(15-06-2017, 11:09 PM)Boon Wrote: [ -> ]Very interesting IPO indeed !
- zero revenue and loss making over the past 3 years
- Over AUD 1 billion OTP sales achieved from its two development projects in Melbourne as at 31 Dec 2016.
- What are the risks ?
Revenue:
FY2014= 0
FY2015= 0
FY2016= 0
Profit / (Loss) : (SGD , million)
FY2014 = (12.269)
FY2015 = (12.958)
FY2016 = ( 6.341)
Off The Plan (OTP) Sales, as at 31 Dec 2016 :
Australia 108 (Melbourne) = AUD 949.7 m (including GST)
AVANT (Melbourne) = AUD 270.6 m (including GST)
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We consider the following to be the
most important key risks which could materially affect our business operations, financial position and results, and/or your investment in the Shares.
Our business is subject to the performance of the property industry in the countries in which we operate: Our property development business is subject to the performance of the property market in the countries in which we operate. The demand for properties could be adversely affected by various factors, which may adversely impact the demand and pricing of our properties. Further, all of our current and proposed property development projects are located in either Australia or Malaysia. A concentration of investments in these two countries may cause us to be susceptible to downturns in the real estate markets in these countries. This may lead to a decline in sales which will have an adverse impact on our business, financial condition, results of operations and prospects of our Group.
Our financial performance may be volatile and fluctuate from period to period: The revenue we recognise between financial periods may fluctuate and may be inconsistent due to, amongst other things, the timing of completion and the volume of our on-going and future property development projects. Additionally, in the instance of our existing development properties in Australia and Malaysia, revenue from the sale of such development properties is recognised using the completed contract method when the risks and rewards of the ownership of units have been transferred to the purchasers. If we complete fewer property development projects or do not undertake any new property development projects compared to a prior period or should there be any delay in the progress of completion of any of the projects in our portfolio or the transfer of the risks and rewards of ownership of units to the purchasers, our revenue and profit recognised in a particular financial period will be adversely affected.
We experienced negative operating cash flows and net losses in FY2014, FY2015 and FY2016 as we did not record any revenue from the sale of development properties: Property development businesses typically require substantial capital outlay during the initial land acquisition and construction stages. Our revenue from the sale of development properties in Australia and Malaysia will only be recognised at completion and handover of the properties to the purchasers. As such, prior to the completion of our property development projects and the handover of the properties, we may experience net losses and cash flow mismatches. In FY2014, FY2015 and FY2016, our Group experienced (i) losses of approximately S$12.3 million, S$13.0 million and S$6.4 million respectively as no revenue has been recorded since none of our property development projects were completed and handed over to purchasers, and (ii) net negative operating cash flows of approximately S$301.1 million, S$98.0 million and S$145.7 million respectively, due mainly to the acquisition costs of land and properties for development, development expenditure and losses from operations.
We are subject to risks associated with debt financing: Due to the large capital requirements for our property development business, we may finance a substantial portion of our property development projects from bank loans and credit facilities. In the event that we are unable to secure adequate financing on terms acceptable to us or if we are unable to service the principal and interest payments on the financing, we may be the subject of claims by lenders seeking to recover their loans and seeking to enforce the mortgage over our land or development property. We may also suffer losses if we have to stop construction and we may be the subject of claims by contractors as a result of the foregoing. In addition, in the event we are unable to secure financing for the construction of our projects on a timely basis or on terms acceptable to us, we may have to delay construction of the project which may in turn trigger certain cost escalation clauses in the contracts with our contractors, resulting in higher construction costs. We may also face claims from purchasers of our development properties arising from any delay or default by us in performing our obligations under the sale and purchase agreements for failure to deliver or complete the property on time and according to the specifications set out in the agreements. In addition, we cannot assure you that we will be able to obtain additional funding on terms that are acceptable to us or at all. If we are unable to do so, our future plans and growth may be adversely affected. Disruptions, volatility or uncertainty of the credit markets could limit our ability to borrow funds or increase our borrowing costs. We may be forced to pay high interest rates, thereby increasing our interest expense, decreasing our profitability and reducing our financial flexibility in the event we take on additional debt financing.
We may be exposed to risks associated with fluctuations in foreign exchange rates and changes in foreign exchange regulations: We receive or will receive income and incur expenses in a variety of currencies, including Singapore Dollars, Australian Dollars and Malaysian Ringgit, while our financial statements are presented in Singapore Dollars. Consequently, our costs, profit margins and asset values are affected by fluctuations in the exchange rates among the above-mentioned currencies. Fluctuations in currency exchange rates could materially affect our reported financial results. We may also be subject to the imposition or tightening of exchange control or repatriation restrictions in the jurisdictions which we operate and may encounter difficulties or delay in relation to the receipt of our proceeds from sale of our project development projects and dividends.
Investments in our Company may be subject to Australia’s foreign investment regime: Under Australia’s foreign investment regime in relation to an ALC, a foreign person (and its associates) or a foreign government investor (including existing Shareholders) that acquires any interest in an ALC (such as an interest in our Shares) will be required under the FATA to notify the Australian Treasurer (through the FIRB) and obtain a prior statement of no objections (“FIRB Approval”) to such investment, unless an exemption applies. If we hold more than 50% of our total assets in the form of Australian land, we will be an ALC. A breach of the notification requirement and failure to obtain prior approval by a foreign person acquiring an interest in an ALC may be an offence under Australian law which could result in a fine to, or imprisonment of, the foreign person who acquired the interest, or both. It is the responsibility of any person who wishes to acquire Shares to satisfy themselves as to their compliance with the FATA, regulations made under the FATA, the Australian Government’s Foreign Investment Policy, guidelines issued by the FIRB and with any other necessary approval and registration requirement or formality, before acquiring any Shares. The failure by a person wishing to acquire Shares to obtain a FIRB approval does not have a direct impact on our Company as the sanctions under the FATA are imposed on the acquirer. However, secondary trading in the Shares may be impacted by the operation of the Australian foreign investment regime. If a Shareholder does not comply with the FATA or the Australian Government’s Foreign Investment Policy, the transaction will not be made void or illegal and will not be unwound. However, the Australian Treasurer has powers under the FATA to make adverse orders in respect of an acquisition if he considers it to be contrary to Australia’s national interest. The adverse orders include an order to prohibit a proposed acquisition of an interest that has not yet occurred, or to order disposal of an interest that has occurred. Although our Company is not currently considered an ALC, we may become one. The classification of our Company as an ALC may impact the market for the trading of the Shares including, amongst other things, affecting the liquidity and price of the Shares due to the potential risk of an offence regarding the acquisition of an interest in an ALC. Further, any person who wishes to acquire an interest in our Company that results in a change of control, is recommended to notify and obtain prior approval from the FIRB prior to such acquisition. If such prior approval is not sought and if the Australian Treasurer forms the view that such acquisition is contrary to the national interest of Australia, the Australian Treasurer may make an order ordering the
divestment of the interest acquired.
The above are not the only risk factors that had a material effect or could have a material effect on our business operations, financial condition, results of operations, prospects of the Group, and ownership of our Shares. Refer to “Risk Factors” on pages 37 to 60 of the Offer Document for a discussion on other risk factors and for more information on the above risk factors and the “Notice to Investors” on pages 14 to 19 for more information on the Australia’s foreign investment regime. Prior to making a decision to invest in our Shares, you should consider all the information contained in the Offer Document.
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