APPROXIMATELY RM2.2 BILLION, FOR

Transcription

1 PART A

2 MAH SING GROUP BERHAD ( MAH SING OR COMPANY ) PROPOSED ACQUISITION BY NATURE LEGEND DEVELOPMENT SDN BHD, A WHOLLY- OWNED SUBSIDIARY OF MAH SING, OF THE ENTIRE EQUITY INTEREST IN CORDOVA LAND SDN BHD, WHICH HAS AN OFFER ACCEPTED BY DEWAN BANDARAYA KUALA LUMPUR TO PURCHASE ACRES OF PRIME LAND IN CHERAS, WITH AN ESTIMATED GROSS DEVELOPMENT VALUE OF APPROXIMATELY RM2.2 BILLION, FOR A TOTAL CONSIDERATION OF UP TO RM263,477,256 ( PROPOSAL ) 1. INTRODUCTION The Board of Directors of Mah Sing ( Board ) wishes to announce that its wholly-owned subsidiary, Nature Legend Development Sdn Bhd ( NLDSB or Purchaser ), had on 3 July 2017, entered into a share sale agreement ( SSA ) with Hazreeq Putra Bin Hasman and Maslinda Binti Othman (collectively the Vendors ) to acquire 500,000 ordinary shares in Cordova Land Sdn Bhd ( Cordova ) ( Sale Shares ), representing the entire equity interest in Cordova for a purchase consideration of RM156,349,900 ( Sale Shares Consideration ). By a letter dated 22 June 2017 from Datuk Bandar Kuala Lumpur ( DBKL ) to Cordova ( Offer ), DBKL had accepted the offer by Cordova to purchase all that piece of land more particularly known as Lot 58601, Batu 2½ Jalan Cheras, Mukim Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur measuring approximately acres ( Land ) from DBKL for a purchase consideration of RM82,127,356 ( Land Consideration ) and subject to the terms and conditions in the letter. Pursuant to Offer, Cordova shall formalise the acquisition of the Land via the signing of a sale and purchase agreement with DBKL ( Land SPA ), and an announcement in this respect will be made in due course. As such, the total consideration for the Proposal is up to RM263,477,256 comprising the aggregate of (i) Sale Shares Consideration, which shall be adjusted, as the case may be, as set out in Section of this Announcement (ii) Land Consideration and (iii) reconstruction and upgrading cost, currently estimated at RM25,000,000, of the Stadium Badminton Kuala Lumpur currently located on the Land ( Total Consideration ). The Sale Shares Consideration may be adjusted depending on the final payment terms for the Land Consideration to be agreed under the Land SPA and the total costs and/or contributions to be finalised, which are payable by Cordova for the reconstruction and upgrading of the Stadium Badminton Kuala Lumpur currently located on part of the Land. Based on preliminary plans, Cordova will undertake an integrated development named M Vertica on the Land comprising residential suites and retail shops, with an estimated GDV of approximately RM2.2 billion. The development aims to cater to first home buyers, working professionals, young families and home upgraders seeking to live in the vicinity of Kuala Lumpur City Centre ( KLCC ), within close proximity to the Golden Triangle and public transportation. The development, which is planned to be affordably priced, is intended to offer well thought layout and practically designed residential suites starting from an indicative price of RM450,000 per unit or approximately RM529 per sq. ft., with build ups of 850 sq. ft. and 1,000 sq. ft. ( Proposed Development ). Further details of the Proposal are set out in the ensuing sections. 1

3 2.0 DETAILS OF THE PROPOSAL 2.1 Basis of consideration The Sale Shares Consideration was arrived at between the parties on a willing-buyer willingseller basis after taking into consideration the following: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Cordova being registered as the proprietor of the Land pursuant to the Land SPA; The interest free payment term of the balance 90% of Land Consideration pursuant to the Land SPA shall be not less than thirty six (36) months after all the conditions precedent in the Land SPA are duly fulfilled and the Economic Planning Unit s ( EPU ) approval is duly obtained i.e. the balance of the Land Consideration which is equivalent to 90% of the Land Consideration shall be payable on the last day of an agreed period which shall not be less than thirty six (36) months from the date on which all the conditions precedent in the Land SPA are duly fulfilled and the EPU s approval is obtained, whichever shall be the later, free of interest; Deferred payment terms for the Sale Shares Consideration; The Total Consideration of up to RM million, represents a discount of RM69.70 million or approximately 21% from the Land s market value of RM million; The development potential of the Land given its prime location in the vicinity of KLCC and the mature town of Cheras, which is centrally located within Klang Valley; Scarcity and depletion of land bank in the KLCC and Golden Triangle areas; Completion of Phase 2 of the MRT line in July 2017 will boost connectivity and enhance attractiveness of the area, alongside other upcoming amenities such as shopping malls; and The location of the Land and product fit in well with the current market demand as well as the quick turnaround strategy of the Group due to good connectivity, established catchment, ready infrastructure and amenities within the vicinity. Based on the independent certificate of valuation dated 30 June 2017 by Rahim & Co., an independent firm registered with the Board of Valuers, Appraisers & Estate Agents Malaysia, the market value of the Land is RM333,180, 000 ( Valuation Certificate ). In arriving at the market value, the comparison method is adopted. Further, based on Mah Sing s internal assessment, the Total Consideration, is within range of acceptable land costs given the potential GDV to be generated and is within the range of market values for similar lands in the vicinity. 2.2 Salient terms of the SSA The salient terms of the SSA include, amongst others, the following: Agreement to sell and to purchase The Sale Shares shall be acquired free from all liabilities, claims, charges, liens, pledge, assignment, security interest, encumbrances and equities together with all rights, title and benefits attached thereto and all dividends and distributions declared paid or made in respect thereof on and after the date of the SSA. 2

