TYPE: ANNOUNCEMENT SUBJECT: TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) - NON RELATED PARTY TRANSACTIONS DESCRIPTION: M K LAND HOLDINGS BERHAD ( M K LAND OR THE COMPANY) - DISPOSAL OF NINE PARCELS OF LEASEHOLD LAND MEASURING APPROXIMATELY 195.84 ACRES LOCATED AT MUKIM OF KAMUNTING, DISTRICT OF LARUT AND MATANG, NEGERI PERAK OWNED BY DOMINANT STAR SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF M K LAND FOR A TOTAL CASH CONSIDERATION OF RM72.0 MILLION ("DISPOSAL"). 1. INTRODUCTION The Board of Directors of M K Land wishes to announce that Dominant Star Sdn Bhd ( DSSB ), a wholly-owned subsidiary of M K Land has on 8 May 2017 entered into two Sale and Purchase Agreements ( SPAs ) with KL Teh Land and Development Sdn Bhd ( Purchaser ) for the disposal of the following land for a total cash consideration of RM72.0 million ( Disposal Consideration ): (a) (b) six (6) parcels of leasehold land held under six (6) separate Issue Document of Title i.e. PN 284569 Lot 12034, HS (D) 33221 PT 4415, PN 284572 Lot 12037, PN 383139 Lot 20939, PN 347406 Lot 12069 and PN 386481 Lot 20860 in Mukim of Kamunting, District of Larut and Matang, Negeri Perak measuring in total approximately 33.56 acres for RM9.0 million ( Land 1 ); and three (3) parcels of leasehold land held under three (3) separate Issue Document of Title i.e. PN 284550 Lot 12033, PN 347394 Lot 12067 and PN 347393 Lot 12068 in Mukim of Kamunting, District of Larut & Matang, Negeri Perak measuring in total approximately 162.28 acres for RM63.0 million ( Land 2 ). Land 1 and Land 2 are collectively referred to as the Land or Properties. 2. DETAILS OF THE DISPOSAL Subject to the terms and conditions of the SPAs, DSSB agreed to sell and the Purchaser agreed to purchase from DSSB the Land free from all charges, encumbrances, liens, caveats and trusts on an as is where is basis and in its present state and condition and with vacant possession but subject to such conditions and restrictions-in-interests in the Issue Document of Title imposed by the appropriate state authority having jurisdiction over the Land or any parts thereof ( Appropriate Authority ) or other authority on the Land whether express or implied at the total consideration of RM72.0 million only. 2.1 Background information on Dominant Star Sdn Bhd DSSB is a private company incorporated in Malaysia and it has an issued share capital of RM1,136,000. DSSB is a wholly-owned subsidiary of M K
Land. The principal activities of DSSB are property development, owner of hotel and golf course and investment holding. The Directors of DSSB are as follows: (a) Pn Hjh Felina Binti Tan Sri Datuk (Dr.) Hj Mustapha Kamal; and (b) Mr Hong Hee Leong 2.2 Background Information on the Purchaser The Purchaser is a private limited company incorporated in Malaysia and it has an issued share capital of RM2,000,002. The principal activities of the Purchaser are property development and investment holdings. The Directors and shareholders of the the Purchaser are as follows: (a) Mr Teh Kok Lim; and (b) Ms Ong Soo Fen 3. INFORMATION ON THE PROPERTIES The details of Properties are set out as follows: a. Particulars of the Titles of Land 1: Title no. PN 284569 Lot 12034 HS(D) 33221 PT 4415 PN 284572 Lot 12037 PN 383139 Lot 20939 PN 347406 Lot 12069 PN 386481 Lot 20860 Express conditions Perniagaan Pusat Perdagangan Kediaman Tapak Kediaman Existing Use Location Area (acres) Vacant land for development Mukim of Kamunting, District of Larut and Matang, Negeri Perak Lease expiry date 7.23 26.05.2102 2.80 26.05.2102 1.64 26.05.2102 3.20 26.05.2102 12.11 15.02.2104 6.58 15.02.2104 Total 33.56 - Particulars of the Title of Land 2: Title no. PN 284550 Lot 12033 PN 347394 Lot 12067 PN 347393 Lot 12068 Express conditions Perniagaan Rumah Kelab Bangunan Sukan & Rekreasi (Padang Golf) Pendidikan & Latihan (Kawasan Driving Range) Existing Use Club house Location Area Lease (acres) expiry date 2.93 26.05.2102 Golf course Driving range Mukim of Kamunting, District of Larut and Matang, Negeri Perak 154.17 5.18 15.02.2104 15.02.2104 Total 162.28 - Page 2 of 7
b. Restriction in interest: Each of the Issue Document of Title is subject to the following restrictions-in-interest: Tanah ini boleh dipindah milik atau dipajak dengan kebenaran bertulis oleh Pihak Berkuasa Negeri. c. Encumbrances: The Land is currently not charged to any bank or financial institution and is free from encumbrances. d. Land 2 is a fixed asset of DSSB who had granted a concession to its wholly owned subsidiary, Prominent Valley Berhad ( PVB ) to manage and operate a club membership scheme and offers licenses for sale to the public in accordance with its statement issued pursuant to the Companies Act 1965 as substituted by the Companies Act 2016 ( Act ). Under the SPA for Land 2, DSSB is required to terminate the concession