capital world limited 31 october 2018 company note world 311018.pdf · achieved major milestone...

Capital World Limited

Company note 31 October 2018

Overweight

Current Price S$0.037 Fair Value S$0.147 Up / (downside) 297.3%

Stock Statistics

Market cap S$48.7m

52-low S$0.031

52-high S$0.101

Avg daily vol 1,642,809

No of share 1,317.09m

Free float 22.34%

Key Indicators

ROE 19F 23.8%

ROA 19F 9.8%

P/BV 0.48x

Net gearing 5.2%

Major Shareholders

Siow Chien Fu 38.25%

Chong Thim Pheng 19.83%

Tan June Teng 19.05%

Tan Ping Huang 19.05% Source: Bloomberg

Historical Chart

Source: Bloomberg

Improving Fundamentals Justify Rerating

▪ Achieved major milestone with mall opening. Capital World opened its flagship Capital 21 mall on 17 October. Following this critical milestone, Capital World is no longer a new developer, but a mall owner and developer with operating and cash flow generating assets. We visited the mall and found the crowd to be encouraging with the mall reportedly being packed during its first weekend. Tenants are still moving in, but the tenancy has been said to be around 70%, including space occupied by its theme park.

▪ New store openings and Movie Planet to lure crowds in 2019. The mall opening is the latest of recent events in relation to Capital World’s flagship project. The mall obtained Certificate of Completion and Compliance in May and opened its doors to visitors to its indoor circus in August. We envisage that the number of visitors will likely grow as more tenants move in. The launch of the theme park Movie Planet will also draw visitors in 2019.

▪ Successful mall to spur more than RM450m of new sales. Another synergy of opening the mall is that the subsequent increase in human traffic will raise the attractiveness of Phase 2 of Capital City to investors and potentially spur RM450m of new sales for the group. We estimate the serviced suites and serviced apartments of Phase 2 to have a gross development value of RM455.93m.

▪ Key risks. We are mindful that the group’s current liabilities were more than its current assets as at end FY18. However, part of the group’s liabilities was deferred revenue for billings in advance of work completed and deferred land payments that are tied to the group’s cash flows from sales. These liabilities are not repayable on demand. On an adjusted basis, the group has positive net current assets of RM95.42m. The mall opening also helps the group to obtain financing, as banks will be more likely to accept operating assets as collateral. To diversify its risks, the group will also be launching a mass market landed housing project in the growing Pengerang area.

▪ Compelling upside of almost 300%. We value Capital World’s share of the mall and the theme park at RM600.84m or RM891.87 per sq. ft. of net saleable area. This valuation represents a steep discount of more than 50% from realized selling prices. Including Phase 2 and profits from the sold units, we value the group at S$211m or S$0.147 per share (enlarged share capital of 1.44 billion shares). Hence, the potential return is significant, excluding upside from the Pengerang project and other projects in the pipeline. The group’s share price fell sharply in 2017 and 2018, which could have been partly due to earlier shareholders selling out amidst poor trading liquidity. With improving fundamentals, we reckon that the group’s share price has bottomed and rate Capital World Overweight with a high return and high-average risk view.

Liu Jinshu

(+65) 6236-6887 [email protected] www.tayronafinancial.com

Key Financial Data

(RM m, FYE Jun) 2016 2017 2018 2019F

Sales 81.64 183.89 142.59 192.76

Gross Profit 62.59 136.39 118.80 116.19

Net Profit, net of non-controlling interests 42.91 70.11 58.60 81.60

EPS (cents) 4.01 6.36 4.53 6.20

EPS growth (%) NA 58.6 -28.8 36.8

PER (x) 3.41 2.09 2.49 1.79

NTA/share (cents) 3.60 11.02 15.97 22.35

DPS (cents) NA NA NA NA

Div Yield (%) NA NA NA NA

Source: Company, Tayrona Financial

0.03

0.06

0.09

0.12

0

20

40

09/17 11/17 01/18 03/18 05/18 07/18

http://www.tayronafinancial.com/


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Achieves major milestone as mall commences operation

Recap. Capital World Limited is a SGX Catalist listed developer of properties in Malaysia. Its flagship project is the 4m sq. ft. Capital City, an integrated development comprising of a shopping mall, hotel, serviced suites and serviced apartments. The project has been split into two phases. Phase 1 comprises of the shopping mall, hotel lobby and carpark. Phase 2 comprises of one tower of hotel rooms, one tower of serviced suites and three towers of serviced apartments, to be constructed atop the podium housing Phase 1.

Figure 1: Overview of Capital City

Retail Mall and Theme Park Serviced Apartments Serviced Suites Hotel

Gross floor area (sqm)

Description Status

Retail Mall 113,849 Six levels of 1,579 retail units, including 500,000 sq. ft. of theme parks.

Completed

Carpark 169,412 six storeys of car park Completed

Serviced suites 33,780 18-storey tower with 630 units Under construction

Serviced apartments 49,434 3-towers of 15 storey blocks with 690 units Under construction

Hotel 12,153 16-storey hotel with 315 rooms Under construction

Source: Tayrona Financial, http://www.amazingmodels.com.my, Company

Pictures taken at 0900 hours, 19 October 2018

Carpark entrance

Mock-up of the project

Hilton Garden Inn Lobby (unopened)

Starbucks Main entrance/Mall lobby


page 3

Phase 1 of Capital City opened on 17 October. The 1.2m sq. ft. (gross floor area) shopping mall has been named Capital 21 and comprises of 1,579 retail units, of which the units on the top two floors have been redesigned to house the Cartoon Planet and Movie Planets of the 500,000 sq. ft. gross floor area indoor theme park branded as MCM Studio. When fully completed, the theme park will be the largest indoor theme park in Southeast Asia. The mall and the carpark obtained the Certificate of Completion and Compliance or “CCC” in May 2018. Mall activity really started to ramp up in August. There was a two-day comic, animation and games event on 11 and 12 August, followed by the premiere of the indoor circus on 18 August. The Cartoon Planet section of the MCM Studio theme park was opened to sponsors and media over a four-day period from 27 August to 30 August.

Figure 2: Picture of Mall Interior

Visitors can enter the mall through several routes. Visitors can be dropped off at the main entrance and enter the Ground Floor where the main lobby and exhibition space are located. Visitors can also park at Level 1 of the carpark and enter the mall from the Upper Ground Floor. The first floor of the carpark was full early morning and visitors had to park on Level 5 of the carpark when we visited. Levels 2 to 4 of the carpark were closed. From Level 5, visitors take an escalator down to Cartoon Planet on the Fourth Floor of the mall and switch to one of the longest escalators in Malaysia to the Upper Ground Floor directly.

Source: Tayrona Financial

Picture taken at 1000 - 1200 hours, 19 October 2018

Ground Floor and main lobby

Upper Ground Floor

First Floor

Second Floor (Closed)

Fourth Floor, Cartoon Planet

Third Floor, Movie Planet (Closed)


page 4

Company has prepared a slate of activities to draw shoppers in the first week of opening. For the first week of the soft opening from 17 to 21 October the group has planned various activities such as live band performances, games and activities, such as balloon sculpting, pebble painting, and dance performances. There was even a Sichuan Mask Changing show in the evening of 19 October. These activities are in turn complemented by various tenant promotions such as discounted food and drinks and special offers for certain products.

Figure 3: Pictures of Mall, Selected Events and Tenant Discounts

Source: Company

Stage for live performances

Fun and Activity Area

View from top

Property Investment & Home Living Fair

Car Gathering Event on 19 October


page 5

Decent turnout at first glance. When we visited the mall on 19 October, shops such as KFC, Hero supermarket, Starbucks, San Francisco Coffee, Shihlin Taiwan Snacks and Burger Bandit were open. On the Upper Ground Floor, shops that sold handphones, electronic gadgets, household goods and appliances were open. We could see that initiatives such as the property and home living fair, as well as a health screening booth, were drawing crowds. By late morning, we observed that the first-floor carpark was already full, and visitors had to drive up to Level 5 to park their cars. However, a good portion of the mall remained closed, with some tenants still in the midst of moving in. Some of the shops have already been renovated, but tenants have yet to move in inventory or commence operations. We counted about 129 stores occupying some 211 units across the Ground, Upper Ground and First Floors, based on the store directory at the mall. This translates to an occupancy of roughly 30% of each floor. According to the management, tenant sign-ups have picked up in the first two days of the soft opening; about 40 new tenants have signed up in the first two days. Including the theme park, the overall mall occupancy has been said to be about 70%.

Figure 4: Pictures of Mall

Pictures A and B were provided by the company while C to F were taken by us on the morning of 19 October. Picture A was taken on opening day while Picture B was taken on the evening of 20 October. Picture A shows the crowd at one of the fast food restaurants. Picture B is the crowd taking the escalator to and from the Level 5 carpark and Cartoon Planet on the Fourth Floor. Pictures C, D and E show different views of the Ground Floor. The entrance of the mall is visible in Picture D. Picture F shows the Level 1 carpark, which was already fully occupied by late morning.