4 Upon the execution of the SSA, the Vendors shall effect the transfer of the Sale Shares to the Purchaser. Notwithstanding that the Sale Shares may not have been transferred or registered in favour of the Purchaser into the register of the Company on the date of the SSA, the Purchaser shall be the beneficial owner to the Sale Shares on the date of the SSA Terms of payment The Sale Shares Consideration, which shall be adjusted, as the case may be, in accordance to the provisions stipulated in the SSA shall be paid to the Vendors in the following manner: (i) (ii) (iii) (iv) (v) (vi) RM500,000 ( Deposit ) is to be paid upon execution of the SSA to the Vendor s solicitors as stakeholders; RM20,000,000 ( First Payment ) shall be paid to the Vendors solicitors as stakeholders within forty-five (45) days from the date of the SSA; RM10,000,000 ( Second Payment ) shall be paid to the Vendors solicitors as stakeholders within seven (7) days after the date of the Land SPA; RM20,000,000 ( Third Payment ) shall be paid to the Vendors solicitors as stakeholders within six (6) months from the date of the Land SPA; RM10,000,000 ( Fourth Payment ) shall be paid to the Vendors solicitors as stakeholders within twelve (12) months from the date of the Land SPA; RM34,769,980 ( Fifth Payment ) shall be paid in the following manner within fourteen (14) days after the Effective Date: (a) (b) RM4,769,980 ( Fifth Payment 1 ) shall be paid to the Vendors solicitors as stakeholders; and the Vendors hereby irrevocably and unconditionally authorise the Purchaser to utilise the balance of the Fifth Payment of RM30,000,000 ( Fifth Payment 2 ) to pay the purchase price in respect of units of property purchased by the Vendors and/or their nominee(s) pursuant to the sale and purchase agreements in respect of such units of property, together with all costs and expenses arising from or in respect of having such units transferred and registered in favour of the Vendors and/or their nominated purchasers, as and when the same are due for payment, to the relevant party(ies); (vii) RM15,269,980 ( Sixth Payment ) shall be paid to the Vendors solicitors as stakeholders within three (3) months from the date immediately after the date of payment of the Fifth Payment 1; (viii) RM15,269,980 ( Seventh Payment ) shall be paid to the Vendors solicitors as stakeholders within three (3) months from the date immediately after the date of payment of the Sixth Payment; and (ix) RM30,539,960 ( Eighth Payment ) shall be paid to the Vendors solicitors as stakeholders within six (6) months from the date immediately after the date of payment of the Seventh Payment. In the event the Cordova is not or cannot be registered as the proprietor of the Land under and pursuant to the Land SPA for any reason whatsoever, the SSA shall be rescinded whereupon the Vendors shall within fourteen (14) days from the date of such non-acceptance or rejection or non-registration is made known to the Purchaser, refund or cause to be refunded to the Purchaser, all payments paid towards the account of the Sale Shares Consideration, irrespective of whether such payments are paid directly to the Vendors, together with all compensations, damages and/or refund(s) received by Cordova under and pursuant to the Land SPA, in exchange for the re-transfer of the Sale Shares by the 3

5 Purchaser to the Vendors and thereafter the SSA shall terminate and cease to be of any further effect Vendors Obligations The sale and purchase of the Sale Shares shall also be subject to the following obligations being performed by the Vendors at the Vendors own costs and expenses within six (6) months from the date of the SSA with an automatic extension of three (3) months thereafter with such further extension or extensions of time as the parties may mutually agree upon in writing ( Vendors Obligations Fulfilment Period ): (i) (ii) (iii) The Vendors shall procure that the Land SPA is finalised and signed between Cordova and DBKL upon terms and conditions acceptable to the Purchaser (notwithstanding anything stipulated in the Offer); The Vendors to procure all the conditions precedent in the Land SPA are duly fulfilled and the EPU s approval is obtained; The Vendors to procure that the issue document of title to the Land is issued with the following endorsements therein: (a) (b) (c) (d) category of land use as Bangunan ; express condition as Tanah ini hendaklah digunakan untuk pembangunan bercampur sahaja ; restriction in interest as Tanah ini tidak boleh dipindakmilik, dipajak dan dicagar melainkan dengan kebenaran Jawatankuasa Kerja Tanah Wilayah Persekutuan Kuala Lumpur ; and leasehold land for a full 99-year period effectively from the date of its issuance; (iv) (v) The Vendors shall ensure that the Land shall be free from all caveats, squatters, tenants, occupants, licencees, places of worship, burial grounds, encroachments, poultry farm, structures and/or any other encumbrances; and The Vendors to procure that the Company being registered as the proprietor of the Land under and pursuant to the Land SPA. The date on which all the Vendors Obligations are fully performed (unless otherwise waived by the Purchaser) shall be referred to as the Effective Date. In the event any of the Vendors Obligations is not performed within the Vendors Obligations Fulfilment Period, the Purchaser shall, at its sole and absolute discretion be entitled to: (i) (ii) (iii) seek for the immediate refund from the Vendors of all payments paid towards the account of the Sale Shares Consideration, irrespective of whether such payments have been paid directly to the Vendors, whereupon the Vendors shall become immediately obliged to refund or cause to be refunded the same to the Purchaser and the Purchaser shall no longer be required to pay the remaining outstanding sums payable by the Purchaser to the Vendors under and pursuant to the SSA to the Vendors; or grant extension or extensions of time for the Vendors to perform the Vendors Obligations; or to the extent permitted by laws, to proceed with the SSA and waive the performance of any of the unperformed Vendors Obligations. 4