granted to PVB and wind up or caused to be wound up the club membership scheme, prior to the completion of the Disposal. e. Net book value of the Land, carried at fair value based on audited financial statement as at 30 June 2016 was RM8.6 million. Based on the valuation report dated 15 September 2016 as appraised by an independent valuer, Henry Butcher Malaysia (Perak) Sdn Bhd. ( the Valuer ), the current market value of the Land is RM45.5 million. The Valuer has adopted the Comparison method and Cost method in arriving at the market value of the Land. 4. BASIS OF ARRIVING AT AND JUSTIFICATION FOR THE DISPOSAL CONSIDERATION The Disposal Consideration is arrived at after negotiations on a willing buyer and willing seller basis after taking into consideration the market value of the Land as appraised by the Valuer and potential future earnings from development. The Disposal Consideration will be satisfied in the following manner: Land Deposit (1) (10% of Disposal Consideration) (RM) Balance Purchase Price (90% of Disposal Consideration) (RM) Land 1 900,000 8,100,000 (2) Land 2 6,300,000 56,700,000 (3) Total 7,200,000 64,800,000 Notes: (1) The deposit has been paid upon execution of the SPAs i.e. 8 May 2017. (2) The balance purchase price of Land 1 shall be satisfied within the period of 3 months from the date of state authority approval ( Completion Period 1 ) or an extended period of 1 month commencing immediately upon the expiry of the Completion Period 1. (3) The balance purchase price of Land 2 shall be satisfied within the period of 3 months from unconditional date, being date of which the last of the conditions precedent fulfilled or waived (as the case may be) ( Completion Period 2 ) or an extended period of 1 month commencing immediately upon the expiry of the Completion Period 2. Page 3 of 7
5. SALIENT TERMS OF THE SALE AND PURCHASE AGREEMENTS 5.1 Vendor s Obligation DSSB is required to obtain the State Authority Consent for the transfer of the Land in favour of the Purchaser. 5.2 Conditions Precedent With regard to Land 2, the SPA is also conditional upon and subject to the fulfilment of the following conditions precedent within the period of six (6) months from the date of the SPA with an extended period of six (6) months immediately upon expiration thereof: (a) (b) the dissolution or winding up of the club membership scheme ( Dissolution ). The Dissolution shall be completed upon the winding up of the club membership scheme in accordance with the provisions of the Act. the written approval of the Economic Planning Unit, Prime Minister s Department, for the acquisition of the Land 2 by the Purchaser, if required. 5.3 Remedies of the parties upon Default pursuant to the SPAs (a) (b) (c) In the event that the Purchaser fails or refuses or neglects to complete the purchase of land by the payment of the Balance Purchase Price (or any part thereof) as stipulated in the SPAs, the Deposit shall be absolutely forfeited by DSSB as agreed liquidated damages and DSSB shall within fourteen (14) days thereafter refund to the Purchaser such part of the Balance Purchase Price, if any, paid by the Purchaser to DSSB free of interest and the Purchaser shall within fourteen (14) days from DSSB s notice hand over vacant possession of the Land to DSSB substantially in its originally state and condition (if vacant possession has already been delivered) and return the Memorandum of Transfer and all other evidence of DSSB s title to the Land whereupon the SPAs shall be deemed to be terminated and neither party shall have any claims against the other. In the event that DSSB defaults or wilfully refuses to complete the sale of the Land in accordance with the terms and conditions of the SPAs, the Purchaser shall be entitled at their option to the right of specific performance of the provisions of the SPAs against DSSB. Alternatively, the Purchaser shall be entitled to terminate the SPAs in which event DSSB shall refund without interest, within fourteen (14) days upon such termination, the Disposal Consideration or any part thereof paid by the Purchaser and a further sum of ten percent (10%) of the Disposal Consideration as agreed liquidated damages and the Purchaser shall within fourteen (14) days from DSSB s notice, hand over vacant possession of the Land to DSSB substantially in its original state and condition (if vacant possession has already been Page 4 of 7