A B C

D E F


page 6

Figure 5: List of Stores as at 19 October 29, 2018 – Ground Floor and Upper Ground Floor

Ground Floor Upper Ground Floor Food & Beverage

Food & Beverage

1 AK Noodles House (3 units) 38 Chatto

2 Answer Tea 39 Choco

3 Blackball 40 Show Thai

4 Burger Bandits (3 units) 41 Supasnacks

5 Carabao

Digital & Lifestyle

6 Daily Fresh 42 Action Studio

7 D'Celebrity (14 units) 43 Huawei Concept Store

8 Ding Tea 44 IFIX Station

9 J&C Juicy & Crunchies House 45 Maxis (2 units)

10 KFC (3 units) 46 Oppo Concept Store

11 Lime Thai Restaurant and Café 47 Red Elite (2 units)

12 Mr and Mrs Dai Waffle Taste 48 Smart IT Technology (5 units)

13 Mr Chizu

Optical & Eyecare

14 Old Town White Coffee (2 units) 49 Eye Venture Optical

15 Papparoti 50 Moote Optical

16 Pick Up Fairytale

Jewellery & Accessories

17 Pizza Hut (4 units) 51 Jiuyi Gold & Jewellery (2 units)

18 Polar Ice Cream 52 Kedai Emas Wai Chen

19 Pre Tea Q

Beauty & Personal Care

20 Sakura Bento 53 Intermede hair salon

21 San Francisco Coffee (2 units)

Home Furnishing & Appliances

22 Shihlin Taiwan Street Snacks (2 units) 54 Dream Home Furniture

23 Sisters Crispy Popiah 55 Miniso

24 Starbucks (4 units) 56 Mr. DIY

25 Tea Mondo 57 GG Grace House Fashion 58 Zero (2 units)

26 #Hashtag

Supermarket & Convenience Store

27 Modernform 59 7-Eleven Optical & Eyecare 60 I Go Chain Store (6 units)

28 68 degree optical (4 units)

Entertainment

29 MOG (2 units) 61 JV Media House Jewellery & Accessories 62 Lido (2 units)

30 Her Jewellery 63 Wawa Town Beauty and Personal Care

Footware & Bags

31 Caring Pharmacy (3 units) 64 XES (2 units) Home Furnishing & Appliances

Gifts & Souvenirs

32 Getha (2 units) 65 Al Ikhlas Gift (2 units) Supermarket & Convenience Stores Other Services

33 Hero Supermarket 66 New Market (2 units) Entertainment

34 Lido

Other Services

35 ABD Wahab Bin M. Abu Bakar Sdn Bhd

36 Isma Holidays

37 Wings (2 units)

Source: As obtained from Store Directory in mall


page 7

Figure 6: List of Stores as at 19 October 29, 2018 – First Floor

First Floor

Food & Beverage Sports

67 32 Waffle House 100 Legit Store

68 Bao Secret Digital & Lifestyle

69 Chocoffle Station 101 CPT SK Smartphone Shop (2 units)

70 Comet Catering 102 Darling Stall (3 units)

71 Cool Buddy Streetwear 103 Digi Store Express

72 Coolblog 104 Epoch DIY Trading 73 Da Shun Hang Herb (2 units) 105 Fass Gadget

74 Fructose 106 Galaxy Phone Accessories Supply (3 units)

75 Happiness Family Food House (3 units) 107 Gemini Trading & Services (2 units)

76 Icedealistick 108 Ideal Leisure Management

77 JB Hashtag 109 JH Sky Mobile Accessories

78 P.I.O. 110 MG Accessories Mobile (2 units) 79 Paradise 66 111 Nowtha

80 TRF Universal (4 units) 112 Pro Apple Repair Enterprise

81 Tropifruitis 113 Remax (2 units)

82 Uncle Bob (2 units) 114 Sagittarius Telecommunication

83 Yuli Biscuits 115 Seven IT 84 Yuli Indonesia (2 units) 116 U Tele Centre

Fashion 117 Umobile

85 Aryana Sofea 118 Uptown Mobile Solution (3 units) 86 Dyla Family Jewellery & Accessories

87 Dyna Clothing 119 Lenle (2 units)

88 ETA Textile (2 units) 120 Michiro Shop 89 Nuage 121 MJ Jewellery

90 Nyla Fashion Entertainment

91 Qisha Harmosa Resources 122 6D Cinema (2 units)

92 Sisterhood Shawl 123 Star Biz (3 units)

93 Sugar & Cream Garments 124 TNT World Marketing Sdn Bhd (2 units)

94 Thisplay Gifts & Souvenirs

95 Yin Sin Jewellery 125 Danny Bear

96 YY Eight Boutique 126 Shikyo Deyao Enterprise

Optical & Eyecare Other Services

97 A-Sight Optical (2 units) 127 Borneo Massage (3 units)

98 Corton Optometry 128 Myeg

99 Mode Brille Optometry (3 units) 129 Qbe Insurance

Source: As obtained from Store Directory in mall

We noted that there was some negative publicity regarding the mall. Some visitors complained about the dust in the carpark, the toilets and that parts of the mall remained under construction or closed. The management has since cleaned up the carpark and stowed away the construction debris. During our visit, the toilets in the areas open to the public were clean. Hence, the dirtier toilets are likely to be in the uncompleted areas of the mall. Some areas were not fully hoarded. As tenants were still in the stages of moving in, it is understandable that parts of the mall will still be closed.


page 8

Receiving visitors daily with circus show

Daily shows bolster mall’s positioning as an entertainment hub. To differentiate Capital 21 from other shopping malls, the group decided on an indoor live theatre with regular performances. The indoor live theatre opened to audiences on 18 August with its first show “The Greatest Showman”, performed by the London Musical Circus. Other than songs, music and dance routines, the two-hour long show included acts such as swinging trapeze, aerial dances and fire shows. The highlight is perhaps the last act where three motorcyclists rode at high speed within a caged ball, seemingly defying gravity without knocking into each other. The London Musical Circus is affiliated to Big Kid Entertainments Ltd of the Great British Circus in Malaysia and the Big Kid Circus in the United Kingdom. The Big Kid Circus is on tour for the 14th year. This explains why the group was able to gather an international cast of artists from UK, Russia, Chile, Venezuela, Mexico and USA to put up a credible performance. Tickets are available for shows up to the end of December and we understand that the London Musical Circus will perform a new show from January 2019 onwards.

Figure 7: Pictures from the Circus Show



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Value-for-money family entertainment. In general, we see the circus show as decent entertainment for the attractive pricing of as low as the promotional rate of RM20 per person to the usual price of RM40 per person. At RM40 to RM70, the show would be priced like those of the Great British Circus. Parking is convenient. Visitors can drive up to the seventh floor to enter the reception area of the indoor theatre directly. Otherwise, walk-in visitors can also take a lift from the first floor up. There were adequate signages that gave clear direction. We felt that the stage is somewhat smaller than that of the other circus acts. That said, the indoor theatre offers some comfort as compared to the typical outdoor or “big top” circus. The larger downside is if audiences find the acts similar to that of the Great British Circus. The London Musical Circus will start performing a new show in January 2019. Ticket sales to add to income base of the group. The first show was fully sold. The indoor theatre can seat about 960 people. We understand that there were about 15,000 attendees in the first two weeks of operations, translating to an average attendance rate of about 700 people per show or 74%. As the show was in the promotional period, tickets were priced at as low as RM20 per person. Hence, we are looking at about RM0.3m of ticket revenue in the first two weeks of operations or RM6.6m on an annualised basis (11 months of operation and one-month of rest). On the internet, tickets are sold at RM40 to RM250 each, depending on the choice of seats. On Tuesdays, all seats are sold at RM30 each. We reckon that each ticket will probably cost about RM40 on average, after accounting for promotions. Hence, each show can generate about RM23,040 of revenue, assuming 60% attendance over time. With an average of 10 shows per week, the indoor theatre can generate sales of about RM0.84m over a month or RM10.1m per year, of which RM2.03m will accrue to the bottom line if we assume 20% pretax margin. Hence, the circus shows offer growth potential. The group has a subsidiary MCM Studio Entertainment Group Sdn Bhd that will operate the theme park and earn revenue from ticket sales, including that of the circus.

Figure 8: Approximate Seating Plan, Ticket Prices and Showtimes

Source: https://www.greatestshowman.net/tickets


page 10

Activity based theme park to draw crowds

Largest Indoor Theme Park in Southeast Asia. The theme park has been split into three sections – Cartoon Planet, Movie Planet and Music Planet. Each section takes up one floor of the mall. The group has already commenced ticket sales for Cartoon Planet, which also opened on 17 October. Movie Planet will be opened later as the group finalizes its attractions to ensure its success. Plans for Movie Planet include a virtual reality park, haunted house etc.

Cartoon Planet features bumper cars, magic shows, a ball pool, rides for children and the world’s first Garfield themed restaurant. The group has been participating in travel fairs, such as at the Matta Fair in Kuala Lumpur, to promote the theme park and attract domestic tourists. A full-day ticket cost about RM128 per person.

The third section of the theme park Music Planet will comprise of live and musical performances, concerts, performances and theatrical shows. The indoor theatre with its circus shows probably forms part of Music Planet.

Figure 9: Layout of Cartoon Planet

Source: Company


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Figure 10: Pictures of Cartoon Planet

Source: Company

Cartoon Planet may generate >RM20m of revenue. The Puteri Harbour Family Theme Park consisting of the Sanrio Hello Kitty Town and Thomas Town attracted more than 2,500 visitors during its first week of opening late in September 2012 and it targeted more than 500,000 visitors in its first year of operation. Merlin Entertainments plc one of the largest visitor attraction operators in the world has about 10,500 visitors per week to each of its 120 large and small attractions globally. Being a relatively new attraction, we expect Cartoon Planet to attract 5,000 visitors per week for a total of 250,000 visitors in its first year of operation. Based on an average ticket price of RM79 (50% entry pass at RM30 and 50%-day pass at RM128), we estimate first year ticket revenue to be about RM19.8m.

