SGSB is a 99.99%-owned subsidiary of Sunsuria and is principally engaged in investment holding.

Transcription

1 SUNSURIA BERHAD ("SUNSURIA" OR THE COMPANY") PROPOSED JOINT VENTURE BETWEEN SUNSURIA CITY SDN. BHD. (FORMERLY KNOWN AS SIME DARBY SUNSURIA DEVELOPMENT SDN. BHD.) ( SCSB ), SUNSURIA GATEWAY SDN. BHD. ( SGSB ) AND WELCOME GLOBAL CO. LTD. ( WELCOME GLOBAL ) VIA SUNSURIA EVERRICH SDN. BHD. ( SESB ) FOR THE PROPOSED DEVELOPMENT OF A PIECE OF LAND MEASURING APPROXIMATELY 8.48 ACRES LOCATED AT SALAK TINGGI, PUTRAJAYA SOUTH OWNED BY SCSB ( LAND ) ( PROPOSED JOINT VENTURE ) 1. INTRODUCTION The Board of Directors of Sunsuria ( Board ) wishes to announce that its 99.99%-owned indirect subsidiary, SCSB, and its 99.99%-owned direct subsidiary, SGSB, had on 6 May 2016 entered into a shareholders agreement with Welcome Global ( Shareholders Agreement ) to regulate the respective equity participation, rights and obligations as shareholders in SESB and the conduct of the business and affairs of SESB, which has been identified as the joint venture vehicle between SCSB, SGSB and Welcome Global to undertake the Proposed Joint Venture. The Board wishes to further announce that on 9 May 2016, SCSB and SESB had entered into a joint development agreement ( Joint Development Agreement ) to regulate the relationship and respective roles as joint developers for the development of the Land. 2. INFORMATION ON THE PARTIES 2.1 Information on SCSB SCSB is a private limited company incorporated in Malaysia on 6 June 2013 under the Companies Act, 1965 ( Act ). As at the date of this announcement, the authorised share capital of SCSB is RM400,000 comprising 400,000 ordinary shares of RM1.00 each, of which RM250,000 comprising 250,000 ordinary shares of RM1.00 each have been issued and fully paid-up. SCSB is a 99.99%-owned subsidiary of Sunsuria through its wholly-owned subsidiary, Havana Symphony Sdn. Bhd. (which holds a 50% direct interest in SCSB) and its 99.99%- owned subsidiary, SGSB (which holds a 50% direct interest in SCSB). SCSB is principally engaged in property development. 2.2 Information on SGSB SGSB is a private limited company incorporated in Malaysia on 23 April 2013 under the Act. As at the date of this announcement, the authorised share capital of SGSB is RM5,000,000 comprising 2,240,000 ordinary shares of RM1.00 each and 276,000,000 redeemable preference shares of RM0.01 each, of which RM3,370,002 comprising 1,000,002 ordinary shares of RM1.00 each and 237,000,000 redeemable preference shares of RM0.01 each have been issued and fully paid-up. SGSB is a 99.99%-owned subsidiary of Sunsuria and is principally engaged in investment holding. 2.3 Information on Welcome Global Welcome Global is a private limited company incorporated in Samoa on 16 May As at the date of this announcement, the authorised share capital of Welcome Global is USD5,000,000 comprising 5,000,000 ordinary shares of USD1.00 each, of which USD5,000,000 comprising 5,000,000 ordinary shares of USD1.00 each have been issued and fully paid-up. 1

