Natarajan Return on average assets (%) 2.0 (0.1) 9.9 11.4 11.9 Net debt to equity (%) 151.3 34.6 117.3 97.2 68.4 +65 6232 3872 Our vs consensus EPS (adjusted) [email protected]
Source: Company data, RHB
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Financial Exhibits
Financial model updated on: 2017-10-16. Asia Financial summary Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F Singapore Recurring EPS (MYR) 0.01 (0.00) 0.08 0.14 0.20 Property EPS (MYR) 0.01 (0.00) 0.08 0.14 0.20 Aspen Group DPS (MYR) 0.00 0.00 0.00 0.03 0.04 Bloomberg ASPEN SP BVPS (MYR) 0.04 0.05 0.13 0.24 0.40 Buy Weighted avg adjusted shares (m) 867 867 867 867 867
Valuation basis Valuation metrics Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F RNAV. Recurring P/E (x) 126 na 8 5 3 P/E (x) 126 na 8 5 3 Key drivers P/B (x) 19.0 14.5 5.3 2.8 1.7 i. Re-rating of the Penang (Batu Kawan) property FCF Yield (%) (1.7) 13.3 (1.4) 5.6 15.9 market; Dividend Yield (%) 0.0 0.0 0.0 4.1 5.9 ii. Strategic partnership with IKEA; iii. Early mover in the affordable housing market; EV/EBITDA (x) 108 na 9 5 4 iv. Implementation of its mixed development EV/EBIT (x) 81 120 8 5 3 strategy in the overseas market. Income statement (MYRm) Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F Total turnover 52.5 99.7 395.1 700.4 1,025.0 Key risks Gross profit 22.7 35.4 142.2 234.6 328.0 i. Execution risks; EBITDA 5.9 (3.8) 78.5 149.6 220.5 ii. Government policy risks; Depreciation and amortisation 1.9 8.7 6.7 18.6 23.2 iii. An economic slowdown in Malaysia. Operating profit 7.8 4.9 85.2 168.2 243.7 Net interest (1.6) (3.2) (9.4) (16.3) (23.4) Company Profile Income from associates & JVs (0.0) (0.0) 0.0 0.0 0.0 Aspen Group was founded in Malaysia in 2013 with Pre-tax profit 7.2 2.3 87.5 151.9 220.3 the vision to provide the middle-income with affordable Taxation (0.9) (2.7) (17.5) (30.4) (44.1) residential and mixed development properties at Minority interests (1.6) 0.1 0.0 0.0 0.0 strategic locations. Aspen Group is the developer for Recurring net profit 4.7 (0.3) 70.0 121.5 176.2 Aspen Vision City, a 245-acres freehold project situated in Bandar Cassia, Penang. Cash flow (MYRm) Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F Change in working capital 16 107 (70) (75) (72)
Cash flow from operations 20 93 3 44 104 Capex (30) (14) (11) (11) (10) Cash flow from investing activities (77) (19) (15) (17) (17) Proceeds from issue of shares 5 10 0 0 0 Dividends paid 0 0 0 (24) (35) Cash flow from financing activities 107 (31) (6) 1 (23) Cash at beginning of period 8 58 100 82 110 Net change in cash 49 43 (19) 29 64 Ending balance cash 58 100 82 110 175
Balance sheet (MYRm) Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F Total cash and equivalents 60 103 85 113 178 Tangible fixed assets 64 76 87 98 108 Total investments 16 22 28 35 43 Total other assets 1 9 11 11 11 Total assets 387 529 886 1,254 1,711 Short-term debt 111 73 123 173 223 Total long-term debt 2 45 95 145 195 Other liabilities 41 0 0 0 0 Total liabilities 353 485 771 1,043 1,359 Shareholders' equity 31 41 111 208 349 Minority interests 3 3 3 3 3 Total equity 35 44 114 212 352 Net debt 52 15 134 206 241 Total liabilities & equity 387 529 886 1,254 1,711
Key metrics Dec-15 Dec-16 Dec-17F Dec-18F Dec-19F Revenue growth (%) 0.0 89.8 296.5 77.3 46.3 Recurrent EPS growth (%) 0.0 (106.5) 0.0 73.6 45.0 Gross margin (%) 43.2 35.6 36.0 33.5 32.0 Operating EBITDA margin (%) 11.2 (3.8) 19.9 21.4 21.5 Net profit margin (%) 8.9 (0.3) 17.7 17.3 17.2 Dividend payout ratio (%) 0.0 0.0 0.0 20.0 20.0 Capex/sales (%) 57.1 14.4 2.8 1.6 1.0 Interest cover (x) 2.74 1.13 7.79 9.59 9.70
Source: Company data, RHB.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Valuation Initiate coverage with BUY and SGD 0.31 TP based on a 45% discount to our RNAV estimate (Figure 1). The higher RNAV discount (compared to the typical 20-30% for developers) reflects Aspen’s smaller size, shorter track record and concentration risks. We believe our GDV assumptions are fairly conservative, as they: i. Are based on current selling prices or comparable selling prices in neighbouring projects; ii. Have not assumed any price appreciation for future sales in existing launches and upcoming developments. Key risks to our assumptions are an unexpected slowdown in Penang’s property market, the group’s inability to deliver the projects on time and a potential breakdown of its JV partnership with IKEA. AVC assumptions. Most of Aspen’s growth potential hinges mainly on the AVC development. In our GDV calculation for AVC, we used the proposed development plans for various plots, as indicated by management (based on Henry Butcher’s valuation reports as at 31 Mar). Our selling price assumptions for various types of developments in AVC are: i. Office space: MYR600.00 psf; ii. Condominiums: MYR550.00 psf; iii. Retail shops: MYR600.00 psf; iv. Hotel: MYR550.00 psf; v. Small office/home office (SOHO) suites: MYR575.00 psf; vi. Bungalow office: MYR450.00 psf; vii. En bloc office: MYR425.00 psf; viii. Bungalows: MYR3m per unit. We assumed an 18% net margin for the development, which we believe is achievable due to the low land acquisition cost (around MYR45.00-50.00 psf). In our model, we assume that the entire AVC project is to be fully completed over a period of nine years, ie by the end of 2025. Discount rate assumptions. We arrive at our RNAV net surplus by using a discount rate, ie cost of equity (CoE) of 10.5%. Our CoE is calculated based on a risk-free rate of 3.5%, beta of 1 and a market risk premium of 7%.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Figure 1: RNAV Calculations
*JV with profit sharing agreement Source: RHB
Sensitivity Analysis As AVC accounts for the bulk (73%) of our RNAV estimate, we conducted a sensitivity analysis on our assumptions for its net margins and discount rates. In our analysis, every 1ppt change in its net margin (currently at 18%) for AVC would imply a c.4% increase or decline in our RNAV estimates. Similarly, every 1ppt change in the discount rates assumed would lead to a corresponding c.4% change (ie increase and decrease) to our RNAV calculation.
