Emerging Towns & Cities Singapore - RHB Invest 2017-06-13: Banking On Growth In Emerging Cities And Towns

Emerging Towns & Cities Singapore - RHB Invest 2017-06-13: Banking On Growth In Emerging Cities And Towns EMERGING TOWNS&CITIES SING LTD 1C0.SI

Emerging Towns & Cities Singapore - Banking On Growth In Emerging Cities And Towns

  • Emerging Towns & Cities Singapore (ETC) is a play on emerging cities and towns in Asia. Anchored by its existing two projects in Yangon and Huizhou, and armed with a strong balance sheet, the group is on the lookout to diversify into new markets in the region. 
  • In Yangon, ETC has established itself as a leading developer with the robust sales chalked up by its CBD project, Golden City. 
  • On-going profit recognition of its pre-sales there would underpin earnings over the next two years.

Real estate play focused on emerging markets. 

  • Emerging Towns & Cities Singapore (ETC) is a niche developer and real estate investor in emerging Asian markets. Arising out of a reverse takeover of Cedar Strategic, ETC is currently focused on development projects in Yangon, Myanmar and Huizhou, China. 
  • It is also currently exploring strategic investments in property-related ventures in Indonesia, Thailand, Malaysia and the PRC.

Yangon project: Golden City. 

  • ETC’s flagship project is the Golden City luxury mixed-use development in the Yankin township of Yangon, Myanmar. 
  • Golden City has an estimated GFA of 2.2m sqf, comprising four phases in total. The initial two phases consist of 1,065 residential units with a GDV of USD400m and as of 31 Mar, ETC has sold 460 units with a sales value of USD164m. With the completion of the first phase, the group has booked in revenue of USD89m, with another USD75m of pre-sales to be booked in future quarters. 
  • Golden City is considered one of the most successful luxury projects in Yangon, having achieved an average price of USD250-320 psf in a challenging market.

Huizhou project: Daya Bay. 

  • ETC’s other project is in Huizhou, where the group is developing a resort-style residential project, with a GFA of 552,000 sqf and a GDV of RMB687m. ETC has sold and recognised most of the residential units, and has kept another 399 units as holiday rental apartments to provide a source of recurring income (~CNY10m in gross rental pa).

Latest financials. 

  • For 1Q17, the group delivered topline growth of 92% YoY to SGD10.1m, underpinned by ongoing revenue recognition of pre-sold units at Golden City. 
  • ETC generated a gross margin of 27.7% due to the healthy profit margin from Golden City (GM: 25%) and high margins from its rental units. 
  • The group has a solid balance sheet, with net gearing of 16%. We expect future quarters to be underpinned by ongoing profit recognition from the existing pre- sales at Golden City.


  • The stock is currently trading at ~1x its book value of SGD0.11/share.

Company Background 

  • ETC, previously known as Cedar Strategic Holdings, focuses on acquiring quality assets in emerging towns and cities. Through property development to obtain short-term profits, and property investment for long-term recurring income, it aims to be a niche property developer and investor in emerging markets. 
  • Currently, it owns a 49% stake in a mixed- use development in Yangon, Myanmar as well as a 60% stake in Daya Bay, a residential and hospitality apartment project in Guangdong, China.

Properties portfolio 

Daya Bay, Huizhou Guangdong Province. 

  • Located within a vibrant domestic tourist hotspot, ETC acquired a 60% stake in the development. The project consists of 717 residential apartments and 399 holiday rental apartments.

Holiday apartment rental. 

  • All 399 holiday apartments are rented to e-Stay, a third party hotel operator, for five years. e-Stay is a high-end, short-term home rental startup backed by Wu Xiao Guang and offers more than 300,000 rental units across 200 locations in China and is managed by ex-employees from Ascott and Dalian Wanda. 
  • The contract agreement with e-Stay allows a review of price per unit every 6 months, with a floor price of CNY2,000 per unit.

Golden City, Yankin Township, Yangon Myanmar

  • ETC acquired a 49% stake in the luxury mixed-use development that can be used for residential and commercial purposes. On the site stands the tallest building in Myanmar, offering a clear view of key landmarks including Shwedagon Pagoda and Inya Lake. 
  • Situated within prestigious real estate and lifestyle amenities including 5-star hotels, fine dining restaurants, international schools and multinational corporations’ office headquarters, Golden City has managed to attract affluent local buyers, with prices between USD250 and USD320 psf.

Overview Of Myanmar’s Real Estate Market 

Economic reforms in Myanmar. 

  • As the cost of doing business in ASEAN countries increase due to rising labour costs, investors and business owners seeking new opportunities are increasingly looking at Myanmar. With the local government actively driving political and regulatory changes, business owners have since found a more favourable business environment. 
  • Since 2012, the Foreign Investment Law (FIL) allowed foreign firms the right to fully own ventures as well as the right to lease land, an indication of the Myanmar Government’s intention to push through economic reforms. 
  • Further measures implemented include the Condominium Law, a detailed Special Economic Zone (SEZ) Law and a Financial Institutions Law.

Rapid urbanisation. 

  • With the establishment of SEZs, the rural population is expected to decline as better paying jobs could be found within these areas. This would further increase the demand for residential buildings within Yangon.
  • Regulatory changes alongside increasing income levels and rapid urbanisation would help underpin Myanmar’s residential construction industry outlook.


  • SEZs, pioneered by the Myanmar Government, seek to attract foreign investors by developing transport and other supporting infrastructures for factories to move in. The Thilawa SEZ, the first operational project was formed through joint ventures and public-private partnerships (PPP). 
  • Encompassing the Myanmar’s capital city Yangon, the Thilawa SEZ focuses on companies with manufacturing needs, for the high-tech, textile and labour-intensive industries. 
  • Moving forward, in order to facilitate the movement of goods and services, plans to improve road connectivity as well as port connectivity are underway.

A burgeoning tourist industry. 

  • The tourism sector was similarly identified as an area of focus, with plans to reach 7.5m tourists by 2020. Despite Myanmar’s ambitious target, there is no denying that actions have been taken to boost tourist arrivals into Myanmar. 
  • With the long-term aim of increasing tourism growth, further economic benefits can be realised within Myanmar and its capital city, Yangon.

Target Price: N/A

Goh Han Peng RHB Invest | http://www.rhbinvest.com.sg/ 2017-06-13
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