Announcement Type: General AnnouncementCompany Name: S P SETIA BERHADStock Name: SPSETIADate Announced: 28/01/2011
Announcement Detail:Type: Announcement
Subject: S P SETIA BERHAD (19698-X) ("S P SETIA" or "THE COMPANY")
PROPOSED ACQUISITION BY SETIA INDAH SDN BHD (185555-H) ("SETIA INDAH" OR "PURCHASER"), A WHOLLY OWNED SUBSIDIARY OF S P SETIA BERHAD, OF A PIECE OF LAND HELD UNDER H.S.(D) 368479 FOR PTD 117035 IN THE MUKIM OF TEBRAU, DISTRICT OF JOHOR BAHRU, STATE OF JOHOR DARUL TAKZIM MEASURING APPROXIMATELY 265.719 ACRES ("SAID LAND") FROM KENYALANG PROPERTY DEVELOPMENT SDN BHD ("VENDOR") FOR A TOTAL CASH CONSIDERATION OF RM125,788,604.04 ("PROPOSED ACQUISITION")
Contents: 1. INTRODUCTION
The Board of Directors of S P Setia wishes to announce that on 28 January 2011, a wholly owned subsidiary of S P Setia, Setia Indah Sdn Bhd ("Setia Indah"), has entered into a conditional Sale and Purchase Agreement ("SPA") with Kenyalang Property Development Sdn Bhd (Company No. 348577-X) ("Vendor") to purchase a piece of land held under H.S.(D) 368479 for PTD 117035 in the Mukim of Tebrau, District of Johor Bahru, State of Johor Darul Takzim measuring approximately 265.719 acres ("Said Land") for a total cash consideration of RM125,788,604.04 ("Purchase Consideration").
2. INFORMATION ON SETIA INDAH
Setia Indah is a wholly-owned subsidiary of S P Setia. Setia Indah is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 16 August 1989. The present authorised share capital is RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each of which 25,000,000 shares are issued and fully paid up. Presently Setia Indah's principal activities are property development and property investment holding.
3. INFORMATION ON KENYALANG PROPERTY DEVELOPMENT SDN BHD
The Vendor is a private limited incorporated in Malaysia under the Companies Act, 1965 on 27 June 1995. The present authorised share capital is RM1,000,000 comprising 1,000,000 ordinary shares of RM1.00 each of which 1,000,000 ordinary shares are issued and fully paid up. The Vendor's principal activity is investment holding.
4. INFORMATION ON THE SAID LAND
The Said Land is held under H.S.(D) 368479 for PTD 117035 in the Mukim of Tebrau, District of Johor Bahru and State of Johor Darul Ta'zim and measures approximately 265.719 acres in total.
The Said Land is situated in the Tebrau corridor which is a fast growing area in Johor given increased development activities and new property launches as housing demand has spilled over from the congested Johor Bahru city to this corridor. The Group's matured Setia Indah Johor township is located approximately 10 minutes from the Said Land. Other established projects in the vicinity include Taman Seri Austin, Bandar Dato Onn, Adda Heights, Kempas Indah and Setia Tropika. The Said Land is accessible from Jalan Seelong as well as from Bandar Dato Onn.
Please refer to the attached map for location details of the Land.
5. SALIENT TERMS OF THE PROPOSED ACQUISITION
5.1 Basis of Consideration
The Purchase Consideration of RM125,788,604.04 is calculated at the rate of RM11 per square foot based on a net land of 262.519 acres after excluding approximately 3.2 acres reserved for water pipeline.
The Purchase Consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration the development potential of the Said Land. Given the Group's knowledge of the market value of the properties surrounding the Said Land, no valuation was carried out on the Said Land.
The Said Land, which category of land use has been approved by the relevant authorities from "Agricultural" to "Building" ("SBKS Approval"), is purchased free from all encumbrances and with vacant possession and upon the terms and conditions specified in the SPA.
5.2 Conditions Precedent and Estimated Time Frame for Completion
The Proposed Acquisition is conditional upon the fulfillment of inter-alia, the following conditions precedent (collectively, "Conditions Precedent") within a period of three (3) months from the date of the SPA or such other period as may be mutually agreed in writing between the parties, namely:-
(i) the approval of the Estate Land Board being obtained by the Vendor for the transfer of the Said Land to the Purchaser;
(ii) if required, the approval of the Economic Planning Unit being obtained by the Purchaser for the purchase of the Said Land;
(iii) the planning approval (Kebenaran Merancang) and revised layout approvals being obtained by the Purchaser from Majlis Bandaraya Johor Bahru and the land authorities for the Purchaser's development of the Said Land as a mixed development;
(iv) the approval of the relevant authorities for the transfer to the Purchaser of that part of the SBKS Approval relating to the Said Land being obtained by the Vendor from the relevant authorities; and
(v) the Vendor obtaining the written consents of the developers of the lands adjacent to the Said Land, or such other persons who are the owners of the adjacent lands at the relevant time, for the construction of certain access roads and bridges by the Purchaser.
The SPA shall become unconditional on the date on which the last of the Conditions Precedent has been duly fulfilled or waived by the Purchaser (as the case may be) ("Unconditional Date").
5.3 Payment of Purchase Consideration
The Purchase Consideration will be satisfied wholly in cash from internally generated funds and/or external borrowings in the following manner:-
(i) deposit amounting to RM12,578,860.40 representing 10% of the Purchase Consideration will be paid to stakeholders upon the execution of the SPA; and
(ii) the balance of the Purchase Consideration of RM113,209,743.64 representing 90% of the Purchase Consideration shall be payable to the Vendor by installments within a period of twenty four (24) months from the Unconditional Date.
5.4 Liabilities to be Assumed
There are no liabilities including contingent liabilities and guarantees to be assumed by S P Setia Group arising from the Proposed Acquisition.
