Further details of the Proposed Acquisition and Proposed Development are set out in the ensuing sections.

Transcription

1 MAH SING GROUP BERHAD ( MAH SING OR COMPANY ) PROPOSED ACQUISITION BY MAH SING PROPERTIES SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF MAH SING, OF FIVE (5) PIECES OF ADJOINING FREEHOLD LAND, WITH A TOTAL NET LAND AREA MEASURING APPROXIMATELY 3.56 ACRES AND AN ESTIMATED GROSS DEVELOPMENT VALUE OF UP TO APPROXIMATELY RM650 MILLION, ALL IN SEKSYEN 86A, BANDAR KUALA LUMPUR, DAERAH KUALA LUMPUR, NEGERI WILAYAH PERSEKUTUAN KUALA LUMPUR ( PROPOSED ACQUISITION ) 1.0 INTRODUCTION The Board of Directors of Mah Sing ( Board ) wishes to announce that Mah Sing Properties Sdn Bhd ( MSPSB ), a wholly-owned subsidiary of Mah Sing, had on 17 May 2017, entered into a conditional sale and purchase agreement with Saw Shiuo Sonny Saw ( Vendor ) for the proposed acquisition of five (5) pieces of adjoining freehold land in Seksyen 86A, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan Kuala Lumpur ( Land ) ( SPA ). The total purchase consideration to be paid to the Vendor is up to RM60 million, premised upon the development order in respect of MSPSB s proposed development plan on the Land is obtained with density of 350 units per acre or more ( Purchase Consideration ). The Purchase Consideration shall be adjusted accordingly in the event the density obtained based on the development order is lower than 350 units per acre. A further announcement will be made in due course when the density and consequently, the total purchase consideration are determined. Based on preliminary plans, MSPSB intends to develop a residential condominium on the Land which will front the acres Titiwangsa Lake Garden ( Proposed Development ). The proposed transit-oriented development, with an estimated gross development value ( GDV ) of up to approximately RM650 million, is located only 250 metres away from the upcoming Hospital KL MRT station under the MRT Line 2 (the full service is slated to be ready by Q2 2022) and 1.8km away from the Titiwangsa LRT, monorail and MRT interchange. It is close by to Istana Budaya and 3.7km away from Kuala Lumpur City Centre. The Proposed Development, indicatively priced from RM485,000 per unit with built-up from 850 square feet, aims to cater for first home buyers, working professionals, young families and home upgraders seeking to live in the vicinity of the Kuala Lumpur City Centre and close proximity to public transportation. The Proposed Acquisition will result in the increased ownership of prime landbanks by Mah Sing group of companies ( Group ) to 2,328 acres, with total remaining GDV and unbilled sales of RM30.9 billion. Further details of the Proposed Acquisition and Proposed Development are set out in the ensuing sections. 2.0 DETAILS OF THE PROPOSED ACQUISITION 2.1 Information on MSPSB MSPSB is a private limited company incorporated in Malaysia on 24 May 1993 under the Companies Act, 1965 as Desa Aktif Sdn Bhd and subsequently changed its name to its present name on 16 December Its principal activity is property development and investment holding. As at the date of the SPA, MSPSB has a total number of issued share capital of 10 million. MSPSB is a wholly-owned subsidiary of Mah Sing. 1

