CAPITAL WORLD: Marks first FY as listco with strong profit

Capital World, which listed on the SGX in May 2017 through a reverse takeover (RTO) of Terratech Group, ended its FY2017 with strong financials. (See table).

RM’m	FY17	FY16	Change
Revenue	183.9	81.6	125.2%
Gross profit	136.4	62.6	117.9%
Gross profit margin	74.2%	76.7%	(2.5ppt)
Net profit	70.1	42.9	63.4%
Net profit margin	38.1%	52.6%	(14.5ppt)
Net profit margin*	47.8%	52.6%	(4.8 ppt)
* Excludes one-off items: RM17.8 m mainly relating to RTO, and RM5.0 m of interest provision for land cost payable.

Under the RTO, the asset injected into Terratech was Capital City, a massive integrated development in Johor which is under construction.

Capital City was valued at S$300 million, resulting in new shares issued at 28 cents apiece to three vendors, mainly its CEO, Siow Chien Fu, who subsequently was appointed CEO of Capital World.

The other two vendors: brothers Edwin Tan (29.78%) and Colin Tan (also 29.78%), who are also controlling shareholders of recently-listed Hatten Land.

SiowChienFu 8.17 Siow Chien Fu, 54, owns 39.56% of Capital World and is the largest shareholder.
Photo by Leong Chan TeikPost-RTO, the share price of Capital World has slipped despite two strong quarterly reports.

The recent share price of 8.8 cents values the company at S$112 million.

Some key metrics about the Capital City project -- which will be the biggest shopping mall in Johor -- as at end-June 2017:

♦ It had unbooked revenue of RM126.9 million.

♦ Its retail mall units were 65% sold (versus 63% as per RTO circular in March 2017) and serviced suites 45% sold (versus 29% as per RTO circular).

♦ Sales of serviced apartments (690 units) will be launched by end 2017.

♦ The retail mall is on track to open for operations in 1H2018.

The integrated development has been estimated to have a net present value of RM2.416 billion for its gross development value, according to a third-party valuation.

It's worth highlighting again that the net profit margin of the Capital City project is very high, at 48% for FY2017, because of its business model.

Instead of paying outright for land, Capital World makes a small initial cash payment to the landowner.

Capital World subsequently pays the land owner progressively at an agreed percentage of the proceeds from development units that are sold.

The total land cost and payment period are covered under an agreement which does not have any profit sharing clause.

Without incurring financing cost to buy the land outright, the Capital City project has been yielding high profit margins since its launch in 2014.

CAPITAL WORLD: Marks first FY as listco with strong profit - but weak share price

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