6 2.2.4 Adjustment of Sale Shares Consideration The Sale Shares Consideration shall be adjusted, in the event that: (i) the payment term of the balance of the Land Consideration (which is equivalent to 90% of the Land Consideration) shall be less than thirty six (36) months from the date on which all the conditions precedent in the Land SPA are duly fulfilled and the EPU s Approval is obtained, whichever shall be the later, the Sale Shares Consideration shall be reduced by an amount calculated at the rate of RM425,000 per month multiplied by the difference in the number of months between thirty six (36) months and the number of months granted for the Land SPA payment term provided that the total sum to be reduced shall not in any event be greater than RM12,750,272. There shall be no adjustment to the Sale Shares Consideration in the event the number of months granted for the Land SPA payment term is greater than or equal to thirty six (36) months. Any deduction of Sale Shares Consideration shall be by way of adjusting the Fourth Payment (if the same has not been paid), the Fifth Payment 1, the Sixth Payment, the Seventh Payment and the Eighth Payment proportionately; and/or (ii) the total costs and/or contributions payable for the reconstruction and upgrading of the stadium badminton currently sitting on part of the Land ( Total Costs ) shall be: (a) (b) in excess of RM25,000,000, the Sale Shares Consideration shall be reduced by a sum which is equivalent to the difference between the Total Costs and RM25,000,000, by way of reducing the Eighth Payment accordingly; or less than RM25,000,000, the Sale Shares Consideration shall be increased by a sum which is equivalent to the difference between RM25,000,000 and the Total Costs, by way of increasing the Eight Payment accordingly Default Vendors Default In the event of the Vendors defaulting or failing to observe or perform or otherwise being in breach of any of the provisions of the SSA and such default, non-observance or nonperformance or otherwise, if capable of remedy is not remedied within fourteen (14) days after the Purchaser shall have given written notice to the Vendors to remedy such breach, the Purchaser shall be entitled at its sole and absolute discretion to the remedy of specific performance of the SSA against the Vendors and to all reliefs flowing therefrom. Purchaser s Default In the event of the Purchaser defaulting or failing to observe or perform or otherwise being in breach of any of the provisions of the SSA and such default, non-observance or nonperformance or otherwise, if capable of remedy is not remedied within fourteen (14) days after the Vendors shall have given written notice to the Purchaser to remedy such breach, the Vendors shall be entitled to claim for damages. 5

7 2.3 Source of funding The Company intends to fund the Sale Shares Consideration through the Group s internally generated funds and/or proceeds raised from the Group s unrated senior perpetual securities programme ( Perps Programme ). As for the Land Consideration and costs and expenses related to the Proposed Development (including the reconstruction and upgrading costs for the Stadium Badminton Kuala Lumpur), it is intended to be funded through a combination of internally generated funds, bank borrowings and/or proceeds raised from the Group s Perps 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. 2.4 Assumption of liabilities Save for the costs and expenses related to the proposed acquisition of the Land and the Proposed Development as well as the reconstruction and upgrading costs for the Stadium Badminton Kuala Lumpur, there is no other liability, including contingent liability and guarantee to be assumed by the Company arising from the Proposal. 3.0 SALIENT TERMS OF THE OFFER The Offer is subject to issue document of title to the Land being registered in DBKL s name, failing which, both DBKL and Cordova agrees that neither party shall have any claim against the other. Cordova shall pay DBKL RM500,000 ( Earnest Deposit ), within fourteen (14) days from DBKL s letter dated 22 June Further, 10% of the Land Consideration (less the Earnest Deposit) shall be paid within fourteen (14) days from the date on which the issue document of title to the Land is issued in DBKL s name, and the remaining balance within three (3) months from the date Cordova receives approval from Pejabat Tanah dan Galian, Wilayah Persekutuan in respect to the transfer of the Land, with interest at rate of 8% per annum on delay. The Land SPA has to be executed between Cordova and DBKL within fourteen (14) days from the date after the 10% of the Land Consideration has been paid in full. 4.0 INFORMATION ON THE LAND AND PROPOSED DEVELOPMENT 4.1 Information on the Land The Land comprises a piece of prime 99-year leasehold land (information on expiry of the lease will be available upon issuance of document of title to the land) held under Lot 58601, Batu 2½ Jalan Cheras, Mukim Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur measuring approximately acres. The category of Land use is for mixed development purpose and the Land cannot be transferred, leased or charged without the consent from Jawatankuasa Kerja Tanah Wilayah Persekutuan Kuala Lumpur having first been obtained. The terrain of the Land is generally flat and houses a surau, Kompleks Belia Bandaraya and the aged Stadium Badminton Kuala Lumpur, built in Pursuant to the proposed acquisition of the Land, the surau, Kompleks Belia Bandaraya and Stadium Badminton will be reconstructed by the Group. The Land is strategically located in an established location in Cheras, approximately 5.6 km from KLCC. It is easily accessible via Jalan Cheras and is only 300 metres away from the Besraya Eastern Extension Expressway. Other major thoroughfares and expressways in the vicinity include Jalan Loke Yew, Jalan Pudu, Jalan Tun Razak, SMART, KL-Seremban Highway, New Pantai Expressway and Maju Expressway. 6