Figure 2: Aspen’s discount rate/net margin sensitivity to RNAV estimates (MYRm)
Source: RHB
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Financials Expect multi-fold net profit growth as earnings are progressively recognised. As at 1H17, Aspen unbilled sales stood at MYR1bn. The orderbook is backed by strong sales across its existing launches in Tri Pinnacle (82% sold as at 1H17), Vervéa (84% sold), Vertu Resort (60% sold) and Beacon Executive Suites (56% sold). The revenue for the units sold is recognised based on the percentage of project completion. As the bulk of the projects are still in the early stages of completion, earnings are expected to kick in progressively upon the different completion stages. For FY15-16, Aspen reported net profit of MYR5m and a loss of MYR300,000 respectively. The key reason for the FY16 loss was the lower earnings recognition and higher administrative expenses (+98% YoY) and opex (+113% YoY) incurred. This was on the back of elevated employee expenses, depreciation charges, and selling and distribution expenses, mainly due to the initial launch of AVC. With the increased pace of construction progress, we expect a jump in revenue and earnings contributions ahead. For FY17, we expect a near four-fold increase in revenue to MYR395.1m and a net profit of MYR70m, with Tri Pinnacle and Vervéa being the key contributors. In 1HFY17, Aspen recorded a revenue of MYR108m and a net profit of MYR18.5m with a better than expected gross margin of 46.6%. For FY18-19, we expect net profit to further increase YoY by 74% and 45% respectively. Our gross margin assumptions for FY17-19 are 36%, 34% and 32% respectively (FY16: 36%). We have also assumed 40% and 15% increases in administrative expenses for FY17-18 respectively to factor in higher staff expenses and other costs.
Figure 3: Aspen’s revenue and net profit Figure 4: Aspen’s gross and net margins
Source: RHB Source: RHB
Gearing to remain low on the back of healthy presales. As of 1H17, Aspen has net cash (net debt/total assets) of MYR13.5m. Overall, we expect the group to maintain a healthy balance sheet and its gearing level to remain low (ie less than 20%) over the next three years. This is due to the cash generation ability from its successfully sold phases in earlier launches, which should help fund its working capital for subsequent developments. As at 14 Jun, Aspen has total banking facilities of approximately MYR683.2m, of which MYR543.2m remain unutilised. The banking facilities comprise mainly term loans, bridging facilities and bank guarantees. Dividend policy of 20% of its PATMI commencing 2018F. Aspen (or its subsidiaries) has not declared or paid any dividends since its incorporation. In 1H17, it announced a dividend policy of distributing not less than 20% of net profits from 2018 onwards. This translates to a healthy dividend yield of 4% and 6% for FY18-19 respectively, based on our calculations. Taxation. Under Malaysian taxation laws, income tax is charged on income accruing in or derived from the country, or received in Malaysia from outside the nation. The taxation of dividend distributions are under the single-tier system, whereby corporate income is taxed at the corporate level and this is a final tax.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Single-tier dividends paid or credited by a company that is a tax resident in Malaysia (ie a “Malaysia Resident Company”) are exempted from the income tax. A company is a tax resident in Malaysia if the control and management of its businesses are exercised in the country. Resident companies are currently taxed at the rate of 24%. For the years of assessment 2017 and 2018 – subject to fulfilment of conditions – companies that achieve an incremental chargeable income may enjoy a reduction of income tax rate of up to 4%. Dividends paid by a Malaysian resident company from its tax- exempt income account are tax-exempt in the hands of its shareholders. There is no dividend withholding tax in Malaysia. Peer comparison. Aspen’s Malaysian-listed peers are currently trading at an FY17F average of 1.1x P/BV and 16.3x P/E. Singapore-listed property stocks that have exposure to Malaysia are trading at an average of 2.0x P/BV and 15.6x P/E for the same forecast period. Aspen trades at a FY17F P/BV of 5.3x. The expected future net profit growth should lower this ratio down to a P/BV of 1.7x by FY19F.
Figure 5: Peer Comparison Table
Note: Data As at 18th Oct 2017 Source: RHB, Bloomberg
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Key Risks Highly reliant on IKEA relationship. Aspen’s project development success relies heavily on its relationship with IKEA for its development projects. Thus, a breakdown of the ties between the two parties would have a highly negative impact on the group’s future outlook and financials. Concentration risk. Aspen’s current and future development projects are almost entirely situated within Penang. Being highly reliant on the economic and industry conditions of the state, the group’s business risks include changes in the regulations made by the Penang State Government, supply and demand conditions, market sentiment and competition. Hence, if the state’s property market faces a downturn, the developer’s revenues would likely be adversely affected due to its lack of diversification. Execution risk. Aspen has a limited track record in terms of property development. Additionally, its business model is reliant on third-party contractors, where – despite stringent measures in the selection of such contractors – delays in projects or budget overruns may occur. This may affect the group’s project profitability and future prospects. Relationships with suppliers. Aspen has tied up with a lot of global suppliers to fully furnish the projects it currently undertakes. A loss of a key supplier could have a negative impact on its project development. Additionally, any substandard quality products from its suppliers could also hurt the group’s reputation. Loss of key management team. Aspen’s success heavily hinges on the execution of strategy by its key management team, in particular CEO and executive director Dato’ M Murly and executive director Dato’ Seri Nazir Ariff. Any premature departure of key management personnel would have an adverse impact on the group’s progress. Delays in surrounding ecosystem developments. Although Batu Kawan was chosen by the Penang State Government as the mainland site for a major industrial area and third satellite town of Penang, it is not an absolute certainty that these plans would ultimately be completed as planned. If these plans fall through, it may negatively affect property prices in Batu Kawan, where AVC is located. However, this risk is minimal, in our view, as most of the projects in the area have been successfully tendered out, with many currently undergoing their construction phase. Banking regulatory risks. Aspen’s success also depends on buyers successfully securing financing for its projects. Currently, banks are supportive of the group’s developments and are able to fund the total unit costs, which include furnishings as well. Any loan tightening by the banks could have a negative impact on buyers’ borrowing capabilities and, thus, hurt demand. Political governance risks. Aspen’s ability to secure timely project approvals depends on a stable political environment. Additionally, the pace at which Batu Kawan transforms is also heavily reliant upon the local government’s push in promoting and executing its infrastructure development plans. Forex impact. Aspen’s revenue, costs and borrowings are denominated in MYR, while the stock is quoted in SGD. The group does not currently hedge any of its currency exposure. Thus, an adverse movement of the MYR vs SGD could potentially result in lower earnings and dividends in SGD terms.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Company Highlights Aspen was founded in Malaysia in 2013 as Aspen Vision Development Sdn Bhd (AV Development), with the vision of providing middle-income mass market purchasers with affordable residential and mixed development properties at strategic locations. Initially, as a JV with Bursa Malaysia-listed Ivory Properties Group (Ivory Properties), Aspen Vision Land SB (AV Land) entered into a purchase and development agreement with Penang Development Corp (PDC) to acquire the land for the development of AVC. In 2015, AV Development acquired the remaining stake in AV Land from Ivory Properties. Aspen was then incorporated on 22 Dec 2016 in Singapore under the Companies Act under the Aspen (Group) Holdings Pte Ltd name. The company was listed on the SGX catalist board in 28 Jul 2017.
