OSK PROPERTY HOLDINGS BERHAD ("OSKP" OR "THE COMPANY") PROPOSED ACQUISITION BY POTENSI RAJAWALI SDN BHD, A WHOLLY OWNED SUBSIDIARY COMPANY OF OSKP, OF TWO PARCELS OF ADJOINING INDUSTRIAL LAND MEASURING APPROXIMATELY 13.73 ACRES OR 598,408 SQUARE FEET IN TOTAL HELD UNDER GERAN 307507, LOT 10376, SEKSYEN 23, BANDAR SHAH ALAM, DAERAH PETALING AND P.N. 92138, LOT 82162, BANDAR SHAH ALAM, DAERAH KLANG FROM PERNIAGAAN SRI MUJUR MAJU SDN BHD FOR A TOTAL PURCHASE CONSIDERATION OF RM45,419,167.00 ( PROPOSED ACQUISITION ) 1. INTRODUCTION The Board of Directors of OSKP ( Board ) is pleased to announce that Potensi Rajawali Sdn Bhd (Company No. 917572-T) ( PRSB ), a wholly-owned subsidiary of the Company had on 7 March 2012 entered into a Sale and Purchase Agreement ( SPA ) with Perniagaan Sri Mujur Maju Sdn Bhd (Company No. 190532-T) ( PSMM or the Vendor ) for the acquisition of two parcels of adjoining industrial land measuring approximately 13.73 acres or 598,408 square feet in total, held under Geran 307507, Lot 10376, Seksyen 23, Bandar Shah Alam, Daerah Petaling and P.N. 92138, Lot 82162, Bandar Shah Alam, Daerah Klang ( Land ) for a total purchase consideration of RM45,419,167.00 ("Purchase Consideration"), representing approximately RM75.90 per square foot, subject to the Condition Precedent as contained in the SPA (collectively referred to as Proposed Acquisition ). 2. INFORMATION ON THE LAND The details of the Land to be acquired pursuant to the SPA are as follows:- Plot 1 Plot 2 Lot No. Lot 10376 Lot 82162 Title No. GRN 307507 PN 92138 Present Land Area 40,370 square meters 15,224 square meters Mukim Seksyen 23, Bandar Shah Alam Bandar Shah Alam District Petaling Klang State Selangor Selangor Registered Land Perniagaan Sri Mujur Maju Sdn Perniagaan Sri Mujur Maju Sdn Owner Bhd Bhd Tenure Freehold Leasehold (until 18/09/2105) The separate documents of title to the Land are subject to a restriction in interest as Tanah yang diberi milik ini tidak boleh dipindah milik, dipajak atau digadai melainkan dengan kebenaran Pihak Berkuasa Negeri.
The Land is located in an established industrial area occupied by large warehouses and factories known as Taman Perindustrian Subang Utama. The surrounding area of the Land is zoned for light and medium scale industrial factories. The Land has been approved with Development Order for 16 units of semi-detached factories with land sizes and built up ranging from 17,900 to 50,800 and 14,896 to 60,076 square feet respectively. Based on preliminary plans and subject to approval from the relevant authorities, OSKP proposes to revise and enhance the development plan by offering smaller industrial units to increase affordability and saleability. 3. INFORMATION ON PRSB PRSB was incorporated in Malaysia on 10 October 2010 under the Companies Act, 1965 as a private limited company. The principal activities of PRSB are property management and development. The present authorised share capital of PRSB is RM100,000.00 comprising 100,000 ordinary shares of RM1.00 each and the issued and paid-up share capital is RM2.00 comprising two (2) ordinary shares of RM1.00 each. PRSB is a wholly owned subsidiary of OSKP. 4. INFORMATION ON THE VENDOR PSMM is a private limited company incorporated in Malaysia on 8 December 1989 under the Companies Act, 1965 and having its business office at 17, Jalan Pemberita U1/49, Temasya Industrial Park, Seksyen U1/49, Shah Alam, 40150 Selangor. The Vendor has an authorised capital of RM100,000.00 comprising 100,000 Ordinary Shares of RM1.00 each and a paid-up capital of RM1,000.00 comprising 1,000 Ordinary Shares of RM1.00 each. PSMM is principally involved in property development and property investment. 5. DETAILS OF THE PROPOSED ACQUISITION 5.1 Salient Terms and Conditions of the SPA The completion of the sale and purchase of the Land shall be subject to and conditional upon the procurement of the consent of the State Authority to the transfer of the Land in favour of PRSB being obtained within six (6) months from the date of the SPA or such further period as may be mutually agreed in writing between the parties. 5.2 Basis of Arriving at the Purchase Consideration The Purchase Consideration of RM45,419,167.00 was arrived at on a willing-buyer willing-seller basis, after taking into consideration the valuation of the Land of
