ENCORP BERHAD ( ENCORP OR THE COMPANY )

Transcription

1 ENCORP BERHAD ( ENCORP OR THE COMPANY ) PROPOSED JOINT VENTURE BETWEEN ENCORP BUKIT KATIL SDN BHD ( EBKSB ), AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF THE COMPANY WITH SINMAH DEVELOPMENT SDN BHD ( SDSB ) VIA SINMAH DEVELOPMENT JV SDN BHD ( SDJSB ), AN INCORPORATED JOINT VENTURE COMPANY, AND THE ASSIGNMENT OF THE DEVELOPMENTAL RIGHTS FOR ACRES OF LAND WITHIN A PARCEL OF LEASEHOLD LAND MEASURING APPROXIMATELY ACRES HELD UNDER PN 43209, LOT NO. 6934, MUKIM BUKIT KATIL, DISTRICT OF MELAKA TENGAH IN THE STATE OF MELAKA ( MASTER LAND ) BY EBKSB TO SDJSB, FOR RM69,654, TO BE SATISFIED BY CASH AND SECURITIES IN SDJSB ( PROPOSED JOINT VENTURE OR THE PROPOSAL ) 1. INTRODUCTION Further to Encorp s announcements on 31 October 2016, 25 January 2017 and 21 April 2017, on behalf of the Board of Directors of Encorp ( Board ), MIDF Amanah Investment Bank Berhad ( MIDF Investment ) wishes to announce that EBKSB had on 8 June 2017, entered into a joint venture and shareholders agreement with SDSB and SDJSB, being the company incorporated as the joint venture company in relation to the joint venture to carry out a proposed mixed development project on acres of the Master Land ( the Land ) ( JVSA ). In conjunction with the Proposed Joint Venture, EBKSB shall assign developmental rights for the Land to SDJSB, which is acquired by SDJSB for RM69,654,443.76, to be satisfied by the following considerations ( Considerations ): (i) (ii) RM6,268, via issuance of 6,268,900 redeemable preference shares ( RPS ) in SDJSB at an issue price of RM1.00 each to EBKSB ( Consideration RPS ); and Cash consideration of RM63,385, to be paid by SDSB and/or SDJSB on staggered basis as detailed out in Sections 2.6.3(d)(i)(bb) and 2.6.3(d)(ii) of this announcement. Further details on the Proposed Joint Venture are set out in the ensuing sections. [The rest of this page is intentionally left blank] 1

2 2. DETAILS OF THE PROPOSED JOINT VENTURE 2.1 The Proposed Joint Venture On 8 June 2017, EBKSB entered into the JVSA with SDSB and SDJSB, whereby EBKSB, as the master developer of the Master Land, shall assign to SDJSB the right to develop the Land. Under the Proposed Joint Venture, SDJSB shall be responsible to develop the Land and to construct and build thereon a development project comprising of inter-alia mix development for commercial and/or other forms of building for commercial purposes which shall include medical college and hospital, and/or housing projects for residential purposes and, a public and private integrated hospital that may be approved by the relevant authorities subject to its category of land use together with necessary public facilities and infrastructure ( the Development or the Project ). Relevant authorities include any government in any jurisdiction, whether federal, state, provincial, territorial or local, any minister, department, office, commission, delegate, instrumentality, agency, board, authority or organisation of any government or in which any government is interested, any non-government regulatory authority, any provider of public utility services, whether or not government owned or controlled and any court in any jurisdiction ( Relevant Authority(ies) ). Pursuant to the JVSA, SDSB is holding 70% shares in SDJSB and the remaining 30% is held by EBKSB. EBKSB will finance the subscription of 29,997 ordinary shares in SDJSB ( Ordinary Shares ) from advances to be received from Encorp which is sourced through internally generated funds. For the purpose of the Development, SDJSB shall pay EBKSB RM69,654, for the acquisition of the developmental rights for the Land as defined in Section 2.6.6(a) of this announcement. The Land consists of two (2) parcels of acres and acres of commercial and residential land, respectively and are proposed to be developed into a mixed development project consisting of: (a) (b) bungalows, Semi-D & link houses ( Bungalows, Semi-D & Link Houses ); and commercial units which shall include medical college and Hospital. The name for the Project has not been determined as of the date of this announcement. The number of units for the building categories will be finalised in due course. The total estimated gross development value, total estimated gross development cost and total estimated gross development profit for the Project is RM865 million, RM417 million and RM172 million, respectively. The Considerations to be paid to EBKSB for the assignment of the developmental rights for the Land was arrived at on a willing-buyer and willing-seller basis and after taking into account, amongst others, the following: 2