Figure 6: Aspen's key milestones
Source: Company
Strategic JV with Ikano the game changer. In Aug 2014, AV Land and Ikano entered into a master agreement to jointly develop AVC. We understand that the latter is part of the privately-held Ikano Group – with operations in 14 countries – which manages the IKEA franchise rights for South-East Asia. Based on Ikano’s 2016 data, it currently operates five IKEA stores – Malaysia (two), Singapore (two) and Thailand (one) – and has three under construction (including the one in Batu Kawan) in Malaysia and Thailand. Ikano also announced that it plans to double its business in the region in the coming years and has opened a small development office in Manila, the Philippines. As per the JV agreement, Ikano is to develop the only IKEA store in northern West Malaysia in AVC. Construction is currently underway and the store is set to be open by 1Q19. Ikano would also take the majority 70% stake in the neighbouring Bandar Cassia Shopping Centre (BCSC) and play a key role in the curation of the mall’s tenants. Additionally, Ikano is also taking a minority 20% stake in the mixed developments in AVC, with Aspen holding the majority 80% portion. We understand that this is the first residential/mixed development project that Ikano has taken a stake in – this is an endorsement to the growth potential and future developments in the region. We believe the JV partnership also provides a template for Aspen’s future growth by replicating a similar strategy. The group could potentially grow along by replicating a similar strategy of building mixed developments in other parts of Malaysia and overseas markets (via potential JVs with local developers). Management has identified Thailand and the Philippines as potential near-term target markets.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Figure 7: AVC – the JV structure between Aspen and Ikano
Source: Company data
AVC project developments. AVC is Aspen’s 245-acre flagship freehold project, which is located in Bandar Cassia, Penang. The project comprises the following: i. Mixed development. Aspen is to hold an 80% stake in AVC as the developer of the mixed development land (save for those lands sold to third parties). The remaining 20% is held by Ikano. The 170-acre mixed development land is expected to house residential homes, offices, medical facilities, a 20-acre central park, international school(s), hotels, and other retail and commercial components. There are two ongoing projects within the mixed development, namely Vervéa and Vertu Resort. Aspen is also expected to launch Viluxe – a 133-bungalow project in AVC – soon; ii. BCSC is to be developed on Plot 4 of the AVC land parcel that sprawls across 51 acres and is very close to the linkage spot of the Penang Second Bridge. Ikano is to have a majority 70% stake in the development with Aspen holding the remaining 30%; iii. IKEA store. The 24-acre IKEA store, the first in northern West Malaysia, is to be developed by Ikano Penang Pte Ltd (Ikano Penang); iv. Columbia Hospital and petrol station. In August, Aspen announced the completion of the sale of land, ie Plot 25, in AVC to Columbia Asia SB (CASB). This was for the purposes of constructing and operating a Columbia Asia Medical Centre – and its supporting amenities – for a total consideration of MYR17m (or MYR130 psf). The medical centre, scheduled to be completed by 2020, is expected to have 150 beds. The transaction would result in a net gain of MY8.8m. Separately, Aspen has also sold an acre of land in Parcel 1A to Pendang Pembangunan SB (PPSB) for MYR6.5m (or MYR150.00 psf), resulting in a net gain of MYR2.9m.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Figure 8: AVC land parcels
Source: Company
IKEA store a key re-rating catalyst for AVC. Based on historical experience, the opening of an Ikano Power Centre and IKEA outlet in 2003 boosted the population density, property demand and real estate values in the Taman Tun Dr Ismail, Bandar Utama, Mutiara Damansara and Desa ParkCity enclaves. We expect the Batu Kawan area to experience a similar trend in the coming years. This is given the enhanced road infrastructure, pick-up in industrial and commercial activities, and establishment of more education institutions (eg GEMS International School in Pearl City and the KDU Penang University College campus) in the area. Among the catalytic developments, the premier shopping outlet by PE Land SB and CB Richard Ellis (CBRE) already kicked off operations in late 2016. We believe that once the IKEA store opens in 2019, we expect Batu Kawan to be able to pull in a bigger crowd. This is given its local population catchment of around 5.8m people, ie 2.1m from Kedah, 1.7m from Penang, and about 2m from North and Central Perak. This is in addition to the flow of foreign tourists and shoppers from Medan (Indonesia) and South Thailand.
Figure 9: AVC development model with IKEA store in front Figure 10: IKEA store construction works (as at September)
Source: RHB Source: RHB
Maiden foray into Selangor’s affordable housing market. In September, Aspen announced the acquisition of freehold land in Bandar Batu, Selangor, from Tropicana Kajang Hill SB. The total purchase consideration for the land was MYR66.7m. The land has been approved for two blocks of residential properties, comprising SOHO and serviced apartments, one block of 9-storey podium car parks, 16 shop lots (retail units), and other facilities. Aspen’s estimated total GDV of the development is MYR500m.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Quality homes at affordable price levels. Aspen’s aims to mainly cater to housing demand from middle-income mass market purchasers. As a developer of affordable housing projects, it is able to obtain certain beneficial planning approvals, such as those in relation to density plot ratios. This makes the group’s projects cost-effective and enables it to deliver healthy margins. Additionally, Aspen is able to further monetise its developments under the Penang Affordable Housing Scheme (PMM) by entering into quota-sharing agreements with other developers. The group currently has a quota-sharing arrangement with Ivory Properties for MYR19.8m and Tropicana Ivory for MYR62.3m in aggregate – payable upon the requisite milestones for units under construction at Tri Pinnacle. Despite keeping prices at affordable levels, Aspen’s projects provide condominium facilities and amenities, including – but not limited to – swimming pools, gymnasiums, landscaped gardens and conference room facilities. This boosts the attractiveness of its projects.
