ASLAN Pharmaceuticals — ASLAN004 a go for atopic dermatitis

ASLAN Pharmaceuticals — ASLAN004 a go for atopic dermatitis

ASLAN announced in July 2018 that it has received clinical trial authorisation in Singapore to conduct a Phase I study of ASLAN004 for the treatment of atopic dermatitis (AD). The product is a monoclonal antibody targeting interleukin 13 receptor α 1 (IL13Rα1). The Phase I dosing study will consist of a single dose escalation in healthy volunteers and a multiple dose escalation in AD patients.

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ASLAN Pharmaceuticals

ASLAN004 a go for atopic dermatitis

Clinical update

Pharma & biotech

9 July 2018

Price

US$8.3

Market cap

US$273m

NT$30.06/US$

Net cash ($m) at 31 March 2018

+ IPO + greenshoe

70.2

ADS in issue

32.9m

Free float

67%

Code

ASLN

Primary exchange

Taipei

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

(15.8)

N/A

N/A

Rel (local)

(15.4)

N/A

N/A

52-week high/low

US$10.24

US$5.48

Business description

ASLAN Pharmaceuticals is a Singapore-based drug developer targeting Asia-prevalent diseases. It has varlitinib in pivotal clinical trials for biliary tract cancer and gastric cancer, and will be advancing ASLAN003 to Phase II trials for acute myeloid leukaemia and ASLAN004 to Phase I for atopic dermatitis.

Next events

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Analysts

Nathaniel Calloway

+1 646 653 7036

Maxim Jacobs

+1 646 653 7027

ASLAN Pharmaceuticals is a research client of Edison Investment Research Limited

ASLAN announced in July 2018 that it has received clinical trial authorisation in Singapore to conduct a Phase I study of ASLAN004 for the treatment of atopic dermatitis (AD). The product is a monoclonal antibody targeting interleukin 13 receptor α 1 (IL13Rα1). The Phase I dosing study will consist of a single dose escalation in healthy volunteers and a multiple dose escalation in AD patients.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/16

11.5

(7.6)

(0.07)

0.0

N/A

N/A

12/17

0.0

(38.8)

(0.31)

0.0

N/A

N/A

12/18e

0.0

(38.9)

(0.25)

0.0

N/A

N/A

12/19e

0.7

(62.5)

(0.36)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

ASLAN004 mechanism previously validated

The target of ASLAN004 IL13Rα1 is a subunit of an interleukin receptor on the surface of macrophages that regulates their inflammatory and anti-inflammatory properties. The principle of targeting this receptor has already been tested in the form of the drug Dupixent (dupilumab, Regeneron/Sanofi), which inhibits the receptor’s other subunit IL4Rα1. The drug was approved in March 2017 for atopic dermatitis and had revenues of €219m that year.

Atopic dermatitis: 18m adults affected in the US

AD is the most common form of eczema, affecting c 18 million adults in the US. Of these, 20% have moderate to severe disease and 4% have chronic forms, and we expect these patients to form the target market for the drug. The first-line treatment is typically topical steroids, although approximately half of patients with severe disease become refractory and require non-steroid treatments.

A competitive market

There are a number of options available for patients with steroid refractory AD both on the market and in development. Patients can be treated with PDE4 inhibitors such as Eucrisa (crisaborole, Pfizer) and calcineurin inhibitors such as Elidel (pimecrolimus, Valeant). In addition to Dupixent and ASLAN004, there are other drugs under development targeting the IL-4/IL-13 pathway such as tralokinumab (AstraZeneca) in Phase III and lebrikizumab (Dermira) in Phase 2b.

Valuation: Increased to $399m or $12.13 per ADS

We have increased our valuation to $399m or $12.13 per ADS from $364m or $11.04 per ADS due to the inclusion of ASLAN004. We arrive at a peak sales forecast of $587m based on conservative estimates of future market share (2%). The inclusion of the programme in our forecasts has increased our financing requirement by $22m to $82m, although we expect this to be offset by the out-licensing of assets.

ASLAN004 to enter Phase I

On 3 July 2018, ASLAN announced that it had submitted an application for clinical trial authorisation to the Singapore Health Science Authority to initiate a Phase I study of ASLAN004 for the treatment of atopic dermatitis (AD). It also provided a brief outline of the study which will consist of a single ascending dose portion in healthy volunteers and a multiple ascending dose portion in AD patients. We expect the trial to be initiated shortly after the application is approved (in our forecasts at the beginning of 2019). The dosing information found in this study can serve as the basis for further clinical study in the US and other geographies. The compound was licensed from CSL in 2014 and had a patent runway to 2027 (extendable to 2032).