RM45,500,000.00 which was carried out by a professional valuer firm, Messrs. CH Williams & Talhar based on their valuation dated 14 February 2012. 5.3 Payment of Purchase Consideration 1. Prior to the execution of the SPA, PRSB has paid to the Vendor's Solicitors as stakeholders the sum of Ringgit Malaysia Nine Hundred and Eight Thousand Three Hundred and Eighty Three (RM908,383.00) only being the earnest deposit of two per centum (2%) of Purchase Consideration and towards part payment of the Purchase Consideration. 2. Upon the execution of the SPA, PRSB shall pay to the Vendor's Solicitors as stakeholders the sum of Ringgit Malaysia Five Million Nine Hundred and Four Thousand Four Hundred and Ninety Two and Sen Five (RM5,904,492.05) only, being the balance deposit of thirteen per centum (13%) of the Purchase Consideration. 3. PRSB shall pay the balance of the Purchase Consideration of eighty five per centum (85%) of the Purchase Consideration amounting to the sum of Ringgit Malaysia Thirty Eight Million Six Hundred and Six Thousand Two Hundred and Ninety One and Sen Ninety Five (RM38,606,291.95) only to the Vendor's Solicitors as stakeholders within three (3) months from the date when the SPA becomes unconditional. 5.4 Source of Funding The Proposed Acquisition is to be funded by a combination of internally generated funds and external borrowings. Based on preliminary discussions, the indicative funding from internally generated funds is 15% while indicative funding from bank borrowings is 85%. 5.5 Liabilities to be Assumed Save for the bank borrowings to be procured for the partial payment of the Purchase Consideration in relation to the Proposed Acquisition, there are no liabilities, including contingent liabilities and guarantees, to be assumed by OSKP Group arising from the Proposed Acquisition. 5.6 Estimated Time Frame for Completion The Proposed Acquisition is subject to obtaining the consent of the State Authority to transfer the Land in favour of PRSB and is expected to be completed by the fourth quarter of 2012. 5.7 Information on the Land and its Proposed Development Based on preliminary plans and subject to approval from the relevant authorities, OSKP proposes to undertake industrial development comprising 32 units of semi-detached industrial factories on the Land. The proposed development is expected to have an estimated gross development value of approximately RM127 million.
The Board is unable to procure the net book value of the Land in the financial statements of the Vendor as the Company is not privy to such information. 5.8 Rationale for the Proposed Acquisition The Proposed Acquisition will enable OSKP to diversify its development portfolio to include Small Medium Industrial factories and to expand its geographical coverage to Shah Alam. The Land is situated in an established industrial area occupied predominantly by large warehouses and factories such as Tiong Nam Logistics, Panasonic Factories and Frase & Neave to name a few. The management of OSKP is of the view that there is demand for supplementary services and smaller semi-detached factories which will be priced more affordably at between RM2.0 to RM3.0 million per unit. The Land is also strategically located in close proximity to the Kesas Highway and easily accessible via a comprehensive network of expressways such as the Elite Highway, North Klang Valley Expressway and Kemuning-Shah Alam Highway, making the Land an ideal location for industrial activities. The Proposed Acquisition is both timely and essential as part of the Group s plans to increase its land bank while complementing its strategy to supplement its existing range of developments by offering a wider choice of products. Subject to the necessary development approvals being obtained, the Group targets to launch the development on the Land by the fourth quarter of 2012. 6. PROSPECTS TO OSKP GROUP ARISING FROM THE PROPOSED ACQUISITION Whilst the global economic environment remains challenging and fragile with the ongoing unresolved Euro zone debt crisis and prevailing weaknesses in the US economy, the outlook for the Malaysian economy continues to be positive given its strong economic fundamentals coupled with the Government s effective demand management policies. The Malaysian economy is forecasted to grow in 2012 within the range of 5.0% to 5.5% mainly driven by strong domestic demand, private investment activities and healthy employment levels, supported by a higher export of commodities and resourcebased products. The implementation of the Economic Transformation Programme ( ETP ) and the New Economic Model of the 10th Malaysian Plan are expected to further reinforce growth of the domestic economy. With the Entry Point Project under the ETP which will focus on new Mass Rapid Transit ( MRT ) lines and MRT stations, rapid speed transportation linking key growth areas of Malaysia is expected to propel demand for properties in locations currently deemed less desirable or accessible. Further, with a more convenient mode of transportation, property prices in those areas are expected to be relatively stable.
