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

Transcription

1 MAH SING GROUP BERHAD ( MAH SING OR COMPANY ) PROPOSED ACQUISITION BY TRISTAR ACRES SDN BHD, A WHOLLY OWNED SUBSIDIARY OF MAH SING, OF 8 PARCELS OF ADJACENT FREEHOLD LAND WITH TOTAL NET AREA MEASURING APPROXIMATELY ACRES FROM BOON SIEW DEVELOPMENT SDN BHD FOR A TOTAL CASH CONSIDERATION OF RM330,765, OR APPROXIMATELY RM18.60 PER SQUARE FOOT 1. INTRODUCTION The Board of Directors of Mah Sing ( Board ) wishes to announce that Tristar Acres Sdn Bhd ( Tristar or Purchaser ), a wholly owned subsidiary of Mah Sing, had on 21 May 2012, entered into a sale and purchase agreement ( SPA ) with Boon Siew Development Sdn Bhd ( Boon Siew or Vendor ) for the proposed acquisition of 8 parcels of adjacent freehold land with a total net area measuring approximately acres as more particularly described in Section 2.3 herein ( Lands ) for a total cash consideration of RM330,765, or approximately RM18.60 per square foot ( Proposed Acquisition ). Further, on the same day, Tristar also entered into another sale and purchase agreement with Wong Hong Ho Hea Sia for the purchase of a piece of leasehold land held under PM 1098, Lot 2017, Tempat Teras Jernang (Sg. Merab) Tepi Sg Langat, Mukim Dengkil, Daerah Sepang, Negeri Selangor measuring approximately acres ( Leasehold Land ), for a total cash consideration of RM2,477, ( Leasehold Land Acquisition ). The Leasehold Land is contiguous with the Lands. The Lands and the Leasehold Land, the total size of which is acres, are strategically located in Bandar Baru Bangi, with prime frontage of 2 km along both sides of the North South Highway. To be called Southville City, the Group intends to replicate the successful and proven concept of its selfsustaining townships i.e. award winning projects such as Aman Perdana in Meru-Shah Alam, Kinrara Residence in Puchong, Garden Residence in Cyberjaya and M Residence@ Rawang. With estimated gross development value ( GDV ) at RM2.15 billion, this large piece of prime land fits in well with the Group s landbanking strategy of acquiring sizeable land for township development offering mainly affordable homes priced below RM1 million. Further details of the Proposed Acquisition are set out in the ensuing sections. 2. THE PROPOSED ACQUISITION 2.1 Information on Tristar Tristar is a private limited company incorporated in Malaysia on 12 September 2007 under the Companies Act, The present authorised share capital of Tristar is RM100,000 comprising 100,000 ordinary shares of RM1.00 each, of which 2 ordinary shares of RM1.00 each have been issued and fully paid-up. Tristar is currently dormant. 2.2 Information on the Vendor Boon Siew is a private limited company incorporated in Malaysia on 27 September 1975 under the Companies Act, The present authorised share capital of Boon Siew is RM35,000,000 comprising 35,000,000 ordinary shares of RM1.00 each, of which 30,000,000 ordinary shares of RM1.00 each have been issued and fully paid-up. Boon Siew is principally involved in the extraction and sale of red earth, sand and granite, cultivation and sale of oil palm produce, property development and investment holding. 1