8 The Maluri MRT and LRT stations are approximately 600 metres away and Taman Pertama MRT station is approximately 800 metres away from the Land. The Maluri MRT and Taman Pertama MRT stations form part of the Sungai Buloh-Kajang Line, a 31-station line linking the densely populated areas of Damansara in the northwest and Cheras in the southeast, through the central business district of Kuala Lumpur city, serving a 51 km corridor with an estimated population of 1.2 million people. The Land is closeby to Bandar Malaysia and is 2 MRT stops away to Tun Razak Exchange and 3 MRT stops away to Bukit Bintang and Golden Triangle areas. Within 2.5 km from the Land, there are various entertainment and shopping centres such as IKEA Cheras, Sunway Velocity Mall, MyTOWN Shopping Centre, AEON Big Peel Road, AEON Maluri and Viva Home. Upon the start of phase 2 operations of the MRT Line 1 in July 17, Sunway Velocity Mall, MyTOWN Shopping Centre and IKEA Cheras are all within walking distance from Cochrane station, which is only one stop away from Maluri MRT station. There is also a park approximately 700m away from the Land which is suitable for various recreational activities. Prince Court Medical Centre, Pantai Hospital Ampang, Hospital Ampang, Pantai Hospital Cheras, Hospital University Kebangsaan Malaysia, SMK Perempuan Pudu, SK Convent Jalan Peel, SMK Seri Bintang Selatan, SMK Seri Bintang Utara, Nam Kheung Chinese National School and Royal Selangor Golf Club are all located within 5 km from the Land. Please refer to Appendix I for the location map. 4.2 Proposed Development Based on preliminary plans, M Vertica encompasses an integrated development of residential suites and retail shops catering to attract buyers from throughout Kuala Lumpur and Klang Valley, including young adults moving out from parents home, first time home buyers, urban working professionals and young families who prefer to own a home in the vicinity of the city centre with good accessibility, amenities and infrastructures such as shopping malls, hospitals, public schools and entertainment centres. Subject to authorities approval, M Vertica is planned to house the tallest residential towers in Cheras, which gives a panoramic view of Kuala Lumpur. It is also proposed to have the largest landscaped deck in a KL highrise and equipped with a clubhouse and facilities such as complimentary WiFi service at all common areas, swimming pool, gym and landscaped area. The development is based on an affordably priced urban luxury concept, and intends to offer well thought layout and practically designed residential suites starting from an indicative price from RM450,000 per unit or approximately RM529 per sq. ft., with build ups of 850 sq. ft. and 1,000 sq. ft. The Vendors will procure Cordova to submit the proposed development plans to the relevant authorities for approval. 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. Subject to the Vendors Obligations being fulfilled, the Proposed Development is scheduled for a preview in the third quarter of 2017 and to be developed over a span of approximately 4 5 years. Please refer to Appendix I for an artist impression of the Proposed Development. 7

9 5.0 INFORMATION ON THE PARTIES 5.1 Information on NLDSB NLDSB is a private limited company incorporated in Malaysia on 10 July 2013 under the Companies Act, As at the date of the SSA, NLDSB has a total number of issued share capital of 2. NLDSB is principally an investment holding company. 5.2 Information on the Vendors The Vendors are the legal and beneficial owners of the Sale Shares of Cordova in the proportion set out below: No. of ordinary shares % Hazreeq Putra Bin Hasman 495, Maslinda Binti Othman 5,000 1 Total 500, Hazreeq Putra Bin Hasman and Maslinda Binti Othman are Malaysian citizens from Kuala Lumpur. 5.3 Information on Cordova Cordova is a private limited company incorporated in Malaysia on 1 July 2015 under the Companies Act, As at the date of the SSA, Cordova has a total number of issued share capital of 500,000. Cordova has not commenced business operations. Based on the latest audited financial statements of Cordova for the financial year ended 30 June 2016, the net assets of Cordova is RM381,350, and it recorded a net loss of RM118,650. As at the date of the SSA, the directors of Cordova are Hazreeq Putra Bin Hasman and Maslinda Binti Othman. 6.0 RATIONALE FOR THE PROPOSAL AND PROSPECTS OF THE LAND Following the recent announcements of land acquisitions in Sentul and Titwangsa, the Group is making steady progress on increasing its presence in Klang Valley where it aims to expand the overall remaining GDV in this region from 67% (assuming completion of the land acquisitions in Cheras and Titiwangsa) to 75% over the next 2-3 years. With M Vertica, the Group will continue its strategy of building good quality projects at strategic locations and designing average sized residences at affordable entry level pricing to meet market demands. The Group s focus on the mass-market segment has held up relatively well as a result of the basic demand for housing underpinned by population growth, household formation and urbanisation. Being approximately 5.6 km to KLCC, the Land is surrounded by well-established townships, schools and amenities such as shopping malls and medical centres. Due to its central location, good connectivity and accessibility, coupled with mature catchment, ready infrastructure and amenities and upcoming major developments within the vicinity, the management is confident that the Proposed Development will be well received by prospects within the Klang Valley. As the Land is within short walking distance to Maluri LRT station and Maluri and Taman Pertama MRT stations, completion of the MRT line by July 2017 will further boost connectivity and enhance attractiveness of the area. 8