3 (a) (b) (c) The market value of the Land as appraised by Raine & Horne International Zaki+Partners Sdn Bhd ( Valuer ), which is free from legal encumbrances, is valued at approximately RM58,100,000, which is equivalent to approximately RM17.11 psf, based on the Valuation Certificate dated 25 May The Valuer has ascribed a market value of RM44,130,000 for the commercial land and RM13,970,000 for the residential land. As stated in the Valuation Certificate, the market value were arrived upon by way of Comparison Method where references are made to recent transactions and sale evidences involving other similar property in the vicinity with due considerations given for factors including location, plot size, improvements made if any, surrounding developments, facilities and amenities available. The Comparison Method of valuation is adopted as the sole method of valuation as the Land does not have detailed planning approvals nor approved building plans. Hence, other methods of valuation are considered not appropriate; The Net Present Value of the Considerations, given that cash payments arising from the Considerations are to be received on staggered basis, whereby it was computed based on a discount rate of 8.51%. The discount rate has been determined after taking into account the capital structure of Encorp and cost of financing based on its Annual Report for financial year ended 31 December 2016 and average cost of equity of Encorp for the past ten (10) years as sourced from Bloomberg; and The outlook of the property sector as well as the prospects and growth potential of the Land as set out in Section 5 of this announcement. Based on the letter dated 31 March 2017 vide Ref. No. MPHTJ/603/06/2016/16 issued by Majlis Perbandaran Hang Tuah Jaya, the application for Kebenaran Merancang has been granted subject to approval from Majlis Perancangan Fizikal Negara and other various technical department. Subsequently, based on the letter dated 18 May 2017 vide Ref. No. MPHTJ/603/06/2016/16 issued by Majlis Perbandaran Hang Tuah Jaya, the application for Permohonan Kebenaran Merancang (Pindaan) has been approved. At the time of this announcement, the master layout plan for the Master Land is in the process of approval endorsement by the state authority. Subject to the issuance of the Development Order and/or kebenaran merancang in respect of the development of the Land and/or the Project as may be approved by the Relevant Authorities ( Development Order or KM ), SDJSB shall with the assistance of SDSB, commence and carry out the Project within one (1) month from the date of SDJSB being granted the Development Rights ( Commencement Date ). The Project is expected to be completed within five (5) years and if required, any period to be mutually agreed in writing by the Parties from the Commencement Date. The financing to finance the Development shall be raised by SDJSB. In the event that further capital is required by SDJSB, such capital needs, subject to the approval of the Board of SDJSB, will be met by any one or more of the following methods: (i) Increase in the issued share capital of SDJSB; 3

4 (ii) (iii) Shareholders advances to SDJSB; and Credit facilities from financial institutions to SDJSB. All payments payable for the Agreed Land Cost (as defined herein in Section 2.6.3(a) of this announcement) pursuant to the JVSA are exclusive of the Main/ Common Infrastructure Cost. 2.2 Details of the Master Land and the Land The Master Land The Master Land is a piece of leasehold land with tenure expiring on 27 January 2096 measuring approximately acres held under PN 43209, Lot no. 6934, Mukim Bukit Katil, District of Melaka Tengah in the State of Melaka. Federal Land Development Authority ( FELDA ), a body incorporated under the Land Development Act 1956 (Act 474) is the registered proprietor of the Master Land. The details of the Master Land are summarised in the table below: Land details Registered proprietor Category land use Express Condition Existing use Proposed use of A piece of land measuring approximately acres held under PN 43209, Lot no. 6934, Mukim Bukit Katil, District of Melaka Tengah in the State of Melaka FELDA Building Untuk bangunan perniagaan sahaja Nil Proposed to be developed with mixed development i.e. commercial and residential development Tenure Leasehold, expiring on 27 January 2096 Encumbrance(s) Net book value as at 31 December 2016 Not stated RM382,794,473 (including interest and development expenditure) [The rest of this page is intentionally left blank] 4

5 By virtue of a master development agreement dated 20 January 2016 made between FELDA and EBKSB ( Master Development Agreement ) together with an irrevocable Power of Attorney dated 20 January 2016 ( Power of Attorney ) which has been duly registered in the High Court of Malaya at Kuala Lumpur on 22 August 2016 and at the Pendaftar Hakmilik Tanah Melaka on 25 August 2016, FELDA has given the full rights and power of attorney in respect of the Master Land to EBKSB to inter alia develop the Master Land in accordance with the terms therein contained, to invite the participation of any third party and/or enter into a joint venture with any third party in carrying out the development. The vacant possession of the Master Land has been delivered to EBKSB by FELDA in accordance with the term and conditions set forth in the Master Development Agreement. EBKSB s total cost of investment in the Master Land as at 31 December 2016 is RM382.8 million The Land The Land, which is part of the Master Land consists of two (2) plots of leasehold land with tenure expiring on 27 January 2096 held under PN 43209, Lot no. 6934, Mukim Bukit Katil, District of Melaka Tengah in the State of Melaka. The total size of the Land is approximately acres and consists of (1) plot of residential land measuring acres and one (1) plot of commercial land measuring acres, respectively. The net book value of the Land as at 31 December 2016 is RM46.39 million. The Land has not been issued with separate individual titles yet. Pursuant to the Proposed Joint Venture, the Land is proposed to be developed into a mixed development project consisting of Bungalows, Semi-D & Link Houses and commercial unit which shall include medical college and hospital. In relation to the Proposed Joint Venture, the Land has been valued by the Valuer, with a total Market Value of RM58,100,000 as at 9 May 2017 which was arrived at following an assessment based on the Comparison Method. As stated in the Valuation Certificate dated 25 May 2017, the amount was arrived upon by way of Comparison Method where references are made to recent transactions and sale evidences involving other similar property in the vicinity with due considerations given for factors including location, plot size, improvements made if any, surrounding developments, facilities and amenities available. 2.3 Background information on EBKSB EBKSB is a wholly-owned subsidiary of Encorp Must Sdn. Bhd., which in turn is a wholly-owned subsidiary of the Company. EBKSB is a private limited company incorporated in Malaysia on 14 December 2015 under the Companies Act, EBKSB has an issued share capital of RM2.00 comprising two (2) ordinary shares. The principal activity of EBKSB is property development. 5

