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NRA is ‘overweight’ on this unique property developer

PC Lee
PC Lee • 2 min read
NRA is ‘overweight’ on this unique property developer
SINGAPORE (June 5): NRA Capital is “overweight” on Capital World with 25.5 cents target price given the stock is trading at close to the land value of Capital City.
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SINGAPORE (June 5): NRA Capital is “overweight” on Capital World with 25.5 cents target price given the stock is trading at close to the land value of Capital City.

With its unique business model, NRA also believes the property group can deliver high returns if its projects proceed smoothly.

Capital World insists that it has a unique business model that entails low initial capital outlay, fast project turnaround and higher profitability by entering into joint venture agreements with landowners whose assets are ready for development.

Under this business model, Capital World will fund the development of the land and repay the landowner progressively in the form of cash or on completion in units.

In a Monday report, NRA analyst Liu Jinshu says being a veteran architect, Capital World’s CEO is well qualified to propose highly differentiated projects such as large scale integrated developments.

Meanwhile, Capital World is trading at a market capitalisation of $166.1 million, compared to a land cost of RM324 million ($105 million) for its flagship Capital City project which is slated for completion in stages from 2018 to 2020.

Comprising of a thematic retail mall, serviced suites, serviced apartments and a hotel, this high quality development has a total net floor area of about 1.9 million sqf.

Capital World’s current market capitalisation translates to only RM270.6 psf, whereas Capital City’s retail mall units fetch selling prices of as high as RM2,800 psf or more.

However, NRA has lowered its estimate the value of the net development profits of Capital City Project to RM560.7 million from RM970 million in March.

Still, Liu says there is the risk that reported group profits may vary significantly from his forecasts as he has not incorporated any on-going losses and write-offs from the marble business in his forecasts and valuation which only reflect that of the newly injected business.

As of end 2016, Terratech had a book value of RM9.8 million which still can be unlocked if a buyer can be secured for this legacy asset.

Shares of Capital World are trading 0.1 cent higher at 13.2 cents.

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