REGAL INTERNATIONAL: 8 takeaways from roadshow

Dominic Su, executive chairman & CEO of Regal International, at 28 July investor dialogue: "I personally have sold more than 300 houses in my life."  Photo by Leong Chan TeikREGAL INTERNATIONAL listed on the Singapore Exchange in Nov 2014 and then kept a low profile. Its stock price, perhaps not surprisingly, sunk. Bottomline losses in 2014 and 2015 did not help things. (The losses were mainly due to the legacy precision business known as Hisaka Holdings). Regal listed through a reverse takeover of Hisaka and then traded, thinly, at around 55 cents and a market cap of S$110 million back then. After a downtrend lasting more than a year and a small rebound recently, the stock trades for about 14 cents and a market cap of S$28 million. Regal, as we heard recently at a briefing by its chairman, has grown into a stronger property development story. Along with that, it has decided to reach out regularly to the investment community. The recent briefing was the first of many planned "investor dialogues". Here are our takeaways:

Regal executive chairman Dominic Su presenting at an investor dialogue in Suntec City on 28 July. Photos: Ann Ng1. Only Sarawak company listed on SGX: Regal Holdings is thus the only play on Sarawak's thriving resource-based economy and property scene -- and it's only an hour away by air from Singapore.

It develops a variety of properties -- shophouses, landed properties, apartments, condominiums, shopping malls and commercial and industrial projects. This wide range of capability enables it to focus on the property type that sells better in a given set of circumstances.

Currenly, it has 24 property development projects, up from 10 when it was listed in Nov 2014.  

Thus, now it is a more sizeable play than ever. The gross development value of these 24 projects -- whose completion will stretch to 2019 -- is estimated at RM1.7 billion.  

(Put simply, gross development value is the estimated value that a property or new development would fetch on the open market if it were sold in the current economic climate)

2. Selling proactively:"We have 30 in-house sales staff, the largest among property developers in Sarawak. Our sales people don't sit and wait for customers. They go out every day, selling outside banks, door to door....," said Dominic Su, the executive chairman of Regal. 

He did not reveal pre-sales figures for the group but a selection of projects highlighted at the recent investor dialogue are said to have high sales success rates.

3. Gross margin is decent at 15-20%, according to Regal. Interestingly, it has an asset-light strategy whereby Regal partners land owners in property development projects. The landowners are paid subsequently in kind -- ie completed property units. Unsold units could also be used as currency to buy land for future projects.

4. Regal's RNAV is estimated to be 53.2 cents a share by NRA Capital, which pegged the stock's fair value at 35 cents a share after a 35% discount on the RNAV.

5. Bright second half: The unimpressive topline and bottomline of 2014 and 2015 are set to give way to better results. The second half of this year will look good for Regal's property division, according to NRA Capital.

"We can expect RM401.9m of revenue from the property development business in 2016 and net profit contribution of RM40.09m," according to NRA Capital in its 14 July 2016 report.

"The risk for Regal is that losses from the disposal of Hisaka may still drag on reported profitability."

♦ "When will Regal pay dividends?"

"I used to get a lot of dividends when I wholly owned Regal. Every year I got a lot of dividends. I have not been getting any, except my wages, in the last two years. I am waiting for dividends and I want them too." -- Dominic Su, in response to an investor's question on dividend payout.  (NextInsight file photo)

6. Eco-tourism play: Given the rich natural attractions of Sarawak, Regal has just partnered three Singapore companies to "assess the commercial potential of two locations/properties in East Malaysia with a view to own, develop and operate an eco-resort destination and vacation community."

The partners are Destination Lab LLP, ONG&ONG and Kingsmen Exhibits. (For more, see press release).

This reflects Regal's thrust to develop "content" or "theme" for its properties.

7. Prospects in Sarawak: Interest rates in Malaysia have eased, which would have a positive impact on property sales, including Kuching's mass market segment where properties go for below RM500,000. The take-up rate for condos in Sarawak was reportedly 60% in 1Q2016.

8. Regal's distinction:  "We design, build and sell. A lot of the projects' design are by me. Only in the last 12 months I engaged a team of people, now I have 3 architects," said Mr Su.

"When we give design briefs for the architects, we give them all the outline designs. We need to do this in order to reflect what the market wants currently."