2 Welcome Global is a wholly-owned subsidiary of Ever Rich Land Co. Ltd. ( Ever Rich ) based in Taiwan. Ever Rich is a multinational company with construction and project development as one of its business activities. Ever Rich is involved in property developments and property investments in various countries including Taiwan and Korea. In addition, Ever Rich runs a hotel in Ganghwa Island in Korea and owns various investment assets in Taiwan and Korea. Welcome Global is one of the investment arms of Ever Rich for the expansion of its real estate businesses. 2.4 Information on SESB SESB is a private limited company incorporated in Malaysia on 20 April 2016 under the Act. As at the date of this announcement, the authorised share capital of SESB is RM550,000 comprising 400,000 ordinary shares of RM1.00 each and 15,000,000 redeemable preference shares of RM0.01 each, of which RM274, comprising 250,000 ordinary shares of RM1.00 each and 2,498,760 redeemable preference shares of RM0.01 each have been issued and fully paid-up. SESB is principally engaged in investment holding and project development. 3. DETAILS OF THE PROPOSED JOINT VENTURE 3.1 Details of the Land The Land is a freehold vacant land identified as H.S (D) 39887, PT 55373, Mukim Dengkil, District of Sepang, State of Selangor, Malaysia with a total area measuring approximately 8.48 acres. SCSB is the registered proprietor of the Land. The current category of land use for the Land is building subject to the express condition for commercial purpose. The Land is currently charged to Public Bank Berhad. The net book value of the Land is RM33.62 million based on the latest consolidated audited financial statements of Sunsuria as at 30 September The Land is situated within Sunsuria City, the flagship integrated township development project of Sunsuria and its group of companies ( Sunsuria Group or Group ), and it spans over 525 acres in Salak Tinggi, Putrajaya South ( Sunsuria City ). At the heart of Sunsuria City is the Xiamen University Malaysia Campus, the first overseas campus of Chinese university. Sunsuria City is also a transit-oriented development that is directly accessible through the dedicated ELITE Expressway interchange as well as the Express Rail Link (ERL). Sunsuria City sits adjacent to International Premium Outlet Mall and is only a short distance from Kuala Lumpur International Airport with fast connectivity to KL Sentral, adding an extra dimension of convenience. The Land is proposed to be developed into a unique theme-designed mixed development comprising of serviced apartments, retail shops, mall and boutique hotel together with such necessary infrastructure, amenities and public utilities as may be approved by the relevant authorities ( Project ). Application for planning approval of the Project is targeted to be submitted by the second (2 nd ) half of The estimated total gross development value ( GDV ) of the Project is approximately RM694 million. The estimated total gross development cost of the Project has yet to be determined and shall be finalised at a later stage. The development of the Project is targeted to commence in 2017 and to be completed by Salient Terms of the Shareholders Agreement The Shareholders Agreement SCSB and SGSB (collectively referred to as Sunsuria Shareholders ) have agreed to incorporate a private company in Malaysia with Welcome Global under the name of 2

3 SESB and to use SESB as a joint venture vehicle to enter into the Joint Development Agreement with SCSB for the joint development of the Land. Sunsuria Shareholders and Welcome Global have entered into the Shareholders Agreement to govern their respective rights and obligations as shareholders in SESB and the conduct of the business and affairs of SESB upon terms and conditions contained in the Shareholders Agreement Structure and Shareholdings Upon the execution of the Shareholders Agreement, the shareholders shareholdings in SESB shall be maintained in the following proportions ( Agreed Proportions ): Shareholder Percentage of shareholding in SESB SCSB 55% SGSB 5% Welcome Global 40% Financial Requirements The parties mutually agree that the financial requirements of SESB can be met either though: i. borrowings from third parties including banks and financial institution secured by assets and properties of SESB; ii. iii. shareholders advance in the Agreed Proportions; or the issuance of preference shares by SESB and subscribed by its shareholders in the Agreed Proportions. (c) Notwithstanding the above, Welcome Global shall be responsible in providing SESB with such funds in meeting SESB s financial requirements for the payment of the Performance Deposits (as defined in Section herein) to SCSB. In the event SESB has insufficient cash flow to make schedule payments on the Balance of Sunsuria s Entitlement (as defined in Section herein), it is agreed that Welcome Global shall provide such funding to SESB in its Agreed Proportions to meet the financial requirements of SESB in relation to payment of the Balance of Sunsuria s Entitlement Directors, Board Chairman and Board Meetings The board of directors of SESB ( SESB Board ) shall consist of five (5) members or such other numbers as the shareholders may agree. Sunsuria Shareholders shall have the right to collectively appoint three (3) directors to the SESB Board and Welcome Global shall have the right to appoint two (2) directors to the SESB Board. The SESB Board agrees that the chairman of the SESB Board ( SESB Board Chairman ) and managing director/chief executive officer shall be appointed by Sunsuria Shareholders from amongst its appointed directors. The office of SESB Board Chairman may be rotated between the directors appointed by Sunsuria Shareholders Votes and Decisions of the SESB Board Each director shall be entitled to one vote at SESB Board meetings. The SESB Board Chairman shall not have a second vote in the event of an equality of votes. 3