10 The mature neighbourhood of Cheras which has an estimated population size of approximately 800,000, has a pent-up demand for well-planned, modern properties as most of the residential projects in Cheras are decades-old housing estates. In addition, due to the central location of the Land within the Klang Valley, the location of the Land would be attractive to working professionals working in the city. Furthermore, with the Land being in such close proximity to Bandar Malaysia, it stands to benefit from the spill-over effect of the proposed 350 km High Speed Rail which will begin in Bandar Malaysia and ends in Jurong East, Singapore. Given the strategic location, superior connectivity and accessibility, established catchment, ready infrastructure and amenities within the vicinity coupled with strong demand for affordable homes by the middle income group, the Land has the potential for a quick turnaround development model, of which the Group has had successes in the past such as Lakeville Residence in Taman Wahyu, MCity in Jalan Ampang and Icon City in Petaling Jaya. As such, the Group is optimistic that the Proposed Development will be well-received which will augur well for its near and mid-term earnings and growth prospects. 7.0 PROSPECTS AND RISK FACTORS 7.1 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. The Malaysian economy expanded by 5.6% in the first quarter of Growth was lifted by stronger domestic demand, particularly private sector spending. From the supply side, the improvement was driven mainly by the turnaround in the agriculture sector and higher growth in manufacturing and services sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.8% (4Q 2016: 1.3%). Headline inflation rose to 4.3% due to higher fuel prices. Growth in household debt slowed further to 5.2% (4Q 2016: 5.4%). Financing conditions were supportive of the economy with eligible borrowers continuing to have access to financing. The economy is on track to register higher growth in Domestic demand is projected to continue to expand. Exports are expected to benefit from the improvement in global growth. While inflation increased in the first quarter, it is expected to moderate from the second quarter onwards. (Source: Bank Negara Malaysia Annual Report 2016; Economic and Financial Developments in Malaysia in 1Q2017) 9

11 7.2 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. 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) 7.3 Risk factors for the Proposal The Proposal 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. Further, the Proposal is subject to the Vendors Obligations above being fulfilled. 8.0 EFFECTS OF THE PROPOSAL 8.1 Share capital and shareholdings of substantial shareholders The Proposal 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. 8.2 Earnings The Proposal 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 only scheduled for a preview in the third quarter of However, the Proposal is expected to contribute positively to the future earnings of the Group. 10

12 8.3 Net assets ( NA ) and gearing The Proposal 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 only scheduled for a preview in the third quarter of However, the Proposal 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 Proposal on the gearing of the Group will be dependent on the eventual funding mix to be used. 9.0 APPROVALS REQUIRED Other than the approvals to be procured under the Vendors Obligations as set out in Section of this Announcement, the Proposal is not subject to the shareholders approval of Mah Sing or any regulatory authorities approval ESTIMATED TIME FRAME FOR COMPLETION The Sale Shares are expected to be transferred or registered in favour of the Purchaser into the register of Cordova by the third quarter of HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposal pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 8.01% 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 Proposal DIRECTORS RECOMMENDATION The Board of Mah Sing, having considered all aspects of the Proposal, is of the opinion that the Proposal is in the best interest of the Group DOCUMENTS AVAILABLE FOR INSPECTION The SSA and the Valuation Certificate are 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 3 July

13 Appendix I MAH SING GROUP BERHAD Location map of the Land Proposed Development Artist Impression of M Vertica (Source: Company) 12