2 2.3 Information on the Lands The Lands have an aggregate estimated gross area measuring approximately hectares and are held under the titles as stated below. The Lands are freehold and are subject to the following category of land use and express conditions: Title No GRN Lot 6453, Lot 6452, Mukim Kajang, Daerah Ulu Langat, Negeri Selangor GRN Lot 6460, Lot 6462, Lot 6458, Lot 6455, Mukim Kajang, Daerah Ulu Langat, Negeri Selangor GRN Lot 1780, Mukim Kajang, Daerah Ulu Langat, Negeri Selangor GRN 1097 Lot 1511, Tempat Sungai Merab, Mukim Dengkil, Daerah Sepang, Negeri Selangor GRN 1098 Lot 1541, Tempat 22 nd mile, Sungai Merab, Mukim Dengkil, Daerah Sepang, Negeri Selangor GRN 1256 Lot 4438, Tempat 23 rd mile, Bangi Road, Sungai Merab, Mukim Dengkil, Daerah Sepang, Negeri Selangor GRN 3859 Lot 1109, Tempat 23 rd mile, Bangi Road, Sungai Merab, Mukim Dengkil, Daerah Sepang, Negeri Selangor GRN 3860 Lot 1108, Tempat 22½ mile, Bangi Road, Sungai Merab, Mukim Dengkil, Daerah Sepang, Negeri Selangor Category of land use Express condition Land area hectares Tiada Tiada Tiada Tiada Tiada Tiada Pertanian Tanaman Kekal (Industry Pertanian Nil Pertanian Nil Pertanian Nil Pertanian Nil The area of the Lands are also subject to the following: (a) (b) (c) an acquisition by the relevant authority for the highway and Mint Technology Park of an approximately acres ( Acquired Area ); a wayleave in favour of Tenaga Nasional Berhad over an approximate area of acres ( TNB s Wayleave ) subject to the terms and conditions contained in the easement created in respect thereto; and sale of an approximate area of 8 acres located on Lot 6462 to Malaysian Chinese Association ( MCA Land ) vide a sale and purchase agreement dated 19 February 1997 made between the Vendor and Malaysian Chinese Association subject to the terms and conditions therein contained, (The Acquired Area, the TNB s Wayleave and the MCA Land are collectively referred to as the Excluded Portion ). Tristar shall be acquiring the Lands net of the Acquired Area and the MCA Land but subject to TNB s Wayleave. The 8 parcels of adjacent freehold land which are not subject to any restriction in interest are to be purchased from the Vendors on an as is where is basis, free from all squatters/tenants/occupants/ licensees, encumbrances, caveats, charges, liens whatsoever and with vacant possession but subject to the existing express conditions, category of land use, zoning, usage and other implied conditions affecting the issue document of title to the Lands. 2

3 The Lands is located on both sides of the North South Highway, which is approximately 3.2 km from University Kebangsaan Malaysia and 2.6 km from the Sony plant. Mah Sing plans to build a new interchange to allow direct access to the Lands. The Lands have approximately 2 km long of North South Highway frontage on both sides of the highway. Currently, the Lands are occupied by matured palm oil. The Lands together with the Leasehold Land will be developed into a self-contained township with an estimated GDV of approximately RM2.15 billion. Based on preliminary plans, the township is expected to be developed over 4 to 5 years and the first phase of the development project will be mainly double storey link homes with indicative pricing from RM530,000 onwards. Other upgrader market properties such as linked semi-detached homes, semi-detached houses and bungalows are planned for later phases. Approximately 30% of the township is planned to comprise commercial components to enrich the living space and to add vibrancy to the township. Tristar will be submitting the relevant proposed development plans to 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 authorities approval, the proposed development is expected to commence by the first half of Awareness programme and registration of interest for Southville City are expected to commence in the third quarter of Please refer to the attached map for location details of the Lands. 2.4 Basis of consideration The purchase consideration of RM330,765, was arrived at between the parties on a willingbuyer willing-seller basis after taking into consideration the development potential of the Lands. Based on Mah Sing s internal assessment of the Lands, the purchase consideration is within range of the market values for similar lands in the vicinity. Mah Sing will appoint an independent property valuer to undertake a valuation of the Lands. The independent market value of the Lands will be disclosed in the circular to the shareholders to be issued later. Mah Sing is unable to disclose the net book value of the Lands as it is not privy to this information. 2.5 Salient terms of the SPA The salient terms of the SPA include, amongst others, the following: Terms of payment of the purchase consideration The total purchase consideration of the Lands amounting to RM330,765, shall be paid in the following manner: (i) (ii) prior to the date of the SPA, the Purchaser has paid a sum of RM6,531, only ( Earnest Deposit ) to the Vendor s solicitors as stakeholders, the receipt whereof by the Vendor s solicitors shall be deemed and acknowledged by the Vendor as earnest deposit and part payment towards the account of the purchase consideration. The Vendor s solicitors shall be authorised to release the Earnest Deposit to the Vendor simultaneously with the execution of the SPA; simultaneously with the execution of the SPA, the Purchaser shall pay a sum of RM26,544, only ( Balance Deposit ) to the Vendor s solicitors, as stakeholders, as part payment towards the account of the purchase consideration whom shall be authorised to release the same to the Vendor together with interest accrued thereon upon receipt of the approval of the Estate Land Board; and The Earnest Deposit and the Balance Deposit shall be referred to as the Deposit. 3