4 All resolutions of the SESB Board shall be passed by a simple majority of votes of all directors for the time being who are entitled to vote. In the event that a resolution is not duly passed after having been raised and considered at three (3) consecutive SESB Board meetings, that resolution shall be deemed to be a matter which requires a shareholders resolution Votes, Decisions of the Shareholders and Shareholders Reserved Matters All resolutions of the shareholders shall be carried on a poll by a simple majority of votes except for the shareholders reserve matters as stipulated in the Shareholder Agreement Financing by Shareholders (c) The shareholders undertake to each other and with SESB that the shareholders shall contribute in the Agreed Proportions any financial requirement of SESB, as determined by the SESB Board and in this connection, the shareholders shall severally grant shareholders advance and/or subscribe for any issue of shares by SESB in the Agreed Proportions. In the event that a resolution is validly passed by the shareholders for SESB to require share capital contribution and to issue any new shares to the shareholders in the Agreed Proportions, and if any shareholder defaults in subscribing for its entitlement, then the shares not taken up shall be offered to the subscribing shareholder and if the subscribing shareholder fails to subscribe for the same, then allotment not subscribed for shall be cancelled. Insofar as the shareholders are required to fund SESB by way of shareholders advance and in the event that any shareholder defaults ( Breaching Shareholder ) in providing all or any part of its Agreed Proportions of such shareholders advance ( Short-fall Loan ): i. any shareholder which has provided his portion of the shareholders advance ( Contributor ) shall have the right (but not the obligation) to contribute the whole or part of the Short-fall Loan ( Substitute Loan ). Notwithstanding any Substitute Loan, the obligation of the Breaching Shareholder to contribute the whole of the Short-fall Loan shall remain until the date the Breaching Shareholder contributes the whole of such amount to SESB; ii. iii. the Breaching Shareholders shall be liable to pay SESB interest at the Prescribed Rate (as defined in section 3.2.7(d) of this announcement) plus Three per centum (3%). the Contributor shall have the right (but not the obligation) to convert and to capitalise the Substitute Loan into ordinary shares of SESB if the Breaching Shareholder fails to pay the whole or any part of the Short-fall Loan to SESB within three (3) months from the date when such Short-fall Loan is due and payable to SESB. (d) Shareholders advance contributed in the Agreed Proportions will be given by the shareholder to SESB with an interest of One Point Five per centum (1.5%) above Malayan Banking Berhad s base rate ( Prescribed Rate ) Management of SESB The shareholders agree that SESB shall enter into a service agreement ( Service Agreement ) with Sunsuria ( Service Provider ) and to engage the Service Provider for the purpose of managing SESB and/or the Project on such terms as stated in the Service Agreement. SESB shall bear all costs relating to the engagement of the Service Provider for the services rendered. 4

5 The financial controller of SESB shall be appointed by Sunsuria Shareholders and will be responsible for in overseeing SESB s accounting and the implementation and monitoring of internal financial controls Reserved Matters Each of the shareholders will cause and procure SESB and the SESB Board will not permit or cause any of the following shareholders reserved matters (as detailed under Schedule 1 of the Shareholders Agreement) to be done or effected in any manner or exercise their vote in respect thereof without the unanimous approval of the shareholders in writing: (c) (d) (e) Corporate Development; Share Capital; Corporate Matters, Disputed Board Matters; and Matters requiring Special Resolution by Law 3.3 Salient Terms of the Joint Development Agreement Nature of the Joint Development Agreement The nature of the Joint Development Agreement is to regulate the relationship and respective roles between SCSB and SESB in making good use of their complementary strength and specialties towards the development of the Land into the Project. In consideration of the anticipated mutual benefits to be derived from the Joint Development Agreement, the parties have determined that collaborative efforts as joint developers in connection with the development of the Project would be beneficial to facilitate the timely development and enhance the overall quality of the Project Profit Sharing The parties agree that SCSB shall be entitled to an aggregate of Eighteen per centum (18%) of the total GDV of the Project ( Sunsuria s Entitlement ) comprising of units developed within the Project for sale ( Sales Units ) and units developed within the Project held for investment purposes ( Investment Units ), and shall be paid to SCSB as follows: i. the First Performance Deposit equivalent to Ringgit Malaysia Two Million Four Hundred and Ninety Eight Thousand Seven Hundred and Sixty (RM2,498,760.00) only upon the execution of the Joint Development Agreement; ii. iii. the Second Performance Deposit equivalent to Ringgit Malaysia Four Million Nine Hundred and Ninety Seven Thousand Five Hundred and Twenty (RM4,997,520.00) only upon the receipt of the development order (KM) approval from the relevant authorities; the Third Performance Deposit equivalent to Ringgit Malaysia Four Million Nine Hundred and Ninety Seven Thousand Five Hundred and Twenty (RM4,997,520.00) only upon launching for the Sales Units and commencement of construction for the Investment Units; and (collectively referred to as Performance Deposits ) 5