2 2.2 Information on the Vendor The Vendor, Saw Shiuo Sonny Saw, from Kuala Lumpur, is the sole and absolute registered, legal and beneficial owner of the Land. 2.3 Information on the Land The Land, comprising five (5) pieces of adjoining freehold land, are held under titles Geran 36507, Lot 7; Geran 36508, Lot 8; Geran 36509, Lot 9; Geran 36510, Lot 10 and Geran 36511, Lot 11, all located at Seksyen 86A, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan Kuala Lumpur. The Land is regularly sized, almost a square shape and on flat terrain ready to be developed immediately. It is zoned for residential use. The Land is 3.7km away from Kuala Lumpur City Centre and is strategically located in the established neighbourhood of Titiwangsa, fronting the Titiwangsa Lake Garden. It is located along Jalan Beserah, off Jalan Tun Razak and accessible via Jalan Tembeling off Jalan Kuantan. The other major thoroughfares and expressways in the vicinity include Jalan Tun Razak, DUKE Highway and Middle Ring Road 2 Highway. The Land is 250 metres walking distance from the upcoming Hospital KL MRT station under the MRT Line 2 and 1.8km away from the Titiwangsa LRT, monorail and MRT interchange. There are various medical facilities surrounding the Land, all within 2.5km radius, such as National Blood Centre (750 metres), KL General Hospital (1.8km), Institute Jantung Negara (2.2km), KPJ Tawakkal Specialist Hospital (1.9km) and Respiratory Medical Institute (1.4km). Nearby educational institutions include SK Jalan Kuantan (100m), Seri Wangsa School (550m), SMK Puteri Titiwangsa (650m) and Chiao Nan Primary School (1.7km) whilst universities and colleges include UKM Campus Tun Syed Nasir College, UTM KL Campus, UKM Campus Healthcare Faculty, UUM KL Campus and Multimedia College, all within 2.7km. Within 6.4km from the Land, there are various entertainment and shopping centres such as Sunway Putra Mall (2.7km), Quill City Mall (3.1km), Suria KLCC (3.7km), Pavillion KL (5.5km) and Publika Shopping Gallery (6.4km). The Land is situated close by to Istana Budaya, 400 metres away from the National Visual Arts Gallery and approximately 1km away from the Titiwangsa PDRM Golf Club and National Library. As at the date of the SPA, save for a Registrar s caveat, the Land is free from all other encumbrances, caveats, charges and liens. Please refer to Appendix I for the location map. 2.4 Proposed Development Based on preliminary plans, the residential condominium fronting the acres Titiwangsa Lake Garden to be built on the Land, has an estimated GDV of up to approximately RM650 million. Slated for affordable transit oriented lake side condominiums, the units with built-up from 850 square feet and indicatively priced from RM485,000, aim to cater for first-time home buyers, working professionals, young families and home upgraders seeking to live in the vicinity of the Kuala Lumpur City Centre within close proximity to the Golden Triangle and public transportation. MSPSB will be submitting the proposed development plans to the relevant authorities for approval once the density per acre for the Land is finalised. Therefore, it is too preliminary at this stage to ascertain the total development cost and the expected profits to be derived from the Proposed Development. The Proposed Development is expected to commence in the second half of 2017 and to be developed over a span of 3-4 years. 2

3 2.5 Basis of consideration The Purchase Consideration was arrived at between the parties on a willing-buyer willingseller basis after taking into consideration the following: (i) (ii) (iii) (iv) (v) the location and prospects of the Land; its strategic location due to its close proximity to Kuala Lumpur City Centre and surrounded by matured townships with ready amenities and infrastructure; the development potential of the Land into a residential condominium with potential estimated GDV of up to approximately RM650 million based on preliminary management estimates; eventual density per acre obtained from the relevant authorities on the development order in respect of MSPSB s proposed development plan on the Land; the management s knowledge of the market value of properties surrounding the Land; and strategic fit of the Land to the Group s fast turnaround development model with ready infrastructure and connectivity. No valuation was carried out on the Land. Based on the Company s internal assessment of the Land, the Purchase Consideration is within the range of acceptable land costs given the potential GDV to be generated. 2.6 Salient terms of the SPA The salient terms of the SPA include, amongst others, the following: Agreement to sell and to purchase The Land will be acquired free from all encumbrances, squatters and structures whatsoever and with vacant possession subject to all conditions of title whether express or implied contained in the documents of title to the Land and on as is where is basis Terms of payment of the Purchase Consideration The total Purchase Consideration (excluding goods and services tax which shall be dealt with in accordance to the terms of the SPA) for the Land will be determined based on the eventual density per acre obtained from the relevant authorities on the development order in respect of MSPSB s proposed development plan on the Land. The Purchase Consideration of up to RM60,000,000 shall be paid in the following manner: (i) Upon execution of the SPA, a total deposit sum of RM6,000,000 ( Deposit ) is paid to the Vendor s solicitors as stakeholders, subject always that in the event the Vendor is subject to payment of real property gains tax under the Real Property Gains Tax Act 1976 in respect of the Vendor s disposal of the Land, MSPSB shall be entitled to retain the required sum from the Deposit for the purpose of remitting the same to the relevant authorities on behalf of the Vendor ( Retention Sum ); The Vendor s solicitors shall only be authorised to release the Deposit less the Retention Sum (if any), to the Vendor within seven (7) days after the Unconditional Date (as defined herein). 3