6 2.4 Background information on SDSB SDSB is a wholly-owned subsidiary of Sinmah Capital Berhad (formerly known as Farm s Best Berhad). SDSB is a private limited company incorporated in Malaysia on 3 May 1990 under the Companies Act, SDSB has an issued share capital of RM13,500,000 comprising 13,500,000 ordinary shares. The principal activity of SDSB is property development. 2.5 Background information on SDJSB As at the date of the JVSA, SDJSB is seventy percent (70%) owned by SDSB and thirty percent (30%) owned by EBKSB whereas both SDSB and EBKSB hold seven (7) and three (3) Ordinary Shares each. EBKSB and SDSB shall further subscribe in cash for 29,997 Ordinary Shares for total issue price of RM29,997 and 69,993 Ordinary Shares for total issue price of RM69,993, respectively. In addition, SDJSB shall issue 6,268,900 RPS to EBKSB at the issue price of RM1.00 for the 30% of the Initial Agreed Land Cost (as defined herein in Section 2.6.3(d)(i) of this announcement). Eventually, SDJSB will have an issued share capital of RM6,368,900 comprising 100,000 Ordinary Shares and 6,268,900 RPS. The percentage of Ordinary Shares held by EBKSB and SDSB shall be 30% and 70%, respectively. The Directors of SDJSB are as follows: Name Dato Fong Kok Yong Datuk Fong Kiah Yeow Designation Company Director Company Director The historical financial information of SDJSB is not available since SDJSB was only incorporated on 7 June Salient terms of the JVSA For the purpose of this Section, the definitions used in the JVSA shall apply. In the event of discrepancies arising between the terms of the JVSA and the contents of this announcement for any reason whatsoever, the terms of the JVSA shall prevail. The salient terms of the JVSA include inter alia, the following: Subscription of shares Within thirty (30) days from the date of the JVSA or such other period as mutually agreed by EBKSB and SDSB: 6

7 (i) EBKSB and SDSB shall further subscribe for the following number of Ordinary Shares at the following issue price, in the Agreed Proportion (as defined herein in Section of this announcement): Shareholders of SDJSB ( Shareholders ) Number of ordinary shares Total Issue Price (RM) Percentage of Ordinary Shares Held After Subscription EBKSB 29,997 29,997 30% SDSB 69,993 69,993 70% Total 99,990 99, % (ii) (iii) Both SDSB and EBKSB shall subscribe for the Ordinary Shares allotted to it under Section 2.6.1(i) above in cash; and For the 30% of the Initial Agreed Land Cost (as defined herein in Section 2.6.3(d)(i) of this announcement), SDJSB shall issue 6,268,900 RPS to EBKSB at the issue price of RM1.00 each with a fixed cumulative preferential dividend at the rate of six percent (6%) per annum Agreed proportion The Shareholders must, at all times during the existence of SDJSB, maintain their shareholding in SDJSB in the following proportions or any varied proportion subject to the terms of the JVSA ( Agreed Proportion ): Shareholders Agreed Proportion SDSB 70% EBKSB 30% Unless otherwise mutually agreed, the Shareholders must exercise their voting rights in SDJSB to ensure that, at all times, no unissued Ordinary Shares and/or RPS ( Shares ) are allotted to: (a) (b) any person other than EBKSB and SDSB; and any person that would result in any Shareholder not holding its Agreed Proportion Agreed land cost (a) The Agreed Land Cost for the gross area of the Land, as agreed by SDSB and EBKSB, is RM69,654, ( Agreed Land Cost ). The Agreed Land Cost set out herein shall be binding on EBKSB, SDSB and SDJSB ( the Parties ) and shall not be subject to any further change regardless of any change in the value of the Land in the future. 7

8 Notwithstanding that the position, measurements, boundaries or areas of the Land as indicated in the JVSA or the title deed of the Master Land and other documents may be different from its position, measurement, boundaries or areas as is existing, the position, measurements, boundaries and areas of the Land as given herein are believed but not guaranteed to be correct. It is expressly agreed that if upon final survey there exists a variation in the area of the Land, neither Party shall have any claim whatsoever against the other resulting therefrom. Notwithstanding such variation if any, the JVSA shall continue to subsist, except that if the new area of the Land becomes less than or in excess of zero point two per centum (0.2%) of the original area of the Land resulted from the said variation, the Agreed Land Cost shall be adjusted accordingly based on the new area of The Land. (b) The Shareholders further agree that the Agreed Land Cost shall be contributed in the following proportions: Agreed Land Cost Percentage Land Cost Amount (RM) Initial Agreed Land Cost 30% 20,896, Balance Agreed Land Cost 70% 48,758, Total 100% 69,654, (c) The Land Cost is RM69,654, which is based on the size of the Land area amounting to acres. The said Land Cost shall be reduced or increased in accordance with the actual Land size approved by the Relevant Authority and the price shall be subjected to the land usage as follows: Land Usage Acres Price per square feet Commercial Medical college (10 acres); Hospital (20 acres); and Commercial units (27.89 acres) Total Price (RM) ,955, Residential ,698, Total ,654,

9 (d) The payment terms of Agreed Land Cost are as follows: (i) For Initial Agreed Land Cost A sum of RM20,896, being 30% of the Agreed Land Cost ( Initial Agreed Land Cost ) to be dealt with as follows: (aa) (bb) for a sum of RM6,268, (which is equivalent to 30% of the Initial Agreed Land Cost), SDJSB shall issue 6,268,900 RPS to EBKSB; the remaining sum of RM14,627,433.13, being the balance of the 70% of the Initial Agreed Land Cost, shall be paid by SDSB in cash to EBKSB in the following manners: (i) (ii) (iii) a sum of RM975, to be paid upon execution of the JVSA; a sum of RM3,900, shall be paid by SDSB to EBKSB within thirty (30) days from the date of the execution of the JVSA, being the partial payment for the Initial Agreed Land Cost; and a balance sum of RM9,751, shall be paid by SDSB and/or SDJSB (as the case may be) to EBKSB within ninety (90) days from the date of all the conditions precedent of the JVSA is completed. The above amounts (bb)(i), (ii) and (iii) shall be treated in the books of SDJSB as a shareholder s advance by SDSB. SDJSB hereby authorizes SDSB to make such payments directly to EBKSB. [The rest of this page is intentionally left blank] 9