6 iv. the balance Sunsuria s Entitlement (after deducting the Performance Deposits) ( Balance Sunsuria s Entitlement ) shall be paid over the development period of the Project, in accordance with the terms in the Joint Development Agreement. (c) Save and except for the Sunsuria s Entitlement, the remaining profit generated by the Project (after deducting Sunsuria s Entitlement) shall belong and vests to SESB absolutely ( SESB s Entitlement ). Where there is any delay in payment of the Sunsuria s Entitlement, SCSB shall have the right to impose a late payment interest at a rate of Eight per centum (8%) per annum calculated on a daily basis from the date of the due payment of any part of Sunsuria s Entitlement until the date of full settlement of such amount due owing Duties of the Parties SESB shall, with due care and diligence and further with the assistance of SCSB, execute and complete the development of the Project in accordance with the provisions of the Joint Development Agreement and shall comply with and fulfill all planning and building requirements imposed by the relevant authorities from time to time. Further, SESB shall throughout the development of the Project, be responsible for, inter alia, to all such duties as contemplated in the Joint Development Agreement. SCSB shall assist SESB in the planning, design, construction and development of the Project and that SCSB shall, without assuming the responsibility of the consultants for the accuracy adequacy and completeness of design, and without assuming the responsibility of the contractors, assist and perform its duties as contemplated in the Joint Development Agreement with due diligence and efficiency and in accordance with good practices and accepted professional standards and shall exercise requisite skills and competences in meeting the parties intention and agreement in the Joint Development Agreement. 3.4 Source of Funding SCSB and SGSB s portions of investment in SESB will be funded through internally generated funds of Sunsuria Group. 3.5 Liabilities to be Assumed Save for the cost and expenses to be incurred in relation to the Shareholders Agreement and the Joint Development Agreement, there are no other liabilities (including contingent liabilities and guarantees) to be assumed by Sunsuria Group arising from the Proposed Joint Venture. 3.6 Estimated Financial Commitment Save for the future development cost to be incurred for the development of the Project, the Board does not foresee any other material financial commitments to be incurred by the Group pursuant to the Proposed Joint Venture. The associated development cost for the Project are expected to be funded by SESB via a combination of internally generated funds by the Project, external bank borrowings and/or shareholders advances, the quantum of which will only be determined at a later stage after taking into consideration, among others, the actual funding required and eventual amount of bank borrowings to be procured by SESB. 6

