Further details on the Proposed Acquisition are set out in the ensuing sections of this announcement.

Transcription

1 SIGNATURE INTERNATIONAL BERHAD ("SIGN" OR THE "COMPANY") PROPOSED ACQUISITION BY SIGNATURE REALTY SDN BHD ("SRSB" OR "PURCHASER"), A WHOLLY-OWNED SUBSIDIARY OF SIGN, OF FIVE PARCELS OF INDUSTRIAL LAND MEASURING IN AGGREGATE APPROXIMATELY ACRES OR EQUIVALENT TO APPROXIMATELY 1,692,741.6 SQUARE FEET, ALL LOCATED WITHIN TECHPARK@ENSTEK PHASE 2 OR TECHPARK 2 IN BANDAR BARU ENSTEK, DAERAH SEREMBAN, NEGERI SEMBILAN, FOR A TOTAL CASH CONSIDERATION OF RM50,782,248 ("PROPOSED ACQUISITION") 1. INTRODUCTION On behalf of the Board of Directors of SIGN ("Board"), RHB Investment Bank Berhad ("RHB") wishes to announce that SRSB, a wholly-owned subsidiary of SIGN, had on 2 September 2014 entered into a conditional sale and purchase agreement ("SPA") with Lembaga Tabung Haji (the "Proprietor") and THP Enstek Development Sdn Bhd (formerly known as TH-NSTC Sdn Bhd ("THP" or the "Vendor") for the proposed acquisition of five (5) parcels of land, measuring approximately acres in aggregate (or equivalent to 1,692,741.6 square feet) held under the master title of PT17774, HS(D) , in Mukim of Labu, Daerah Seremban, Negeri Sembilan ("Properties") at an aggregate cash consideration of approximately RM50.78 million ("Purchase Consideration") Further details on the Proposed Acquisition are set out in the ensuing sections of this announcement. 2. DETAILS OF THE PROPOSED ACQUISITION Pursuant to the SPA, the Vendor has agreed to sell and SRSB agreed to purchase the Properties free from all encumbrances for a purchase consideration of approximately RM50.78 million, upon the terms and conditions contained in the SPA. 2.1 Information on the Property The Properties consist of five (5) industrial plots with a total site area of approximately acres of which Plot Nos 6, 7 and 8 form a larger parcel of land with total area of acres whilst Plot Nos 25 and 26 form a smaller parcel of land with a total area of acres. The Properties are located within an industrial park in Bandar Baru Enstek called Techpark@Enstek Phase 2. The industrial park is still undergoing construction and it is estimated to be completed within eighteen (18) months. Bandar Baru Enstek is an integrated and self-contained township sited near the state boundary of Selangor Darul Ehsan. Developments in this township include shopoffices, terrace houses, semi-detached houses and public amenities. There are also two colleges nearby, namely Cempaka International Ladies' College and a Britishbased Epsom College. Further details of the Properties are set out as follows:- Details Property identification Postal Address Land area Encumbrances Description Developer's Plot Nos 6, 7, 8, 25 and 26, Jalan Teknologi 5, Phase 2, Bandar Baru Enstek, situated on part of the land held under the master title of PT17774, HS(D) , Mukim of Labu, District of Seremban, Negeri Sembilan Darul Khusus * Not available yet acres or equivalent to 1,692,741.6 square feet Nil 1

