MAH SING GROUP BERHAD ( MAH SING OR COMPANY )

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1 MAH SING GROUP BERHAD ( MAH SING OR COMPANY ) PROPOSED ACQUISITION BY MEDITERRANEAN VIEW DEVELOPMENT SDN BHD, A WHOLLY OWNED SUBSIDIARY OF MAH SING, OF ALL THAT PIECE OF PRIME LAND WITH ESTIMATED GROSS DEVELOPMENT VALUE OF APPROXIMATELY RM520 MILLION LOCATED IN RAWANG MEASURING APPROXIMATELY ACRES FOR CASH CONSIDERATION OF RM68,666, OR APPROXIMATELY RM16.30 PER SQUARE FOOT 1. INTRODUCTION The Board of Directors of Mah Sing ( Board ) wishes to announce that Mediterranean View Development Sdn Bhd ( Mediterranean View or Purchaser ), a wholly owned subsidiary of Mah Sing, had on 27 August 2013, entered into a sale and purchase agreement ( Agreement ) with Ng Tan Moi and Tan Lee Kau (collectively be referred to as Vendor ) for the proposed acquisition of all that piece of prime land measuring approximately acres in Rawang as more particularly described in section 2.2 herein ( Land ) for cash consideration of RM68,666, or approximately RM16.30 per square foot ( Proposed Acquisition ). The Land is situated less than 5km from the Group s existing projects, M Residence and M Residence 2 in Rawang. Offering mostly affordable homes within gated guarded community with residents private clubhouse and lush greeneries, both projects have enjoyed overwhelming take-up. The Proposed Acquisition is timely and opportunistic for the Group, allowing it to capitalize on the branding already established in Rawang and tap on the spillover demand from the two existing projects. The Proposed Acquisition fits in to the Group s landbanking strategy of enhancing its portfolio with more affordable mid-range homes in view of the demand-supply gap for such properties. Based on preliminary plans, the Land, to be branded as M Residence 3@Rawang is proposed for mainly 2 storey link homes and 2 storey Semi-Ds with amenities and facilities within the township s commercial components. Gross Development Value ( GDV ) is estimated at approximately RM520 million. With M Residence 3, the Group has 3 township lands in Rawang measuring 480 acres. Total combined GDV from the 3 projects is approximately RM2.13billion. Dubbed the next Puchong by some, Rawang s growing popularity as a residential hub has made it the new development corridor in Klang Valley. M Residence 3 can readily tap into upgraders demand from matured housing schemes in Rawang as well as wider catchment of buyers from Kepong, Petaling Jaya, Selayang, and other parts of Selangor and Kuala Lumpur. The Proposed Acquisition comes with favourable deferred payment terms of up to 15 months. Surrounded by matured residential schemes with ready infrastructure, connectivity and amenities and coupled with the Group s familiarity with the marketing landscape of this part of town, M Residence 3 is expected to replicate the success of M Residence and M Residence 2 and potentially be another of the Group s fast turnaround project. Mediterranean View will be submitting the proposed development plans to the relevant authorities for approval. Subject to authorities approval, the project is expected to be developed over a span of 3 to 5 years. Preview of M Residence 3 is expected in the second half of Further details of the Proposed Acquisition are set out in the ensuing sections.

2 2. THE PROPOSED ACQUISITION 2.1 Information on Mediterranean View Mediterranean View is a private limited company incorporated in Malaysia on 22 March 2013 under the Companies Act, The present authorised share capital of Mediterranean View 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. Mediterranean View is currently dormant and its intended principal activity is property development. 2.2 Information on the Land The Land is held under title number H.S.(D) 35626, PT No , Mukim Rawang, Daerah Gombak, Negeri Selangor measuring approximately acres (approximately 391,371.5 square metres). The original issue document of title to the Land is to be surrendered by the Vendor to the relevant authorities for the issuance of the New Title (as defined herein). The Vendor is the sole and absolute registered and beneficial owner of the Land. The Land is a leasehold land subject to the category of land use Bangunan and is subject to express condition Bangunan Kediaman. The Land is also subject to restrictions in interest Tanah yang diberi milik ini tidak boleh dipindah milik, dipajak atau digadai melainkan dengan kebenaran Pihak Berkuasa Negeri. The lease term is 99 years with expiry date on 7 May The Land is currently vacant. Save and except for the charge in favour of the Vendor s financier ( Charge ), the Land is to be acquired from the Vendor free from all encumbrances, caveats, charges and liens whatsoever, free from all squatters, tenants, occupants, licensees, structures, places of worship, burial grounds, encroachment and with vacant possession. M Residence 3 is just 6.6km from the Rawang toll and a mere 4.0km from the Aeon Jusco on Jalan Batu Arang. Just 500m from the Aeon Jusco is a right junction to Jalan Desa Utama. From there, it is approximately 3.5km to the township, which is adjacent to the Saujana Rawang township. Additional accessibility to the township is expected to be improved with a proposed new access road from the main thoroughfare of Jalan Batu Arang. M Residence 3 is surrounded by mature neighbourhoods, which presents residents with easy access to established public amenities such as schools like SMK Taman Desa, SK Taman Desa and SK Taman Desa 2; and shopping complexes including AEON Bandar Anggun, TESCO hypermarket and Giant Rawang. Residents also benefit from existing public transport services of buses that ply the Kuala Lumpur- Rawang route such as RapidKL, Metrobus and SJ Buses. Please refer to Appendix I for the location map. 2