4 (ii) The balance of the Purchase Consideration amounting to the difference between the Purchase Consideration and Deposit ( Balance Purchase Consideration ) shall be paid to the Vendor s solicitors as stakeholders within three (3) months after the Unconditional Date (as defined herein) ( Completion Period ), failing which, the payment can be made within two (2) months after the expiry of the Completion Period, together with late payment interest ( Extended Completion Period ). For the purpose of clarification and for the avoidance of doubt, the date on which the Vendor s solicitors is in receipt of the relevant letter of undertaking ( Letter of Undertaking ) from MSPSB s financier wherein MSPSB s financier undertakes to pay the Balance Purchase Consideration or any part thereof directly to the Vendor s solicitors as stakeholders in accordance with the SPA together with such sum (if any) being the difference between the Balance Purchase Consideration and the amount which MSPSB s financier undertakes to pay under the Letter of Undertaking shall be referred to as the Completion Date, provided always that MSPSB s obligation to settle the Balance Purchase Consideration or late payment interest, if any, shall only be released and discharged upon receipt of the Balance Purchase Consideration or loan amount and the late payment, if any, by the Vendor s solicitors from MSPSB s financier and/or MSPSB within the Completion Period or the Extended Completion Period Conditions Precedent The SPA is subject to, and conditional upon the following conditions precedent being fulfilled or obtained, as the case may be: (i) (ii) (iii) the approval from the appropriate authority for the relevant development order in respect of MSPSB s proposed development on the Land in accordance with MSPSB s proposed development plan is obtained upon terms and conditions acceptable to MSPSB and at MSPSB s own costs and expenses; the Vendor shall, at its own cost and expenses, remove or cause to be removed all registrar caveats and/or any other encumbrances on the Land; and the Vendor shall, at its own cost and expenses, remove or cause to be removed all squatters, tenants, licencees, places of worship, burial grounds, encroachment, poultry farming and structures from the Land; within three (3) months from the date of the SPA with an automatic extension of two (2) months and further extension or extensions of time as may be granted by MSPSB ( CP Period ). In the event any of the condition precedent is not obtained within the CP Period due to no fault, neglect, omission by the Vendor, MSPSB shall have the absolute rights either: (i) (ii) (iii) to terminate the SPA and in such event, the Vendor shall refund or cause the Vendor s solicitors to refund the Deposit (less the Retention Sum) (if any) together with the interest earned thereon (if any) to MSPSB within seven (7) days from the date of receiving the termination notice; or to the extent permitted by laws, to proceed with the SPA by waiving the fulfillment of any of the condition precedent; or to renegotiate the terms and conditions of the SPA mutually agreed by both parties. The date on which all the conditions precedent are fulfilled or obtained or otherwise waived by MSPSB shall be referred to as the Unconditional Date. 4