2 Details Registered/beneficial owner of the Properties Audited net book value ("NBV") of the Properties Indicative market value Tenure Category of Land Use Existing use Future use Registered and beneficial owner Lembaga Tabung Haji Not applicable (1) RM50,790,000 (2) Freehold Industrial Industrial Industrial Description Notes:- * The titles to the Properties have yet to be issued as the Properties are part of the process of an application for the surrender and re-alienation of the land in accordance with the National Land Code 1065 (Act 56). (1) The Purchaser is not privy to such information. (2) Based on consultation with Messrs KGV International Property Consultants (M) Sdn Bhd ("Messrs KGV" or the "Valuer"), an independent firm of registered valuers, they have independently provided the market valuation of approximately RM50.79 million on the Properties based on the assumption that all the necessary main infrastructures on the Properties have been completed, the earthwork platform is ready for building construction and the industrial park is issued with Practical Completion Certificate There are no buildings erected on the Properties. The Properties are earmarked for the future development of a new manufacturing facility which is expected to take up approximately 28 acres of the land, with the remaining balance land held for investment purposes. The Company intends to undertake the development in several phases over an estimated development period of five (5) years. Construction is expected to commence in second (2 nd ) half of 2016 upon completion of the SPA with the manufacturing facilities envisaged to be completed in 2017 and the remaining phases such as the warehouse and other amenities to be completed in stages over a period of up to five (5) years depending on the market conditions at the relevant point in time. Indicatively, the Company plans to invest approximately RM50.0 million during the entire duration of the development. Save for the costs in relation to the construction of its kitchen cabinet production plant on the Properties, there are no other additional financial commitments required by SIGN to put the Properties on-stream. The construction cost will be funded via internally generated funds and bank borrowings. 2.2 Information on the Proprietor and Vendor Proprietor Lembaga Tabung Haji is a statutory body established under the Lembaga Tabung Haji Act 1995 (Act 535) and having its registered address at Bangunan Tabung Haji, No. 201 Jalan Tun Razak, Kuala Lumpur. The Proprietor is the registered owner of all that piece of Properties and had given the rights to the Vendor to enter into any dealings in respect of the Properties for the benefit of and in favour of the Proprietor. 2

3 2.2.2 Vendor THP was incorporated in Malaysia under the Companies Act, 1965 as a private limited company on 30 July THP is principally involved in the business of property development. THP is a wholly-owned subsidiary of TH Properties Sdn Bhd, which in turn is owned by Lembaga Tabung Haji. 2.3 Basis and justification of arriving at the Purchase Consideration The Purchase Consideration of RM50.78 million was arrived at on a willing-buyer willing-seller basis after taking into consideration the indicative market value of the Properties of RM50.79 million as ascribed by Messrs KGV International Property Consultants (M) Sdn Bhd ("Messrs KGV"). As the infrastructure on the Properties are in the midst of being developed, the valuation on the Properties is on basis that all the necessary main infrastructures have been completed, the earthwork platform is ready for building construction and the industrial park is issued with Practical Completion Certificate. The valuation was carried out using the Comparison Method as stated in their valuation letter dated 4 August The Purchase Consideration represents a slight discount over the indicative market value of RM50.79 million as ascribed by the Valuer. Messrs KGV will be issuing the valuation report on the Properties to the Company ("Valuation Report") within two (2) weeks from the date of this announcement. The Valuation Report will be made available for inspection upon issuance of the Company's circular in respect of the Proposed Acquisition. 2.4 Liabilities to be assumed There are no liabilities, including contingent liabilities and guarantees to be assumed by SRSB from the Proposed Acquisition. 2.5 Source of funding The Proposed Acquisition is expected to be funded by internally generated funds and bank borrowings of the Company, the quantum of which has yet to be determined at this juncture. 2.6 Settlement of the Purchase Consideration The Purchase Consideration shall be satisfied by cash in the following manner:- (RM) Date of settlement Earnest Deposit (1) 1,015,645 Prior to the execution of SPA Deposit (1) 4,062,580 Upon signing of the SPA Balance purchase consideration 45,704,023 Within 3 months from the date on which the SPA becomes unconditional ("Unconditional Date") (2) Total 50,782,248 Notes:- (1) As defined hereinafter. (2) The Unconditional Date means the date on which all the conditions precedent have been fulfilled, which shall not be later than eighteen (18) months from the date of the execution of the SPA or such other date to be mutually extended by both parties. 3