Assuming 20% pretax margin, we can expect Cartoon Planet to add RM3.95m to the group’s profitability. Merlin Entertainments earns an operating margin of 19% from its Midway Attractions and Legoland Parks, after rental.

Assuming similar visitor numbers and pricing for Movie Planet, we can expect the London Musical Circus, Cartoon Planet and Movie Planet to generate about RM49.6m of revenue and about RM9.93m of pretax profit each year for the group. In FY18 ended June, the group reported revenue of RM142.59m and profit before tax of RM74.8m. Hence, the operation of the theme park will be a significant growth driver for the group, in addition to providing cash flows.


page 12

Expects occupancy increase as mall matures

Spate of mall activities has raised occupancy. According to the management, various activities such as the launch of the circus, the preview of Cartoon Planet and the soft opening of the mall have led to increased interest from prospective tenants. Known tenants include Hero Market which has about 20 outlets in Malaysia, Thai restaurant Lime Thai, confectionary Mr. Chizu’s first branch in Johor Bahru and Malaysia’s first branch of PRC bubble tea company Answer Tea. Old Town Coffee will also have an outlet at Capital 21. These tenants also show that the mall management is attempting to bring in new brands to Johor Bahru to enhance the appeal of the mall.

Figure 11: Mall Rental Assumptions

Gross floor area (sq. ft.)

Net Saleable/ Leasable Area (sq. ft.)

Efficiency Occupancy Remarks

Whole Mall 1,225,471 755,554 61.7% 70%

Theme Park 500,000 308,271 61.7% 100% 10% of ticket sales

Rest of Mall 725,471 447,283 61.7% 49.3% RM6.55 psf. pm of NSA in year 1

The gross floor area and the net saleable area of the mall is obtained from the company’s RTO circular. We assume that the net saleable area is the same as net leasable area and that efficiency, defined as net saleable area divided by gross floor area, is consistent throughout the mall. Occupancy is obtained from management at the most recent results briefing. At 70%, the implied occupancy for the rest of the mall is 49.3%.

We assume that 10% of theme park sales will be used to pay for rent while the rest of the mall will be charged at a rate of RM6.55 per sq. ft. of net leasable area. We understand from the management that the rent varies for different tenants. F&B outlets are charged 10% to 12% of gross turnover while other tenants may pay RM4.50 to RM18 per sq. ft. We chose a rate of RM6.55 per sq. ft. for the rest of the mall based on the rate at @Mart Kempas. @Mart Kempas is a 99-year leasehold single-storey hypermarket located about 1km north of Capital City that is owned by KLSE listed Al-Salam REIT. Hence, its rental information etc is publicly available. In 2017, it charged about RM6.55 per sq. ft. of monthly rent. Thereafter, we assume that rent will rise by about 5% to 20% per annum to RM10.44 per sq. ft. by FY23, as the mall matures. Rent at Capital 21 will probably be between that of Komtar JBCC and @Mart Kempas given its location and positioning as a shopping and entertainment hub.


Figure 12: Comparable Information

2015 2016 2017

Net Leasable Area (sq. ft.)

Komtar JBCC 397,555 397,266 397,076

@Mart Kempas 98,723 98,724 99,699

Occupancy

Komtar JBCC 89% 93% 95%

@Mart Kempas 95% 90% 92%

Occupied Net Leasable Area (sq. ft.) (net leasable area x occupancy)

Komtar JBCC 353,824 369,457 377,222

@Mart Kempas 93,787 88,852 91,723

Gross revenue (RM m)

Komtar JBCC 8.159 39.915 43.09

@Mart Kempas 1.753 6.781 7.209

Rental rate (RM per sq. ft.) (gross revenue divided by occupied area)

Komtar JBCC 7.69 9.00 9.52

@Mart Kempas 6.23 6.36 6.55

Source: Al-Salam REIT annual reports

Komtar JBCC is an integrated development comprising of a 7-storey shopping mall cum car park complex. It is located in the CBD of Johor Bahru, adjacent to the CIQ and has been drawing day trippers from Singapore.

@Mart Kempas is a hypermart with 164 tenancies located further inland.

Both properties have efficiencies of 63.4% and 60.6%, which is comparable to Capital 21’s 61.7%.

It is interesting to note that both properties have been enjoying rising rental rates and stable occupancy, at least in the case of @Mart Kempas. Komtar JBCC’s occupancy has been rising. These trends indicate demand for mature retail assets.


page 13

Est. RM500m of retail unit sales. Based on the group’s reported revenue up to end June 2018, we can estimate that it has pre-sold about RM500m of retail mall units. Sales would have been higher, if not for transactions that have yet to receive regulatory approval and bank approval for financing. By floor area, we estimate that about 22% of the mall has been sold, based on the estimated total development cost of RM649.45m for Phase 1. Excluding units held as investment properties under construction, recognized sales are about 36% of saleable properties, by cost.

The deficit of RM150m of development costs was partially funded by RM45m of borrowings and the deferment of payments to the land owner and key suppliers. As at 30 June 2018, the group had classified RM64m of the total land cost payable to the landowner as current liabilities. However, the payment of this portion of the land cost is tied to cash received by the company from progress billings and sales, in a back-to-back arrangement. Some RM116.6m of trade payables have also been classified as non-current, probably due to deferred payment schemes with key suppliers and the landowner.

Figure 13: Mall Sales and Cost Estimates

RM m Remarks

Cumulative property revenue recognized 438.88 From FY14 to FY18

Less estimated serviced suites revenue -24.84 As per RTO circular, the group has sold 180 serviced suites at RM0.63m each. Multiplied by the percentage of completion of 22%

Mall revenue recognized 414.03

% completion 82.8% As reported as at 30 June 2018

Total pre-sales and revenue recognized 500.04 Implied pre-sales

Inventory properties – current 193.69 Cost of unsold retail units.

Investment properties under construction 192.58 Cost of retained units and space

Cumulative cost of goods sold recognized 100.30 from FY14 to FY18, less RM0.4m of marble inventories expensed

Freehold land and building in progress 89.44 Cost of hotel’s share of retail podium and carpark held as PPE

Total costs recognized 576.00

Estimated land cost 222.40 Est. gross development value of RM1.78 billion x 16.7% landowner’s share divided by total gross floor area of 378,628 sq. m. x (113,849 sq. m. of mall gross floor area + 169,412 sq. m. of carpark gross floor area)

Recognized construction cost 353.60 576, less 219.08

Grossed up construction cost 427.06 353.60 divided by 82.8%

As at 30 June 2018

Remaining Construction

costs

Balancing Figure, e.g. land costs

Est. costs incurred upon

completion

%

Inventory properties – current 193.69 33.6% 24.70 33.6% -8.04 210.34 38.3%

Investment properties under construction 192.58 33.4% 24.56 33.4% 217.14 39.6%

Cumulative cost of goods sold recognized 100.30 17.4% 12.79 17.4% 8.04 121.13 22.1%

Freehold land and building in progress 89.44 15.5% 11.41 15.5% 100.84

Total costs 576.00 100% 73.45 100% 649.45


RM per sq. ft. Remarks

Revenue per sq. ft. GFA, Average selling price 1,848 RM500m / (22.1% x 113,849 sq. m. of mall x 10.764)

Land cost per sq. ft. GFA 72.94 RM222.40 / (113,849 + 169,412 sq. m.)

Construction cost per sq. ft. GFA, mall and car park 140.06 RM427.06 / (113,849 + 169,412 sq. m.)

RM100.30 / 82.8% 576 + 74.14 = 2224.0 + 427.06 = 649.45


page 14

Figure 14: Projected Mall Income - Assumptions

FY19 FY20 FY21 FY22 FY23

Attendances

Circus 211,200 253,440 304,128 349,747 384,722 FY20=960pax x 60% occupancy x 10 shows/weeks x 4 weeks/mth x 11 mth/yr. FY19 = 10/12 x 253,440

Cartoon Planet 170,000 250,000 300,000 345,000 379,500 FY19=8.5mth. FY20= 5,000pax/week x 50weeks/yr

Movie Planet 120,000 250,000 300,000 345,000 379,500 FY19 = 6 months x 4 weeks x 5,000

Growth rate 20% 15% 10% Assumed

Ticket Selling Prices

Circus 40.0 40.0 40.0 40.0 40.0 Assumed

Cartoon Planet 79.0 79.0 79.0 79.0 79.0 50% x RM30 + 50% x RM128

Movie Planet 79.0 79.0 79.0 79.0 79.0 Assume same as Cartoon Planet

Ticket Proceeds

Circus 8.448 10.14 12.17 13.99 15.39

Cartoon Planet 13.43 19.75 23.7 27.255 29.98

Movie Planet 9.48 19.75 23.7 27.255 29.98

Total 31.36 49.64 59.57 68.50 75.35 RM, millions

Rental from theme park 3.14 4.96 5.96 6.85 7.53 RM, millions, 10% x ticket proceeds

Implied rental rate 0.85 1.34 1.61 1.85 2.04 Rental/12mths/(500,000 sq. ft. x 61.7%) RM psf.

Rest of Mall Occupancy 65% 80% 90% 95% 95% Assumed

NLA Taken up 290,734 357,826 402,555 424,919 424,919 Occupancy x net area

Rental rate 6.55 7.86 9.04 9.94 10.44 Assumed, RM per sq. ft.

Growth 20% 15% 10% 5% Assumed

Rental income (RM m) 22.85 33.75 43.66 50.70 53.23

Carpark income (RM m) 1.51 1.81 2.08 2.29 Est. mall visitors = theme park and circus attendances x 2. Carpark income = RM1 x visitors. The actual rate is RM3 on weekdays and RM5 on weekends for the first three hours of parking.