10 (ii) For Balance Agreed Land Cost The Balance Agreed Land Cost of RM48,758, (which is equivalent to 70% of the Agreed Land Cost) shall be paid to EBKSB by SDSB and/or SDJSB (as the case may be), at the option of SDSB in accordance to the payment schedule below: Date for payment Percentage from Land Cost Amount (RM) First Payment is due and payable at on/before the end of 12th months calendar period after the payment under Section 2.6.3(d)(i)(bb)(iii) is paid Second Payment due and payable on/before the end of 12th months after First Payment above is paid Third Payment due and payable on/before the end of 12th months after the Second Payment above is paid Fourth Payment due and payable on/or before the end of 12th months after the Third Payment above is paid Fifth Payment due and payable on/or before the end of 12th months after the Fourth Payment above is paid 10% 6,965, % 6,965, % 13,930, % 6,965, % 13,930, % 48,758, (aa) SDJSB may utilise the revenue gained from the sale of individual units of the residential and commercial projects developed by SDJSB ( Development Proceeds ) to make the payment towards the Balance Agreed Land Cost to EBKSB in accordance with the payment terms as stipulated in Section 2.6.3(d)(ii) above. If there is insufficient funds from the Development Proceeds to pay the outstanding Balance Agreed Land Cost when due, SDSB shall advance the payment in the first instance and to recover from the Development Proceeds thereafter and such payment be treated as shareholder s advance to SDJSB. [The rest of this page is intentionally left blank] 10

11 (e) It is hereby agreed between the Parties that any repayment of the shareholder s advance by SDJSB to SDSB shall also trigger the redemption of RPS proportionate to the repayment of the shareholder s advance. For illustrative purpose, repayment of shareholder s advance and redemption of RPS shall be as follows: Outstanding shareholder s advance : for e.g. RM1,000, and the repayment is RM100, Outstanding RPS : for e.g. 1,000 units and the redemption is 100 units. (f) (g) If SDJSB needs to obtain any loan for the parcel it is developing, the particular Land Cost involving the particular parcel would need to be fully paid before that particular Land parcel would be charged. For the purpose of financing from financial institution and/or banks, SDJSB must first obtain the necessary and prior written approval from EBKSB as the beneficial owner of the Land, wherein such approval shall not be unjustifiably withheld by EBKSB. SDJSB shall contribute to the Main/ Common Infrastructure Cost for the Land and responsible to pay all Quit Rent, Assessment and all outgoings on the Land with effect upon SDJSB unconditionally entitled to the development rights on land parcel. Main/ Common Infrastructure means the main/ common infrastructure works be done for the whole development that is to be carried out by EBKSB as part of the Master Land including Access road, Irrigation and drainage, Sewerage, Power Station; among others road and drainage, reservoir, water sewerage plant tank, TNB substation, sewerage treatment plant, oxidation sewerage plant pond, pencawang masuk utama (PMU), pencawang pembahagian utama (PPU) and public amenities including the low cost/ affordable home component, school, balai bomba and mosque and all other infrastructure, facilities, utilities and amenities as required or approved by the Relevant Authorities which are required to be constructed, or to be surrendered and maintained on the Development ( Main/ Common Infrastructure ). All payments payable for the Agreed Land Cost pursuant to the JVSA are exclusive of the Main/ Common Infrastructure Cost. (h) The Scheduled payment as agreed between the Parties shall and must be paid accordingly and any non-payment of the agreed sum for the respective years shall be subject to eight per centum (8%) interest on daily basis, and to be calculated per annum Effective Date and Condition Precedent The JVSA shall come into force and effect on the date of the JVSA. However, subject always to the following condition precedent being satisfied: 11

12 (a) (b) (c) The Payment as mentioned in Sections 2.6.3(d)(i)(bb)(i) and (ii) above is paid by SDSB to EBKSB; The Deed of Assignment to assign the Development Rights to SDJSB is executed; and Board of directors and/or shareholders approval of EBKSB and SDSB (including the approval of the shareholders of EBKSB s and SDSB s Holding Company if required by law or the listing requirements of Bursa Malaysia Securities Berhad),in relation to the joint venture between the Parties within six (6) months of the date of signing of the JVSA or anytime later to be mutually agreed between the Parties Objectives of SDJSB SDJSB will be the development company to develop the Land as a mixed development subject to the requirements as may be determined by the Relevant Authorities and the objectives and business of SDJSB shall be: (i) (ii) (iii) (iv) (v) (vi) to acquire the Developmental Rights from EBKSB; to invest in and fund the Agreed Land Cost; to invest in and fund the Project; to undertake the development of the Project on the Land pursuant to and in accordance with the provisions of the JVSA; subject to prevailing market conditions, to sell commercial and residential units ( the Units ); and to perform and fulfil all acts, matters and things as may be consistent with, necessary for and incidental to the attainment of the objectives of SDJSB and all other provisions of the JVSA. (collectively as Objectives ). SDJSB shall not undertake any business other than the above without the unanimous consent of the Shareholders Obligations of EBKSB EBKSB shall: (a) upon the payment of RM14,627, to EBKSB being payment mentioned in Section 2.6.3(d)(bb) above of the Land Cost, assign to SDJSB the following developmental rights in relation to the Land and the Development (hereinafter referred to as the Developmental Rights ): 12

