1. INTRODUCTION
The Board of Directors of HUAYANG wishes to announce that the wholly-owned subsidiary of the Company, Prop. Park Sdn Bhd (PPSB) had today entered into a conditional sale and purchase agreements (SPA) with U Thant Square Sdn Bhd, a company incorporated in Malaysia with its business office at 9th Floor, Kenanga International Building, Jalan Sultan Ismail, 50250 Kuala Lumpur (the “Vendor”) for the purpose of acquiring a parcel of land, more particularly described below, for a total cash consideration of RM32,000,000.00 (“Purchase Price”) (collectively the “Proposed Acquisition”).
Further details of the Proposed Acquisitions are set out in the following sections:
2. THE PROPOSED ACQUISITION
2.1 Details of the Proposed Acquisition
The land to be acquired is a leasehold vacant land located at No. Lot 1851, Jalan 5/76B, Desa Pandan, Jalan Kg Pandan, 55100 Kuala Lumpur under title H.S.(D) 50295, No. PT 1851, Mukim Ampang, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan KL measuring approximately 6258.41 square metres (67,364 square feet) in area (“Land”) on an as is where is basis, free from encumbrances and with vacant possession, but subject to all restrictions-in-interest and conditions of title, whether express or implied, at a total purchase price of RM32,000,000.00, inclusive of RM1,356,750 being the reimbursement of development charges incurred by the Vendor on the Land.
The lease tenure of the Land is for 99 years expiring on 6 July 2085. The Vendor has obtained a development order from Dewan Bandaraya Kuala Lumpur for a commercial development.
The Land is located within the Desa Pandan Commercial Centre, right behind the Royal Selangor Golf Club and is within a 3 km radius from the city centre of Kuala Lumpur. The category of land use is stated as “Building” on the title of the Land. PPSB intends to develop this Land into a mixed residential and commercial development.
2.2 Details of the Vendor
The Vendor is a private limited company incorporated in Malaysia with an issued and paid-up capital of RM3,000,000 and its principal activity is investment holding.
2.3 Salient terms of the SPA
The SPA is conditional upon the fulfilment of the following conditions precedent:
(a) The procurement of the consent to sell and transfer from the State Authority within six (6) months from the date of the SPA or such extended date as mutually agreed upon;
(b) The procurement of the written irrevocable undertaking from the Vendor’s solicitor confirming that the duly executed, valid and registrable prescribed form for the withdrawal of the private caveat has been deposited with the Vendor’s solicitor and a letter from the existing caveator that no further caveat to be entered on the Land.
The SPA shall become unconditional on the date of PPSB’s solicitors receipt of the confirmation and the certified true copy of the Consent to Transfer.
The Purchase Price will be settled in the following manner:
(a) RM640,000 being the earnest deposit has been paid as stakeholder prior to the execution of SPA;
(b) Balance of the 10% of the Purchase Price and the development chargers are to be paid upon execution of the SPA;
(c) The balance sum shall be paid within three (3) months from the date of the SPA becoming unconditional
The Vendor shall deliver vacant possession of the Land to PPSB within seven (7) working days upon receipt of full payment of the Purchase Consideration.
2.4 Basis of arriving at the Purchase Price
The Purchase Price was arrived at based on a willing buyer willing seller basis after taking into consideration the development potential of the Land and comparison with the transacted price of other properties surrounding the Land.
The Board is unable to disclose the net book value of the Land as PPSB is not privy to such information.
2.5 Source of funding and mode of satisfaction
The Purchase Price will be funded through internally generated funds and/or bank borrowings.
PPSB is to reimburse the Vendor RM1,356,750.00 being the development charges incurred in procuring the development order of the Land. Other than this, there are no other liabilities to be assumed from the Proposed Acquisition.
3. RATIONALE OF THE PROPOSED ACQUISITION
The Proposed Acquisition is opportune for the HYB Group to be able to acquire a prime and strategically located land near to the city centre at a reasonable price. The Land has a ready catchment area and it will also to increase the Group’s land bank for its future property development projects.
Further, with the Development Order already in place, this will shorten the turnaround time from the acquisition date to launch date.
The development of the Land is expected to generate gross development value f approximately RM160 million and PPSB expects to commence development in mid 2012 and expect to complete the development within 3 to 4 years from commencement of development.
4. EFFECTS OF THE PROPOSED ACQUISITION
The effects of the Proposed Acquisition are as follows:
Share capital and substantial shareholders’ shareholdings
The Proposed Acquisition will not have any effect on the issued and paid-up share capital and substantial shareholders’ shareholdings of the Company as the Proposed Acquisition does not involve any issuance of shares of HYB.
Net assets per share and earnings per share
The Proposed Acquisition is expected to increase the net assets per share of HYB Group to the extent of the value of the Land that would be taken into account and is expected to contribute positively to the future earnings of HYB Group.
Gearing
As the Purchase Price is to be satisfied by internally generated funds and/or bank borrowings and the exact manner in which the Purchase Price will be satisfied has not been finalised at this juncture, hence, the effect of the Proposed Acquisitions on the gearing cannot be ascertained at this juncture. Nonetheless, there would be no material effect to the gearing of the Group
5. PROSPECT
The acquisition forms part of HYB Group strategy to expand our operations in the Klang Valley and will be contributing reasonable future earnings to the Group.
6. RISK FACTORS
HYB Group’s core business is in the property sector. As such, the Proposed Acquisition will not materially change the risks of the Company’s business as the Group would still be exposed to the same business, operational, financial and investment risk inherent in the property sector. These risks are inherent risk due to timely commencement or completion of projects, obtaining required approvals, satisfactory performance of contractors and adverse economic events or recession. In addition, any material escalation of cost of cement and other building materials as well as increase in petrol prices may contribute to a higher overall development cost thereby impacting the profit margins of any development project.
The Management shall endeavour to limit the abovementioned risks through, inter-alia, careful planning and identification of the type of developments, innovative pricing strategies, more prudent financial policy, a close supervision on any property development project and effective management.
7. APPROVALS REQUIRED
The Proposed Acquisition is not subject to the approval of the shareholders of HYB but will be subject to the approval of the State Authority for the consent to transfer of the Land.
8. ESTIMATED TIME FRAME FOR THE COMPLETION
Barring any unforeseen circumstances, the Board of HYB expects the Proposed Acquisitions to be completed by February 2012.
9. HIGHEST PERCENTAGE RATIO APPLICABLE
The highest percentage ratio applicable to the transaction is 16.2%.
10. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM
None of the directors, major shareholders of HYB and/or persons connected to them has any interest, direct or indirect in the Proposed Acquisitions.
11. DIRECTORS’ RECOMMENDATION
The Board, having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the HYB Group.
12. DOCUMENTS FOR INSPECTION
The SPA dated 11 May 2011 is available for inspection at HYB’s registered office at 123A, Jalan Raja Permaisuri Bainun (Jalan Kampar), 30250 Ipoh, Perak Darul Ridzuan during normal office hours from Monday to Friday (except public holidays) for a period of three months.
This announcement is dated 11 May 2011.