delivered) and return the Memorandum of Transfer and all other evidence of DSSB s title to the Land whereupon the SPAs shall be deemed to be terminated and neither party shall have any claims against the other. 6. LIABILITIES TO BE ASSUMED There are no liabilities, including contingent liabilities and guarantees to be assumed by DSSB from the Disposal. 7. ORIGINAL COST OF THE PROPERTIES The original cost and date of acquisition of the Land by DSSB are as follows: Date of acquisition Title no. Original Cost of Investment PN 284550 Lot 12033 8 January 1997 PN 347394 Lot 12067 PN 347393 Lot 12068 PN 284569 Lot 12034 HS(D) 33221 PT 4415 PN 284572 Lot 12037 PN 383139 Lot 20939 PN 347406 Lot 12069 PN 386481 Lot 20860 RM5.65 million * * apportioned based on land area 8. UTILISATION OF PROCEEDS The Disposal Consideration is expected to be utilised by the Group in the following manner: Particular of utilisation Working capital for the Group, corporate tax, real property gains tax and estimated incidental expenses related to the disposal Amount to be utilised (RM million) Timeframe for utilisation of proceeds 47.0 within 24 months Development expenses for on-going and future projects 25.0 within 24 months Total 72.0 - The Disposal is not expected to result in the listed issuer becoming Cash Company or a PN17 Issuer under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Listing Requirements ) The Group is expected to record a net gain of approximately RM32.14 million from the disposal after deducting disposal expenses, taxes and related costs. Page 5 of 7
9. RATIONALE AND BENEFIT FOR THE DISPOSAL The Disposal is part of M K Land Group s streamlining exercise to improve the assets utilisation and overall financial position of the Group. The Board is of the opinion that the Disposal will improve the Group s overall financial and liquidity. 10. FINANCIAL EFFECTS OF THE DISPOSAL 10.1 Issued and paid-up share capital The Disposal will not have any effect on the issued share capital of the Company. 10.2 Net Assets The disposal will not have any material effect on the Net Assets of the Group for the financial year ending 30 June 2017. Upon completion of the Disposal, the Net Asset of the Group will increase by RM32.14 million. 10.3 Earnings The Disposal will not have any material effect on the earnings of the Group for the financial year ending 30 June 2017. Upon completion of the Disposal, the Group is expected to record a net gain of RM32.14 million. 10.4 Gearing The Disposal will not have any material effect on the Gearing Ratio of the Group for the financial year ending 30 June 2017. 10.5 Substantial Shareholders Shareholdings The Disposal will not have any effect on the substantial shareholders shareholdings of M K Land. 11. DIRECTORS STATEMENT The Board, having considered all aspects of the Disposal, including but not limited to the basis of arriving at the Disposal Consideration, rationale and the financial effects of the Disposal is of the opinion that the Disposal is in the best interest of M K Land and is not detrimental to the interests of the minority shareholders of the Group. 12. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors and/or major shareholders of M K Land, including persons connected with them have any interest, direct or indirect in the Disposal. Page 6 of 7
13. RISK FACTORS Except for the general risks such as non-completion of the SPAs, the Board is not aware of any anticipated risk arising from the Disposal. The Board will use its best endeavours to ensure the completion of the Disposal and will take all reasonable steps to ensure that the conditions precedents of the SPAs are fulfilled in a timely manner, to avoid delays or termination and to facilitate the completion of the Disposal. Completion of the Disposal is subject to the approval from the Appropriate Authority and full settlement of net proceeds of the Disposal Consideration by the Purchaser. However, there is no assurance on the approval from the Appropriate Authority and that the Purchaser will be able to settle the balance Disposal Consideration on the completion date of the SPAs. 14. APPROVALS REQUIRED The Disposal does not require the approval of the shareholders of M K Land as it falls below the percentage ratio of 25%. However, the Disposal is subject to approval from the Appropriate Authority. 15. PERCENTAGE RATIO The highest percentage ratio applicable to the Disposal pursuant to paragraph 10.02(g) of the Listing Requirements of Bursa is 6.22% derived from the value of the assets which are the subject matter of the transaction, as compared with the net assets of M K Land. 16. EXPECTED TIMEFRAME FOR COMPLETION OF THE DISPOSAL Apart from unforeseen circumstances, the Disposal is expected to be completed within eighteen (18) months from the date of the SPAs. 17. DOCUMENTS AVAILABLE FOR INSPECTION The SPAs in relation to the Disposal will be made available for inspection at M K Land s Registered Office at No. 19, Jalan PJU 8/5H, Perdana Business Centre, Bandar Damansara Perdana, 47820 Petaling Jaya, Selangor Darul Ehsan during normal office hour from Monday to Friday (except for public holidays) for a period of three (3) months from the date of this announcement: This announcement is dated 8 May 2017. Page 7 of 7