4 (iii) subject to Section and Section herein, a sum of RM297,688, only ("Balance Purchase Price") shall be paid or caused to be paid by the Purchaser to the Vendor s solicitors as stakeholders within a period of 4 months from the date of the SPA or within 2 months from the date of the receipt of the Estate Land Board s approval, whichever is the later ( Completion Period ) provided always that in the event the Balance Purchase Price or any part or portion thereof is not paid within the Completion Period, the Vendor shall automatically grant to the Purchase an extension of 1 month immediately after the expiry of the Completion Period ( Extended Completion Period ) to pay the Balance Purchase Price or any part or portion thereof remaining outstanding subject to payment of interest at the rate of 8% per annum on the Balance Purchase Price or any part or portion thereof remaining outstanding ( Interest ) to be calculated on the basis of the actual number of days elapsed and a 365 day year and shall accrue from day to day on simple interest commencing from the date immediately after the expiry of the Completion Period until the date the Balance Purchase Price is fully paid. For the purpose of clarification and for the avoidance of doubt, the date the Balance Purchase Price is paid to the Vendor s Solicitors as stakeholders shall hereinafter be referred to as the Completion Date. In the event of default by the Purchaser, at the Vendor s sole discretion, amongst others, the Deposit shall be forfeited as agreed liquidated damages by the Vendor upon termination of the SPA. In the event of default by the Vendor, at the Purchaser s sole discretion, amongst others, the Deposit shall be refunded to the Purchaser and a sum equivalent to the Deposit to be paid to the Purchaser as agreed liquidated damages upon termination of the SPA. In the event the transfer is not accepted or is rejected for registration or is not registered for reason not attributable to either parties fault, the Purchaser may elect to terminate the SPA and the Vendor shall refund all monies paid for the purchase price, free from interest Adjustment of the purchase consideration (i) (ii) (iii) The parties hereby agree that in the event that area of the Lands as verified by the licensed surveyor appointed by the Purchaser through good faith consultation with the licensed surveyor appointed by the Vendor and/or with the relevant authority, where necessary, within 3 months from the date of the SPA, shall be more than acres, the purchase consideration payable by the Purchaser to the Vendor under the SPA, shall be adjusted and the Purchaser shall pay to the Vendor the additional amount for every square foot that is more than acres, calculated at the rate of RM18.60 per square foot, as part of the Balance Purchase Price payable under the SPA, on or before the Completion Period or the Extended Completion Period, as the case may be. In the event that area of the Lands as verified by the licensed surveyor appointed by the Purchaser through good faith consultation with the licensed surveyor appointed by the Vendor and/or with the relevant authority, where necessary ( Surveyor s Verification ), within 3 months from the date of the SPA, shall be less than acres, the purchase consideration payable by the Purchaser to the Vendor under the SPA, shall be adjusted and the amount for every square foot that is less than acres, calculated at the rate of RM18.60 per square foot shall be deducted from the Balance Purchase Price payable. For avoidance of doubt, the parties hereby acknowledge and undertake that the land area which requires the Surveyor s Verification for adjustment in the purchase consideration shall be limited to the Excluded Portion only. Any setback or reserves required for the river running across the Lands and/or any surrender of the Lands required by the relevant authority and/or for the purposes of the Purchaser s intended use, shall not be taken into account for the adjustment of the purchase consideration. 4