Theme park PBT (RM m) 6.27 9.93 11.91 13.70 15.07 20% of ticket sales

We assume average selling price of RM40 for circus tickets and RM79. RM79 is also comparable to that of Hello Kitty Town, but above that of Angry Birds Activity Park. That said, the Angry Birds Activity Park is relatively small. Currently, most theme parks in Johor are targeted at children and priced at around RM60 to RM132.

Komtar JBCC had 6.5m visitors in 2015. Based on our growth assumptions, we project slightly more than 1m visitors to the theme park by FY23. We make no projections for Music Planet, given the absence of details. The completed development will also feature a water theme park, probably to be completed with Phase 2.


Comparable Pricing Information

Theme Park Mall Opening Floor Area Single Entry/ All Day Ticket, Adult

Angry Birds Activity Park Johor Komtar JBCC Oct-14 26,000 sq. ft. RM60

"Dinosaur Alive" Water Theme Park KSL City Mall 2012 est. 100,000 sq. ft. Free for hotel guests

Sanrio Hello Kitty Town Puteri Harbour 2012 NA RM81

Thomas Town Puteri Harbour 2012 NA RM81

Legoland NA 2012 NA RM132

Legoland water theme park NA 2012 NA RM85

Source: Various theme park websites


page 15

Figure 15: Valuation of Mall

RM m FY19 FY20 FY21 FY22 FY23

FAIR VALUE OF CAPITAL WORLD’S SHARE OF MALL AND THEME PARK

Rental income – theme park 3.14 4.96 5.96 6.85 7.53

Rental income – rest of mall 22.85 33.75 43.66 50.70 53.23

Rental income - theme park + rest of mall 25.99 38.71 49.62 57.55 60.77

Property income margin (% of rental income only) 60.0% 65.0% 70.0% 73.0% 75.0%

Net property income (rental x margin + carpark income) 15.59 25.16 34.73 42.01 45.57

Other income, i.e. carpark

1.51 1.81 2.08 2.29

Theme Park PBT @ 20% of ticket proceeds 6.27 9.93 11.91 13.70 15.07

Total (net property income + theme park PBT+ carpark) 21.86 36.60 48.45 57.79 62.93

Less guaranteed yield (7.5%/ year over sales of RM500m, 2 years from 2QFY19 – 1QFY21 -28.13 -37.50 -9.38 Less 22% of mall sold (net property income x 22%) -5.75 -6.95 -7.55

Income attributable to Capital World -6.26 -0.91 33.33 50.83 55.38

Less tax @ 24% -8.00 -12.20 -13.29

Income after tax -6.26 -0.91 25.33 38.63 42.09

Return on investment (est. inventory properties – current and investment properties of RM210.69m + RM217.37m) -1.5% -0.2% 5.9% 9.0% 9.8%

Capitalisation rate 6.0% Discount factor 1.06 1.12 1.19 1.26 1.34

Present value of income after tax -5.91 -0.81 21.27 30.60 31.45

Total 76.60 Value of Mall attributable to Capital World at end FY23 (Income after tax of RM30.16m / cap rate of 6%) 701.54

Discounted back to FY18

524.23

Plus PV of income stream from FY19 to FY22 600.84 Income after tax divided by fair value of RM574.23m. -1.0% -0.2% 4.2% 6.4% 7.0%

FAIR VALUE OF ENTIRE MALL

Net property income 15.59 25.16 34.73 42.01 45.57

Carpark income 1.51 1.81 2.08 2.29

Less tax -3.74 -6.40 -8.77 -10.58 -11.49

Income after tax 11.85 20.27 27.77 33.51 36.37

PV of mall income (based on discount rate of 6%) 11.18 18.04 23.32 26.54 27.18

Value of Mall in FY23 (based on cap rate of 6%) 759.57

Discounted back to FY18

567.60

Plus PV of income stream from FY19 to FY22 – RM m 673.85 RM million

Est. fair value per sq. ft. based on 1.2m sq. ft. 549.87 RM psf

Est. fair value per sq. ft. based on 3.05m sq. ft. (include carpark)

221.01 RM psf

Based on 755,554 sq. ft. of NSA 891.87 RM psf


Comparable net property income margin

2015 2016 2017

Komtar JBCC 62.7% 68.8% 63.9%

@Mart Kempas 59.0% 55.6% 55.0%

WCT Holdings Berhad 75.9% 86.3% 67.4%

KSL Holdings Berhad 83.8% 84.7% 84.8%

Assumptions for Capital 21 65% - 75%

Source: Respective companies’ annual reports


page 16

Retained units offer revaluation upside in FY19

Full mall valued at RM673.85m or RM892 per sq. ft. of net saleable area. Our calculations value the entire mall at RM673.85m (RM892 per sq. ft. of net saleable area, or RM221.01 to RM550 per sq. ft. of gross floor area, depending on whether carparks are included in gross floor area). This is equivalent to a discount of approximately 70% from the realized selling prices of RM1,850 per sq. ft. of gross floor area, excluding carpark). The difference can be explained by two factors:

a) Our valuation is based on projected income and a capitalisation rate of 6%. Property buyers and investors may accept a lower yield of e.g. 3% to 4%. The different costs of capital result in drastically different valuation outcomes.

b) The realized selling prices of RM1,850 per sq. ft. were partly based on transactions that took place in 2014 when the project was first launched. Sales since then have been slow, partly due to slow bank approvals for end financing.

A lower valuation to some extent would better reflect the full realizable value of the mall, i.e. at e.g. RM892 per sq. ft., the mall could have been fully sold. In turn, such a valuation, rather than the historical selling prices of the properties, will be more relevant to shareholders and investors of the company’s shares.

Our valuation of the mall can be said to be reasonable as it is comparable to that of other properties. Other Johor retail properties that we reviewed are valued at RM395 to RM838 per sq. ft. of gross floor area.

We are mindful that our chosen cap rate of 6% is at the lower end of discount rates used by other Malaysian property companies. The low cap rate can be said to be justified by the mall’s unique positioning with a large-scale theme park on its premise. Moreover, existing sales proceeds already cover about 77% of the mall’s development costs. A higher cap rate will conversely risk underestimating the profitability of developing the mall. Suppose we apply the upper limit of 8% cap rate, the mall will be valued at RM398 per sq. ft. of gross floor area (excluding car park) or RM645 per sq. ft. of net saleable area.

Figure 16: Valuation of Malls in Johor

Mall Tenure GFA (m sq. ft.)

Valuation (RM m)

Valuation (RM psf)

Discount rate

Paradigm Mall Freehold 1.31** 1,097.48 838 6.0% - 6.5%

Komtar JBCC Freehold 0.62* 465.00 746 6.5% - 7.3%

@Mart Kempas 99 years to Jan 2106 0.16* 65.00 395 6.5% - 7.3%

KSL City and Resort Freehold NA 502.79 NA 8%

Capital 21 Freehold 1.23 669.13 549.87 6%

**Retail net lettable area, *Probably excludes carpark

Source: 2017 Annual Reports of Al Salam REIT, KSL Holdings Berhad and WCT Holdings Berhad

Investment properties may be revalued to RM266.7m. Capital World has retained approximately 40% of the mall as investment properties under construction. At RM549.87 per sq. ft., the investment properties or retained units are valued at RM266.7m or RM49.57m (RM37.67m after tax) above the estimated costs of RM217.14m. Including the unsold units and theme park, we value Capital World’s share of the mall at RM600.84m. This includes the cost of paying out retail unit buyers the guaranteed yield of 7.5%/year over the estimated sales of RM500m for two years. To attract buyers, the retail units have been advertised as providing 15% guaranteed yield for two years.


page 17

When a buyer purchases a unit, he will also sign a lease agreement to rent out the unit to a third-party mall management company. Capital World has asserted that it is not responsible for paying out the guaranteed yield to unit buyers and that the third-party mall management company will make the pay-outs. We don’t think any mall management company will take up such an onerous deal. Likely, any deficit will be deducted from Capital World’s share of rental proceeds. Hence, our workings consider this added cost.

Nonetheless, our workings show that Capital World’s retained and unsold retail units, the mall’s carpark and other retained space, as well as its operation of the theme park are worth RM600.84m. After deducting the group’s net working capital and liabilities of negative RM376.67m as at 30 June 2018, the net book value of the mall is about RM227.23m or S$0.053 per enlarged share capital.


Figure 17: Sensitivity Analysis

Figure 18: Mall anchors value of the firm

% of costs Gross floor area

(sq. ft.) Valuation (RM m)

Estimated investment properties @RM546 per sq. ft. GFA (including allocated value of carpark)

39.6% 485,036 266.71

Estimated unsold units @RM546 per sq. ft. GFA (including allocated value of carpark)

38.3% 469,855 258.36

Estimated sold floor area, GFA 22.1% 270,580

Total 100% 1,225,471

PV of guaranteed yield payment to unit buyers

-67.78

Theme Park and other income

143.55

Value of Mall, carpark and theme park 600.84 30 June 2018

Total liabilities -508.07

Less deferred revenue 94.48

Add back cost to complete the mall (remaining 17.2%) -73.45

Less convertible bonds -10.18

Less derivative component of CB -4.04

Less current assets, excluding inventory properties 99.22 -373.60

Revised net book value (RM m)

227.23 SGD m 75.74

Enlarged share capital (m shares)

1,439.04

Net book value of mall and theme park per share (S$)

S$0.053


669567

487

886

463 398

0

300

600

900

1200

6% 7% 8%

Mall valuation, at 100% ownership (RM, million)

Value (RM per sq. ft. net saleable area)


page 18

Successful mall will spur Phase 2 sales

At the time of the listing of Capital World, the group had sold 180 serviced suites, of which 135 units were sold at an average price of RM627,378. Since then, some units were probably sold on a deferred payment basis as trade receivables almost doubled in FY18. Without further disclosures by the company, we assume that 180 serviced suites were sold as at end FY18 in our projections. Thus far, the group has yet to launch any of the serviced apartments for sale.