4 (i) Deposit On the execution of SPA, the Purchaser:- (a) (b) has already paid the Vendor the sum of approximately RM1.02 million only (being 2% of the Purchase Consideration) ("Earnest Deposit") paid prior to the execution of the SPA and the receipt of which the Vendors already acknowledged and the Vendors will apply such amount to the payment of the Deposit by the Purchaser; shall pay the Vendor the sum of approximately RM4.06 million only (being 8% of the Purchase Consideration) ("Balance Deposit"). Both the Earnest Deposit and the Balance Deposit shall collectively be referred to as the "Deposit"; and (ii) Balance (a) The balance of the Purchase Consideration amounting to approximately RM45.70 million only (being 90% of the Purchase Consideration) ("Balance") shall be paid by the Purchaser to the Vendors' solicitors as stakeholders within three (3) months from the date of which the SPA becomes unconditional ("Completion Period") subject to the clause below. As set out in clause 22.2 of the SPA, the Purchase Consideration shall be exclusive of Good and Services Tax ("GST") and where GST is applicable to the sale of the Properties under the SPA, the GST shall be payable only on the Balance or on any amount as required by law and the applicable rate of GST shall be payable by the Purchase. (b) In the event that the Purchaser fails to pay the Balance within the Completion Period, the Vendor shall grant the Purchaser an extension of thirty (30) days from the expiry of the Completion Period or such longer period as the Parties hereto may agree in writing to do so on the condition the Purchaser shall pay Ta'widh* to the Vendor at the rate of eight per cent (8%) per annum on the Balance or any part thereof still outstanding calculated on a daily basis from the first day of the Extended Completion Period^ to the day the Balance has been duly paid in full. Notes:- * The penalty agreed upon by both the Vendor and Purchaser as compensation/profit which can be rightfully claimed by a party when the other party fails or is late in meeting his obligation to pay or refund monies due and owing. ^ The period of thirty (30) days from the expiry of the Completion Period or such longer period as the Vendor may agree in writing for the payment of the Balance. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 4

5 2.7 Salient terms and conditions of the SPA The salient terms and conditions of the SPA, amongst others, are set out as follows: Conditions precedent The SPA shall be conditional upon the fulfilment of the conditions precedent as set out below by the respective parties within eighteen (18) months from the date of the SPA or such other date to be mutually agreed by both parties in writing ("Conditional Period"):- Conditions Precedent to be fulfilled by the Vendor (i) (ii) The consent from the relevant state authority for the transfer of the Properties from the Vendor to the Purchaser; and The issuance of separate individual titles to the Properties. Conditions Precedent to be fulfilled by the Purchaser (i) (ii) A valuation report on the Properties to be issued by a licensed valuer duly approved by the Securities Commission Malaysia and forwarded to the Purchaser's Solicitors; and Approval from the shareholders of SIGN at an extraordinary general meeting to be convened. The land on which the Properties are located at is currently undeveloped with an uneven terrain. The Vendor, at its own cost and expense, is developing the land as an industrial park which includes the related infrastructure and common facilities. The titles to the Properties have yet to be issued as the Vendor is currently in the process of submitting an application for the surrender and re-alienation of the land in accordance with the National Land Code 1065 (Act 56). Pursuant thereto, the period of eighteen (18) months to satisfy the Conditions Precedent is to allow sufficient time for the issuance of separate individual titles to the Properties Vacant possession (i) (ii) The Vendor shall deliver vacant possession of the Properties to the Purchaser on an 'as is where is' basis from the date of receipt by the Vendor's Solicitors, as stakeholders, of the full payment of the Balance together with Ta'widh (if any) and apportioned outgoings (if any) payable by the Purchaser. Upon receipt by the Vendor's Solicitors, as stakeholders, of the full payment of the Balance together with Ta'widh and apportioned outgoings (if any), the parties hereto shall conduct a joint inspection of the Properties within five (5) business days to determine if the Properties are free from any squatter(s) preventing the delivery of vacant possession of the Properties from the Vendor to the Purchaser. In the event that the Properties are not free from squatter(s), the Vendor shall at its own costs and expense remove the squatter(s) within thirty (30) days from the date of joint inspection, failing which the Purchaser shall be entitled to the remedies as set out in Section 2.7.3(ii) below. 5