13 (i) (ii) (iii) (iv) (v) The right to design, develop, build and complete the Development on the Land in such manner as SDJSB deems fit; The right to manage and implement the Development including the appointment of all consultants, advisers, contractors and suppliers in relation to the Development; The right to deal with the Land or any part of the Land including to dispose of the component comprised in the Land or otherwise deal with the same in such manner as SDJSB deems appropriate; The right to receive, collect, retain and demand all proceeds and/or profits derived from the sale of the components comprised in the Development; and The right to do and/or execute all such acts, matters and/or things relating to the Development and the Land which are necessary for and/or incidental to the attainment of any of the foregoing objectives. (b) (c) (d) (e) (f) obtain its board of directors and/or shareholders approval (including the approval of the shareholders of EBKSB s Holding Company if required by law or the listing requirements of Bursa Malaysia Securities Berhad) for the joint venture between the Parties and for the subscription of Shares in SDJSB; The Developmental Rights shall be assigned to SDJSB by EBKSB by way of executing a Deed of Assignment and shall contain the power of attorney for the purpose of giving effect to SDJSB s obligations and covenants under the JVSA including any application, plans, drawings and other document necessary or relevant to the applications for the change of the category of name used and issuance of individual titles in respect of the Land and for the development of the Land and the construction of the buildings thereon and the sale or sales of the subdivided building lots; To submit on behalf of SDJSB any application to the Relevant Authority with regard to the Development (if applicable); Assist and procure FELDA and/or SDSB (as the case may be) to obtain the subdivided title deed(s) in respect of Site, for the purpose of the Development. For avoidance of doubt, SDJSB shall bear the premium cost for the conversion of land use and SDJSB shall prepare the application for surrender and realieanation to be submitted by SDSB, and bear any other costs and expenses relating to the application of surrender and realienation pursuant to this clause and such cost by SDSB shall be treated as a shareholder s advance to SDJSB; to deliver possession of the Land on as is where is basis within thirty (30) days upon receipt of the approval from the Relevant Authorities; 13

14 (g) (h) (i) (j) to execute any relevant documentations to enable SDSB and/or SDJSB to obtain a valid Advertisement Permits and Developer License as required under the Housing Development (Control & Licensing) Act, 1966 or other relevant laws for the Residential Units; allow and give full liberty to SDSB and/or SDJSB alongside its excavators, lorries, equipment, machineries, sub-contractors and workmen to enter the Land for the purpose of the Project; to render every assistance to SDSB and/or SDJSB to deal with the Relevant Authorities to expedite the approval of the various plans permits and issuance of the same for the Project; and shall grant SDSB and/or SDJSB the sole and exclusive right to carry out the Project upon obtaining the necessary approvals, consent or licenses from the Relevant Authority, immediately and without undue delay Obligations of SDSB SDSB shall: (a) (b) (c) (d) (e) (f) Obtain its board of directors and/or shareholders approval (including the approval of the shareholders of SDSB s Holding Company if required by law or the listing requirements of Bursa Malaysia Securities Berhad) for the joint venture between the Parties and for the subscription of Shares in SDJSB within six (6) months of the date of signing of the JVSA or anytime later to be mutually agreed between the Parties; Pay EBKSB the Agreed Land Cost in accordance with the terms of the JVSA; To study and deliberate the Integrated Township Development Masterplan, to be carried out by SDJSB in line with EBKSB s aspiration and commercial objectives; To develop and present a comprehensive investment proposal outlining the business model propositions, cash flow requirements and anticipated gross development value within three (3) months from the date of execution of the JVSA (hereinafter referred to as the Development Proposal ) to EKBSB; To develop and present a comprehensive Development Proposal outlining inter alia Development commencement date, timeframe for relevant stages of construction works and anticipated completion date within one (1) month from the date of execution of the JVSA (hereinafter referred to as the Development Timeline ) to EBKSB; To manage and coordinate the development and progress according to Integrated Township Masterplan and the Development Timeline; and 14

15 (g) To jointly develop and construct the Development in accordance to the Integrated Township Development Masterplan with EKBSB as per the agreed Investment Proposal, Masterplan and Development Timeline Financing (a) (b) (c) The Parties agree that SDJSB shall be used to raise financing to finance the Development of the Land. The Parties agree that SDJSB must use all reasonable endeavours to ensure that the Board of SDJSB adopts a budgeted project costs and projected revenue for the Project ( Financial Project Statement ). The Financial Project Statement must identify the amount of any financing that SDJSB will need to apply for from a bank or other financial institution to finance the Project. The Parties also agree that, in the event that further capital is required by SDJSB, such capital needs, subject to the approval of the Board, will be met by any one or more of the following methods: (i) (ii) (iii) Increase in the issued share capital of SDJSB; Shareholders advances to SDJSB; and Credit facilities from financial institutions to SDJSB. (d) (e) (f) Should the board of SDSB resolve that Section (c) (ii) above is applicable in any given situation, the said Shareholders advances to the SDJSB shall carry six per centum (6%) per annum of interest, on monthly rest, compounding yearly at the end of each year (or pro rated by number of days of that year thereof if applicable) payable by SDJSB to any party whom had extended such advances to the SDJSB. The Parties agree that in the event that SDJSB needs to obtain loan for the development of the Project, the Land may be charged to the third parties and/or financial institutions provided that the Agreed Land Cost (or any part thereof which has paid and subdivided as the case may be) has been fully paid by the Parties. The Parties further agree that upon subdivision of the Land, the title for such divided Land may be charged to the said third parties and/or financial institutions provide always that the Agreed Land Cost proportionate to the said subdivided Land has been fully paid by SDJSB and/or SDSB (as the case may be) to EBKSB. The Parties agree that in the event that the corporate guarantee is required by the financial institution as security for the financing of the Development of the Land, the guarantee shall be provided first by SDSB and only if required by the financial institution, EBKSB would provide guarantee up to its proportion of shareholdings in SDJSB. 15

