A quick look at ASPEN GROUP HOLDINGS prospectus before its IPO!
We chanced upon Aspen Group Holding’s IPO booth at Raffles Place last Friday and collected a copy of their super thick prospectus! The company seems to have put in a lot of effort for good reason, given the lack of hype surrounding this IPO. We decided that the report shouldn’t go to waste and we scoured some some preliminary facts to share with anyone that is interested in a last-minute IPO application!
1. Company Overview
Aspen (Group) Holdings Limited, is a Malaysia-based property development group with a focus on developing affordable residential and mixed development properties at strategic locations, with quality infrastructure and amenities, which target middle-income mass market purchasers.
The group’s flagship project is Aspen Vision City located in Batu Kawan, Penang, Malaysia. It is a 245-acres freehold project which will include the following:
- a 170-acre Mixed Development Land which has two on-going developments, which are Vervea and Vertu Resort. There are also plans for future developments such as Vittoria Financial Centre, Viluxe Designer bungalows and other residences, offices, schools, hotel and retail projects.
- A 51-acre Regional Integrated Shopping Centre
- A 24-acre IKEA Store, the first IKEA store in the northern region of Malaysia.
2. IPO Information
With its listing on the Catalist board with an offer of 173.27M invitation shares comprising 4.348M public shares and 168.922 placement shares at S$0.23 per share, Aspen will be valued at a market cap of S$199.32M.
The offer will close on 26 July 2017 at 12pm and trading will commence on 28 July at 9am.
Aspen is a relatively young company in Malaysia’s property development scene. It was first incorporated in FY13 and currently has three on-going launched development projects all located in Penang, Malaysia, namely Tri Pinnacle, Vervea and Vertu Resort.
Tri Pinnacle is the group’s first development project, a residential property valued at RM520.85 million and slated for completion in third quarter of 2018. To date, 82.16% of the units have already been sold.
Vervea is a commercial and retail project under Aspen Vision City and valued at RM868.50M upon completion in third quarter of 2018. To date, 83.22% of units have already been sold.
Vertu Resort is a residential project under Aspen Vision City and valued at RM661.70M upon completion in first quarter of 2021. To date, 57.70% of units have already been sold.
Aspen has also announced future development projects: Regional Integrated Shopping Centre (under Aspen Vision City), Beacon Executive Suites and HH Galleria. The projects are slated to start in 2018 and will be completed in 2020-2022.
Valuation is done by Henry Butcher and audited by KPMG.
Given timeline of projects, projected development profit of S$1821M, averaged out to around S$300M per year, can only be fully realized by 2022.
5. Aspen Group Holding’s Prospects
- On-going projects have already seen strong demand, with Tri Pinnacle and Vervea having sold at least 82% of total units
- Penang, where Aspen is concentrated in, has seen strong economic growth in the past few years. From 2008 to 2015, the state has recorded near two-fold increase in investments from the previous 8-year period. Furthermore, population in Penang has grown by 7.5% between 2011 and 2016. Those aged between 20 to 34, the general age-group for first-time home buyers, has increased by 11.11%. Batu Kawan, where Aspen’s flagship project Aspen Vision City is to be located in, is slated to be a development hotspot in the future as the State Government of Penang intends the township to transform into an Eco City. Hence, the stock is highly dependent on the Penang’s future economic progress.
- Joint venture with Ikano Group, which operates IKEA in Southeast Asia, is a strategic move which will attract traffic to their developments.
- Business model leverages on macroeconomic trends in Malaysia where there is an increasing demand for housing from the lower to middle-income mass market purchasers.
- No dividend for the foreseeable future. Management has not announced a dividend policy and it is likely given the current balance sheet and scale of future development projects no dividend payout is likely until at least completion of Aspen Vision City in FY22.
- Company is still in its infancy and may face issues of negative operating cash flow and financing for the foreseeable future. Developments may also face delays and will be severely hampered by macroeconomic headwinds.
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