SINGAPORE (Sept 29): CIMB is initiating Aspen Group Holdings, the Penang-based property developer, with an “add” rating and a target price of 29 cents.
In a Thursday report, analyst Lock Mun Yee says, “Aspen’s key value proposition is its niche in the value-added affordable mass residential market in Penang.”
The group also has a strategic relationship with Ikano as the joint owner of the Bandar Cassia Shopping Centre and joint master developer for the mixed development Aspen Vision City (AV City) in Bandar Cassia, Batu Kawan.
Under the joint venture, the mixed development will have the Bandar Cassia Shopping Centre as well as North Peninsula Malaysia’s first ever IKEA store.
“These two complexes would increase the attractiveness of this township, in our view. In addition, an attractive land payment structure would ensure an asset-light landbanking strategy,” says Lock.
Aspen has a unique business model that provides value-added packages to homebuyers, allowing it to upgrade development margins while maintaining exposure to the large affordable housing market.
The group’s first of such projects, Tri Pinnacle, was well received and is 82.2% pre-sold.
The analyst expects the Aspen to post 245% revenue CAGR and 228% gross profit CAGR in FY16-18F, based on the schedule of project completions.
“We arrived at these figures based on the RM1.26 billion ($405 million) unrecognised locked-in residential sales at end-Jun 2017, largely from Tri Pinnacle and Vervea. Owing to the group’s strong profit recognition profile, we believe its FY17-18F ROE is likely be superlative at 35.4%,” says Lock.
As at 10.05am, shares in Aspen are trading at 24 cents or roughly 3 times 2017 forward book value with a dividend yield of 2.75%.