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Wednesday, November 26, 2014

REGAL INTERNATIONAL: First Sarawak Property Developer To List On SGX


REGAL INTERNATIONAL has become the first property developer from Sarawak to be listed on the Singapore stock market.

It did so on Wednesday (Nov 19) via a reverse takeover of metallic precision manufacturer Hisaka Holdings. The mainboard-listed company has been renamed Regal International Group.

Regal injected 10 property projects with an aggregate net realizable value of about RM529,598,000(S$204,320,216) as at 31 March 2014, based on an independent valuation by Suntec Real Estate.

The aggregate fair value of 100% equity interest in Regal as at 31 March 2014 was "reasonably stated at S$214,995,000," according to Hisaka's circular for the EGM to approve the RTO.

The purchase consideration of Regal by Hisaka is substantially lower at S$127,250,000 payable by S$20 million cash and the rest in shares priced at S$0.825 apiece. This discount is not atypical of property developers listed on SGX.

Following the RTO, Regal has 200,114,340 shares outstanding and a market cap of about S$120 million (based on share price of 60 cents).

For an idea of the business of Regal, view the following video on one of its current projects:

♦ Why Singapore? Mr Su said that Singapore is a gateway for Regal to tap international capital. In addition, he reckoned that a Singapore listing would raise Regal's profile among Singapore property developers and open up opportunities for them to enter into joint ventures with Regal in Sarawak and Sabah.

Incidentally, Mr Su has lived in Singapore previously while studying for his M.Sc in Building Science from the National University of Singapore. He has also worked as a mechanical and electrical engineer in some projects in Singapore. 

dominicsu_regal11.14Dominic Su, 50, who became chairman of Regal upon its RTO, holds a M.Sc in Building Science from the National University of Singapore, and a double degree -- Bachelor of Engineering (Electrical Engineering) and a Bachelor of Science from the University of Sydney. Photo by Leong Chan Teik♦ Unusual business model: In Sarawak, unlike in Singapore, property developers like Regal develop properties without first acquiring the land. 

Instead, the land owner grants development rights to the developer and accepts payment for the land in the form of completed units of the property, or even units in other projects of the developer.

This contra payment cuts out the cost of land holding for property developers.

The majority of Regal's past projects was executed in this manner. 

♦ Recurring income: Property development can yield lumpy revenue and profit from year to year. The unaudited pro forma combined profit attributable to Regal shareholders were RM 123,875, RM 2,208,249 and RM 20,464,698 for FY2011, FY2012 and FY2013, respectively. 

Regal recognises revenue from the development of a property project using the completion of construction method  - ie, revenue is only recognised when the project is completed. 
To help smoothen its revenue and profit trend, Regal has a mid-term objective to build serviced apartments and own them for rental income, said Mr Su. 

♦ Market trend: Sarawak has seen a steady and gradual uptrend in property prices in the past few decades  -- without strong speculation driving prices sharply up and the resulting bubble bursting. 

"It's been very sustainable and it has been a user market, instead of a speculative one. People buy to stay in or to give their loved ones to stay in. People buy industrial properties in the same way -- for own use. But in recent years, there has been more buying for investment with rental yields at 3-6% per annum."

Typically, projects sell out, or are significantly sold out, within 6 to 12 months. 

♦ Past projects: Regal is into residential, commercial and industrial property development. Aside from Sarawak, it is developing a resort-style residential project with commercial units in the Nilai region of Negeri Sembilan, West Malaysia.

Over the last 10 years, Regal completed 17 property projects with a total of 508 units in Sarawak. Currently, Regal is undertaking more than 10 projects, such as terrace houses, semi-detached houses, condominium apartment units and commercial offices. 

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