16 2.6.9 Indicative Terms for the RPS The indicative terms of the RPS are as follows: Terms Issuer Issue price Tenure Conversion Rights dividend Entitlement receive notice Redemption rights to to Description SDJSB RM1.00 per RPS Five (5) years from the date of the issuance. The holders of RPS shall not have the right to convert any of their RPS into Ordinary Shares under any circumstances whatsoever. SDJSB is entitled to declare dividend at the sole discretion of SDJSB. Any dividends payable to RPS holders should rank in priority to all dividends payable to shareholders in respect of Ordinary Shares. EBKSB shall be entitled to receive a fixed cumulative preferential dividend at the rate of six per centum (6%) per annum. The holders of the RPS shall have no right to receive notice of or to attend any general meeting of SDJSB, other than in respect of any of the following events: (i) (ii) (iii) (iv) (v) (vi) any proposal that affects the rights and privileges of the RPS holders; any proposal to wind up SDJSB; during the winding up/liquidation of SDJSB; any variation or abrogation of the rights and privileges attaching to the RPS; any proposal to reduce SDJSB s share capital; and in such other circumstances as may be provided under law and applicable to preference shares and/or preference shareholders from time to time. In the above cases, the holders of RPS shall be entitled to vote and each RPS shall bear one vote. (i) The RPS issued shall carry a right to redemption at the option of SDJSB based on the provisions of the Companies Act 2016 and be redeemed from within five (5) years from the date of issuance or at the end of the Project or whichever is earlier upon a prior notice having given by SDJSB to the holders of RPS therefore, at the Redemption Price. Only fully paid RPS are entitled to be redeemed; and (ii) Any repayment of the shareholder s advance by SDJSB to SDSB shall also trigger the redemption of RPS proportionate to the repayment of the shareholder s advance. For illustrative purpose, repayment of shareholder s advance and redemption of RPS shall be as follows: Outstanding shareholder s advance : for e.g. RM1,000, and the repayment is RM100, Outstanding RPS : for e.g. 1,000 units and the redemption is 100 units. 16

17 Terms Redemption price Redemption period Rights upon winding-up, dissolution or liquidation Description At a redemption price of RM1.00 per RPS. Within five (5) years from the date of issuance or at the end of the Project whichever is earlier upon a prior notice having given by SDJSB to the holders of RPS In the event of liquidation, dissolution or winding-up (other than for reasons due to insolvency) of SDJSB, the holders of the RPS shall be entitled to have assets of SDJSB available for distribution among the members and/or receive cash repayment in full of the subscription price paid up on the RPS, held in hand prior to any distribution to the holders of the Ordinary Shares. 2.7 Consideration for the Agreed Land Cost The consideration for the Agreed Land Cost of RM69,654, shall be satisfied in the following manner: (i) (iii) RM6,268, via issuance of 6,268,900 RPS at an issue price of RM1.00 each to EBKSB ( Consideration RPS ); and Cash consideration of RM63,385, to be paid by SDSB and/or SDJSB on staggered basis as detailed out in Sections 2.6.3(d)(i)(bb) and 2.6.3(d)(ii) of this announcement Basis and justification of arriving at the issue price for the Consideration RPS The issue price for the Consideration RPS has been determined at RM1.00 to round the portion for the Agreed Land Cost which is to be satisfied by the Consideration RPS to the nearest RM Ranking of the Consideration RPS The Consideration RPS shall rank pari passu among the RPS in respect of the right to receive dividends out of distributable profits Retention of the Consideration RPS The Consideration RPS is to be retained by Encorp and may be redeemed over the tenure of the RPS at the option of SDJSB. 2.8 Liabilities to be assumed There are no liabilities including contingent liabilities and/or guarantees to be assumed by Encorp or EBKSB pursuant to the Proposed Joint Venture. 17

18 3. PROPOSED UTILISATION OF PROCEEDS The total estimated proceeds from the Agreed Land Cost of RM69.65 million which are to be received on staggered basis from the date of the JVSA are expected to be utilised by Encorp for payment to FELDA in respect of the acceptance of development rights for the Master Land in accordance with the Master Development Agreement. 4. RATIONALE FOR THE PROPOSED JOINT VENTURE Encorp, via EBKSB has accepted the developmental rights to develop the Master Land from FELDA and it is the intention of Encorp to develop the said land into an integrated township comprising both commercial and residential development. Given the strategic location of the land at the heart of Melaka, Encorp believes that the Master Land has a strong growth potential. Pursuant to the above, Encorp is undertaking the Proposed Joint Venture to embark on the development of the Master Land of which the Proposed Joint Venture would serve as a forum for collaboration between the Parties to form a strategic alliance for the Development. The Proposed Joint Venture would enable EBKSB to commence the development of the Land without incurring massive capital outlay and allow both parties to tap into each other strength and expertise. In addition, the Proposed Joint Venture would also unlock partially the value of the Master Land subsequent to the completion of acceptance of the rights to develop the Master Land in Based on the foregoing, the Encorp Group is expected to benefit from the Proposed Joint Venture which is expected to contribute positively towards the future financial performance of the Encorp Group. 5. PROSPECTS OF THE PROPOSED JOINT VENTURE 5.1 Overview and prospects of the Malaysian economy The Malaysian economy grew by 4.5% in the fourth quarter of 2016 (3Q 2016: 4.3%), underpinned by continued expansion in private sector expenditure. On the supply side, growth continues to be driven by the manufacturing and services sectors. On a quarteron-quarter seasonally-adjusted basis, the economy recorded a sustained growth of 1.4% (3Q 2016: 1.4%). Overall, domestic demand expanded at a more moderate pace, as the sustained growth in private sector expenditure was partly offset by the decline in public expenditure. In the fourth quarter, private consumption grew by 6.2% (3Q 2016: 6.4%), supported by continued wage and employment growth. Private investment registered a growth of 4.9% (3Q 2016: 4.7%), following continued capital spending in the services and manufacturing sectors. Growth of public investment improved mainly on account of higher spending on fixed assets by public corporations, but nevertheless, remained in contraction during the quarter. Public consumption also declined by 4.2% (3Q 2016: +2.2%) arising from the rationalisation of spending on supplies and services and a moderation in the growth of spending on emoluments. On the external front, net exports contributed positively to growth as real exports expanded at a faster rate than real imports. 18