3 2.3 Proposed development of the Land Based on preliminary plans, the Land is proposed for 2 storey link homes and 2 storey Semi-Ds with amenities and facilities within the township s commercial components with an estimated GDV of RM520 million. Mediterranean View will be submitting the 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, proposed development is expected to commence in the second half of The project is expected to be developed over a span of 3 to 5 years. Preview of M Residence 3 is expected in the second half of Basis of consideration The purchase price of RM68,666, was arrived at between the parties on a willing-buyer willing-seller basis after taking into consideration the following: (i) (ii) (iii) (iv) Development potential of the Land in view of large target market catchment from older housing schemes in Rawang, as well as wider areas such as Kepong, Selayang, Petaling Jaya and other parts of Selangor and Kuala Lumpur; Ready connectivity to Kuala Lumpur city centre and the rest of the Klang Valley; Potential synergistic advantages riding on the Group s familiarity with the marketing landscape and branding already established in Rawang, as well as cost efficiencies from economies of scale due to proximity of the Land to M Residence and M Residence 2; and Strategic fit to the Group s fast turnaround development model as the location is ready with available infrastructure connectivity and amenities. Based on Mah Sing s internal assessment of the Land, the purchase price is within range of acceptable land cost given the potential GDV to be generated. No valuation was carried out on the Land. 2.5 Salient terms of the Agreement The salient terms of the Agreement include, amongst others, the following: Terms of payment of the purchase price Subject to the final measurement of the actual land area of the Land and adjustment thereof, if any, the purchase price of the Land amounting to RM68,666, ( Purchase Price ) shall be paid by Mediterranean View to the Vendor in the following manner: (i) (ii) total deposits sum amounting to RM6,866, (or approximately 10% of the Purchase Price) ( Deposit ) shall be paid to the Vendor upon execution of the Agreement, subject to a retention sum retained by Mediterranean View from the Deposit for remitting the same to the relevant authorities on behalf of the Vendor for payment of real property gains tax pursuant to the Real Property Gains Tax Act, 1976; subject to the final measurement of the actual land area of the Land and adjustment thereof, if any, the balance purchase price of RM61,800,

4 ( Balance Purchase Price ) shall be paid or caused to be paid by Mediterranean View to the Vendor in the following manner:- (a) (b) (c) a sum of RM6,866, (or approximately 10% of the Purchase Price) ( BPP 1 ) shall be paid to the Vendor s solicitors as stakeholders within three (3) months from the date of the Agreement or within one (1) month from the Unconditional Date (as defined herein), whichever shall be the later with an automatic extension of one (1) month thereafter to be granted by the Vendor; a sum of RM20,600, (or approximately 30% of the Purchase Price) ( BPP 2 ) shall be paid to the Vendor s solicitors as stakeholders within three (3) months from the date immediately after the date of the payment of the BPP 1 with an automatic extension of one (1) month thereafter to be granted by the Vendor; and a sum of RM34,333, (or approximately 50% of the Purchase Price) ( BPP 3 ) shall be paid to the Vendor s solicitors as stakeholders within six (6) months from the date immediately after the date of the payment of the BPP 2 with an automatic extension of one (1) month thereafter to be granted by the Vendor. The date of full payment of the Balance Purchase Price and the late payment interest (if any) to the Vendor s solicitors as stakeholders shall be referred to as the Completion Date Condition precedent The Proposed Acquisition is conditional upon the following conditions precedent ( Conditions Precedent ) being fulfilled by the Vendor at its own costs and expenses within five (5) months from the date of the Agreement with an automatic extension of four (4) months thereafter and such other extension(s) of time as may be mutually agreed upon by the parties in writing:- (i) the issuance of new title to the Land with:- (a) the land area of acres; (b) the Vendor endorsed therein as the sole and absolute registered proprietor; (c) the category of land use as Bangunan ; and (d) the Charge endorsed therein; (herein be referred to as the New Title ); and (ii) the relevant state authority consent to transfer of the Land in favour of Mediterranean View based on the New Title ( State Authority Consent to Transfer ) being obtained. The date on which a certified true copy each of the New Title or the State Authority Consent to Transfer is delivered to Mediterranean View s solicitors, whichever shall be the later, shall be referred to as the Unconditional Date. 4