To relaunch Phase 2 units after mall opening. With the mall up and running, Capital World will have enhanced its value proposition for the serviced suites and serviced apartments in Phase 2 of Capital City, e.g. access to amenities in the mall, etc. The serviced suites have been rebranded as MCM Planet Hotel, an extension of the theme park. Hence, the serviced suites will have a captive market once the theme park is up and running, which will appeal to investors looking for recurring income and capital appreciation potential.

Banks may extend more end-financing with proven commercial viability. Based on the median monthly household income of RM5,228 in 2016 and the average selling price of RM0.63m for each of the first 135 serviced suites sold, each unit costs will cost the average household about 10 years of their income.1 Moreover, each unit is very small – about an average of 577 sq. ft. of gross floor area per unit. Hence, these units are targeted at higher income earners or investors.

The challenge is that only 40% of residential property loans, by quantum, are approved in Malaysia each year and that 70% of home loans are for first-time buyers with close two-thirds of new loans channelled towards house purchases of less than RM0.5m.2 We reckon that banks may be more willing to finance property purchases at Capital City after the mall proves its commercial viability.

Figure 19: Residential Property Loan Approval, Malaysia

Source: Bank Negara Malaysia

Loans approvals may rise in new National Housing Policy. Figure 19 shows that loan approvals hit a bottom of 41.3% in 2016. While the approval rate stayed low in 2017, the value of loans approved for the purchase of residential properties rose by 13% to RM240 billion. The Malaysian government is announcing its new National Housing Policy by the end of this year. Several objectives have been mentioned. Other than providing more affordable housing to the bottom and middle 80% of households, reports suggest that the government may also work with the central bank to ease housing loan requirements to reduce the number of unsold completed units in the country.3

252

212240

61.6%

60.8%

59.0%

54.1%

50.6%

50.9%

47.3%

48.0%

52.6%

48.4%

41.3%

42.3%

41.7%

41.9%

0

100

200

300

30.0%

45.0%

60.0%

75.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jan -Jul17

Jan -Jul18

RM billions


page 19

Our base case scenario – higher sales at lower prices. We assume that serviced suites will be fully sold by FY20 and the serviced apartments by FY22 with full completion of Phase 2 by FY23 – almost a decade from the initial conception of this project. To realistically achieve the sale of approximately 450 serviced suites and 690 serviced apartments in four years or 250 units per year, amidst an overall loan approval rate of 40%, we assume that the group will slash net selling prices, in line with discounts offered by other developers to drive sales.

While the earlier serviced suites are sold at RM630k each, we assume that the remaining units will be sold at RM470k each (25% discount). The serviced apartments are slightly larger, at an average of 708 sq. ft. as opposed to 577 sq. ft. for the serviced suites. We assume an average selling price of RM500 per sq. ft. for the serviced apartments or about RM354k each. Landed properties are being sold at quantum of as low as RM300,000 to RM500,000 each. Hence, we don’t think buyers will be receptive towards higher prices for smaller multi-storey apartments and suites, despite benefits such as amenities, proximity to branded hotels.

Figure 20: Assumptions for Serviced Suites and Serviced Apartments

FY18 FY19 FY20 FY21 FY22 FY23 Total

Serviced Suites 630 units,

Number of new units sold 180 230 220

363,608 sq. ft. GFA

ASP per unit (RM m) 0.63 0.47 0.47

RM699 per sq. ft.

Pre-sales (RM m) 112.93 108.22 103.52

Cumulative pre-sales (RM m) 112.93 221.15 324.67 324.67

% Sold 28.6% 65.1% 100.0% 100.0%

% Completion 15.0% 30.0% 80.0% 100.0%

Cumulative revenue recognized (RM m) 16.94 66.35 259.73 324.67

Cumulative land cost recognized (RM m) -1.14 -5.18 -21.22 -26.52

Cumulative construction cost recognized -4.56 -20.77 -85.11 -106.39 RM300 per sq. ft.

Serviced Apartments 690 units

Number of new net saleable area sold 244,190 244,190 488,379 sq. ft.

ASP per unit (RM per sq. ft.) 500 500

Pre-sales (RM m) 122 122

Cumulative pre-sales 122 244 244

% Sold 50.0% 100.0% 100%

% Completion 30.0% 80.0% 100.0%

Cumulative revenue recognized 37 195 244

Cumulative land cost recognized -5.82 -31.05 -38.81

Cumulative construction cost recognized

-23.35 -124.56 -155.69 RM292.6 per sq. ft.

Our projected gross development value of RM1.78 billion for the entire project suggests that the land cost will amount to RM297.26m rather than the maximum of RM324m. For the serviced suites or serviced apartments, land cost = RM297.26m / 4.075m sq. ft. x the gross floor area of the serviced suites (33,780 sq. m.) or serviced apartments (49,434 sq. m.). The mall costs RM266 per sq. ft. of gross floor area to construct, excluding car park space and costs. We assume a construction cost of RM292.6 per sq. ft. (10% + 266), taking into consideration inflation. The group did not disclose the net saleable area of the serviced suites but disclosed selling prices per unit. The group disclosed the net saleable area of the serviced apartments but did not disclose expected selling prices per unit. This inconsistency led to different approach in estimates for the serviced suites and serviced apartments.

1 https://www.thestar.com.my/business/business-news/2017/10/09/median-monthly-household-income-rises-in-2016/ 2 https://www.thestar.com.my/business/business-news/2018/02/14/bank-negara-five-pronged-approach-to-afforable-housing/ 3 http://www.theedgemarkets.com/article/housing-ministry-bnm-ease-housing-loan-requirements


page 20

Phase 2 adds RM154m or another 3.6 Singapore cents to fair value. Based on our assumptions, we derived a fair value of RM153.91m for Phase 2, including RM51.19m of development upside from the Hilton Garden Inn hotel assuming a fair value of RM350k per room. The fair value of RM153.91m adds about 3.6 Singapore cents to the per share value of Capital World. Hence, the achievement of milestones towards the sale and completion of Phase 2 will help to provide upside while the mall anchors the value of Capital World’s shares.

Figure 21: Serviced Suites, Serviced Apartments and Hotel, Valuation of Development Upside

FY18 FY19 FY20 FY21 FY22 FY23 Remarks

Serviced Suites

Revenue

49.41 193.39 64.93

% completion

Land cost

-4.04 -16.04 -5.30

% completion

Construction cost

-16.21 -64.34 -21.28

% completion

Selling and distribution costs

-2.22 -8.70 -2.92

4.5% of revenue, as per FY18

Operating profit

26.93 104.31 35.43

Tax

-6.46 -25.03 -8.50

@ 24%

PAT

20.47 79.27 26.93

Invested capital 103.67 54.27 0.00 0.00

Construction and land costs, less revenue accrued

Capital cost

-7.26 -3.80 0.00

7%, as per cap rate for mall

Residual income

13.21 75.47 26.93

Discount factor

1.10 1.21 1.33

10% cost of equity

Present value

12.01 62.38 20.23

Total 94.61

Serviced apartments

Revenue

36.63 158.72 48.84 % completion

Land cost

-5.82 -25.23 -7.76 % completion

Construction cost

-23.35 -101.20 -31.14 % completion

Selling and distribution costs

-1.65 -7.14 -2.20 4.4% of revenue, as per FY18

Operating profit

5.80 25.15 7.74

Tax

-1.39 -6.04 -1.86 @ 24%

PAT

4.41 19.12 5.88

Invested capital

136.15 99.53 0.00 0.00 Construction and land costs

Capital cost

-9.53 -6.97 0.00 7%, as per cap rate for mall

Residual income

-5.12 12.15 5.88

Discount factor

1.33 1.46 1.61 10% cost of equity

Present value

-3.85 8.30 3.65

Total 8.10

Hotel Assumptions Total Phase 2 Value of hotel (RM m) 110.25 Gross floor area 130,815 Serviced suites 94.61 Land cost (RM m) -9.06 Gross floor area per room 415.3 Serviced apartments 8.10 Construction cost (RM m) -39.24 No of rooms 315 Hotel 51.19 Development upside (RM m) 61.94 Value per room (RM m) 0.35 Total RM153.91m Assume completion by FY20, Discount backwards by 1.21

51.19



page 21

We referred to the ongoing and completed projects of WCT Holdings Berhad in its 2017 annual reports. Prices ranged from RM0.21m to RM1.06m per unit, with units priced at RM0.21m to RM0.66m being 86% and 66% taken up respectively. Conversely, higher priced units are less than 50% sold. Hence, we reckon that our assumptions of RM0.3m to RM0.5m are already very low compared to list prices and that it is reasonable for us to expect 100% sales over the next five years given such prices.

Likewise, our assumption of the value per room for the hotel is also within the lower end of comparable assets.