14 PART B 13

15 MAH SING GROUP BERHAD ( MAH SING OR COMPANY ) PROPOSED ACQUISITION BY ENCHANTING VIEW DEVELOPMENT SDN BHD, A WHOLLY- OWNED SUBSIDIARY OF MAH SING, OF A PIECE OF FREEHOLD VACANT DEVELOPMENT LAND MEASURING APPROXIMATELY ACRES, WITH AN ESTIMATED GROSS DEVELOPMENT VALUE OF APPROXIMATELY RM150 MILLION, IN BUKIT MERTAJAM, PULAU PINANG, FOR A TOTAL CASH CONSIDERATION OF RM43,800,321 ( PROPOSED ACQUISITION ) 1.0 INTRODUCTION The Board of Directors of Mah Sing ( Board ) wishes to announce that Enchanting View Development Sdn Bhd ( Enchanting View or Purchaser ), a wholly-owned subsidiary of Mah Sing, had on 3 July 2017, entered into a sale and purchase agreement with Waz Lian Properties Sdn Bhd ( WLP or Vendor ) for the proposed acquisition of a piece of freehold vacant development land in Bukit Mertajam, Pulau Pinang, measuring approximately acres ( Land ) for a total purchase price of RM43,800,321, which includes costs for conversion premium, land clearance, earthworks and development planning for the Land, which have already been paid by the Vendor ( Purchase Price ) ( SPA ). The Land, with development order obtained and earthworks done, is ready for immediate development which fits in well with the quick turnaround model of the Group. Enchanting View is planning to submit revised development plans to the relevant authorities for approval to vary certain components of the development order to maximize the Land s development potential. Enchanting View plans to develop an industrial park on the Land under the Mah Sing group of companies ( Group ) i-parc series. The proposed development, with an estimated gross development value ( GDV ) of approximately RM150 million, will offer wellconceptualised multi-function industrial spaces comprising a mix of shop offices and light industrial factories ( Proposed Development ). 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 the Purchaser Enchanting View is a private limited company incorporated in Malaysia on 5 December 2013 under the Companies Act, Its principal activity is property development. As at the date of the SPA, Enchanting View has a total number of issued share capital of 2,500, Information on the Vendor WLP is a private limited company incorporated in Malaysia on 27 September 2010 under the Companies Act, 1965 as Mega Money Minds (M) Sdn Bhd and subsequently changed its name to its present name on 20 October Its principal activity is property holding and investment. As at the date of the SPA, WLP has a total number of issued share capital of 100,000. The Directors of WLP are Ng Soon Hong, Ta Hui Hean, Ta Shun Dher and Ta Wee Dher. 1

16 2.3 Information on the Land The Land is a freehold vacant development land measuring approximately acres further subdivided into sixty-two (62) pieces of land held under one master title namely, Geran , Lot No , Mukim 14, Daerah Seberang Perai Tengah, Pulau Pinang. It is generally flat in terrain and lies at the same level of the frontage metalled road. It is zoned for commercial / industrial use and a development order has been issued on 13 March 2016 for the Land for the development of shop offices and factories ( DO ). Currently, the Land has been cleared and earthworks done. The Land is located along the south-western side of Jalan Permatang Tinggi, Bukit Mertajam, Pulau Pinang which is mainly developed with 1.5 to 3-storey terrace and semi-detached factories. It is 3km to the north-west and 10km to the north of the Simpang Ampat and Bukit Mertajam towns, respectively. Access to the Land includes North South Expressway (5.6km), Penang Bridge (13.4km) and Second Penang Bridge (17km). The Penang Port and Penang International Airport are 18.0km and 31.1km away. It is in close proximity to established industrial parks such as Bukit Minyak Industrial Park, Permatang Tinggi Industrial Park, Usaha Jaya Light Industrial Park and Asas Jaya Light Industrial Park. Surrounding matured townships include Taman Permatang Tinggi, Taman Usaha, Taman Perwira Indah, Taman Perwira, Taman Sukun and Taman Impian Indah. Based on an independent valuation report dated 13 March 2017 prepared by PPC International Penang Sdn Bhd ( Valuer ), an independent property valuer registered with the Board of Valuers, Appraisers and Estate Agents Malaysia, the appraised value of the Land is RM45,310,000. The audited net book value of the Land was RM25,339,911 as at 30 September As at the date of the SPA, save for a charge lodged by a financier, 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 The Group is proposing to develop an industrial business park on the Land and plans to value add on the design and layout of a new business park following the concept of its award winning i-parc series. Mah Sing pioneered its i-parc series in 1994 and subsequent i-parc projects adopted the 4-in-1 business concept where both front and back-end operational processes are catered for. Front-end operations like showrooms or corporate offices can be housed in the same space as back-end operations like warehousing and production. The Proposed Development aims to target small and medium scale industries looking to adopt a more cost-efficient model for their operations. The estimated GDV of the Proposed Development is approximately RM150 million. Enchanting View plans to submit revised development plans to the relevant authorities for approval to vary certain components of the DO to maximize the Land s development potential, 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. Subject to market conditions, the Proposed Development is scheduled for a preview in the third quarter of 2017 and to be developed over a span of 3-4 years. 2

17 2.5 Basis of consideration The purchase price for the Land of RM43,800,321 was arrived at between the parties on a willing-buyer willing-seller basis after taking into consideration the following: (i) (ii) (iii) the market valuation of the Land of RM45,310,000 as appraised by the Valuer vide its valuation report dated 13 March 2017; the prospects of the Land and the Proposed Development; and the DO has been obtained, and benefit of having earthworks completed and subdivided plots will expedite the development process. The Valuer had arrived at the market valuation of the Land using the Comparison Approach by comparing the Land with similar properties that were transacted recently in other comparable localities. In comparing properties, due consideration is given to factors such as location and accessibility, market conditions, shape and terrain of land, size, tenurial interest and restrictions (if any) and other relevant factors to arrive at the opinion of value. The Purchase Price represents a discount of approximately RM1,509,679 or 3.33% to its market value. 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, charges, claims, caveats, liens and equities whatsoever and with vacant possession, for the Purchase Price upon terms and subject to the conditions contained in the SPA Terms of payment of the Purchase Price (i) (ii) RM1,000,000 ( Deposit ) has been paid simultaneously with the execution of the SPA; RM42,800,321 ( Balance Purchase Price ) shall be payable in the following manner: (a) (b) the Purchaser has procured Great Doctrine (M) Sdn Bhd ( GDSB ) to issue a written undertaking addressed to the Vendor, wherein GDSB undertakes to pay the Vendor a total sum of RM32,747, ( LU from GDSB ) on or before the Completion Date (as defined hereunder) and the receipt by the Vendor of the LU from GDSB shall be deemed and acknowledged by the Vendor as payment paid by the Purchaser to the Vendor towards the account of the Purchase Price*; and the balance sum of RM10,052, ( Balance Purchase Price ) shall be paid by the Purchaser to the Purchaser s solicitors as stakeholders, on or before the Completion Date. The Purchaser s solicitors shall utilise the Balance Purchase Price in the following manner: (aa) (bb) firstly, towards payment of the redemption sum; and secondly, to release the remaining balance, if any, to the Vendor fourteen (14) days after the presentation of the discharge of charge, Memorandum of Transfer and the legal charge in favour of the Purchaser s financier (if any), subject to the Vendor having delivered vacant possession of the Land to the Purchaser in accordance with the terms of the SPA. 3