5 2.5.3 Estate Land Board Approval The sale of the Lands by the Vendor to the Purchaser is conditional upon, the Vendor, at its own costs and expense, obtaining the approval of the Estate Land Board, if necessary ( Estate Land Board Approval ). The Vendor shall obtain the Estate Land Board s approval within 6 months from the date of the SPA failing which, the Purchaser shall grant to the Vendor an automatic extension of a further 3 months to obtain the same ( Conditional Period ). In the event the Estate Land Board Approval is not obtained within the Conditional Period, the parties shall enter into a bona fide discussion to renegotiate the terms of the sale and purchase agreement with a view to reach an amicable settlement or alternative arrangement on the transaction contemplated herein Grant of Power of Attorney Simultaneously with the execution of the SPA, the Vendor shall execute a valid and registrable limited Power of Attorney in favour of the Purchaser (with no claim for compensation) authorizing and empowering the Purchaser to sign, submit, apply and obtain all relevant approvals from the relevant authorities with regard to the Purchaser s intended use of the Lands relating to the development order, conversion of the category of land use of the Lands, and subdivision of the Lands and hoarding approval provided that the Vendor shall not be liable in any way to the Purchaser in the event that such applications shall not be approved by the relevant approving authorities and provided further that the Purchaser shall indemnify and keep indemnified the Vendor in respect of any claims, loss or damages suffered by the Vendor arising from the exercise of the powers conferred upon the Purchaser pursuant to the Power of Attorney. 2.6 Source of funding Mah Sing intends to fund the Proposed Acquisition and the development cost of the Lands through internally generated funds and/or bank borrowings. The exact mix of internally generated funds and bank borrowings will be decided by the management at a later stage taking into consideration Mah Sing and its subsidiaries ( Mah Sing Group or Group ) gearing level, interest costs as well as internal cash requirements for its business. 2.7 Assumption of liabilities There are no other liabilities, including contingent liabilities and guarantee to be assumed by the Group arising from the Proposed Acquisition. 3. RATIONALE FOR THE PROPOSED ACQUISITION Since the Group s foray into property development in the 1990s, the Group has now grown into a wellrecognized and established lifestyle provider with a range of product types across 3 geographical regions in Malaysia, i.e. Greater Kuala Lumpur, Penang and Johor. It also recently ventured into Kota Kinabalu with the proposed joint venture development of a prime commercial land in Kota Kinabalu s Central Business District. Given Mah Sing s current achieved scale and scope, the Group is cognizant of the need to continue its proactive and opportunistic plans to acquire more tracts of land to fuel long term growth. With Southville City, the Group has a total of 28 projects in Greater Kuala Lumpur, and this position the Group to indirectly support the opportunities arising from the Greater Kuala Lumpur National Key Economic Area implementation. The Proposed Acquisition together with the Leasehold Land Acquisition is in line with the overall Group s strategy to acquire larger sized land banks for potential township development in strategic locations with high development value. As close to 70% of the residential component will be priced below RM1 million, this proposed development will provide an opportunity for the Group to balance 5