Figure 22: Comparable Serviced Apartment Selling Prices

Project Location NDV No of units

NDV per unit

Take-up rate

Status

The Azure Residences Petaling Jaya 200.8 189 1.06 53% Handed over August 2017

Renai Jelutong Residences Bukit Jelutong, Shah Alam 141.5 222 0.64 NA Handed over April 2017

Medini Signature Medini Iskandar 379.4 456 0.83 47% Handed over March 2017

Impiria Residensi Klang Valley 266.8 403 0.66 66% Completed early 2018

Rumah Selangorku Klang Valley 198.5 933 0.21 86% Est. completion in 2018

Waltz Residences Kuala Lumpur 400.9 419 0.96 34% Launched in 2016

Source: Data is obtained from the 2017 annual report of WCT Holdings Berhad

Figure 23: Comparable Hotel Valuations

Rating Lease No of

rooms Valuation Value per

room

JW Marriott Hotel, KL 5 star Freehold 578 424 733,564

The Majestic Hotel, KL 5 star 73 years 300 385 1,283,333

The Ritz-Carlton, KL – Suite Wing (P1) Serviced apt Freehold 60 207 3,450,000

The Ritz-Carlton, KL – Suite Wing (P2) Serviced apt Freehold 54 99 1,833,333

The Ritz-Carlton, KL – Hotel Wing 5 star Freehold 251 343 1,366,534

Vistana Penang Bukit Jambul NA 76 years 238 118 495,798

Vistana KL Titiwangsa NA Freehold 364 136 373,626

Vistana Kuantan City Centre NA 74 years 215 88 409,302

Source: YTL Hospitality REIT 2017 Annual Report


page 22

Tapping landed housing market with Pengerang Project

Strategically located near Pengerang Integrated Petroleum Complex. The Pengerang Project is a development that the group acquired the development rights in November 2017 at a consideration of RM63.0m. The site is located 22km north-east of the Pengerang Integrated Petroleum Complex (PIPC) and sits on a land area of 207.5 acres (839,722.71 sq. m.). The PIPC refer to a petrochemical hub that is being developed by Petronas and other oil & gas industry players. When completed, it will house oil refineries, naphtha crackers, petrochemical plants and other facilities. Within the PIPC, Petronas will invest RM53 billion in building a refinery to be commissioned by 2019.

As for Capital World, the site that is developing has a 99-year lease expiring on 18 January 2114 and will be developed into terrace houses, cluster homes, townhouses, low cost flats, terrace shops and offices over an eight to ten-year period. The landowner shall be entitled to 7.5% of the gross development value or a minimum guaranteed sum of about RM72.8m.

What’s interesting is that anecdotal accounts suggest that demand for housing near the PIPC is rising to house workers at the complex. SGX listed developer Astaka Holdings Limited also has a project in the Pengerang vicinity and we understand that sales have been progressing well.

Likely the project will be developed in phases and we understand that the group is awaiting approval of the building plan for Phase 1. Upon approval, the group will be able to launch this project for sale. The other interesting angle about this project is that it will help to supplement the group’s revenue recognition pipeline should sales at Capital City continue to remain sluggish. We expect the launch of the project to take place in FY19 and that it should contribute towards revenue in FY20. However, we do not incorporate this project in our forecasts, pending other information such as initial take-up.

Figure 23: PIPC

Source: http://www.jpdc.gov.my/development/pipc/


page 23

Project being de-risked with mall completion and opening

Land title to be split into strata titles. Just to recap, the group entered into an agreement with Gadang Holdings Berhad on 26 December 2013 to develop Capital City with Gadang remaining as the registered and beneficial owner of the land. Following the completion of the mall, the land title can now be split into strata titles to be handed over to buyers, subject to quantity survey.

As for the unsold units, the group will have to pay Gadang the underlying land cost of the respective unit, pegged at 16.7% of the gross individual unit selling price of the units of the whole project, subject to a maximum of RM324m (i.e. gross development value of at least RM1.94 billion or RM861.5 per sq. ft. across the entire project), before it can take over the title.

Based on our current estimates, the gross development value of Capital City Phases 1 and 2 is about RM1.78 billion with a lower land cost of RM297.26m, of which we reckon approximately RM180.6m is still owed to Gadang (RM64.1m relate to Phase 1 of the project). The remaining RM116.59m is classified as non-current trade payables and most likely refers to the land cost for Phase 2.

Figure 24: Composition of Project GDV of RM1,779,98m


Which can be used to secure bank financing. After the land title has been split into the respective strata titles, Capital World can approach banks to pledge the unsold units for loans. These loans can be used to repay outstanding land payments or to finance the construction of Phase 2. Moreover, banks would probably be more willing to lend against operating, cash flow generating assets as collateral.

Based on our estimates, the unsold and retained retail units are worth about RM600.84m. Assuming a loan-to-value ratio of 60%, these units can yield Capital World about RM360.50m of loans – which will be enough to repay the land owner and kickstart the construction of Phase 2.

And meet refinancing needs of the group. The company thus far has four financing facilities

1) A HK$50m (RM25.74m) loan secured against 166.5m shares (or 12.6% of the company’s share capital today) held by the controlling shareholders of the company. This loan bore interest of 10% and was initially due at the end of October 2018.

Sold retail units, 500.04

Retained/unsold retail units,

600.84

Hotel, 110.25

Serviced Suites, 324.67

Serviced apartments, 244.19


page 24

As announced on 11 October, the group has obtained the extension of this loan by one year, with a revised maturity date of 31 October 2019, at a higher interest rate of 10.5% per annum.

2) S$10m (RM30m) of convertible bonds secured against 258.74m shares (or 19.6% of share capital) owned by the controlling shareholders. The convertible bonds bear interest of 10%, are convertible at S$0.082 per share and will mature one year from their respective dates of issue, from February 2019 onwards.

The subscriber has the option to extend the maturity of these bonds by another year and can subscribe for up to S$8m of additional convertible bonds.

The subscriber Dato’ Sri Chong Thim Pheng has considerable experience in managing hotels, restaurants and real estate businesses, being the executive Chairman of Hotel Re! Pte Ltd in Singapore. Dato’ Sri Chong is also a substantial shareholder by virtue of the shares that the controlling shareholders have pledged to him for the convertible bonds. Dato’ Sri Chong also directly owns 17.22m shares of Capital World, or 1.31% of the group’s share capital as at 27 September 2018.

3) A revolving credit facility amounting to RM2.96m owed as at 30 June 2018. This facility is repayable from one to six months from the date of drawdown and charges interest of 3% per annum above the bank’s cost of funds.

4) A bank loan amounting to RM4.44m owed as at 30 June 2018. This bank loan is repayable in 24 equal monthly instalments up to November 2019 and attracts interest of 2% per annum above the bank’s cost of funds.

Both the bank loan and the revolving credit facility are secured by a charge of fixed deposit of RM5.2m of the group and corporate guarantee by the company.

Figure 25: Major Shareholders

28-Sep-17 27-Sep-18 Change

Siow Chien Fu (Executive Director and CEO) 503.75 503.75 38.25% 0.00

Tan June Teng Colin 250.89 250.89 19.05% 0.00

Tan Ping Huan Edwin 250.89 250.89 19.05% 0.00

CGS-CIMB Securities (Singapore) Pte Ltd NA 35.20 2.67% <=35.20

UOB Kay Hian Private Limited 44.38 33.74 2.56% -10.64

Tritech Group Limited 40.11 25.14 1.91% -14.97

Chong Thim Pheng NA 17.22 1.31% <=17.22

OCBC Securities Private Limited 12.77 16.19 1.23% 3.42

Citibank Consumer Nominees Pte Ltd NA 14.15 1.07% <=14.15

Luminor Pacific Fund 1 Ltd 15.41 9.98 0.76% -5.43

Maybank Kim Eng Securities Pte Ltd 13.74 8.28 0.63% -5.45

Phillip Securities Pte Ltd 6.93 6.68 0.51% -0.25

RHB Securities Singapore Pte Ltd 17.70 4.53 0.34% -13.17

Other shareholders 111.75 140.47 28.71

Total 1268.31 1317.09 48.78

The shareholders’ list at the back of the 2017 and 2018 annual reports help to explain for Capital World’s weak share price performance over the past one year. For instance, TriTech Group pared its stake in the group from 3.16% to 1.91%. Investors who held their shares at RHB Securities also sold heavily. The table above is compiled based on the top ten shareholders as at 28 September 2017. New shareholders that joined the top ten list in 2018 were included. Investors holding their shares at CGS-CIMB Securities, Citibank Consumer Nominees and OCBC Securities bought more shares over the past year. Source: Company annual reports


page 25

Key Risks

1) Risk of slowing crowds mitigated by progressive new store openings and Movie Planet in 2019. The mall’s performance in its first week of operation can be said to be encouraging. However, the mall must sustain and grow visitor footfall over an extended period to reaffirm its viability and value. If visitor numbers were to decline after some time, Phase 2 sales as well as our valuation of the mall may be affected.

This risk is in turn mitigated by the prospect of more shops opening over the next three months, as well as the opening of Movie Planet in 2019. These events will continue to attract shoppers.

2) The group’s pricing strategy and execution of sales campaigns will be crucial. Our base case scenario assumes that the group will price its serviced suites and serviced apartments to fully sell them within the next five years. Hence, the realization of our forecasts also depends on the pricing strategy of the group.

3) FY20 earnings may taper. FY19 earnings will be supported by approximately RM86m of revenue to be recognized from the completion of Phase 1. In addition, the group can recognize sizeable fair value gains from the retained units (carried as investment properties under construction on the balance sheet), estimated at RM49.6m before tax.

Our projections assume that the pace of sale and construction of the serviced suites and serviced apartments will lead to a cliff-off in earnings in FY20, if no new projects are sold and commence construction in FY20.