18 Note: * Pursuant to the announcement made by the Company on 3 July 2017 in relation to the termination of the sale and purchase agreement dated 12 March 2014 between Enchanting View Sdn Bhd ( Enchanting View ), a wholly-owned subsidiary of Mah Sing, and GDSB on the proposed acquisition by Enchanting View of a piece of land forming part of Sultan Salahuddin Abdul Aziz Shah Golf Course in Shah Alam ( Shah Alam Land ), Enchanting View has authorised GDSB to utilise the monies paid by Enchanting View as deposit for the Shah Alam Land amounting to RM32,747, (which is to be refunded by GDSB to Enchanting View pursuant to the sale and purchase agreement for the Shah Alam Land) as part payment towards the Purchase Price Redemption statement cum undertakings The Vendor shall within fourteen (14) days from the date of receipt of the written request of the Purchaser or the Purchaser s financier or its solicitors, as the case may be, cause the chargee to issue and deliver a statement stating that the amount payable to the chargee to redeem the Land and to obtain the redemption documents together with the written undertaking in such form and substance acceptable to the Purchaser s financier made in favour of the Purchaser or Purchaser s financier, as the case may be Completion date Completion date is a date falling on or before 13 September 2017 ( Completion Date ). The sale and purchase of the Land shall be completed on the date on which the Vendor is in receipt of the LU from GDSB and the Balance Purchase Price. If the Balance Purchase Price is not paid in full on or before the Completion Date, the payment can be made within thirty (30) days from the Completion Date or such other extension of time as may be mutually agreed in writing by the parties, together with late payment interest ( Extended Completion Date ) Breach and termination Vendor s right to terminate The Vendor shall be entitled, at any time after such default, to give notice in writing to the Purchaser terminating the SPA if: (a) (b) (c) the Purchaser fails, neglects or refuses to pay the full Purchase Price in accordance with the provisions of the SPA; or the Purchaser fails, neglects or refuses to perform or comply with any of its obligations under the SPA; or the Purchaser suffers any petition or passes any resolution for its winding up or enters into receivership or if the Purchaser is wound up; and within fourteen (14) days of such notice terminating the SPA, the Deposit shall be forfeited in favour of the Vendor as agreed liquidated damages and monies received by the Vendor as part of the Balance Purchase Price shall be returned to the Purchaser or the Purchaser s financiers, as the case may be, free from interest. Purchaser s right to terminate The Purchaser shall be entitled, at any time after such default, to give notice in writing to the Vendor terminating the SPA if: (a) (b) (c) any of the warranties is found at any time to be untrue or incorrect; or the Vendor fails, neglects or refuses to complete the sale in accordance with the provisions of the SPA; or the Vendor fails, neglects or refuses to perform or comply with any of its obligations under the SPA; or 4

19 (d) (e) the Vendor suffers any petition or passes any resolution for its winding up or enters into receivership or if the Vendor is wound up; or distress, attachment or execution is levied or enforced upon, the Land or any substantial part of the assets or undertakings of the Vendor; and within fourteen (14) days of such notice terminating the SPA, the Vendor shall return or caused to be returned all monies received by them as part of the Purchase Price to the Purchaser s solicitors or the Purchaser s financier, as the case may be, free from interest together with an additional sum equivalent to the Deposit being agreed liquidated damages. Notwithstanding the foregoing provisions, the Purchaser shall be at liberty to take such action in law and or equity as may be necessary to compel the Vendor by way of specific performance to complete the sale or purchase in accordance with the provisions of the SPA (in which respect the alternative remedy of monetary compensation shall not be regarded as compensation or sufficient compensation for any default of the Vendor in the performance of the terms and conditions in the SPA) and to claim damages for the breach of the Vendor Power of Attorney Upon execution of the SPA, the Vendor shall execute and deliver the valid and registrable power of attorney in favour of the Purchaser authorising and empowering the Purchaser to deal with such matters in respect of the development of the Land subject to the terms and conditions therein contained. The Power of Attorney shall be revoked and be of no further force or effect upon the Land having been registered in the name of the Purchaser of if the SPA is terminated pursuant to and in accordance with the provisions of the SPA. 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 liability, including contingent liability and guarantee to be assumed by Mah Sing arising from the Proposed Acquisition. 3.0 RATIONALE FOR THE PROPOSED ACQUISITION AND PROSPECTS FOR THE LAND The Land, with DO obtained and earthworks done is ready for immediate development which fits in well with the quick turnaround model of the Group. The location of the Land is suitable for industrial development, hence the Proposed Acquisition represents an opportunity for the Group to further strengthen its branding in the development of the i-parc series of industrial properties. The Land is situated nearby Bukit Mertajam town, a fast growing town in the Central Seberang Perai District. Due to outward expansion, Bukit Mertajam is increasingly conjoined with other subdivisions, forming an increasingly urbanised area and well-established town in mainland Penang. This will provide a large catchment of skilled workforce for the Proposed Development. The Land is easily accessible by the North South Expressway, connecting it to the Penang Bridge and Second Penang Bridge, which are just 13.4km and 17km away, respectively. The Penang Port, which is 18km away and Penang International Airport, 31.1km away, also add 5

