Apr 19, 2017 - Companyâ) is pleased to announce that Kwantas Plantations Sdn Bhd (âKPSBâ ... a public company list
KWANTAS CORPORATION BERHAD (“KWANTAS” OR “THE COMPANY”) PROPOSED DISPOSAL OF 3,791 ACRES OF AGRICULTURE LAND HELD UNDER TITLE COUNTRY LEASE 095316395 LOCATED AT SUNGAI KINABATANGAN, DISTRICT OF KINABATANGAN, SABAH TOGETHER WITH ALL OIL PALM TREES PLANTED AND STRUCTURES ERECTED THEREON OWNED BY KWANTAS PLANTATIONS SDN BHD (“KPSB”), A WHOLLY OWNED SUBSIDIARY OF KWANTAS. 1.
INTRODUCTION The Board of Directors (“the Board”) of Kwantas Corporation Berhad (“Kwantas” or “the Company”) is pleased to announce that Kwantas Plantations Sdn Bhd (“KPSB” or “the Vendor”), a wholly owned subsidiary of Kwantas, had on 19 April 2017 entered into a Sale and Purchase Agreement (“SPA”) to dispose a parcel of agriculture land held under title Country Lease 095316395 located at Sungai Kinabatangan, District of Kinabatangan, Sabah measuring 3,791 acres identified as Pintasan 8, together with all oil palm trees planted and structures erected thereon (collectively known as “the Property”) to KUB Malua Plantation Sdn Bhd (“KMPSB” or “the Purchaser”) for a total cash consideration of RM100,448,621.00 (“Disposal Consideration”) (collectively hereinafter referred to as “Proposed Disposal”). KMPSB, formerly known as KUB Oil & Gas Sdn Bhd, is a wholly-owned subsidiary of KUB Malaysia Berhad (“KUB”), a public company listed on the Main Market of Bursa Malaysia Securities Berhad (“BURSA”).
2.
DETAILS OF THE PROPOSED DISPOSAL Subject to the terms and conditions of the SPA, KPSB agrees to sell and KMPSB agrees to purchase from KPSB the Property free from all encumbrances including any claims, charges, security, liens, options, pledge created or secured by bank liabilities and other encumbrances whatsoever from the Completion Date (as defined in Part 13 of this announcement) 2.1
BACKGROUND INFORMATION OF THE PARTIES a.
Background information of Kwantas Kwantas is a public company incorporated in Malaysia and listed on the Main Market of BURSA. The principal activities of the Company are investment holding and provision of management services to its subsidiaries.
b. Background information of KPSB KPSB is a private limited liability company incorporated in Malaysia and has a paid-up share capital of RM58,801,289.00. KPSB is a wholly-owned subsidiary of Kwantas and its principal activity is operating oil palm plantations. KPSB is the registered and beneficial owner of the Property. Page 1
The Directors of KPSB are as follows :(i) (ii) (iii) (iv) c.
Kwan Yean Yeow Kwan Ngen Wah Kwan Ngen Chung Kwan Chiew Giok
Background information of KUB KUB is a public company incorporated in Malaysia and listed on the Main Market of BURSA. The principal activities of KUB are investment holding and provision of management services to its subsidiaries.
d. Background information of KMPSB KMPSB is a private limited liability company incorporated in Malaysia with a paid-up share capital of RM5,000,000.00. KMPSB is a wholly-owned subsidiary of KUB and is currently dormant. Upon completion of the Proposed Disposal, KMPSB principal activities shall be in agricultural and plantation business. The Directors of KMPSB are as follows :(i) (ii) (iii) (iv) (v)
2.2
Datuk Abdul Rahim Mohd Zin Dato’ Ab Rahim Bin Abu Bakar Datuk Hj Faisyal Datuk Yusof Hamdain Diego Tunku Alizan Bin Raja Muhammad Alias Tengku Zahaimi Bin Tuan Hashim
INFORMATION ON THE PROPERTY The details on the Property are set out as follows: a. Particulars of the Land Title: Title Number
Estate Name
CL095316395 (“Land Title”)
Ladang Pintasan 8
Location Sungai Kinabatangan, District of Kinabatangan, Sabah
Area (Acre)
Lease Expiry Date
3,791
31.12.2887
b. Restriction in interest: Nil c. Encumbrances: The Property is currently encumbered by way of a third party legal charge in favour of OCBC Al-Amin Bank Berhad as security for the facilities granted to Kwantas. Page 2
d. Endorsement: Nil e. Present usage of the Property: Oil palm plantation, cultivated with oil palm trees and erected with building structures, access roads, drains, bridges and other amenities. f. Estate profile of the oil palm plantation: Description of land area Age profile for planted area: Immature (0 to 3 years) Mature – Young (4 to 7 years) Mature – Prime (8 to 15 years) Mature (16 to 25 years) Total planted area Unplantable area (i.e. building and quarters, roads and bridges, river and stream, steep hill and etc.) Total land area
Area (Acre) 341 334 3,040 3,715
9% 9% 80% 0% 98%
76
2%
3,791
100%
g. Annual production of fresh fruit bunches (“FFB”):
Production of FFB per annum Yield per hectare
2014 MT
2015 MT
2016 MT
30,791 22.7
31,925 23.6
33,727 24.9
h. Net book value of the Property, carried at fair value based on audited financial statement as at 30 June 2016 was RM125.4 million. Based on the current valuation report dated 03 April 2017 as appraised by an independent valuer Messrs. C H Williams Talhar & Wong (Sabah) Sdn Bhd (“the Valuer”), the current market value of the Property is RM124.5 million. The Valuer has adopted a combined method of comparison and income approach in arriving at the market value or fair value of the Property.
