A Johor developer with a unique business model for regional expansion

SINGAPORE (May 29): Capital World (CW) is a Johor-based property developer that focuses on creating joint ventures (JV) with landowners. Listed on May 5, CW was formed through the reverse takeover of Capital City Group (CCG) by Terratech Group.

In a Friday unrated report, analyst Shane Goh explains how CW’s business model works. Under the JV agreements, CW will be granted the right to develop and sell the units on a land parcel for an agreed price. The price of the land site is agreed and fixed before the development and is not defined as a percentage of selling prices. A percentage of the sales proceed will be paid out by CW until it fulfils the agreed land price. Thereafter, the full proceeds of future sales will go to CW. CW is targeting to expand geographically, first focusing in Southeast Asia.

Currently, CW has one project under development, Project Capital City (PCC). The project is located along Jalan Tampoi in Johor Bahru and is an integrated development with a gross development value of about RM3 billion and a total GFA of about 209,216 sqm, excluding carpark space. The development comprises a retail mall (54% of GFA), a 16-storey hotel with 315 rooms (6%), an 18-storey tower with 630 serviced suites (16%) and three 15-storey blocks with 690 serviced apartments (24%). As of 17 March, 63% of retail space and 29% of serviced suites have been sold. Plans are for sales of its serviced apartments to open in 2H17 while the hotel, which will be operated by Hilton Garden Inn, will be retained in the initial years. PCC is slated to be completed by end-2020.

Meanwhile, JV agreements to develop two other projects in Malaysia – Project Austin in Johor Bahru and Project Sitiawan Wellness Hub in Perak — have also been signed by CW.

As of 30 September 2016, CW has minimal borrowings. However, according to management, the company may explore borrowings if attractive future projexts arise. Siow Chien Fu, CW’s CEO and CCG’s founder, is the group’s largest shareholder with a 40% interest.

The stock is trading 0.5 Singapore cent lower at 14 Singapore cents. — theedgemarkets.com.sg

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