5.5 Completion of the Proposed Acquisition
Barring unforeseen circumstances and subject to the fulfillment of the Conditions Precedent (unless waived by the Purchaser), the Proposed Acquisition is expected to be completed during the financial year ending 31 October 2011.
6. ECONOMIC OUTLOOK AND PROSPECTS
The Malaysian economy registered a growth of 5.3% in 3Q2010, driven by domestic demand amid slowing external demand. The unemployment rate has declined to 3.1% in 3Q2010, below its long-term average of 3.4%, providing an important catalyst for private consumption. Similarly, consumer sentiment, another indicator of private consumption, has remained upbeat; suggesting a sustainable growth in private consumption throughout 2011. Private consumption will benefit from the favourable employment situation, firm commodity prices and the accommodative financing environment. Capital spending in domestic-oriented sectors and the economic transformation programmes by the Government will underpin the continued growth of private investment. Malaysia's GDP growth in 2011 is anticipated to normalise but remain higher than its long-term trend of 4.5% to 5%. In 2011, inflation is expected to creep up but stay below the 3% mark due to the lack of demand-driven factors that offset rising food and fuel prices arising from the government's subsidy-rationalisation efforts to reduce the burden on its coffers.
Singapore emerged as the largest foreign investor in Malaysia in the first seven months of 2010, as warmer bilateral ties spurred faster growth. Data from the Malaysian Industrial Development Authority showed that Singapore investments totaled RM2.9 billion (S$1.2 billion) for the January to July period. The surge could be attributed largely to 'pull' factors such as the Malaysian government's generous tax incentives, and the effort to develop Iskandar. But the push factor is also getting stronger. Singapore's twin policies of having a stronger currency and stricter foreign worker policy, have pushed up domestic manufacturing costs. This led local companies to relocate their manufacturing operations overseas, with Malaysia benefiting from their move.
The level of economic activity in Singapore is projected to remain high across a broad range of industries. For 2010 as a whole, GDP is on track to grow by around 15% while in 2011, the domestic economy will see a more sustainable rate of growth of 4 to 6% which will create positive spill-over effects for Johor Bahru.
Sources:-
Bank Negara Malaysia, Press Release dated 22 November 2010
Malaysian Rating Corporation Berhad, Economic Outlook 2011: The tail-end of the rollercoaster ride dated 30 December 2010
New Straits Times Malaysia, Singapore is Malaysia's Largest Foreign Investor dated 18 November 2010
Monetary Authority of Singapore, Recent Economic Developments in Singapore dated 3 December 2010
In light of these factors, the management of S P Setia is of the view that the prospects for property development activities in Malaysia, particularly in Johor Bahru remain positive and is not aware of any risk factors arising from the SPA other than the usual market and global economic risks.
7. RATIONALE FOR THE PROPOSED ACQUISITION AND PROPOSED DEVELOPMENT
S P Setia has been present in Johor for more than 13 years and has carved a solid reputation for delivering quality homes in its four ongoing projects, namely Bukit Indah Johor, Setia Indah Johor, Setia Tropika and Setia Eco Gardens. The Group's long presence and continuous efforts to create value for all its integrated townships in Johor have resulted in numerous local and international awards along with consistently strong sales.
The Proposed Acquisition is in-line with the Group's strategy to continue to grow and strengthen its presence in Johor Bahru. The Said Land's location within the Tebrau corridor where the S P Setia has established a strong following enables it to tap further into the sustained potential demand from upgraders comprised within the Group's own customer base and the surrounding matured residential areas. Apart from that, there will also be operational economies of scale arising from better manpower and resource utilization given the Group's existing three other projects in the same corridor namely Setia Indah, Setia Tropika and the new Setia Eco Kaskadia.
The Group intends to develop a mixed residential development project on the Said Land.
Whilst it is currently too preliminary to ascertain the exact product mix, total development revenue/cost, expected completion date or expected profits to be derived, Management is confident that the proposed development of the Said Land will be well received. This augurs well for the Group and is expected to contribute positively to the future earnings and cash flow of S P Setia.
8. EFFECTS OF THE PROPOSED ACQUISITION
8.1 Share Capital and Major Shareholders
The Proposed Acquisition which will be satisfied entirely in cash will not have any effect on the share capital and major shareholders of S P Setia.
8.2 Earnings and Net Assets ("NA")
The Proposed Acquisition is not expected to have any material effect on the S P Setia Group's earnings and NA for the financial year ending 31 October 2011. However, the Proposed Acquisition is expected to contribute positively to the future earnings and NA of the S P Setia Group.
8.3 Gearing
The Proposed Acquisition will not have a material effect on the gearing of S P Setia for the financial year ending 31 October 2011.
9. PERCENTAGE RATIOS
Based on S P Setia's audited financial statements for financial year ended 31 October 2010, the highest percentage ratio under paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 5.75%
10. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTEREST
None of the Directors or Substantial Shareholders of S P Setia or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition.
11. DIRECTORS STATEMENT
The Board of Directors of S P Setia, after having considered all aspects of the Proposed Acquisition is of the opinion that it is in the best interest of the S P Setia Group.
12. APPROVALS REQUIRED
The Proposed Acquisition is not subject to the approval of the shareholders of S P Setia but is subject to the relevant authorities' approvals as set under Section 5.2 herein.
13. DOCUMENT FOR INSPECTION
A copy of the SPA may be inspected at the registered office of S P Setia at Plaza 138, Suite 18.03, 18th Floor, 138 Jalan Ampang, 50450 Kuala Lumpur during normal office hours on Mondays to Fridays (except public holidays) for a period of fourteen (14) days from the date of this announcement.
This announcement is dated 28 January 2011.
Attachments: Bintai Land Announcement.pdf