5 2.6.4 Power of Attorney Upon execution of the SPA, the Vendor shall execute and deliver the valid and registrable power of attorney in favour of MSPSB authorising and empowering MSPSB to deal with such matters in respect of the development of the Land subject to the terms and conditions therein contained Representations and warranties The SPA also contains standard representations and warranties as typically found in agreements of this nature. 2.7 Source of funding Mah Sing intends to fund the Proposed Acquisition, the eventual development cost of the Land through a combination of internally generated funds, bank borrowings and/or proceeds raised from the Group s unrated senior perpetual securities programme. The exact funding mix will be decided by the management at a later stage after taking into consideration the Group s gearing level, interest costs as well as internal cash requirements for its business operations. 2.8 Assumption of liabilities There is no other liability, including contingent liability and guarantee to be assumed by the Company arising from the Proposed Acquisition. 3.0 RATIONALE FOR THE PROPOSED ACQUISITION AND PROSPECTS FOR THE LAND The Proposed Acquisition enables the Group to gain access to 3.56 acres of prime land and represents a timely opportunity and is in line with the Group s strategy to continuously scale up development in locations with strong growth potential, easy accessibility and ready amenities and infrastructure to replenish GDV for greater sustainability to future earnings. The Group is focused on increasing its land bank in Klang Valley where demand remains resilient due to population and economic growth and aims to expand the overall remaining GDV from the current 62% to 75% over the next 2 to 3 years. According to the National Property Information Centre (NAPIC), in 2016, the value of residential property transactions in the Klang Valley itself was RM30.81 billion, accounting for nearly half of the RM65.6 billion achieved in the whole of Malaysia. In addition, the Group remains committed on delivering quality homes with affordable pricing as a result of the widening gap between supply and demand for this segment. In terms of demand, 48% of the total transaction value of RM65.6 billion for the residential sub-sector in 2016 came from units with price points between RM300,000 and RM1 million (vs 45% in 2015) per NAPIC s report. It further stated that from , 118,000 new families were formed per year on average but only 85,000 new houses completed, indicating insufficient supply of new houses compared to increase in households. Thus, by stepping up land acquisitions in Klang Valley with focus on affordable pricing, the Group will be in a better position to meet market demand. The Proposed Development is in the matured location of Titiwangsa which is adjacent to the heart of Kuala Lumpur and is expected to have access to over 8 million population of the Klang Valley as its natural catchment. It is also expected to further benefit from increased population. According to the Performance Management and Delivery Unit (PEMANDU), the population of Greater Kuala Lumpur / Klang Valley is expected to surpass 10 million by 2020 and by 2030, the extended metropolis beyond the capital could house almost half of Malaysia s estimated population of between 33 to 35 million. 5

6 The Land is strategically located, being only 3.7km from Kuala Lumpur City Centre. It is accessible from various parts of the city and suburbs via trunk roads and highways including DUKE Highway and the Middle Ring Road 2 Highway. The Proposed Development will be a transport-oriented development as the upcoming Hospital KL MRT station is only a mere 250 metres away whilst the Titiwangsa LRT, monorail and MRT interchange is 1.8km away. The Land will also benefit from ready amenities and infrastructure surrounding the Land, amongst others, major roads and highways, public train stations, medical centres, universities, public schools, retails shops, shopping malls, hypermarts and other recreational facilities. Given the strategic location, superior connectivity and accessibility and strong demand for affordable homes by the middle income group, the Land has the potential for a quick turnaround development model. The Group will leverage on its past experiences and successes with both lakeside and transport oriented developments such as D sara Sentral which has a direct link to Kg Selamat MRT Station, Lakeville Residence in Taman Wahyu and MCity in Jalan Ampang which has a view of Taman Tasik Ampang Hilir, all of which have recorded strong take-up rates. Therefore, the Group is confident of replicating the success for the Proposed Development. This will augur well for the Group s future growth and earnings prospects. 4.0 PROSPECTS AND RISK FACTORS 4.1 Overview and prospects of the Malaysian economy The Malaysian economy recorded a growth of 4.2% (2015: 5.0%) despite considerable external and domestic headwinds. The global economic landscape was challenging given the subdued global demand and low commodity prices. International financial markets were also subjected to heightened uncertainty with significant reversal of capital flows from emerging economies. Domestically, the economy continued to face headwinds from the higher cost of living amid soft employment conditions. Global economic activity is projected to improve in 2017, underpinned by an expansion in domestic demand in the advanced and emerging market economies, boosted in part by expansionary fiscal policies in selected major economies The outlook would also be supported by a recovery in commodity prices amid the move to reduce oversupply conditions. Nonetheless, the global economy will continue to be subjected to several downside risks. These include a potential retreat from globalisation and free trade in the advanced economies, and uncertainty over the UK and EU negotiations and geopolitical developments. Anticipation of monetary policy divergence between the US and the other major economies could also result in over-adjustment in the foreign exchange markets amidst destabilising capital flows. With the gradual improvement in global growth, recovery in global commodity prices and the continued growth of domestic demand, these factors are expected to collectively support Malaysia s growth performance. The Malaysian economy is projected to register a sustained growth of 4.3% - 4.8% in (Source: Bank Negara Malaysia Annual Report 2016) 4.2 Overview and prospects of the residential sub-sector in Kuala Lumpur The overall property market in Kuala Lumpur softened in 2016, registering 14,950 transactions with a total value of RM34.22 billion, down by 19.5% in volume. Nevertheless, the value of transactions increased significantly by 46.3% due to several major sales recorded in the year, primarily coming from the commercial property sub-sector. Residential sub-sector retained its lion share, contributed 75.3% of the total transactions followed by commercial (21.3%), development land (2.3%) and industrial (1.1%) sub-sectors. 6