19 On the supply side, growth in the manufacturing, mining and agriculture sectors improved. The manufacturing sector expanded at a faster pace owing to higher growth in both domestic and export-oriented industries. The mining sector recorded an improvement due to the increase of natural gas production during the quarter. In the agriculture sector, economic activity contracted at a slower pace, reflecting the diminishing impact of El Niño on crude palm oil yields. Growth in the services sector continued to expand, albeit at a more moderate pace, supported mainly by consumptionrelated services. In the construction sector, growth remained driven by the civil engineering subsector. Inflation, as measured by the annual change in the Consumer Price Index (CPI), increased to 1.7% in the fourth quarter of 2016 (3Q 2016: 1.3%), driven mainly by upward adjustments to domestic fuel prices during the quarter. Inflation in the transport category registered a smaller negative inflation of 2.6% during the quarter (3Q 2016: - 7.4%). The inflationary impact was, however, mitigated by the lower inflation in the alcoholic beverages and tobacco category (6.6%; 3Q 2016: 19.7%) due to the lapse in the impact of the upward revision in cigarette prices in the base period of 4Q For the year as a whole, inflation averaged 2.1% (2015: 2.1%). In 4Q 2016, the current account surplus widened, due mainly to a higher trade surplus and narrower deficits in the income accounts. As at 31 January 2017, the reserves position amounted to USD95.0 billion (equivalent to RM426.0 billion). The international reserves remain ample to facilitate international transactions. They are sufficient to finance 8.6 months of retained imports, significantly higher than the 3-month international threshold. The reserves level is also adequate to meet external obligations given the reserves to short-term external debt coverage of 1.1 times. It is important to note that not all short-term external debt creates a claim on reserves given the availability of external assets and export earnings of borrowers. (Source: Economic and financial developments in Malaysia in the Fourth Quarter of 2016, quarterly bulletin, fourth quarter of 2016, BNM) 5.2 Overview and outlook of Melaka and Malaysian Property Market Melaka 2016 Property Market Activity The state s property market continued to moderate in There were 14,525 transactions worth RM4.21 billion, indicating a contraction of 8.5% in volume and 6.1% in value against The residential property remained the leading sub-sector, dominating 64.1% of overall market activity, followed by agricultural sub-sector with 18.8% share. Market activity was down in all sub-sectors except for agriculture. Residential sub-sector was down by 9.6%. commercial 19.7%, industrial 27.3% and development land 5.6% whereas agriculture increased by a mere 3.2%. Value of transactions also showed similar movement pattern. (Source: Property Market Report 2016 by the National Property Information Centre, Valuation & Property Services Department, Ministry of Finance Malaysia) 19

20 Melaka 2017 Outlook Housing sector will continue to top the state s main agenda. The development of Rumah Mesra Rakyat Melaka ( RMRM ) and PR1MA would help address housing affordability issues in the state. In the coming year, 1,177 units of RMRM are expected to complete while another 2,289 units are under construction. The Melaka Guangdong collaboration on Melaka Gateway is anticipated to entail inward investments as well as more tourists arrivals into the state, which would then boost the local economy. On the commercial front, the Hang Tuah Melaka Commercial Centre, located on a 284- hectare site along Jalan Hang Tuah, is the main component of 2050 Melaka Transformation Plan. The long-term integrated development would help spur the commercial property segment in the future. High Speed Rail (HSR) project which would pass through the state is another forwardlooking mega infrastructure project for the betterment of the state s economy and property market. (Source: Property Market Report 2016 by the National Property Information Centre, Valuation & Property Services Department, Ministry of Finance Malaysia) Malaysia 2016 Property Market Activity The uncertainty enfolding the global political scene coupled with the low domestic economic growth have also taken its toll on the property market. The year recorded 320,425 transactions worth RM billion, indicating a decline of 11.5% in volume and 3.0% in value against 2015 (2015: 362,105 transactions worth RM billion). Residential sub-sector dominated the overall market, with 63.4% contribution in volume and 45.1% in value. This was followed by agriculture (21.6%), commercial (7.4%), development land (5.9%) and industrial (1.8%). There were 203,064 transactions (2015: 235,967) worth RM65.57 billion (2015: RM73.47 billion) recorded for residential properties in the review period, which declined by a higher rate of 13.9% in volume and 10.7% in value as compared with For commercial properties, there were 23,745 transactions where RM35.99 billion was recorded, down by 25.3% in volume but value increased by 36.1% as several prominent sales were recorded in the year involving office buildings, shopping complexed and hotels. The industrial sub-sector recorded 5,609 transactions (2015: 7,046), down by 20.4% in volume but increased by a mere of 0.4% in value. (Source: Property Market Report 2016 by the National Property Information Centre, Valuation & Property Services Department, Ministry of Finance Malaysia) [The rest of this page is intentionally left blank] 20