20 to the confluence of easy access to the Land, making the location ideal as a logistics hub. There are ready infrastructure and amenities surrounding the Land such as shopping malls, retail shops, educational and public facilities. The Proposed Development will be developed under Mah Sing s i-parc series, which has gained a high degree of acceptance amongst the Group s customers, as evidenced by the sold-out sales for the Group s previous industrial property projects under the same series in Bukit Jelutong and Shah Alam. The Group s latest i-parc development in Tanjung Pelepas, Iskandar Malaysia, which is merely 1km away from Port of Tanjung Pelepas, has recently garnered The Business Estate Honours Award by The StarProperty.my Award Mah Sing pioneered its iparc series in 1994 and subsequent iparc projects adopted the 4-in-1 business concept where both front and back-end operational processes are catered for. Front-end operations like showrooms or corporate offices can be housed in the same space as back-end operations like warehousing and production. Mah Sing will incorporate further refinements to the key features which define the i-parc brand and based on past successes, the management is confident of replicating the success for the Proposed Development. The Proposed Development is also expected to be fueled by catalytic transport infrastructure developments such as the Penang Transport Master Plan and The Penang Undersea Tunnel, which will further enhance accessibility for the Land and the state government and relevant authorities continuing efforts to seek out high quality manufacturing investments. Therefore, the Proposed Development is expected to be well-received by small and medium scale industries looking to adopt a more cost-efficient model for their operations, thereby contributing positively to the future earnings of the Group. 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. The Malaysian economy expanded by 5.6% in the first quarter of Growth was lifted by stronger domestic demand, particularly private sector spending. From the supply side, the improvement was driven mainly by the turnaround in the agriculture sector and higher growth in manufacturing and services sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.8% (4Q 2016: 1.3%). Headline inflation rose to 4.3% due to higher fuel prices. Growth in household debt slowed further to 5.2% (4Q 2016: 5.4%). Financing conditions were supportive of the economy with eligible borrowers continuing to have access to financing. The economy is on track to register higher growth in Domestic demand is projected to continue to expand. Exports are expected to benefit from the improvement in global growth. While inflation increased in the first quarter, it is expected to moderate from the second quarter onwards. (Source: Bank Negara Malaysia Annual Report 2016; Economic and Financial Developments in Malaysia in 1Q2017) 6

21 4.2 Overview and prospects of the industrial sub-sector in Penang In 2016, there were 443 transactions worth RM million recorded in the industrial property sub-sector, a decline of 29.9% in volume but value saw a significant increase of 23.7%. Prices were on the whole stable with increases recorded in strategic areas served with good accessibility and equipped with proper infrastructure. In 2017, the state s property market would remain on a positive path backed by various ongoing and proposed development projects. Transport infrastructure development remains the state s focus in line with Penang Transport Master Plan for long-term highways projects. The Penang mega project, part of the RM6.3 billion infrastructure package, comprises three (3) highways and an undersea tunnel linking the island to the mainland. The Penang Undersea Tunnel is the key infrastructure project which spans 7.2 km. The tunnel will connect Butterworth, Seberang Perai in the east to George Town, Penang Island in the west. (Source: Property Market Report 2016, Valuation and Property Services Department, MOF) According to Malaysian Investment Development Authority (MIDA), Penang is ranked fourth in terms of total value of approved projects after Johor, Selangor and Sarawak. It attracted approximately RM3.88 billion of capital investments from 84 projects in the first nine months of Henry Butcher expects that Penang s property market, particularly the mainland is expected to see a pick-up in demand in In the short term, the prevailing consolidation and restructuring exercises particularly by multi-national companies, is expected to continue affecting the Penang industrial property sector to a certain extent. In the long run, as the Government and relevant authorities seek high quality manufacturing investment, the outlook of Penang industrial property sector remains positive. (Source: CBRE / WTW s Real Estate Market Outlook Report 2017) 4.2 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. 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 only scheduled for a preview in the third quarter of However, the Proposed Acquisition is expected to contribute positively to the future earnings of the Group. 7

22 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 only scheduled for a preview in the third quarter 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 the Proposed Development on the gearing of the Group will be dependent on the eventual funding mix to be used. 6.0 APPROVALS REQUIRED 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 3 rd quarter of HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposals pursuant to paragraph 10.02(g) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements is 1.33%. 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, Power of Attorney and Valuation Report in respect of the Land are 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 3 July

23 MAH SING GROUP BERHAD APPENDIX 1 Location map of the Land Penang Bridge Site Location Penang Second Bridge (Source: Google Map and Company) 9