6 and complement the Group s existing product portfolio to meet the strong market demand for bread and butter properties.. The Lands and the Leasehold Land is accessible from the North South Highway via the Kajang interchange, Bangi interchange as well as Bandar Seri Putra interchange. Mah Sing is planning a new interchange to allow direct access to the Lands and Leasehold Land. Besides the existing access routes, there are also plans to build a linkage between Putrajaya interchange to Jalan Kajang-Dengkil which will further enhance access to the Lands and the Leasehold Land. The Lands and the Leasehold Land is also linked to highways such as North-South Expressway Central Link, Maju Expressway and SILK Highway. The development of the Lands together with the Leasehold Land is expected to generate an estimated gross development value of approximately RM2.15 billion, which will in turn contribute positively to the Group s future revenue stream and profitability. 4. PROSPECTS 4.1 Malaysian economic overview and outlook The Group is principally engaged in the business of property development and property investment. The Group s prospects are inherently linked to the outlook of the Malaysian economy and property industry. While the global economy continues to recover, developments in the most recent period have increased the risks to global growth. Stress in the international financial markets has re-emerged following rising policy uncertainties and renewed concerns over the sovereign debt crisis in the euro area. While the Malaysian economy is affected by the global developments, domestic demand has continued to support growth, driven by firm consumption and investment activity. Looking ahead, this trend is projected to continue. Private consumption is supported by the stable employment conditions, income growth and public sector measures. Investment activity is mainly led by the domestic-oriented industries, the commodity sector and the public sector. Headline inflation is expected to moderate in 2012 with improved domestic supply and stable demand conditions. The public sector will remain supportive of growth in 2012, with higher capital expenditure by both the federal government and the non-financial public enterprises. Amid the more challenging external environment, Malaysia s economy is projected to experience a steady pace of growth of 4 5% in (Source: Monetary Policy Statement, 11 th May 2012, Bank Negara Malaysia, Bank Negara 2011 Annual Report) 4.2 Klang Valley property market prospects Despite the challenging global economy, the Malaysian residential property market performed well in 2011 with transactions (both primary and secondary) totalling 269,789 units (value RM61.8bn) in 2011 (19% above 2010: 226,874, value RM50.6bn). Out of this figure, primary market transactions i.e. between developer and individual was 55,745 units (value: RM12.4bn) in 2011 (91% above 2010: 29,162, RM5.99bn). In tandem with the better performance of new launches, the volume of residential overhang declined by 15.2% as at end-2011, although the overhang value took an upturn of 16.8%. Properties above RM500,000 increased to 21,905 transactions recording a 31% growth from 2010, attributed to the increase in affordability levels and supported by the ease in borrowing and attractive loan packages offered by financial institutions. The newly launched infrastructure projects such as the Klang Valley Mass Rapid Transit project starting with the Sungai Buloh-Kajang line stimulated market activities in the Klang Valley. The Klang Valley i.e. Wilayah Persekutuan Kuala Lumpur and Selangor saw strong growth in market activity of 14.4% and 8.5% respectively in Single and double storey terraced houses in the Klang Valley recorded strong double digit price growth of between 14% to 34%, with similar trends recorded in 6

7 upcoming locations such as Kajang and Sepang in Moving into 1Q12, the robustness of the Klang Valley property market (KL and Selangor) is sustained as evidenced by the 10.8% and 20.5% growth y-y in transaction volume and value respectively. Attractive financing packages and continuing low borrowing costs (with effective lending rate of between 4.20%-4.40%) should continue to support developers sales. Developers are expected to continue to focus on offering more affordable products in KL city fringe areas and suburban areas as the demand for mass market / beginner homes are likely to continue due to continued urbanization and a supportive wage environment. On the overall property market performance for 2012, it is expected that the residential sub-sector will be sustained. Higher housing starts and building plans approvals in 2011 signify confidence of developers and investors in the development activity. Development in Greater KL would continue to give positive impact on property development and the market in coming years. (Source: NAPIC 2011 Property Market Report, NAPIC 1Q12 Property Sales Data report, CBRE Residential Market View 4Q11) In view of the above, the Board of Mah Sing is of the view that prospects for the proposed development are positive and is not aware of any risk factors arising from the Proposed Acquisition other than the normal market, business and global economic risks. 5. RISK FACTORS 5.1 Sensitivity to economic downturn and oversupply in the property market The demand for properties is dependent on the general economic, business and credit conditions, as well as the availability of supply in the market. Whilst the Board believes that it is possible to mitigate the effects of weaker demand in a slow economic environment by meticulous planning in terms of innovative design, timing of launch and pricing points relative to competitors, there can be no assurance that proposed development on the Lands will be shielded from any adverse downturn in the economy. The proposed development on the Lands is also subject to inherent risks in the property development industry, which includes labour supply, volatility in construction material prices and changes in regulatory framework of the construction and/or property development industries. Mah Sing will leverage on its strength and experience as a property development manager to manage these risks closely. 5.2 Delays in commencement and completion There are many external factors which are beyond the control of the Group that could affect the timely completion of property development projects such as getting the necessary approvals from land offices, planning authorities and local councils as scheduled, confirming the construction materials in reasonable amounts and fulfilling the performance expectations by the appointed building contractors. However, the Group will seek to mitigate such risks by closely monitoring the progress of the development projects and endeavour to promptly come up with solutions to any setbacks in order to ensure the timely completion of the proposed development of the Lands. 6. EFFECTS OF THE PROPOSED ACQUISITION 6.1 Share capital and shareholdings of substantial shareholders The Proposed Acquisition has no impact on the issued and paid-up share capital of Mah Sing and the shareholdings of the substantial shareholders of Mah Sing as it will be satisfied wholly by cash and does not involve any issuance of new ordinary shares. 7