2.3
BASIS OF ARRIVING AT THE DISPOSAL CONSIDERATION The Disposal Consideration is arrived at on a mutual agreement basis after taking into consideration of the current market value of the Property of RM124.5 million as appraised by the Valuer. The Disposal Consideration represents a discount of approximately RM24 million or 19.3% over the current market value of the Property. The rationale for the Proposed Disposal is stipulated under Part 6 of this announcement. Page 3
2.4
SALIENT TERMS OF THE SPA Notwithstanding anything contained in the SPA, KPSB and KMPSB agreed that the completion of the Proposed Disposal of the Property shall be conditional upon and subject to the fulfilment of the following conditions precedent on or before the expiration of the conditional period commencing from the date of the SPA. a. Conditions Precedent (“CPs”) The SPA is conditional upon the following: (i)
The Purchaser obtaining the requisite licence to sell and supply FFB from the Property;
(ii)
The Vendor’s procurement of the Appropriate Authority Approval, such as Malaysian Federal Government (including any Ministry), local government or any governmental agency or body, including all relevant land registry and land administrator on the transfer of the Property to the Purchaser;
(iii)
The Vendor’s or the Purchaser’s, as the case maybe, full observance and fulfilment, of all conditions imposed by the Appropriate Authority in the State Authority’s Consent;
(iv)
The Purchaser obtaining unconditional approval to the acquisition of the Property on terms and conditions contained in the SPA from shareholders of KUB by way of members’ resolution in an extraordinary general meeting;
(v)
The Purchaser obtaining written clearance or approval, as the case may be, from the Regulators on the valuation of the Property based on the valuation conducted and submitted in accordance with the requirements and guidelines issued by the Regulators;
(vi)
The work permits of the Vendor’s employees have been extended to the Purchaser or renewed in the Purchaser’s favour;
(vii)
The Purchaser obtaining the loan on terms acceptable to the Purchaser;
(viii)
The Purchaser’s satisfaction of the results of the Due Diligence Review, which shall include confirmation from the Purchaser’s surveyors that the discrepancy of the planted area within the Property to be no more than two per cent (2%) and that the yield from crops as projected by the Vendor is accurate and achievable;
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(ix)
The Vendor disclosing to the Purchaser contact details and relevant information relating to and introducing to the Purchaser the relevant contractors of existing contracts that are necessary and required for the Purchaser’s usage and operation of the Property post completion of the Proposed Disposal;
(x)
The Vendor’s and the Purchaser’s execution in escrow of a sale agreement in respect of the sale of FFB from the Property by the Purchaser to the Vendor and delivery to Pintasan Palm Oil Mill, which is owned by the Vendor or its related company; and
(xi)
any other CPs as may be imposed or required by law, regulation or Governmental policies, regulations and directives or the relevant State by laws, regulations and directives subsequent to the execution of the SPA.
The aforementioned CPs are to be fulfilled within the period of 4 months from the date of the SPA, hereinafter referred to as the Conditional Period. In the event that any of the CPs is not fulfilled by the expiry of the Conditional Period, the Conditional Period shall automatically be extended by a further period of 1 month or such longer period(s) as mutually agreed upon in writing by the parties. b. Mode of Settlement of the Disposal Consideration The Disposal Consideration shall be settled by KMPSB in the following manner: (i)
on 23 February 2017, a refundable earnest deposit in the sum of RM2,000,000.00 was paid to KPSB by KMPSB prior to execution of the SPA to secure the purchase of the Property and it shall form part payment towards the deposit, being 10% of Disposal Consideration equivalent to RM10,044,862.10 (“the Deposit”);
(ii)
the balance Deposit in the sum of RM8,044,862.10 shall be paid to KPSB upon the execution of the SPA, and shall include the Retention Sum of RM3,013,458.63 to be retained by KMPSB’s Solicitors which shall be paid to the Director General for the purpose of Real Property Gains Tax; and
(iii)
the balance Disposal Consideration in the sum of RM90,403,758.90, being the remaining 90% of Disposal Consideration (“the Balance Purchase Price”), shall be paid in full to KPSB on or before the Completion Period, which falls within 4 months from the Unconditional Date, hereinafter referred to as the date in which all CPs have been fulfilled.