7 The residential sub-sector s market performance eased in 2016 with 11,252 transactions worth RM8.97 billion, a decrease of 19.0% in volume and 13.3% in value compared to Condominiums and apartment units contributed 23.2% of the residential property transactions, which accounted for the second highest volume in the country. Apartments and condominiums also formed bulk of the new launches in Forward looking, the state s property market would remain on a positive path backed by various on-going and proposed development projects. The property market activity is still expected to be driven largely by the residential sector, particularly on affordable housing. On the whole, the performance of the property sector would sustain on the back of various incentives announced in Budget 2017 which would support the residential sub-sector. This is further supported by Bank Negara Malaysia s decision to maintain the Overnight Policy Rate at 3% and the allocation of RM2.1 billion for infrastructure and socioeconomic development in the five economic corridors. Transport infrastructure development is being stepped up in Greater Kuala Lumpur / Klang Valley, having been outpaced by the rapid urbanization in the region. Additionally, the signing of MoU between Malaysia and Singapore on the High Speed Rail project would further enhance the accessibility and improve marketability of areas along line routes. (Source: Property Market Report 2016, Valuation and Property Services Department, MOF) 4.3 Risk factors for the Proposed Acquisition The Proposed Acquisition would subject the Group to risks inherent in the property development business of which the Group is already involved in. Such risks may include sensitivity to economic and political conditions, financing risk, delays in commencement and completion, competition from other property developers, dependence on key personnel and compulsory acquisition. Any adverse change in these conditions may have a material adverse effect on the Group. These risks are addressed as part of the Group s ordinary course of business and are not expected to represent new risks to the Group s operations. 5.0 EFFECTS OF THE PROPOSED ACQUISITION 5.1 Share capital and shareholdings of substantial shareholders The Proposed Acquisition has no impact on the issued and paid-up share capital and the shareholdings of the substantial shareholders of Mah Sing as it does not involve any issuance of new ordinary shares in Mah Sing. 5.2 Earnings The Proposed Acquisition is not expected to have a material impact on the earnings of the Group for the financial year ending 31 December 2017 as the Proposed Development is expected to commence only in the second half of However, the Proposed Acquisition is expected to contribute positively to the future earnings of the Group. 5.3 Net assets ( NA ) and gearing The Proposed Acquisition is not expected to have a material impact on the NA of the Group for the financial year ending 31 December 2017 as the Proposed Development is expected to commence only in the second half of However, the Proposed Acquisition is expected to enhance the NA of the Group in the future in view of the potential future profit contribution arising from the development of the Land. The effect of the Proposed Acquisition and Proposed Development on the gearing of the Group will be dependent on the eventual funding mix for the Proposed Acquisition and the Proposed Development. 7

8 6.0 APPROVALS REQUIRED Save as mentioned in Section above, the Proposed Acquisition is not subject to Mah Sing shareholders or any other governmental authorities approvals. 7.0 ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the fourth quarter of HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Acquisition pursuant to paragraph 10.02(g) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements is 1.82%. 9.0 INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED TO THEM None of the Directors and/or major shareholders of Mah Sing and/or persons connected to them have any interests, direct or indirect, in the Proposed Acquisition DIRECTORS RECOMMENDATION The Board of Mah Sing, having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the Group DOCUMENTS AVAILABLE FOR INSPECTION The SPA is available for inspection at the registered office of the Company at Penthouse Suite 1, Wisma Mah Sing, No. 163 Jalan Sungai Besi, Kuala Lumpur, during normal business hours from Mondays to Fridays (except for public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 17 May

9 MAH SING GROUP BERHAD APPENDIX 1 Location map of the Land (Source: MRT Corp website and Company) 9