However, there are risks that growth may be subdued given the uncertain European financial environment where the property sector sentiment could be dampened as fluctuations in raw material costs and rising commodity prices due to removal of government subsidies in Malaysia are expected to impact disposable incomes. Nevertheless, the Group s resources are being reorganised to meet the changing competitive landscape and will continue to pursue innovative sales and marketing initiatives, ensure effective cost control and management of operations in order to sustain and build on current performances in the new financial year. Demand for industrial land in Kuala Lumpur and Selangor has been on an increasing trend since 2009. The number of industrial property transactions in Kuala Lumpur and Selangor had grown from 2,929 in year 2009 to 3,374 in year 2010 and to 2,121 in the first half of 2011 alone. (Source: Property Market Report 2003 2011) In addition, while Shah Alam is an established industrial zone, the price level of industrial land and factories are comparable to that of other new industrial zones such as Belakong and Kajang, hence there is potential for further upside for industrial land and factories in Shah Alam. In view of the above, the management of OSKP is confident of the prospects of the Land and is optimistic that the development on the Land will contribute positively to the earnings of the Group in the near future. 7. RISK FACTORS The Board is not aware of any risk factors arising from the Proposed Acquisition which could materially or adversely affect the financial and operating conditions of the Group other than the normal market and global economic risks. 8. EFFECTS OF THE PROPOSED ACQUISITION 8.1 Share Capital and Substantial Shareholders Shareholding in OSKP The Proposed Acquisition will not have any effect on the issued and paid-up share capital and the substantial shareholders shareholding structure of OSKP as the Purchase Consideration is to be fully satisfied via cash and does not involve any issuance of new ordinary shares in OSKP. 8.2 Net Assets ( NA ), NA Per Share and Gearing The Proposed Acquisition will not have any material effect on the NA and NA per share of OSKP for the financial year ending 31 December 2012. As disclosed in Section 5.4 of this Announcement, the Purchase Consideration will be funded through internally generated funds and/or bank borrowings. Based on preliminary discussions, the indicative funding from internally generated funds is 15% while indicative funding from bank borrowings is 85%.
Based on the audited consolidated financial statements of OSKP Group as at 31 December 2011, the Group s gearing is 0.60 times. Purely for illustrative purposes, assuming 85% of the Purchase Consideration or RM38.6 million is financed through bank borrowings to be procured, the proforma gearing position of the Group is expected to increase to 0.72 times after the Proposed Acquisition. 8.3 Earnings and Earnings Per Share ( EPS ) The Proposed Acquisition is not expected to have any material impact on OSKP Group s earnings and EPS for the financial year ending 31 December 2012. However, the potential future profit contribution arising from the development of the Land is expected to enhance earnings and EPS of the Group in the near future. 9. PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Acquisition is 13% pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. 10. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, Major Shareholders of OSKP and/or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition. 11. DIRECTORS STATEMENT The Board, after having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the OSKP Group. 12. APPROVALS REQUIRED The Proposed Acquisition is not subject to the approval of the shareholders of the Company. 13. DOCUMENTS FOR INSPECTION The following documents will be made available for inspection by members of the Company at the business address of the Company at 9th Floor, Plaza OSK, Jalan Ampang, 50450 Kuala Lumpur, Wilayah Persekutuan during business hours from Mondays to Fridays (except Public Holidays) for a period of three (3) months from the date of this announcement:
i. the SPA signed between PSMM and PRSB dated 7 March 2012 in respect of the Proposed Acquisition; and ii. the Valuation Report dated 14 February 2012 prepared by CH Williams & Talhar in respect of the valuation of the Land pursuant to the Proposed Acquisition. This announcement is dated 7 March 2012.