ASLAN004 is an antibody that binds the interleukin 13 receptor α 1 (IL13Rα1), which is a receptor present on the surface of macrophages. This protein regulates the balance between the pro-inflammatory (M1) and anti-inflammatory (M2) states of the cell. This mechanism of action has already been validated by the approval of Dupixent (dupilumab, Regeneron/Sanofi), which was approved for the treatment of atopic dermatitis in 2017. Dupixent binds to IL4Rα, which is part of the same receptor complex as IL13Rα1, and generated revenues of €219m in its launch year. The drug has also been submitted for approval for severe asthma. AstraZeneca and Dermira also have programmes targeting this axis (Exhibit 1).

Exhibit 1: Programmes targeting IL-4/IL-13

Drug

Company

Target

Development

Dupixent (dupilumab)

Regeneron/Sanofi

anti-IL4Rα

Approved

Tralokinumab

AstraZeneca

anti-IL-13

Phase III

Lebrikizumab

Dermira

anti-IL-13

Phase 2b

ASLAN004

ASLAN

anti-IL13Rα1

Phase I

Source: EvaluatePharma

AD is the most common type of eczema, affecting an estimated 18 million adults in the US.1 Approximately 20% of these patients have moderate to severe disease necessitating medication, and approximately 4% develop a chronic form of the disease. If the condition is poorly controlled without medication, topical steroids are typically prescribed in the first line. However, about half of all patients with chronic disease become refractory to steroids, necessitating other pharmacological interventions, such as the PDE4 inhibitor Eucrisa (crisaborole, Pfizer) and calcineurin inhibitors such as Elidel (pimecrolimus, Valeant). We expect ASLAN004 to target a similar market of refractory moderate to severe patients.

National Eczema Association

Valuation

We have increased our valuation to $399m or $12.13 per ADS from $364m or $11.04 per ADS due to the inclusion of ASLAN004 in our models. We value the programme at $36m based on a relatively conservative 2% market share of chronic steroid refractory patients. We expect there to be substantial competition in the space among drugs targeting the IL-4/IL-13 axis as well as PDE4 inhibitors and others. Given the late entry of ASLAN004 to the market (launch in 2024), we remain conservative with our market share estimates. Despite this, we model a peak sales forecast of $587m. We expect pricing on par with Dupixent ($37,000 pa in 2017), adjusted for future price growth. The expected R&D programme is also based on Dupixent, with a total of 1,900 patients, although we expect a low cost of enrolment of $20,000 given the milder nature of the disease. Our probability of success for the programme is 15% because we have not seen any clinical data, although the mechanism of action has some validation through other programmes. Otherwise our valuation remains unchanged.

Exhibit 2: Valuation of ASLAN

Programme

Indication

Region

Clinical stage

Prob. of success

Launch year

Peak sales ($m)

Margin/royalties (%)

rNPV ($m)

Varlitinib

2nd line BTC

US + Europe

Phase II/III

30%

2020

277

59%

121.6

East Asia

Phase II/III

30%

2019-2020

195

53-58%

73.9

R&D

-7.2

1st line GC

US + Europe

Phase II/III

20%

2021

182

57%

31.8

East Asia

Phase II/III

20%

2021

302

54-60%

51.5

R&D

-7.7

Upfront and sales milestones payable

-9.5

ASLAN003

1st line AML

US + Europe

Phase II ready

10%

2022

308

59%

38.0

R&D

-4.0

ASLAN002 Royalties

1st line BC + GC

US + Europe

Phase II

15%

2022

909

5%

16.9

ASLAN004

Refractory AD

US + Europe

Phase I

15%

2024

587

55%

42.1

R&D

-6.4

Unallocated costs

-11.8

Total

329.1

Net cash and equivalents (Q118+ IPO + greenshoe) ($m)

70.2

Total firm value ($m)

399.4

Total basic ADSs (m)

32.9

Value per ADS ($)

12.13

Source: ASLAN reports, Edison Investment Research. Note: BTC=biliary tract cancer, GC=gastric cancer, AML=acute myeloid leukemia, AD=atopic dermatitis.

Financials

We have added the expected development costs of ASLAN004 to our financial projections, which has increased our financing requirements for the company. We expect the company to require $82m in additional capital before profitability in 2022, up from $60m previously. We expect this financing requirement to be met through the out-licensing of its products, including ASLAN004. However, in lieu of this agreement we record this as illustrative debt.