Figure 11: Furnished living room (show flat) Figure 12: Furnished kitchen with white goods (show flat)
Source: RHB Source: RHB
Unit customisation enhances value proposition. The majority of Aspen’s property purchasers are end-users. Thus, to increase the appeal of its projects, the group allows its customers to customise the units with home appliances from reputable brands at cost- efficient prices. It is able to achieve cost effectiveness by tying up with suppliers and purchasing in bulk, and is looking to enter into partnerships with Teka Group (Teka) to supply kitchen and home appliances and Schindler for the provision of elevator solutions. The additional frills are provided through optional integrated additional costs in sale and purchase agreements. In addition, Aspen also intends to deploy smart services at its developments in order to target the younger generation of property buyers. Partnership with established players to provide value-added smart services. Aspen is collaborating with established players such as Antah Schindler SB, IBM Malaysia SB and Telekom Malaysia (TM) (T MK, BUY, TP: MYR7.30) to provide smart services in its projects. Through the provision of such services, the group aims to provide sustainable and urban “Smart City” developments for buyers. These services include: i. Surveillance of the premises such as parking lots, lobbies and walk-ways for the security of the residents and owners of its properties; ii. Dim lights during low-activity periods in order to conserve energy and increase cost savings; iii. Installing intelligent digital signs, which promote deals and/or provide information; iv. Provide updates for the availability of parking lots in car parks; v. Provide intelligent waste management solutions to optimise waste collection; vi. Provide charging services for electric vehicles; vii. Installing sensor-based traffic light systems to minimise traffic congestion; viii. Introduce applications that allow residents and/or owners of the properties to access and manage the smart services provided to them.
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Innovative marketing strategies. Aspen currently has the following marketing campaigns – Aspen My Deposit Scheme (AMDS) and Aspen Privilege Card (APC). It also provides progressive grants to buyers of certain developments for selected units. AMDS was introduced in Jul 2016, whereby Aspen provides certain first-time purchasers of Tri Pinnacle and Vertu Resort units with subsidies of up to 5% of the purchase price. In compliance with the prescribed form of the sale and purchase agreement under the Housing Development (Control and Licensing) Regulations 1989, Aspen collects a down payment of 10% of the purchase price upon signing the sale and purchase agreement from buyers – 5% of the purchase price shall be deemed paid under AMDS and the remaining 5% payable by buyers. There are four categories within the APC programme, namely the Gold APC, Platinum APC, Titanium APC and Titanium Reserve APC. The type of APC depends on the accumulated value of the property or products purchased by the APC holder or the pre- paid sum deposited. The following tables set out the requirements and benefits for the different categories within the APC programme.
Figure 13: Aspen’s APC programme Figure 14: Aspen’s APC’s buyer and referral discounts Category Buyer Discount Introducer's referral APC Category Customer Type Minimum Pre-Paid Sum (MYR) discount Gold 0.5% discount on next and every subsequent 0.15% referral discount Gold New buyer 25,000 property purchase from Aspen Value of property (MYR) Platinum 1.0% discount on next and every subsequent 0.30% referral discount Gold Existing buyer 438,000 - 999,000 property purchase from Aspen Platinum Existing buyer 1,000,000 - 4,999,999 Titanium 2.0% discount on next and every subsequent 0.50% referral discount Titanium Existing buyer 5,000,000 - 9,999,999 property purchase from Aspen Titanium 3.0% discount on next and every subsequent 1.00% referral discount Titanium Reserve Existing buyer 10,000,000 and above Reserve property purchase from Aspen Source: Company data Source: Company data
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Aspen Group Singapore Initiating Coverage
20 October 2017 Property | Real Estate
Batu Kawan Transformation Following the construction of the new MYR4.5bn Sultan Abdul Halim Muadzam Shah Bridge (also known as the Penang Second Bridge), Penang Island is now connected to Batu Kawan’s nascent industrial, commercial and residential sites. These sites are slated to open in the coming years. Batu Kawan is expected to offer commercial entities the opportunity to develop large-scale projects that would not have otherwise been possible on the island due to the scarcity of land and, hence, expensive costs. In particular, PDC has announced plans to create a comprehensively-planned industrial park with high-standard infrastructure facilities. Batu Kawan would be accessible from places such as Ipoh, South Thailand and even Medan, Indonesia. It is also approximately 30km from the Penang International Airport, 23km from Penang Port and 5km from the North-South Expressway. There are a number of landmark projects being built in Batu Kawan, such as the Design Village, an Eco World Development Group (EcoWorld) development, and the KDU Penang University College campus. A JV agreement between PDC, Singapore’s Temasek Holdings (Temasek) and Economic Development Innovations Singapore Pte Ltd has also been signed for the development of the Penang International Technology Park (PITP) and Business Process Outsourcing Prime (BPO Prime) in the area. PDC has also continued to build and plan small and medium enterprise (SME) projects to meet demand. The proposed SME village in Batu Kawan would consist of industrial plots and 298 units of terraced and semi-detached factories that would be built in five phases. The Penang State Government also intends to make Batu Kawan an eco-city township which would be modern, sophisticated and comfortable through sustainability and green technology. As such, PDC is working with the Seberang Perai Municipal Council to create eco-city guidelines to develop Batu Kawan into an eco-city. Such plans were approved by the State Planning Committee in Jan 2015.
Figure 15: Timeline of Batu Kawan’s development
Source: RHB
Figure 16: Status of projects developed in Batu Kawan
Source: RHB
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Figure 17: Ongoing developments in Batu Kawan
Source: RHB
Figure 18: Utropolis mixed development Figure 19: Eco Horizon by EcoWorld
Source: Paramount Property (Glenmarie) SB Source: EdgeProp
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Details Of Projects AVC Aspen’s flagship project, AVC, is situated at Bandar Cassia, Batu Kawan. It is a 245-acre freehold project with close proximity to prominent landmarks like the Batu Kawan Stadium, Design Village, industrial parks of various multinational companies, and the upcoming Utropolis development. This JV project with Ikano is a mere 20-minute drive from Penang Island and comprises mixed residential and commercial properties. In addition, AVC would be the first integrated and sustainable intelligent city in Malaysia’s northern region.