7 4. RATIONALE AND PROSPECTS OF THE PROPOSED JOINT VENTURE The Proposed Joint Venture allows Sunsuria Group to unlock the value of the Land by having the Proposed Joint Venture via SESB, which is 40%-owned by Ever Rich through its investment arm, Welcome Global. The potential and prospects of the Land s value will be recognised progressively over the development period of the Project, hence fuel the future profits of the Group. The proposed partnership with Ever Rich is expected to add value to the development of the Project via the expertise and technical know-how in property development and property investment brought by Ever Rich, in particular on the development and management of the proposed mall and boutique hotel under the Project. In addition, the Proposed Joint Venture is expected to pave the way for future collaboration between Sunsuria Group and Ever Rich both locally and overseas. Furthermore, based on the terms of the Joint Development Agreement, SCSB, being the owner of the Land, is entitled to the Sunsuria s Entitlement which is equivalent to approximately RM125 million upon full development of the Project. This will further strengthen the future earnings and cash flows of Sunsuria Group. The Board is of the view that the prospects of the Proposed Joint Venture is favourable as the Land is strategically located within Sunsuria City as stated in Section 3.1 herein. Furthermore, the Project is expected to be transformed into a new future one-stop tourist landmark in Selangor complete with service apartments, retail shops, mall and boutique hotel. 5. RISK FACTORS 5.1 Joint Venture Risk The Proposed Joint Venture may potentially expose Sunsuria Group to the normal operational risks associated with joint ventures including, among others, breaches and nonperformance of obligations under the Proposed Joint Venture. Nevertheless, the Board endeavours to take reasonable and necessary steps to mitigate these risks as and when it occurs. 5.2 Completion Risk The completion of the development of the Project may be subject to risks beyond the control of Sunsuria Group including, among others, obtaining the approvals from the relevant authorities for the development of the Project, the uncertainty of the property market due to economic conditions and the increase in costs of the development. Nevertheless, with the Group s past experience and expertise in the property sector, the Board will use its best endeavours to ensure such risks are mitigated through, inter alia, obtaining all necessary approvals from the relevant authorities for the development of the Project, diligently monitoring the development and changes of the Malaysian property market as well as careful planning and proactive and close monitoring of the progress of the development of the Project. 5.3 Financing Risk As mentioned in Section 3.6 herein, the associated development costs to be incurred for the Project shall be funded by SESB through a combination of internally generated funds by the Project, external bank borrowings and/or shareholders advances. Incurring additional bank borrowings will correspondingly increase the borrowing and gearing level of the Group. It would expose the Group to interest rate and debt servicing risks while any utilisation of 7

8 internal funds is expected to result in a reduction of funds available for working capital purposes, which may have an adverse effect on the Group s cash flow position. Nevertheless, the Board will endeavour to manage its cash flow position and funding requirements prudently to address the above risks. 6. FINANCIAL EFFECTS OF THE PROPOSED JOINT VENTURE 6.1 Share Capital and Substantial Shareholders Shareholding The Proposed Joint Venture will not have any effect on the share capital and substantial shareholders shareholding of the Company. 6.2 Net Assets ( NA ) and Gearing The Proposed Joint Venture is not expected to have any immediate material impact on the NA of Sunsuria Group for the financial year ending ( FYE ) 30 September However, it is expected that the NA of Sunsuria Group to be enhanced when the profits attributable to Sunsuria Group realised from the Project. The effect of the Proposed Joint Venture on the gearing of Sunsuria Group will be dependent on the eventual funding mix for the development of the Project. 6.3 Earning and Earning per Share The Proposed Joint Venture is not expected to have any immediate material impact on the earnings of Sunsuria Group for the FYE 30 September Infact, the Proposed Joint Venture is expected to contribute positively to the future earnings of the Group. 7. APPROVALS REQUIRED The Proposed Joint Venture is not subject to the approval of shareholder of Sunsuria. The development of the Project is subject to the approval of relevant authorities. 8. HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Joint Venture pursuant to Paragraph 10.02(g) of the Main Market Listing Requirement of Bursa Malaysia Securities Berhad is 0.03%, being the total equity participation of Sunsuria Group in SESB attributable to the net assets of the Group based on the audited consolidated financial statements of Sunsuria for the financial period ended 30 September INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND PRESONS CONNECTED WITH THEM None of the directors and/or major shareholders of Sunsuria Group and/or persons connected with them have any interests, direct or indirect, in the Proposed Joint Venture. 10. DIRECTORS STATEMENT The Board, having considered all aspects of the Proposed Joint Venture including the rationale and effects of the Proposed Joint Venture, is of the opinion that the Proposed Joint Venture is in best interest of the Group. 8

9 11. ADVISER Astramina Advisory Sdn. Bhd. is the appointed Financial Adviser for Sunsuria Group in relation to the Proposed Joint Venture. 12. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the development of the Project is targeted to commence in 2017 and to be complete by DOCUMENTS AVAILABLE FOR INSPECTION The Shareholders Agreement and Joint Development Agreement are available for inspection at the registered office of Sunsuria at Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan, Malaysia from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 9 May