8 6.2 Earnings The Proposed Acquisition is not expected to have material impact on the earnings of the Group for the financial year ending 31 December 2012 as the proposed development is expected to commence in the first half of The development of the Lands is expected to enhance the earnings of the Group in future years. 6.3 Net assets ( NA ) and gearing As set out in Section 2.6 above, the Company intends to fund the Proposed Acquisition and the development cost of the Lands through internally generated funds and/or bank borrowings. The exact mix of internally generated funds and bank borrowings will be determined by the management of the Company at a later stage, after taking into consideration Mah Sing Group s gearing level, interest costs and internal cash requirements for its business operations. Assuming that the Proposed Acquisition had been effected at the end of the financial year ended 31 December 2011 and without taking into account the development profits, the Proposed Acquisition would not have any effect on the NA per share of the Group as at 31 December However, in view of the potential future profit contribution arising from the development of the Lands, the net assets of the Group are expected to be enhanced over time. For the purpose of this announcement and illustration purposes, assuming that 80% of the purchase consideration or approximately RM million is financed via external borrowings to be procured by the Group for the Proposed Acquisition, the proforma net gearing ratio of the Mah Sing Group, based on its latest audited consolidated financial statements as at 31 December 2011 is as follows: Audited as at 31 December 2011 RM 000 After the Proposed Acquisition RM 000 Total equity 1,088,489 1,088,489 Gross interest bearing borrowings 977,617 1,242,229 Less: Deposit, cash and cash at bank (665,717) (599,564) Net interest bearing borrowings 311, ,665 Net gearing (times) APPROVALS REQUIRED Pursuant to Chapter 10 of the Main Market Listing Requirements, the Proposed Acquisition is subject to the approval of the shareholders of Mah Sing at an extraordinary general meeting to be convened As mentioned in Section above, the Estate Land Board s approval, if necessary, for the sale of the Lands is to be obtained by the Vendor. Pursuant to the SPA, the Vendor shall submit the application for the Estate Land Board, if necessary, for approval within 10 business days from the date of the SPA. The Proposed Acquisition is not conditional upon any corporate exercise undertaken or to be undertaken by Mah Sing. As for the Leasehold Land Acquisition, the percentage ratio is below 5% and therefore, it is not subject to announcement and approval of the shareholders of Mah Sing pursuant to Chapter 10 of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements. 8

9 8. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED TO THEM Insofar as the Directors are aware, 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. 9. DIRECTORS RECOMMENDATION The Board, having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the Group. 10. HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Acquisition pursuant to Paragraph 10.02(g) of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements is approximately 31%. 11. ESTIMATED TIME FRAME FOR COMPLETION OF THE PROPOSED ACQUISITION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed in the second half of DOCUMENT AVAILABLE FOR INSPECTION The SPA and Power of Attorney in relation to the Proposed Acquisition 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 3 months from the date of this announcement. This announcement is dated 21 May

10 Below is the location map of the Lands. 10