6 2.7.3 Parties' default (i) (ii) In the event the Purchaser fails to pay the Balance in accordance with the terms of the SPA, the sum of RM5,078, only, a sum equivalent to ten per centum (10%) of the Purchase Consideration as agreed liquidated damages (hereinafter referred to as the "Agreed Liquidated Damages") shall be forfeited in favour of the Vendor. In the event that the Vendor fails to comply with any of the Vendor's obligation under the SPA and to complete the sale and purchase in accordance with the terms and conditions therein, the Purchaser shall without prejudice to other rights and remedies of the Purchaser has a right exercisable at its absolute discretion either:- - to seek specific performance of the sale and purchase therein, if the Purchaser is ready, willing and able to fulfil all the Purchaser s obligations under the SPA, in which event the Vendor shall be liable to pay the Purchase all costs and expenses incurred by the Purchaser in connection therewith; or - to terminate the SPA by notice in writing to the Vendor. Should the Agreed Liquidated Damages be forfeited or the SPA be terminated, the Purchaser shall, at the Purchaser's own costs and expense, redeliver vacant possession of the Properties to the Vendor (where vacant possession has been delivered to the Purchaser) and return all the Vendors' documents received by the Purchaser with the Vendor's rights intact. Thereafter the SPA shall be terminated and of no force or effect and neither party shall have any claim against the other Infrastructure The Vendor shall at the Vendor's own costs and expenses, provide construct or cause to be constructed and completed the Infrastructure works to serve the whole development of techpark@enstek (Phase 2) including the Properties (hereinafter referred to as the "Infrastructure") in accordance with the requirements and standards of the Appropriate Authorities. ("Appropriate Authorities" means all the government authorities including and not limited to any Ministry, agency, department, local municipal councils, state authorities, local authorities in Malaysia including but not limited to the Majlis Perbandaran Nilai, the Negeri Sembilan State Authority and the Land Office of Seremban (PTS) and the Director of Land and Mines Office, Negeri Sembilan (PTG- NS)) 3. RATIONALE AND PROSPECTS FOR THE PROPOSED ACQUISITION The Properties to be acquired have been earmarked for the future development of a new manufacturing facility that is expected to take-up approximately 28-acres of space, with the balance land held for investment purposes. The new manufacturing facility is intended to be a larger and more comprehensive production facility compared to our existing facility, and is expected to cater for our long term business expansion plans. Presently, the existing factory of SIGN Group is mainly used for production of kitchen cabinets and wardrobe for its retail segment which represent 35%-40% of the Group's revenue while the kitchen cabinets and wardrobe for its project division are outsourced to third party vendors, which represent 60%-65% of its Group's revenue. We aim to expand our manufacturing capacity and will eventually manufacture the outsourced kitchen cabinets and wardrobe for its project division internally. This will enable us to have more control over the supply chain and help ensure consistency in the quality of the final products. 6

7 In addition, the Properties are located in a new industrial park which will be provided with good infrastructure. Adjoining the Properties is the new Kellogg Asia manufacturing facility. Given the Properties are located in a matured area with good connectivity and public amenities, the Board believes the Properties have good prospects for capital appreciation. As at the LPD, SIGN has an unbilled order book of about RM250 million for which the delivery is only expected to be made progressively over the next three (3) years. The management of SIGN has been regularly submitting tenders to provide built-in kitchen cabinets for new property development projects in the Klang Valley, Johor Bahru and Penang to continuously replenish its order book. The inclination and trend of home buyers looking for properties with built-in kitchen cabinet systems has been increasing and is seen to be more of a necessity than merely a home furnishing item. With new property launches still being planned by developers over the next few years, SIGN is optimistic of the continuous growth in its business. After taking into consideration the above, SIGN plans to expand its business with the purchase of the Properties and the construction of a new manufacturing facility in order to support its existing and future order book. The land purchases together with the construction of the proposed facility are expected to be completed within thirty-six (36) months from the signing of the SPA. The Company will submit all the necessary applications to the appropriate authorities and will closely monitor the project implementation to ensure minimal interruption and delay of the Group's expansion plans. 4. EFFECTS OF THE PROPOSED ACQUISITION 4.1 Share capital and substantial shareholders' shareholdings The Proposed Acquisition will not have any effect on the issued and paid-up share capital as well as the substantial shareholders' shareholdings in SIGN as the Purchase Consideration will be fully satisfied in cash. 4.2 Earnings The Proposed Acquisition is not expected to have any material effect on the earnings and earnings per share of the SIGN Group for the FYE 30 June 2014 as the Proposed Acquisition is expected to be completed in 1 st half However, as the Proposed Acquisition will be partially financed via bank borrowings, the interest expense to be incurred on the borrowings may affect the future earnings of SIGN Group. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 7