Figure 20: Aspen’s project development plans Figure 21: Smart City developments
Source: Company Source: Company
Vervéa commercial district Vervéa is expected to consist of, among others, 441 units of commercial 3- or 4-storey shop offices (each with a private elevator), a boutique hotel, and a multi-storey car park. There may be future developments located within Vervéa, including an integrated petrol kiosk, food & beverage (F&B) outlets, a convention hall and sales gallery. Vervéa has a gross site area of 143,260 sqm and an estimated total GFA of 165,693 sqm. It would also provide external linkages to surrounding establishments, a 300m covered high street, tree- lined walkways, and parking facilities. The project is slated for completion by 3Q18.
Figure 22: Artist impression of Vervéa Figure 23: Vervéa’s project details
Source: Company Source: RHB, Company data
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Vertu Resort Vertu Resort is expected to consist of five blocks of residential towers ranging from 20 to 36 storeys above an 8-storey car park podium with an additional floor for facilities. It is located approximately 350m from IKEA and BCSC. It is also a five minute walk from, among others, the proposed Columbia Asia Hospital, central park, and international schools. The development is expected to consist of 1,246 units with two car park bays for each unit. Vertu Resort is expected to be equipped with amenities such as a 152m swimming pool, up to 200,000 sqf of facilities, and units furnished with home and kitchen appliances from established brands. Construction began in January and is expected to be completed by 1Q21.
Figure 24: Vertu Resort Figure 25: Project details
Source: Company, RHB Source: RHB, Company data
Viluxe Villas Viluxe Villas is expected to consist of 133 units of bungalows (of which 126 units are zero- lot bungalows), with estimated land areas ranging between 3,526-4,920 sqf. This development is expected to be located adjacent to the central park, with direct accessibility to IKEA, BCSC and the proposed Columbia Asia Hospital. It is also expected to be equipped with amenities that include – amongst others – a 4- storey clubhouse with facilities such as a private lounge with VIP rooms, gymnasium, yoga room and private roof top function area with a view of the central park. It would also be equipped with security features such as auto-sensor access at the guardhouse and security patrols within the street compound. Viluxe Villas is expected to commence construction in 3Q17, with its completion slated for 3Q20.
Figure 26: Viluxe Villas Figure 27: Viluxe Villas’ project details
Source: Company Source: RHB, Company data
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Vittoria Financial Centre Situated on Plot 24, Vittoria Financial Centre is expected to consist of five blocks of 8- storey commercial buildings, and a 10-storey tower. The latter comprises 231 office suites and a 4-storey car park podium. The office suites are anticipated to have access to a host of shared services and facilities, which include boardrooms, lounges, retail space, smart conference facilities, concierge services, and a sky gym and swimming pool. Vittoria Financial Centre would be built with a focus towards technological innovation. It aims to cater to businesses that are adapting to the idea of owning scalable workspaces, which come with the flexibility of shared services and lifestyle facilities. The target markets for these office units are start-ups, financial institutions, telecommunication companies, private organisations, and multinational corporations.
Figure 28: Vittoria Financial Centre Figure 29: Vittoria Financial Centre’s project details
Source: Company Source: RHB, Company data
BCSC BCSC is expected to be developed in two phases in the coming years. In total, about 1,000,000 sqf of GLA would be constructed and leased out to retailers. Current plans are ongoing to integrate the first IKEA store in northern West Malaysia with BCSC to ensure a smooth shopping experience for consumers. Aspen owns 30% of the issued share capital of Bandar Cassia Properties (SC) SB (Bandar Cassia Properties), with Ikano’s share at 70%. BCSC’s construction is expected to be completed by 1Q20. Pursuant to the Bandar Cassia shareholders' agreement, Ikano has the right to acquire Aspen Vision All SB’s (AV All) interests in Bandar Cassia Properties within five years of the opening of the entire or major portion of BCSC to the public. This would be at a mutually agreed price. Ikano may also determine the timeline for the development of the business of Bandar Cassia Properties, BCSC, and its tenant mix and location.
IKEA The store is on approximately 24 acres of land and is located within AVC. This would be IKEA’s first store in northern West Malaysia. It is currently being developed by Ikano Penang. The IKEA store is set to commence operations in 1Q19.
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Other Projects – Penang Island Tri Pinnacle Tri Pinnacle, Aspen’s first development, is expected to consist of three residential buildings, two of which are 32 storeys high. The remainder has 36-storeys. The project is located in Mount Erskine, Tanjung Tokong, Penang. It is close to the Prima Tanjung Business Centre, Fettes Park Market, Island Plaza shopping complex, a Tesco Hypermarket, Straits Quay, and the Desiran Vantage Business Centre. Tri Pinnacle was the first privately-funded affordable housing initiative in Penang, with units available for sale under the PMM. This development consists of 859 affordable housing units in two buildings, 458 low-medium cost (LMC) units in the remaining building, four shop lots and 1,381 car park bays. The development has an aggregate gross site area of 40,348 sqm and an estimated total GFA of 125,000 sqm. Tri Pinnacle is equipped with facilities and amenities such as a swimming pool, gymnasium, landscaped garden and children’s playground. The construction of the project is slated for completion by 3Q18.
Figure 30: Tri Pinnacle Figure 31: Tri Pinnacle’s project details
Source: Company Source: RHB, Company data
Beacon Executive Suites Beacon Executive Suites is expected to be a 30-storey building located at Sungai Pinang, Penang, in proximity to the Penang Japanese School, Penang City Stadium, various car showrooms, and the future Penang Times Square integrated development. This development is expected to consist of an 8-level podium that has four shop-lots and car park bays, 19-storeys of 227 SOHO units, and two levels of amenities. Beacon Executive Suites would also have recreational and communal facilities, whereby the top floor of the building is envisaged to comprise a sky lounge, bar, pool and garden as well as conference rooms. The Beacon Concept Gallery is currently located within this development. Construction on the external road works to the buildings commenced in Nov 2016. Construction for Beacon Executive Suites is expected to be completed by 3Q20.