4) Access to financing. Notwithstanding the success of the mall and its theme park, there is still the risk that the group is unable to obtain bank financing. If this scenario is realized, the construction of Phase 2 may be delayed.

We are mindful that the external auditor of the group Ernst & Young LLP has highlighted the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern, as indicated by various factors such as a) the group’s current liabilities exceeding current assets by RM68.07m as at 30 June 2018, b) the group’s borrowings to cash resources and c) the challenging conditions of the Johor property market which may affect the group’s ability to monetise its current assets to pay liabilities.

That said, some of the current liabilities reported as at 30 June 2018 will not be due within FY19. In fact, we could adjust net current assets to a positive RM95.4m after deducting liabilities that are not expected to have cash flow impact or are not due within FY19

Most importantly, the group has reached an agreement with a key supplier to cap the payments over the next 15 months to an agreed amount and to defer payment for construction services to be rendered over the next 15 months.

Other mitigating factors include cash flows from the operation of the mall and the theme park and from improved sales following the opening of the mall.

5) Macroeconomic risks. Sales will also be affected if market conditions continue to worsen.


page 26

Figure 26: Balance Sheet Review

30 June 2018 RM m Remarks

Inventory properties – current 193.69 Auditors have flagged that challenging conditions may impact selling prices

Fixed deposits and cash on hand 29.48 And that cash on hand remains lower than total loans and borrowings

Other current assets 69.74

Total current assets 292.20 And current assets are lower than current liabilities

Trade payables 119.08 A) In mitigation, the group has negotiated with a key supplier to cap and defer payments over the next 15 months. B) RM64.1m of payables are land costs that are not due until the group receives cash from the sale of properties.

Other payables and accruals 72.06

Deferred revenue 94.48 C) This deferred revenue refers to billings for work that has yet to be done. Given that the mall has been completed and is operating, this balance should decline; albeit offset by incremental costs accrued under payables.

Loans and borrowings 43.33 D) RM25.74m of borrowings have been extended.

Other current liabilities 32.04

Total current liabilities 360.98

Net current assets (68.07)

Add back deferred payment for land 64.11 Not due until the group receives cash from sales

Add back loans 25.74 Loan extended to October 2019

Add back deferred revenue 94.48 Refers to invoiced balances for work not done.

Less increase in payables -20.83 The full deferred revenue of Rm94.48m will not be reversed. Cost of construction will be reclassified to payables if payment is not made. RM20.83m is the estimated cost of goods sold for the mall in FY19.

Adjusted net assets 95.42

Source: Tayrona Financial, Company


page 27

Fair value of S$0.147

Diversified revenue streams. One merit of Capital World’s “roll-up” strategy in developing Capital City is that the group will end up with multiple sources of income a) rental income, b) theme park operation income, c) carpark operating income, d) hotel operating income and e) revenue from the sale and development of properties, when the project is fully completed. In turn, these income streams will support the development of future projects. In our forecasts, we adopt a horizon of up to FY23, i.e. the assumed full completion of Capital City.

Forecasts exclude contribution from other projects. However, our forecasts and valuation do not include contribute from the Pengerang project. In fact, the group has plans to build a second integrated development in Johor called Austin, as well as to develop a wellness hub in Perak. In this report, we focus on updating on Capital City and do not factor in upside from the development of the Pengerang project. Project Austin will probably be launched later, when Capital 21 is fully up and running. The wellness hub in Perak is still in the early stage of planning. More importantly, we assert that we should not factor in additional projects while funding uncertainty still exists for these projects.

Figure 27: Financial Forecasts and Workings

RM m FY18 FY19 FY20 FY21 FY22 FY23

Revenue

Completion of mall

86.01

Rental income, less net property income attributable to buyers

25.99 38.71 43.87 50.59 53.22

Carpark income 0.00 1.51 1.81 2.08 2.29

Theme park – ticket sales

31.36 49.64 59.57 68.50 75.35

Serviced suites

49.41 193.39 64.93 0.00 0.00

Serviced apartments

36.63 158.72 48.84

Average room rate

150.00 150.00 150.00

Occupancy

70% 80% 90%

Hotel room revenue

11.58 13.23 14.88

Gross profit

Completion of mall

65.17

Net property income, attributable to Capital World

15.59 25.16 28.98 35.05 38.03

0.00 1.51 1.81 2.08 2.29

Theme park PBT

6.27 9.93 11.91 13.70 15.07

Serviced suites, less land and construction costs

29.15 113.01 38.35

Serviced apartments, less land and construction costs

7.45 32.29 9.94

Hotel operating income (60% margin)

6.95 7.94 8.93 FY18 FY19 FY20 FY21 FY22 FY23

Revenue 142.59 192.76 283.25 218.38 293.12 194.58

Cost of sales -23.79 -76.57 -133.64 -122.93 -202.06 -120.33

Gross profit 118.80 116.19 149.61 95.45 91.06 74.25

Other income, include fair value gains from investment properties 1.57 49.57 0.00 0.00 0.00 0.00

Selling and distribution exp, include guaranteed yield payments -6.45 -30.35 -46.21 -13.95 -7.14 -2.20

General and administrative expenses – FY19 = average of FY17 and FY18, less RM6m of one off amortisation in FY18)

-36.84 -21.9 -22.6 -23.3 -24.0 -24.7

Finance costs (@ 8% of average borrowings) -2.28 -6.10 -9.31 -17.20 -19.23 -15.36

Other expenses 0.00 0.00 0.00 0.00 0.00 0.00

Profit before tax 74.80 107.37 71.49 41.03 40.72 32.00

Income tax expense @ 24% -16.23 -25.77 -17.16 -9.85 -9.77 -7.68

Profit after tax 58.57 81.60 54.33 31.18 30.94 24.32

PATMI 58.60 81.60 54.33 31.18 30.94 24.32

Source: Tayrona FInancial


page 28

Fair value of S$0.147 per share implies highly attractive upside. Based on our preceding computations and including the cost of acquiring the Pengerang project and other assets, we estimate that Capital World is worth about S$211.46m or S$0.147 per share, on a fully diluted basis. Potential catalysts include a) the successful securing of bank financing for Phase 2 of Capital World, b) the sustained ramp up of mall operations and c) higher sales of serviced suites and serviced apartments.

Our valuation is derived using the sum-of-parts method. We do not apply a further discount on the sum-of-parts value as we have not included the upside from the Pengerang project and we have discounted the group’s mining concession by 80%. The group inherited a marble mining business during the reverse takeover exercise at its listing. In FY18, the group recognized revenue of RM2.1m from the sale of marble.

Figure 28: Valuation

RM m

Cumulative PATMI from FY14 – FY18 – Equity from profit from sale of units 169.42 As reported

Estimated gross profit from completing the remaining 17.2% of the mall in FY19 49.53 65.17 x (1 – 24%)

Fair value of unsold and retained retail units, carpark and operation of theme park 600.84 Figure 15

Fair value of Phase 2 of Capital City, net of costs 153.91 Figure 21

PPE (motor vehicles, office equipment etc) 15.50 As at 30 June 2018

Marble mine concession rights (discount to 20% of book value of intangible assets) 18.78

Current assets, excluding inventory properties 99.22 As at 30 June 2018

RM1,107.19m

Total liabilities (reflects payables and borrowings to-date) 508.07 As at 30 June 2018

Less deferred revenue (will not exist upon completion of project) -94.48

Add cost of completing the mall (to factor in remaining 17.2% of completion) 73.45 Figure 13

Less convertible bonds (assume conversion) -10.18 As at 30 June 2018

Less derivative component of convertible bonds -4.36 As at 30 June 2018

Adjusted liabilities RM472.82m

Revised Net Asset Value RM634.37m

Based on SGDMYR rate of 3.00 S$211.456m

Number of shares, enlarged share capital following conversion of CB 1,439.04m

Fair value per share S$0.147



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Recommendation

Deserves credit for achieving major milestone. Ultimately, we like Capital World for its execution from listing to-date. Capital 21, itself, is an ambitious project for a company the size of Capital World. Nonetheless, the management has, over the years, repositioned the mall into a theme park/entertainment destination, and successfully opened the mall and attracted visitors.

Hands-on management. We also like Capital World for its hands-on management. Its offices are located right next to Capital City. While Capital 21 suffered from some negative feedback regarding e.g. the dustiness of its carpark, the management has since acted on these feedback. We also highlight that the CEO of the group Mr Siow is an award-winning architect who has worked with various Malaysian developers such as KSL Holdings, Mah Sing Group etc. Hence, the group has experience in developing and managing integrated developments.

High upside potential. While critics may assert that Capital World lacks scale with only one key project, the company is currently priced modestly, at a market capitalisation of S$48.7m, whereas Capital City has an overall gross development value of RM1.78 billion. In fact, we value the group at S$211m, suggesting attractive upside of almost 300%. What has depressed the group’s share price has been the combined effect of poor liquidity, selling by initial investors and negative sentiment against Malaysian developers.

Comparatively undervalued. Our peer comparison suggests that Capital World’s return on equity is superior to that of its peers in Malaysia. However, the group continues to trade at a discount to net tangible assets per share. We argue that the group deserves to be rerated given the size and execution of its flagship project. Our valuation prices the group at 3.05 times net tangible assets per share.

Overweight with high return and high-average risk view. On balance, we rate Capital World Overweight with a high return and high-average risk view. The high-average risk view reflects the group’s weak balance sheet. Given that the group’s auditor has flagged material uncertainty about its ability to continue as a going concern, we do not find a lower risk rating justified. That said, we do not see Capital World as a high-risk prospect as much of the downside has been factored into its share price.

