Emerging Towns & Cities - OCBC Investment 2017-03-30: Corporate turnaround strategy bearing fruits

EMERGING TOWNS&CITIES SING LTD 1C0.SI

Emerging Towns & Cities - Corporate turnaround strategy bearing fruits

Emerging Towns & Cities Singapore Limited (ETC) recently hosted a site visit to Yangon, Myanmar. The trip included a tour of Golden City, a property development project boasting the tallest building in the country, as well as briefing by the management.
ETC, formerly known as Cedar Strategic Holdings, was suspended from trading in April 2015 following the discovery of accounting irregularities. A replacement of the board occurred soon after. Since the management change, ETC has acquired a 60% stake in Daya Bay in Oct 2015 as well as a 49% stake in Golden City in Feb 2017.
Going forward, the group intends to continue focusing on property investment and development in emerging cities.

The Golden City development has been parsed into 4 phases, with Phase 1 completed in Dec 2016 and Phase 2 due for completion in 1H18.
As at 31 Dec 2016, 62% of Phase 1 (residential units) was sold while 24% of Phase 2 (residential units) was sold. Design plans for Phase 3 and 4 are currently under review, with the use likely to be a mix of retail, hospitality, and commercial.
Potential catalysts for Golden City include an easing of foreign ownership rules in Myanmar. Currently ~90% of the units in the Golden City project have been sold to locals. In addition, mortgage-related legislation would open up more financing options for potential purchasers. There is no clarity on when such legislation will occur, as it is dependent on banking related government reforms.

Shareholders should note that the Convertible Loan Agreement signed in Jan 2017 with Mr. Luo Shandong gives him the right to convert his shareholders loan into up to 468.1m fully paid new ordinary shares.
In addition, there are 40.5m outstanding warrants with an exercise price of S$0.09 that are due to expire in Jun 2017.
ETC’s last closing price as of yesterday is S$0.112. We note the possibility of additional acquisitions within the next year as ETC continues to prospect for quality assets in countries including other parts of ASEAN.
We do not have a rating for ETC.

(Deborah Ong OCBC Investment | http://www.ocbcresearch.com/ 2017-03-30

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