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Figure 32: Beacon Executive Suites Figure 33: Beacon Executive Suites’ project details
Source: Company Source: RHB, Company data
HH Galleria HH Galleria is a mixed development consisting of a 40-storey condominium with 398 residential units and 24-storey condominium with 208 residential units. It also has an 8- storey podium for retail and commercial purposes. Located at Tanjung Bungah on Penang Island, construction is expected to commence in 1Q18 and is slated for completion by 1Q22. Pursuant to the HH agreement, Aspen entered into a JV with HH Distribution for the development of HH Galleria. As at 28 Apr, the group has paid HH Distribution a deposit – along with certain advance payments – amounting to MYR13m. Upon completion of the development of HH Galleria, Aspen is entitled to: i. 74.5% of the GDV of up to MYR413.8m for the condominium units and up to MYR27.9m for the commercial units; ii. 71.5% of the balance of the GDV for the condominium units and commercial units; iii. 71.5% of the GDV for the retail units and sale of additional car park lots, which are not included in the condominium and commercial units. HH Distribution would be entitled to the remainder of the GDV of the development – less any rebates, discounts or promotional rates subject to a minimum price of MYR100m. This would be adjusted for, among others, the deposit, part-payment of MYR50m by way of a 2016 Malaysia Building Society (MBSB) facility, and value of any unsold retail units that are taken by HH Distribution. Aspen is to pay HH Distribution such excess sums if the adjustments exceed the consideration due to the latter.
Figure 34: HH Galleria Figure 35: Project details
Source: Company Source: RHB, Company data
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Company Structure Figure 36 shows Aspen’s company structure and its associated companies. Ikano would hold the remaining 20% equity interest in AVC and 70% in Bandar Cassia Properties. The subsidiaries are not listed on any stock exchange in any jurisdiction.
Figure 36: Aspen Corporate Structure
Source: Company data
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Management Team Aspen is currently run by Dato’ Murly, the co-founder and CEO of the group. He is responsible for leading and implementing Aspen’s strategy, overall management, strategic planning, and business development. Dato’ Murly was previously the executive director and group COO of Ivory Properties. Another key member of the Aspen is Dato’ Seri Nazir – a co-founder and executive director. Prior to establishing the group, he was the deputy chairman and executive director of Ivory Properties. Aspen’s executive directors have – collectively – more than 40 years of experience in the property development industry and are well supported by a team of executive officers.
Figure 37: Aspen's key personnel
Source: Company
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Market Overview Malaysia’s real GDP recorded more robust growth of 5.8% YoY in 2Q17, up from 5.6% YoY in 1Q. This was on the back of stronger external activities and private consumption. Our Malaysian research team expects the country’s real GDP growth to grow by a stronger pace of 5.3% YoY in 2017 from 4.2% YoY in 2016. This is on account of a: i. Stronger projected growth in exports, which could boost overall economic activity; ii. Pick-up in domestic demand, as higher export growth would trickle down to an improvement in consumer spending and private investments; iii. Modest increase in public spending and investment. The strong growth in GDP should support the overall economy and property market. Additionally, the property sector could also receive a boost from Malaysia’s impending general election. Penang, located in the north-west coast of West Malaysia along the Straits of Malacca, has – in general – outpaced the country’s average. GDP has grown at a 5-year CAGR (2010-2015) of 5.7% when compared to the overall country’s 5.3%. Penang has also recorded a strong investment figure of MYR55bn over an 8-year period (2008-2015), approximately a 90% increase from the previous 8-year period’s (2000-2007) MYR29bn. The state has contributed nearly 20% to Malaysia’s overall foreign direct investment (FDI) inflows in 2015, the highest among the country’s states. The increasing investments bode well for the infrastructure and economic development of Penang, which supports migrant population growth and an increase in property demand.
Figure 38: GDP growth rate – Penang vs Malaysia Figure 39: 2015 GDP per capita by state
10% 100 Title: Title: Source: Source: 8.0% 80 8% MYR MYR '000 Please fill in the values above to have them entered in your report Please fill in the values above to have them entered in your report 60 6.0% 6.0% 6% 5.4% 5.5% 5.1% 40 4.5% 5.0% 4% 5.0% 5.0% 20
0 2%
0% 2011 2012 2013 2014 2015
Pulau Pinang Malaysia Malaysia Average
Note: Data as at 30 Sep 2016 Note: Data as at 30 Sep 2016 Source: Department of Statistics (DOS) Malaysia Source: CEIC
Infrastructure developments The increased investments into Penang have prompted a MYR27bn Penang Transport Master Plan (PTMP) aimed at improving connectivity and overcoming traffic congestion. The PTMP, formed by the Penang State Government, seeks to improve the present transport system. With its aim of balancing public transportation and highway improvements, the State Government intends to construct a monorail, highways, and bus rapid transit (BRT) network – as well as an undersea tunnel – to enhance connectivity between Penang Island and its mainland. The long-term infrastructure developments would result in increased connectivity and narrow the prices of property development between the island and mainland.
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Figure 40: PTMP
Note: As at Feb 2016 Source: Penang Transport Master Plan
Penang property market outlook The total number of properties sold in Penang continues to be on downward trend since its peak in 2011. This was after cooling measures were introduced in 2012 to prevent foreigners from speculating on the property market. The current cooling measures include the prevention of bulk buying by investors as well as the banning of the developer interest bearing scheme (DIBS). However, such measures have proven to be ineffective, as housing prices remain high.
Figure 41: Number of properties sold in Penang Figure 42: Value of property sales (MYR)
Note: Data is as at 19 Apr 2017 Note: Data is as at 19 Apr 2017 Source: CEIC Source: CEIC
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Residential segment outlook Malaysia’s house prices have more than doubled since 2000, albeit at a slowing pace. Penang housing prices have outpaced the national average and increased by more than 2.5x since 2000. With a population density of about 1,700 per sq km, Penang has one of the highest population density ratios in Malaysia, which is attributed to the higher-than- average demand for accommodation.
Figure 43: House price index Figure 44: Number of people per sq km
8 7.4 Title: Source: 6
Thousands Please fill in the values above to have them entered in your report
4
2 1.7 1.7 0.8 0.5 0.2 0.2 0.1 0.1 0.1 0.0 0.0 0
People per sq km
Note: Data is as at 28 Jul 2016 Note: Data is as at end-2016 Source: CEIC Source: DOS Malaysia, RHB
Figure 45: Number of properties sold in Penang by sale value
Note: Data is as at 18 Nov 2016 Source: CEIC
Incoming supply refers to properties undergoing construction works slated for completion, usually in about 3-4 years. As at 4Q16, the incoming supply of residential properties stood at about 48,000 units, which accounts for about 24% of Malaysia’s total incoming supply. Real Estate & Housing Developers’ Association (REHDA) Penang chairman Dato’ Toh Chin Leong highlighted that developers usually started building only after 30% of their units are sold. Hence, if we estimate that 50% of the incoming supply is sold – and at current demand levels of about 13,000 units sold pa – it would roughly take about four years to clear the backlog. However, an overhang still exists, with the planned and unsold completed residential supplies continuing to put downward pressure on housing prices.
