(Jul 24): Malaysian property developer Aspen (Group) Holdings is seeking a listing on the Catalist board of the Singapore Exchange, selling 173.3 million shares at 23 cents each to raise net proceeds of $36.7 million. It is the second loss-making developer to list on the Catalist in as many months. 

See: Aspen launches IPO at 23 cents per share

Aspen reported an unaudited pro forma loss of RM482,000 ($153,882) for FY2016 ended Dec 31, on revenue of RM99.7 million. In June, World Class Global listed on the Catalist board at an IPO price of 26 cents. A unit of jeweller cum property developer Aspial Corp, WCG reported a loss of $6.3 million in FY2016 ended Dec 31. The company also has not posted any revenue in its last three financial years. Shares in WCG closed on July 19 at 24.5 cents, 5.8% below the IPO price.

Will Aspen suffer the same fate? Its CEO and president Murly Manokharan is confident of attracting investors. “We have a very strong order book... and that will sustain the revenues and bottom line,” he says at a press conference. In its prospectus, Aspen says as at June 14, it had aggregate confirmed sales of RM1.3 billion. Of this, RM1.1 billion has not been recognised as revenue.

Formed in early 2013, Aspen develops residential and mixed development properties for middle-income mass-market purchasers. It has three ongoing and launched developments in Penang, Malaysia: the commercial and retail space Vervea, as well as condominium projects Vertu Resort and Tri Pinnacle.

The Vervea and Tri Pinnacle developments are expected to be completed in 3Q2018. As at March 31, they were valued at RM86.6 million and RM132.1 million, respectively. Vertu Resort, valued at RM65 million, is expected to be completed in 1Q2021. As at June 14, the take-up rates for Tri Pinnacle, Vervea and Vertu Resort were 82.2%, 83.2% and 57.7%, respectively.

Vervea and Vertu Resort are located in Aspen Vision City, a 245-acre freehold project in Batu Kawan. Aspen is collaborating with Ikano, which has franchise rights for IKEA stores in parts of Southeast Asia, to develop parts of AVC. Murly cites the collaboration with Ikano as a differentiating factor between Aspen and other Malaysian property developers. Ikano will build an IKEA store in AVC. This will be the first IKEA store in northern Malaysia.

Aspen will make 4.3 million of its sale shares available to the public, with the remaining 168.9 million to be offered by way of placement. Together, they represent 20% of Aspen’s enlarged share capital of 866.6 million shares.

Post-IPO, Murly will hold 55.7% of Aspen via a company called Aspen Vision Group. Nazir Ariff, executive director and co-founder of Aspen, is also deemed interested in AVG’s shares. AVG has pledged 303.8 million Aspen shares to Kenanga Investment Bank as part of a revolving credit facility. Another 26.9% of Aspen will be held by Setia Batu Kawan. SBK will be distributing its Aspen shares to SBK shareholders. They include Oh Kim Sun, a non-executive director and shareholder of Malaysia-listed plantation and property company Golden Land.

Aspen intends to use $25 million of the proceeds from its IPO for the acquisition of land bank and future developments. Another $2 million will be used to repay bank borrowings from CIMB Islamic Bank. The remaining funds will be used for working capital and listing expenses.

As at end-December, and after adjusting for estimated net proceeds from the invitation, a restructuring exercise and a share split, Aspen had net tangible assets per share of 5.89 cents. The IPO price is a 290.5% premium to adjusted NTA. The price-to-net operating cash flow ratio is 6.4 times, based on net operating cash flow per share of 3.57 cents for FY2016. After adjusting for net proceeds from the invitation, Aspen will have RM214.0 million in cash and cash equivalents and RM84.8 million in debt, putting it in a net cash position.

Aspen’s invitation closes on July 26 at noon. Trading of its shares is expected to commence on July 28. 

This article appears in Issue 789 (July 24) of The Edge Singapore which is on sale now