5 2.5.3 Grant of power of attorney Simultaneously with the execution of the Agreement, the Vendor shall execute and deliver a valid and registrable revocable limited power of attorney ( Power of Attorney ) in favour of Mediterranean View, authorising and empowering Mediterranean View to deal with all matters in respect of the development of the Land subject to the terms and conditions therein contained. 2.6 Source of funding Mah Sing intends to fund the Proposed Acquisition and the development cost of the Land through a combination of bank borrowings and the proceeds raised from the Rights Issue ( Rights Issue Proceeds )/internally generated funds. The exact mix of the Rights Issue Proceeds/internally generated funds and bank borrowings will be decided by the management at a later stage taking into consideration the Group s gearing level, interest costs as well as internal cash requirements for its business operations. 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 The Group first ventured into Rawang in October 2011 with the acquisition of 226 acres M Residence. This is then followed by 157 acres of M Residence 2 in February Offering mostly affordable homes within gated guarded community with residents private clubhouse and lush greeneries, both projects have enjoyed overwhelming take-up. The Proposed Acquisition is timely and opportunistic for the Group, allowing it to capitalize on the branding already established in Rawang and tap on the spillover demand from the two existing projects. With M Residence 3, the Group has 3 township lands in Rawang measuring 480 acres. Total combined GDV from the 3 projects is approximately RM2.13billion. The Proposed Acquisition fits in to the Group s landbanking strategy of enhancing its portfolio with more affordable mid-range homes in view of the demand-supply gap for such properties. M Residence and M Residence 2 have drawn strong interests from especially the first-time buyers and younger population. Currently into its Phase 4, M Residence first launched its beginner link-homes with starting price from only RM343,800 in April M Residence 2 previewed its first batches of link-homes earlier this year with starting price from RM438,800. Dubbed the next Puchong by some, Rawang s growing popularity as a residential hub has made it the new development corridor in Klang Valley. Target market for M Residence 3 includes upgraders from older housing schemes in Rawang, as well as wider catchment of buyers from Kepong, Petaling Jaya, Selayang, and other parts of Selangor and Kuala Lumpur. Rawang s position in the northern corridor of Kuala Lumpur is strategic as it is only about minutes drive from town with good connectivity by road and rail. In fact, the Rawang toll is only 28km from both Kuala Lumpur s Jalan Duta toll and Petaling Jaya s Damansara toll, which are reachable within an estimated 20 minute drive time. Meanwhile, KTM Rawang is the terminal station of the KTM Komuter s Rawang-Seremban route, which has now been extended north as far as Tanjung Malim. 5

6 With ready amenities and facilities nearby, M Residence 3 is potentially another quick turnaround project of the Group, replicating the success of M Residence and M Residence 2. It is surrounded by mature neighbourhoods, which presents residents with easy access to established public amenities such as schools like SMK Taman Desa, SK Taman Desa and SK Taman Desa 2; and shopping complexes including AEON Bandar Anggun, TESCO hypermarket and Giant Rawang. Residents also benefit from the ongoing upgrading of roads and existing public transport services that ply the Kuala Lumpur-Rawang route. 4. PROSPECTS AND RISK FACTORS 4.1 Malaysian economic overview and outlook While domestic demand in the Malaysian economy has remained strong, the overall growth performance was affected by the weak external sector. In the second quarter, the Malaysian economy expanded by 4.3% (1Q 2013: 4.1%). While domestic demand remained firm, growing by 7.3% (1Q 2013: 8.2%), exports registered a larger decline, amid weakness across most export products. On the supply side, the major economic sectors expanded further in the second quarter, supported by the continued strength in domestic demand. On a quarter-on-quarter seasonally adjusted basis, the economy recorded a growth of 1.4% (1Q 2013: -0.4%). Private consumption expanded by 7.2%, supported by stable employment conditions and sustained wage growth in the domestic-oriented sectors. Public consumption growth improved to 11.1% (1Q 2013: 0.1%), reflecting mainly higher Government spending on supplies and services, and sustained spending on emoluments. For the Malaysian economy, the prolonged weakness in the external environment has affected the overall growth performance of the economy going forward. While domestic demand is expected to remain firm, supported by sustained private consumption, capital spending in the domestic-oriented industries and the ongoing implementation of infrastructure projects, the weak external sector in the first half of this year will affect our overall growth performance for the year. The overall growth of the economy for this year has now been revised to %. Going forward, domestic demand is expected to remain on its steady growth trajectory and will continue to be supported by an accommodative monetary policy. (Source: Bank Negara Malaysia, Economic And Financial Developments In Malaysia In The Second Quarter Of 2013, 21 August,2013) 4.2 Overview and prospects of the property market As elaborated in the box article Developments in Housing Market and Implications on Financial Stability, movements in house prices in Malaysia are largely explained by macroeconomic factors. The widening of the supply-demand gap in residential properties, particularly in the low-to-medium-priced segment and in locations close to and in major employment centres, has contributed to the upward trend in house prices. The effect of medium-term factors, most importantly changes in demography and rate of urbanization, appear to be more pronounced. Over the next few years, the increase in new home buyers is likely to continue, exceeding the average growth in housing stock, notwithstanding measures already announced by the Government to add to new supply which are focused mainly on the low-to-medium-priced segments. Since the second quarter of 2007, demand (using average transacted units as a 6