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Figure 46: Incoming and planned supply Figure 47: Unsold completed residential units
20 1600 Title: Source: 18 1400
16 Millions Hundreds 1200 Please fill in the values above to have them entered in your report 14 12 1000 10 800
8 600 6 400 4 2 200 0 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Number of units Value of units (MYRm) (RHS)
Note: Data is as at 17 Apr 2017 Note: Data is as at 17 Apr 2017 Source: CEIC Source: CEIC
The office segment Existing stock for offices has remained stable since 2015, with no additional incoming or planned supply undertaken since that year. CBRE estimates that 82% of the office spaces are within Georgetown, with occupancy rates at approximately 83% and rental rates ranging from MYR2.50 to MYR3.50 psf. Meanwhile, office spaces outside of Georgetown command higher rental rates of MYR3.30 to 4.50 psf per month. According to Knight Frank, the occupancy rates of office buildings monitored within Georgetown range between 85-100%. New buildings located outside the city recorded an average occupancy rate of 97% as at Dec 2016. New office buildings include Light Waterfront by IJM Land and VOS Lifestyle Office by Inma Development SB.
Figure 48: Office stock Figure 49: Office planned and incoming supply
Note: Data is as at 17 Apr 2017 Note: Data is as at 17 Apr 2017 Source: CEIC Source: CEIC
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Retail segment outlook In 2016, three new retail malls commenced operations at Simpang Ampat, Georgetown, and Batu Kawan. To date, total existing stock stands at 1.67m sqm, with the majority on Penang Island. CBRE reported that overall occupancy rates have remained stable at 72%, with gross rental rates at selected prime areas at MYR22.00 psf. Despite having zero planned supply, 50,000 sqm worth of retail space is currently under construction.
Figure 50: Commercial stock Figure 51: Commercial incoming and planned supply (sqm)
Note: Data is as at 17 Apr 2017 Note: Data is as at 17 Apr 2017 Source: CEIC Source: CEIC
Restrictions on purchases by foreigners. In March, the Penang State Government halved the approval fee for foreigner purchasers to 1.5% instead of 3% for certain properties, but raised the minimum price for foreigners to MYR3m (from MYR2m) for properties on Penang Island. This was to further curb speculation in the housing market and protect locals’ interests. State Executive Councillor Mr Jagdeep Singh Deo highlighted that foreign buyers’ transactions in Penang have traditionally stayed below 10% of the state’s total transactions. The minimum price for a foreign purchase on the mainland is MYR1m for landed properties and MYR500,000 for stratified properties.
Figure 52: Malaysia’s regulations on foreign purchasers of domestic property Penang Johor Rest of Malaysia Minimum threshold MYR3m on island, MYR1m for all types of MYR1m for all types of MYR1m on mainland for property property landed property and MYR500,000 for stratified property property Foreigners' consent fees 1.5%~3% 2% MYR150 Source: Penang State Housing Committee
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Appendix Affordable housing scheme Penang – being one of the most populous states in Malaysia – has managed to attract significant interest from investors looking to participate in the housing market. With the population forecasted to reach 1.98m by 2030 (currently at 1.7m), according to Malaysia’s Department of Statistics (DOS), affordable housing is becoming a major concern. The Penang State Government has introduced the PMM, which aims to provide a range of quality homes at affordable prices spread across various locations in the state. Developers of the affordable housing units have to adhere to stringent price restrictions as stipulated by the local government (Figure 53). Similarly, the buyers of affordable housing units also have to meet the stringent monthly income thresholds set by the state government (Figure 54). The Penang State Government maintains a list of potential buyers eligible for units under various affordable housing schemes, and developers are then allowed to market their projects to these buyers.
Figure 53: Maximum household income
Note: *The applicant and spouse must not own any property priced below the affordable housing unit applied by the applicant unless such property is owned after 2008 Note 2: **The applicant and spouse must not own any property in any state in Malaysia Source: Company data
Figure 54: Buyer eligibility criteria for the PMM Requirements
i. Age 21 and above, Malaysian citizen
Penang-born, working in Penang and is a registered voter or residing in Penang for at least five ii. years and a registered voter For Low Cost/Low Medium Cost applications, the applicant and spouse must not own any property iii. in any state in Malaysia For Affordable Housing applications, the applicant and spouse must not own any property in any iv. state in Malaysia except Low Cost homes. Source: Penang Development Corp (PDC)
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Government policies promoting affordable home ownership The Malaysian Government introduced several policies in Budget 2017 to alleviate the shortage of affordable homes. It has also introduced polices to promote affordable home ownership to a targeted group of citizens. These include low- to middle-income Malaysians, youths entering the labour market, first-time owners, and civil servants. For first-time home buyers purchasing houses valued up to MYR300,000, the stamp duty exemption has been increased to 100% (from a 50% exemption previously) on instruments of transfer from 1 Jan 2017-31 Dec 2018. The 2017 federal budget also introduced several measures to assist civil servants in purchasing property. These included higher housing loans and construction of civil servants housing, which are to be sold at a considerable discount to market rates. To address the scarcity of land faced by Perbadanan PR1MA Malaysia (“PR1MA” refers to the 1Malaysia Housing Programme) – which was set up to provide housing to middle- income households in key urban centres – the Government is providing vacant land at strategic locations to government-linked companies and PR1MA. A new scheme to make home financing easier and more accessible under PR1MA also commenced on 1 Jan, and is a collaboration between the Government, Bank Negara Malaysia (BNM), the Employees Provident Fund (EPF) and four other local banks. Other new policies include subsidies for home purchases and lowered rental rates in urban areas. These initiatives contribute to promoting affordable home ownership.