Figure 29: Peer Comparison

Mkt Cap

(S$m)

Revenue (RM m)

Sales growth

Net margin

Total Liabilities/ Equity

ROE P/E P/BV Div Yield

KLSE Listed

WCT Holdings Berhad 368 2,259.9 31.1% 8.1% 1.70 5.9% 6.21 0.35 3.8%

KSL Holdings Berhad 237 670.64 -4.7% 30.2% 0.21 8.0% 3.54 0.27 NA

UEM Sunrise Berhad 998 3,053.3 22.8% 16.6% 1.06 7.2% 8.42 0.42 1.5%

Al Salam REIT 155 78.52 -2.9% 48.4% 0.63 6.2% 12.23 0.76 4.6%

SGX Listed

Hatten Land Limited 204 235.47 -49.1% 1.4% 5.38 1.4% 194.55 0.91 0.2%

Astaka Holdings Limited 157 343.26 10.9% 5.3% 2.51 7.9% 46.11 2.05 NA

Aspen (Group) Holdings 151 579.52 231.2% 17.3% 1.07 41.4% 4.27 1.44 NA

Pacific Star Development 72.0 121.43 105.4% 6.9% 3.97 32.3% 9.06 1.99 NA

Capital World 48.7 156.45 -14.9% 36.9% 2.53 33.3% 2.42 0.70 NA

Source: Tayrona Financial, Bloomberg All data is provided on a trailing 12-month basis, up to 2Q CY18. *Based on NTA for Capital World


page 30

Profit & Loss (RM m, FYE Jun) 2016 2017 2018 2019F 2020F 2021F 2022F 2023F

Revenue 81.64 183.89 142.59 192.76 283.25 218.38 293.12 194.58

Operating expenses -19.79 -53.77 -55.26 -121.19 -195.01 -152.94 -226.18 -140.42

EBITDA 61.85 130.12 87.34 71.57 88.24 65.44 66.95 54.16

Depreciation & amortisation -8.89 -16.17 -11.83 -7.67 -7.43 -7.21 -7.00 -6.80

EBIT 52.95 113.95 75.51 63.90 80.80 58.23 59.95 47.36

Net interest & invt income 4.42 -11.83 -0.71 43.47 -9.31 -17.20 -19.23 -15.36

Associates' contribution 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Exceptional items 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Pretax profit 57.37 102.11 74.80 107.37 71.49 41.03 40.72 32.00

Tax -14.46 -32.01 -16.23 -25.77 -17.16 -9.85 -9.77 -7.68

Minority interests 0.00 0.01 0.03 0.00 0.00 0.00 0.00 0.00

Net profit 42.91 70.11 58.60 81.60 54.33 31.18 30.94 24.32

Shares at year-end (m) 1,268.3 1,268.3 1,302.5 1,317.1 1,317.1 1,317.1 1,317.1 1,317.1

Balance Sheet (RM m, as at Jun) 2016 2017 2018 2019F 2020F 2021F 2022F 2023F

Fixed assets 65.27 103.76 104.93 113.91 120.00 156.27 153.29 150.32

Intangible assets 0.00 97.11 93.89 89.19 84.73 80.49 76.47 72.65

Other long-term assets 211.13 237.65 318.34 346.64 337.58 298.77 266.71 266.71

Total non-current assets 276.40 438.51 517.16 549.74 542.31 535.53 496.47 489.67

Cash and equivalents 14.08 23.44 29.48 25.00 28.53 36.08 48.49 42.36

Stocks 148.81 175.84 193.69 195.08 167.89 218.93 202.41 194.65

Trade debtors 12.22 26.76 30.87 52.81 77.60 59.83 80.31 53.31

Other current assets 15.30 31.87 38.87 38.87 38.87 38.87 38.87 38.87

Total current assets 190.40 257.91 292.90 311.76 312.89 353.71 370.08 329.19

Trade creditors 85.99 159.38 119.08 244.67 183.07 84.20 138.40 82.42

Short-term borrowings 0.00 0.00 43.33 38.35 54.73 117.26 75.00 78.64

Other current liabilities 182.21 193.67 198.57 36.46 27.99 27.99 27.99 27.99

Total current liabilities 268.20 353.05 360.98 319.49 265.79 229.44 241.38 189.05

Long-term borrowings 0.00 0.00 1.85 38.31 54.69 117.22 74.96 78.61

Other long-term liabilities 152.89 106.31 145.24 120.10 96.78 73.46 50.15 26.83

Total long-term liabilities 152.89 106.31 147.09 158.42 151.48 190.68 125.10 105.43

Shareholders' funds 45.71 236.92 301.91 383.51 437.85 469.03 499.97 524.30

Minority interests 0.00 0.14 0.09 0.09 0.09 0.09 0.09 0.09

NTA/share (RM) 0.04 0.11 0.16 0.22 0.27 0.29 0.32 0.34

Total Assets 466.81 696.42 810.07 861.50 855.20 889.24 866.55 818.87

Total Liabilities + S’holders' funds 466.81 696.42 810.07 861.50 855.20 889.25 866.55 818.87

Cash Flow (RM m, FYE Jun) 2016 2017 2018 2019F 2020F 2021F 2022F 2023F

Pretax profit 57.37 102.11 74.80 107.37 71.49 41.03 40.72 32.00

Depreciation & non-cash adjustments 8.89 33.91 11.81 -41.90 7.43 7.21 7.00 6.80

Working capital changes -19.36 -93.35 -71.75 -39.15 -81.94 -116.65 58.99 -44.54

Cash tax paid -4.40 -13.08 -10.87 -25.77 -17.16 -9.85 -9.77 -7.68

Cash flow from operations 42.51 29.59 3.99 0.55 -20.17 -78.25 96.93 -13.42

Capex -16.62 -16.53 -6.74 -11.95 -9.06 -39.24 0.00 0.00

Net investments & sale of FA -42.49 -15.43 -53.47 -24.56 0.00 0.00 0.00 0.00

Others 0.00 -4.36 6.61 0.00 0.00 0.00 0.00 0.00

Cash flow from investing -59.10 -36.32 -53.60 -36.51 -9.06 -39.24 0.00 0.00

Debt raised/(repaid) -0.17 -0.04 49.95 31.48 32.76 125.05 -84.52 7.30

Equity raised/(repaid) 0.00 16.11 0.00 0.00 0.00 0.00 0.00 0.00

Dividends paid 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Others & exchange rate effects 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cash flow from financing -0.17 16.07 49.95 31.48 32.76 125.05 -84.52 7.30

Change in cash -16.76 9.34 0.34 -4.48 3.53 7.55 12.41 -6.12

Change in net cash/(debt) NA 9.40 -39.09 -35.96 -29.23 -117.50 96.93 -13.42

Ending net cash/(debt) 14.0 23.4 -15.7 -51.7 -80.9 -198.4 -101.5 -114.9

KEY RATIOS (FYE Jun) 2016 2017 2018 2019F 2020F 2021F 2022F 2023F

Revenue growth (%) 120.1 125.2 -22.5 35.2 46.9 -22.9 34.2 -33.6

EBITDA growth (%) NA 110.4 -32.9 -18.1 23.3 -25.8 2.3 -19.1

Pretax margins (% of Revenue) 70.3 55.5 52.5 55.7 25.2 18.8 13.9 16.4

Net profit margins (% of Revenue) 52.6 38.1 41.1 42.3 19.2 14.3 10.6 12.5

Effective tax rates (%) -25.2 -31.3 -21.7 -24.0 -24.0 -24.0 -24.0 -24.0

Net dividend payout (%) NA NA NA NA NA NA NA NA

ROE (%) NA 49.6 21.7 23.8 13.2 6.9 6.4 4.7

Free cash flow yield (%) -34.1 -13.8 -101.8 -73.8 -60.0 -241.1 198.9 -27.5

Source: Tayrona Financial, Company


page 31

Tayrona Financial Pte. Ltd (“Tayrona Financial”) has received compensation for this valuation report. This publication is confidential and general in nature. It was prepared from data which Tayrona Financial believes to be reliable, and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. No representation, express or implied, is made with respect to the accuracy, completeness or reliability of the information or opinions in this publication. Accordingly, neither we nor any of our affiliates nor persons related to us accept any liability whatsoever for any direct, indirect, special or consequential damages or economic loss that may arise from the use of information or opinions in this publication. Opinions expressed are subject to change without notice. Tayrona Financial and its related companies, their associates, directors, connected parties and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add or dispose of or may be materially interested in any such securities. Tayrona Financial and its related companies may from time to time perform advisory, investment or other services for, or solicit such advisory, investment or other services from any entity mentioned in this report. The research professionals who were involved in the preparing of this material may participate in the solicitation of such business. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. You acknowledge that the price of securities traded on the Singapore Exchange Securities Trading Limited ("SGX-ST") are subject to investment risks, can and does fluctuate, and any individual security may experience upwards or downwards movements, and may even become valueless. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling securities traded on the SGX-ST. You are aware of the risk of exchange rate fluctuations which can cause a loss of the principal invested. You also acknowledge that these are risks that you are prepared to accept. You understand that you should make the decision to invest only after due and careful consideration. You agree that you will not make any orders in reliance on any representation/advice, view, opinion or other statement made by Tayrona Financial, and you will not hold Tayrona Financial either directly or indirectly liable for any loss suffered by you in the event you do so rely on them. You understand that you should seek independent professional advice if you are uncertain of or have not understood any aspect of this risk disclosure statement or the nature and risks involved in trading of securities on the SGX-ST.

capital world limited 31 october 2018 company note world 311018.pdf · achieved major milestone...

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