ETC SINGAPORE: Yangon project lifts 1QFY2017 revenue by 92% to S$10m

ETC Singapore's real estate development project in Yangon, Golden City, contributed 92% (S$9.3m) of the Group's 1QFY2017 revenue. (Artist's impression)

Strong sales contribution from Emerging Towns & Cities Singapore's Golden City project in Yangon helped to lift the Group's revenue by 92.3% year-on-year to S$10.1 million in 1QFY2017.

Sales of 16 units in Golden City worth about S$9.3 million were recognized in 1QFY2017. The remaining S$200,000 in revenue was contributed by sales of two units from its Daya Bay project.

Strong presales pipeline

ThiamHee 5.2017
“There is large untapped potential for sales of residential units to foreigners in Yangon.”

- Tan Thiam Hee
CEO
Emerging Towns & Cities S'pore

(Photo by Sim Kih)

There are 239 units of its Golden City project that have been sold and that are expected to be progressively recognized this year and the next.

Another 107 units of its Daya Bay project that have been sold is expected to be progressively recognized in FY2017.

Presale deposits to be progressively recognized amount to S$49.3m.

The Group recognizes sales revenue upon handover of the units or after notification to buyers to take over the units, whichever occurs earlier.

“2QFY2017 will be slow, but we are expecting a huge chunk of income in 4QFY2017 or 1QFY2018,” said CEO Tan Thiam Hee at its 1QFY2017 results briefing on Thursday (18 May).

	1QFY2017	Yoy Chg
Revenue	S$10.1m	92.3%
Gross margin	27.7%	8.4ppt
Net profit attributable to shareholders	S$1.0m	NM
Cash reserves	S$12.4m	48.0%

For more information, refer to its 1QFY2017 financial results here.

“Currently, more than 95% of our sales in Yangon are to locals. There is a big untapped potential in sales to foreigners.

“Legislation in Myanmar that allow home purchases by foreigners is not fully in place. Many real estate projects in Myanmar are being sold to foreigners under a long term lease agreement.

“This is something that we are sorting out with lawyers. Once the paperwork for agreements is in place, we will start selling to foreigners,” he said.

Below is an excerpt of questions raised at the meeting and the replies provided by Mr Tan and CFO Joseph Lim.

♦ Q & A

Q: How many units in Golden City are rented out?

Currently, we have rented out 45 units to an MNC that has its office in Myanmar Plaza, which is very near Golden City. The tenant has another lease for its staff housing at Star City, which is very far away. It has a few hundred staff in Yangon and is relocating them progressively as its lease at Star City expires.

Stock price	9.6c
52-week range	5c - 16c
Market cap	S$82.8m
Price-earnings	3.2 x
Gearing	21.4%
Dividend yield	-
Source: Bloomberg / Company

Q: You had a fair value gain of S$8.3m in 1QFY2017. Without that, you will be making a loss.

Going forward, will you have fair value gain on other properties to top up your income?

It was a fair value gain on investment properties. Singapore is very strict on how companies classify development and investment properties. Unless it is clear from day one that an asset is an investment property, we always label it as a development property. We will not do a transfer until the rental agreement is signed.

In this case, we did a transfer when the MNC signed a lease agreement for the 45 units. If we sign more tenancy agreements with the corporates, we will reclassify more units as investment properties.

We did a revaluation for investment properties from the Golden City project because of the transfer. We do not revalue fair value gains for investment properties from the Daya Bay project on a quarterly basis.

Q: How is rental recognized?

We start recognizing revenue on a monthly basis when the occupants move in. Although we have signed a contract for 45 units, we cannot recognize revenue for 45 units upfront.

Revenue recognition for rental properties builds up slowly, but the cashflow is strong. In Myanmar, rental is paid one year in advance. We collected a year’s rental for the 45 units in advance when the agreement was signed. This can be seen in our balance sheet.

Q: What is your rental rate?

The 45 units contribute more than a million US dollars a year.

Watch this video of our visit to Golden City project in March 2017

ETC SINGAPORE: Yangon project lifts 1QFY2017 revenue by 92% to S$10m

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