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SWOT Analysis
First-mover advantage in Batu Kawan A slowdown in the Malaysian economy Strategic partnership with IKEA Political and Early mover in capturing demand for affordable regulatory risks housing Forex risks
Growing middle- class population fuelling affordable housing demand Opportunity to grow along with the ongoing developments in Batu Kawan
Developments concentrated in the Penang property market Lack of an operational track record
Recommendation Chart
Price Close Date Recommendation Target Price Price 2017-10-16 0.245 Source: Company data, RHB 0.240 0.235 0.230 0.225 0.220 0.215 0.210 0.205 0.200 Jul-17 Aug-17 Sep-17
Source: RHB, Bloomberg
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RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage
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Property | Real Estate availability of any information and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of their content. The research analysts responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. The research analysts that authored this report are precluded by RHB in all circumstances from trading in the securities or other financial instruments referenced in the report, or from having an interest in the company(ies) that they cover. RHB and/or its affiliates and/or their directors, officers, associates, connected parties and/or employees, may have, or have had, interests in the securities or qualified holdings, in subject company(ies) mentioned in this report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, RHB and/or its affiliates may have, or have had, business relationships with the subject company(ies) mentioned in this report and may from time to time seek to provide investment banking or other services to the subject company(ies) referred to in this research report. As a result, investors should be aware that a conflict of interest may exist. The contents of this report is strictly confidential and may not be copied, reproduced, published, distributed, transmitted or passed, in whole or in part, to any other person without the prior express written consent of RHB and/or its affiliates. This report has been delivered to RHB and its affiliates’ clients for information purposes only and upon the express understanding that such parties will use it only for the purposes set forth above. By electing to view or accepting a copy of this report, the recipients have agreed that they will not print, copy, videotape, record, hyperlink, download, or otherwise attempt to reproduce or re-transmit (in any form including hard copy or electronic distribution format) the contents of this report. RHB and/or its affiliates accepts no liability whatsoever for the actions of third parties in this respect. The contents of this report are subject to copyright. Please refer to Restrictions on Distribution below for information regarding the distributors of this report. Recipients must not reproduce or disseminate any content or findings of this report without the express permission of RHB and the distributors. The securities mentioned in this publication may not be eligible for sale in some states or countries or certain categories of investors. The recipient of this report should have regard to the laws of the recipient’s place of domicile when contemplating transactions in the securities or other financial instruments referred to herein. The securities discussed in this report may not have been registered in such jurisdiction. Without prejudice to the foregoing, the recipient is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. The term “RHB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case, RHB Investment Bank Berhad and its affiliates, subsidiaries and related companies.
RESTRICTIONS ON DISTRIBUTION
Malaysia This report is issued and distributed in Malaysia by RHB Research Institute Sdn Bhd. The views and opinions in this report are our own as of the date hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. RHB Research Institute Sdn Bhd has no obligation to update its opinion or the information in this report.
Thailand This report is issued and distributed in the Kingdom of Thailand by RHB Securities (Thailand) PCL, a licensed securities company that is authorised by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is a member of the Stock Exchange of Thailand. The Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai Listed Companies made pursuant to the policy of the Securities and Exchange Commission of Thailand. RHB Securities (Thailand) PCL does not endorse, confirm nor certify the result of the Corporate Governance Report of Thai Listed Companies.
Indonesia This report is issued and distributed in Indonesia by PT RHB Sekuritas Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations.
Singapore This report is issued and distributed in Singapore by RHB Research Institute Singapore Pte Ltd and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these categories of investors, RHB Research Institute Singapore Pte Ltd and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of RHB Research Institute Singapore Pte Ltd ’s interest and/or its representative's interest in securities). Recipients of this report in Singapore may contact RHB Research Institute Singapore Pte Ltd in respect of any matter arising from or in connection with the report.
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RHB Securities Singapore Pte Ltd has been appointed as the Sub-placement agent for the initial public offer of Aspen (Group) Holdings Limited listed on 28 July 2017 ; this report is therefore classified as a non-independent report
Hong Kong This report is issued and distributed in Hong Kong by RHB Securities Hong Kong Limited (興業僑豐證券有限公司) (CE No.: ADU220) (“RHBSHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact RHBSHK. RHBSHK is a wholly owned subsidiary of RHB Hong Kong Limited; for the purposes of disclosure under the Hong Kong jurisdiction herein, please note that RHB Hong Kong Limited with its affiliates (including but not limited to RHBSHK) will collectively be referred to as “RHBHK.” RHBHK conducts a full-service, integrated investment banking, asset management, and brokerage business. RHBHK does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this research report. Investors should consider this report as only a single factor in making their investment decision. Importantly, please see the company-specific regulatory disclosures below for compliance with specific rules and regulations under the Hong Kong jurisdiction. Other than company-specific disclosures relating to RHBHK, this research report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such.
United States This report was prepared by RHB and is being distributed solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, access to this report via Bursa Marketplace or any other Electronic Services Provider is not intended for any party other than “major” US institutional investors, nor shall be deemed as solicitation by RHB in any manner. RHB is not registered as a broker-dealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the purchase or sale of all other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority (“FINRA”) rules on communications with a subject company, public appearances and personal trading. Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States.
OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST Malaysia RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the last 12 months except for: a) - RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for: a) -
Thailand RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions.
Indonesia PT RHB Sekuritas Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above. Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows: 1. Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically; 2. Affiliation between parties to the employees, Directors or Commissioners of the parties concerned; 3. Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same;
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4. Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company; 5. Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or 6. Affiliation between the Company and the main Shareholders. PT RHB Sekuritas Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law. Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b. a substantial shareholder of an Issuer or Public Company; c. an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to inside information; and d. an individual who within the last six months was a Person defined in letters a, b or c, above.
Singapore RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) Aspen (Group) Holdings The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) Aspen (Group) Holdings
Hong Kong The following disclosures relate to relationships between RHBHK and companies covered by Research Department of RHBSHK and referred to in this research report: RHBSHK hereby certifies that no part of RHBSHK analyst compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. RHBHK had an investment banking services client relationships during the past 12 months with: -. RHBHK has received compensation for investment banking services, during the past 12 months from: -. RHBHK managed/co-managed public offerings, in the past 12 months for: -. On a principal basis. RHBHK has a position of over 1% market capitalization of: -. Additionally, please note the following: Ownership and material conflicts of interest: RHBSHK policy prohibits its analysts and associates reporting to analysts from owning securities of any company covered by the analyst. Analyst as officer or director: RHBSHK policy prohibits its analysts, and associates reporting to analysts from serving as an officer, director, advisory board member or employee of any company covered by the analyst. RHBHK salespeople, traders, and other non-research professionals may provide oral or written market commentary or trading strategies to RHB clients that reflect opinions that are contrary to the opinions expressed in this research report. This research report is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice.
Kuala Lumpur Hong Kong Singapore
RHB Research Institute Sdn Bhd RHB Securities Hong Kong Ltd. RHB Research Institute Singapore Level 3A, Tower One, RHB Centre 12th Floor Pte Ltd. Jalan Tun Razak World-Wide House 10 Collyer Quay Kuala Lumpur 50400 19 Des Voeux Road #09-08 Ocean Financial Centre Malaysia Central, Hong Kong Singapore 049315 Tel : +(60) 3 9280 8888 Tel : +(852) 2525 1118 Tel : +(65) 6533 1818 Fax : +(60) 3 9200 2216 Fax : +(852) 2810 0908 Fax : +(65) 6532 6211 Jakarta Shanghai Bangkok
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