8 4.3 Net assets ("NA") and gearing Based on the audited consolidated balance sheet of SIGN Group as at 30 June 2013, the proforma effects of the Proposed Acquisition on the Group's consolidated NA, NA per share and gearing are set out below:- Audited consolidated as at 30 June 2013 RM'000 After the Proposed Acquisition RM'000 Share capital 60,000 60,000 Merger deficit (28,123) (28,123) Treasury shares (920) (920) Retained profits 72,288 71,938 (1) Foreign exchange translation reserve Shareholders' funds / NA 103, ,974 No. of Shares ('000) 118, ,945 NA per Share (RM) Total borrowings 21,500 54,508 (2) Gearing ratio (times) Notes:- (1) After deducting estimated expenses incurred in relation to the Proposed Acquisition amounting RM350,000. (2) Assuming 65% of the Purchase Consideration of approximately RM33.01 million is funded by bank borrowings. 5. RISK FACTORS Shareholders should consider the following risk factors (which may not be exhaustive) pertaining to the Proposed Acquisition as follows:- (a) Non-completion of the Proposed Acquisition The completion of the Proposed Acquisition is subject to, inter-alia, the fulfilment of conditions precedent, the details of which are set out in Section above. In the event the conditions precedent are not met, the Proposed Acquisition will not be completed, which will result in the failure of the Group to achieve the objectives and benefits of the Proposed Acquisition. In the event that the Proposed Acquisition will not be completed due to non-fulfilment of any of the conditions precedent, the deposit will be refunded by the Vendor as per the terms set out in the SPA. (b) Interest rate risks SRSB intends to finance the Proposed Acquisition through a combination of internally generated funds and bank borrowings. As such, the SIGN Group may be exposed to fluctuations in the interest rate movements as well as the risk in generating sufficient funds to meet its financial repayment commitments on time. Significant increase in interest rates may adversely affect the financial performance of the Group. Based on the latest unaudited consolidated financial results of SIGN for the twelve (12)-months ended 30 June 2014, the Group's total borrowings amounted to RM19.18 million. 8

9 The management takes cognizance of this and will take into consideration of the gearing level, interest cost as well as internal cash requirements of the SIGN's business in determining the optimal combination of internally generated funds and bank borrowings to finance the Proposed Acquisition. Further, as the Balance and interest cost is only likely to be incurred in 1 st half 2016, there will be no immediate impact to SIGN's cash flows and SIGN will have sufficient time to plan its cash flow management. The management of SIGN believes that its prudent cash flow management will be able to address the financial risk. (c) Property investment risks Property investments are subject to varying degrees of risk. The returns available from such investments depend largely on the amount of income earned and capital appreciation generated by the properties. The revenues and values of property investments may be adversely affected by a number of factors, which includes international, regional and local economic climate; local real estate conditions; perceptions by businesses on the attractiveness of the properties; competition from other surrounding properties, changes in market rates for comparable sales and rental; and casualty losses due to fire, floods and other natural or man-made disasters. Property investments are also affected by factors such as changes in interest rates, the availability of funds, changes in government regulations, changes in tax laws or rates and the potential environmental or other legal liabilities. 6. APPROVALS REQUIRED FOR THE PROPOSED ACQUISITION As set out in Section of this announcement, the Proposed Acquisition is conditional upon approvals being obtained from the following:- (a) (b) (c) (d) (e) the consent from the relevant state authority for the transfer of the Properties from the Vendor to the Purchaser; the issuance of separate individual titles to the Properties by the Vendor; the issuance of a valuation report on the Properties by a licensed valuer duly approved by the Securities Commission Malaysia; the approval of the shareholders of SIGN at an EGM to be convened; and approval of relevant authorities, if required. The Proposed Acquisition is not conditional upon any other corporate exercise to be undertaken by the Company. 7. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders and/or persons connected to them has any interest, whether direct or indirect, in the Proposed Acquisition. 8. ESTIMATED TIMEFRAME FOR SUBMISSION OF THE APPLICATION TO THE RELEVANT AUTHORITIES Two (2) copies of the Valuation Report will be submitted to Bursa Malaysia Securities Berhad ("Bursa Securities") within two (2) months from the date of this announcement. 9

10 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the first (1 st ) half of PERCENTAGE RATIOS Based on SIGN's audited consolidated financial statements for the financial year ended 30 June 2013 and pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities, the highest percentage ratio applicable to the Proposed Acquisition is 49.15%. 11. DIRECTORS' STATEMENT The Board, having considered all aspects of the Proposed Acquisition, is of the opinion that the terms of the Proposed Acquisition are in the best interest of the SIGN Group. The view of the Board was arrived at after having considered the terms and conditions of the SPA, the rationale for the Proposed Acquisition, as well as the effects of the Proposed Acquisition on the SIGN Group. 12. DOCUMENTS FOR INSPECTION The SPA and the Valuation Letter will be made available for inspection at the registered office of the Company at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan, during normal business hours (except public holidays) for a period of three (3) months from the date of this Announcement. This announcement is dated 2 September