21 Malaysia 2017 Outlook The 2016 conundrums are expected to be reverberate onto It would be expected that the property market would take a breather in the next couple of years before it could make a comeback. Nevertheless, the 4.2% GDP growth indicated the economy was still growing despite the challenging global and domestic environment and should post a silver lining to the property market. Apart from that, the decision by Bank Negara Malaysia to maintain the Overnight Policy Rate (OPR) at 3% would ensure that monetary policy is accommodative and supportive of economic at large and property industry. The allocation of RM2.1 billion for infrastructure and socioeconomic development in the five (5) economic corridors, namely Iskandar Malaysia, Northern Corridor Economic Region (NCER), East Coast Economic Region (ECER), Sabah Development Corridor (SDC) and Sarawak Corridor of Renewable Energy (SCORE) would help support the property market activity. The operation of MRT Sungai Buloh Kajang MRT line (Phase 1) in December 2016 and July 2017 (Phase 2) would enhance accessibility and improve marketability of areas along the line routes. The signing of MoU between Malaysia and Singapore for the High-Speed Rail (HSR) project marked a historical milestone for the country. The HSR which is expected to pass through six transit locations namely Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat and Iskandar Puteri, will cut the travel time between Kuala Lumpur and Singapore to 90 minutes. Another major game-changer is the East Coast Rail Link (ECRL), which runs from Port Klang across Pahang, Kelantan and Terengganu, is expected to improve connectivity from 12-hour journey by road to a four-hour one by rail. Both rail projects would change the economic landscape of the adjacent vicinity and entail better prospects for the property market. (Source: Property Market Report 2016 by the National Property Information Centre, Valuation & Property Services Department, Ministry of Finance Malaysia) 5.3 Overview and outlook of the Development of the Land Pursuant to the Proposed Joint Venture, the Parties intend to develop the Land into a mixed development project comprising residential housing and commercial buildings which shall include medical college and hospital. Over the years, the area surrounding the Land has been developed with notable residential neighborhoods which amongst others include Vista Kirana, Taman Ozana Impian, Melaka Perdana Resort Homes, Taman Bukit Katil Damai, Ozana Villas, Country Villas Resort, Taman Saujana Indah and Taman Saujana Permai. Given the ideal location of the Land for similar development and accessibility via Jalan Tun Hamzah, one of the main arterial roads linking Bukit Katil area with Ayer Keroh development neighbourhoods, the Board expects that the prospect for the development on the Site to be favourable. 21

22 Based on the foregoing, the Board is of the view that the Proposed Joint Venture will contribute positively towards the performance of the Encorp Group as it will unlock the value of the Land and that the Encorp Group shall benefit from the development to be undertaken over the period of the Project. 6. RISK FACTORS The Proposed Joint Venture is subject to the terms and conditions of the JVSA. There is no assurance that the Proposed Joint Venture will not be exposed to risks such as inability to fulfil the terms and conditions of the JVSA. The Project may be subject to normal operational risks inherent in the property development industry. EBKSB, SDSB and SDJSB will take the necessary steps to mitigate the risks as and when it arises. 7. FINANCIAL EFFECTS OF PROPOSED JOINT VENTURE 7.1 Share Capital and substantial shareholders shareholding The Proposed Joint Venture will not have any effect on the share capital and number of issued shares and the substantial shareholders shareholdings of Encorp as the Proposed Joint Venture does not involve the issuance of new shares in Encorp. 7.2 Net Asset ( NA ) per share and gearing The Proposed Joint Venture will not have any material effect on the NA per share and gearing of Encorp and its subsidiaries ( Encorp Group ) save for a gain arising from the payment of the Agreed Land Cost. The Project when completed is expected to increase the NA per Share of the Encorp Group, the effect of which will depend on the timing of recognition of revenues and expenses in accordance with the stages of completion of the Project. The proforma effects of the payment of the Agreed Land Cost on the consolidated net assets and gearing of Encorp based on its audited consolidated financial statements for the financial year ended 31 December 2016 are as set below: [The rest of this page is intentionally left blank] 22

23 (1) (2) Audited as at 31 After the payment of the December 2016 Agreed Land Cost RM 000 RM 000 Share capital 278, ,648 Share premium 104, ,302 Treasury shares (327) (327) Foreign currency translation reserve Retained earnings 39,199 50,377 Shareholders funds/ NA 422, ,180 No. of Encorp Shares ( 000) 278, ,648 NA per Share (RM) Borrowings (RM 000) 1,158,664 1,158,664 Gearings (times) Earnings and earnings per share ( EPS ) Encorp Group is expected to realise a net gain (after deducting estimated expenses) of approximately RM11.18 million or 4.01 sen per share for FYE 2017 arising from the Net Present Value derived from the staggered payment of the Agreed Land Cost. The Project is expected to contribute positively to Encorp Group s future earnings. 8. APPROVALS REQUIRED The Proposed Joint Venture is not subject to the approval of the shareholders of Encorp. 9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED None of the Directors, major shareholders of Encorp and/or persons connected to them has any interests, whether direct or indirect, in the Proposed Joint Venture. 10. STATEMENT BY THE BOARD The Board, after having considered all aspects of the Proposed Joint Venture, is of the opinion that the Proposed Joint Venture is in the best interest of the Company. 23