7 proxy) has consistently outpaced the new supply of houses (as measured by the incremental stock of houses) by a large margin (chart 1.12). Short-term demand factors in particular lower interest rates leading to lower borrowing costs and the higher attraction of property as an asset class and a hedge against inflation have had a smaller relative effect, compared to demographics, on recent movements in house prices. The return on investments in residential properties averaged at about 4.6% over the fourth quarter of 2009 to the second quarter of 2012 (Chart 1.14). This has attracted more investors to the property sector, which is seen as a relatively safe investment given the scarcity of land in prime locations, stable rental yields (outside the Klang valley) and relatively low speculative elements compared with property markets in other countries. (Source: Bank Negara Malaysia, Financial Stability and Payment Systems Report 2012) The Economic Transformation Programme (ETP) will continue to attract both local and foreign investor interest to the Malaysian property sector, said Performance Management and Delivery Unit (Pemandu) chief executive and Minister in the Prime Minister's Department Datuk Seri Idris Jala. Catalysts to pull in the investments include the improved urban public transportation and Entry Point Projects such as the Mass Rapid Transit (MRT), he said. The property landscape will continue to flourish with more jobs created, increased property development and enhanced gross national income (GNI) for the country, shared Idris at the Malaysian Annual Real Estate Convention I am convinced that the property sector will attract interest with many new exciting developments that will help expand our economy, he said. He also said that as income per capita rose to US$15,000 (RM46,605) by 2020, it would have a positive impact on the real estate business, especially in cities, noting that by then, 70% of the local population would be in urban centres. On other mega trends in the property sector, Idris said demand for city-living would continue to rise in line with demand for high-rise buildings and apartments. (Source: ETP to attract local, foreign investors to M'sian property sector by Liz Lee, The Star Online, March ) 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 material risk factors arising from the Proposed Acquisition other than the normal market, business and global economic risks. 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 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 5.2 Earnings The Proposed Acquisition is not expected to have material impact on the earnings of the Group for the financial year ending 31 December 2013 as the proposed development is expected to commence in the second half of The development of the Land is expected to enhance the earnings of the Group in future years. 5.3 Net assets ( NA ) and gearing The Proposed Acquisition is not expected to have material impact on the NA of the Group for the financial year ending 31 December 2013 as the proposed development is expected to commence 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. As set out in Section 2.6 above, the Company intends to fund the Proposed Acquisition and the development cost of the Land through Rights Issue Proceeds/ internally generated funds and/or bank borrowings and that the exact manner in which the Purchase Price will be satisfied has not been finalised, hence the effect of the Proposed Acquisition on the gearing of the Group cannot be ascertained at this juncture. 6. APPROVALS REQUIRED Save as mentioned in Sections above, the Proposed Acquisition is not subject to Mah Sing shareholders or any other governmental authorities approvals. The Proposed Acquisition is not conditional upon any corporate exercise undertaken or to be undertaken by Mah Sing. The highest percentage ratio applicable to the Proposed Acquisition pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 5.5%. 7. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances and subject to the Condition Precedent stated in section herein being fulfilled, the Proposed Acquisition is expected to be completed in the second half of 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. 8

9 9. 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. 10. DOCUMENTS AVAILABLE FOR INSPECTION The Agreement and the Power of Attorney in relation to the Proposed Acquisition 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 3 months from the date of this announcement. This announcement is dated 27 August

10 Appendix 1 Below is the location map of the Land. Source: Google Map ( 10