Exhibit 3: Financial summary

US$k

2016

2017

2018e

2019e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

11,547

0

0

743

Cost of Sales

(125)

0

0

(111)

Gross Profit

11,422

0

0

631

R&D

(13,165)

(30,001)

(30,526)

(34,813)

SG&A

(6,956)

(9,139)

(10,966)

(31,260)

EBITDA

 

 

(7,204)

(37,803)

(38,308)

(62,113)

Normalised operating profit

 

 

(7,280)

(38,013)

(38,533)

(62,337)

Amortisation of acquired intangibles

0

0

0

0

Exceptionals

0

0

0

3

Share-based payments

(1,420)

(1,127)

(2,959)

(3,107)

Reported operating profit

(8,700)

(39,140)

(41,492)

(65,441)

Net Interest

(477)

(54)

(198)

(124)

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

127

(699)

(197)

0

Profit Before Tax (norm)

 

 

(7,629)

(38,765)

(38,929)

(62,460)

Profit Before Tax (reported)

 

 

(9,049)

(39,892)

(41,888)

(65,565)

Reported tax

0

0

0

0

Profit After Tax (norm)

(7,629)

(38,765)

(38,929)

(62,460)

Profit After Tax (reported)

(9,049)

(39,892)

(41,888)

(65,565)

Minority interests

0

0

0

0

Discontinued operations

0

0

0

0

Net income (normalised)

(7,629)

(38,765)

(38,929)

(62,460)

Net income (reported)

(9,049)

(39,892)

(41,888)

(65,565)

Basic average number of shares outstanding (m)

105

124

157

175

EPS - basic normalised (US$)

 

 

(0.07)

(0.31)

(0.25)

(0.36)

EPS - diluted normalised (US$)

 

 

(0.07)

(0.31)

(0.25)

(0.36)

EPS - basic reported (US$)

 

 

(0.09)

(0.32)

(0.27)

(0.38)

Dividend (US$)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

593

689

21,615

19,561

Intangible Assets

84

84

21,053

18,999

Tangible Assets

384

444

405

405

Investments & other

125

161

158

158

Current Assets

 

 

53,121

50,645

41,128

33,719

Stocks

0

0

0

27

Debtors

1,294

0

0

122

Cash & cash equivalents

51,737

50,573

41,047

33,488

Other

90

72

82

82

Current Liabilities

 

 

(3,804)

(5,979)

(14,608)

(7,161)

Creditors

(3,804)

(5,979)

(14,608)

(7,161)

Tax and social security

0

0

0

0

Short term borrowings

0

0

0

0

Other

0

0

0

0

Long Term Liabilities

 

 

(8,336)

(9,841)

(10,524)

(70,966)

Long term borrowings

(8,336)

(9,679)

(10,099)

(70,541)

Other long term liabilities

0

(162)

(425)

(425)

Net Assets

 

 

41,575

35,513

37,611

(24,846)

Minority interests

0

0

0

0

Shareholders' equity

 

 

41,575

35,513

37,611

(24,846)

CASH FLOW

Op Cash Flow before WC and tax

(7,204)

(37,803)

(38,308)

(62,113)

Working capital

1,524

3,274

(2,325)

4,204

Exceptional & other

(109)

(5)

1,320

1,933

Tax

0

0

0

0

Net operating cash flow

 

 

(5,789)

(34,534)

(39,313)

(55,975)

Capex

(374)

(291)

(195)

(224)

Acquisitions/disposals

(81)

(9)

(11,801)

(11,801)

Net interest

0

0

0

0

Equity financing

31,364

33,061

42,320

0

Dividends

0

0

0

0

Other

(68)

(36)

0

0

Net Cash Flow

25,052

(1,809)

(8,989)

(68,001)

Opening net debt/(cash)

 

 

0

(25,052)

(22,544)

(12,598)

FX

0

0

(979)

0

Other non-cash movements

0

(699)

22

0

Closing net debt/(cash)

 

 

(25,052)

(22,544)

(12,598)

55,403

Source: ASLAN reports, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by ASLAN Pharmaceuticals and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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London +44 (0)20 3077 5700

280 High Holborn

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New York +1 646 653 7026

295 Madison Avenue, 18th Floor

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Level 4, Office 1205

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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by ASLAN Pharmaceuticals and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Circle Property — A strong harvest continues

Circle actively manages its assets, placing an emphasis on total returns rather than short-term income maximisation. With three significant office refurbishments recently completed and in various stages of letting, it continues to harvest the benefit in terms of rising income and capital values, supporting growing dividends and NAV. FY18 NAV total return was 28.3% and, since the February 2016 IPO, the compound annual total return has been 26.2% pa. With a positive supply–demand balance in regional office markets continuing, we believe there are more gains to come.

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