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c. Completion Completion shall be deemed to have taken place upon: (i)
the delivery of documents to KMPSB, including the Land Title, transfer documents and any other documents as may be required by KMPSB as a proprietor of the Property;
(ii)
the receipt of legal possession to the Property by KMPSB; and
(iii)
the receipt of the Balance Purchase Price on behalf of KPSB by the Solicitors of Kwantas from KMPSB.
d. Remedies of the Parties upon Default A.
In the event of default by the Purchaser, due to failure to pay the Balance Purchase Price in accordance with the SPA or is in material breach of any terms, conditions, warranties and/or representations or undertakings contained in the SPA, KPSB shall give KMPSB notice in writing to satisfy such condition or to remedy such breach within 14 business days. In the event of KMPSB failing to satisfy such condition or to remedy such breach, KPSB shall be entitled to terminate the SPA by notice in writing to KMPSB and within 10 business days from the notice of termination:
(i)
KPSB shall be entitled to forfeit the Deposit with interest accrued thereon as agreed liquidated damages;
(ii)
KPSB shall refund to KMPSB in full and free from interest all other monies, if any, paid by KMPSB to KPSB pursuant to the SPA;
(iii)
The Solicitors of KMPSB shall return all documents to the Solicitors of KPSB, including the Land Title, transfer documents and any other documents pursuant to the SPA;
(iv)
KMPSB shall register for the withdrawal of private caveat form and forward the same particulars to the Solicitors of KPSB.
B. In the event of default by the Vendor, due to failure to complete the sale and purchase in accordance with the SPA or is in material breach of any terms, conditions, warranties and/or representations or undertakings contained in the SPA, KMPSB shall give KPSB notice in writing to satisfy such condition or to remedy such breach within 14 business days. In the event of KPSB failing to satisfy such condition or remedy such breach, KMPSB shall be entitled either to obtain the decree of specific performance of the SPA as well as any damages and Page 6
costs awarded by the Court, or to terminate the SPA by notice in writing to KPSB and within 10 business days from the notice of termination:
3.
(i)
KPSB shall refund to KMPSB the Deposit and all other monies with interest already paid to KPSB pursuant to the SPA;
(ii)
KPSB shall pay to the Solicitors of KMPSB a sum equivalent to the Deposit as agreed liquidated damages;
(iii)
The Solicitors of KMPSB shall return all documents to the Solicitors of KPSB, including the Land Title, transfer documents and any other documents pursuant to the SPA; and
(iv)
KMPSB shall register for the withdrawal of private caveat form and forward the same particulars to the Solicitors of KPSB.
LIABILITIES TO BE ASSUMED There are no liabilities, including contingent liabilities and guarantees, to be assumed by KMPSB pursuant to the Proposed Disposal.
4.
ORIGINAL COST OF THE PROPERTY The original cost and date of acquisition of the Property by KPSB are as follows:
5.
Date of Acquisition
Title Number
Area (Acre)
Cost of the Property (RM million)
31.12.1998
CL095316395
3,791
20.52
UTILISATION OF PROCEEDS FROM THE PROPOSED DISPOSAL The Disposal Consideration is expected to be utilised by Kwantas Group (“the Group”) in the following manner:
Particulars of utilisation
Repayment of the Group’s bank borrowings Working capital for the Group Real property gains tax Estimated incidental expenses related to the Proposed Disposal
Amount to be utilised (RM million)
Timeframe for utilisation of proceeds
91.95 2.00 4.00
Within 12 months Within 12 months Within 12 months
2.50
Within 12 months Page 7
Total
6.
100.45
RATIONALE FOR THE PROPOSED DISPOSAL The Proposed Disposal is part of Kwantas Group’s streamlining exercise to improve the overall financial position of the entire Group. Based on the past performance of the Group’s oil palm plantation estates in Malaysia, the Property has contributed less than 10% to the Group’s FFB production and less than 7% to the Group’s total crops processed in the mills. The Proposed Disposal will have insignificant impact to the Group’s profit contribution but on the other hand, the disposal proceeds from the sale of the assets will contribute positively to the Group’s overall cash flow position and will reduce the Group’s overall borrowings accordingly. Given the size, location and market value of the Property, it is not easy for KPSB to dispose the Property at the market value to a single buyer. As a result of that, KPSB is willing to dispose the Property at a discounted value in view that the Disposal Consideration derived from the Proposed Disposal will enable the Group to strengthen its cash flows in order for the Group to repay approximately 14% of its total borrowings, thereby reducing the Group’s exposure to higher interest expenses and foreign exchange fluctuation and improving the Group’s gearing ratio. Subsequent to the completion of the Proposed Disposal, the Group is still in possession of approximately 56,916 hectares of land bank of which 18,743 hectares are planted with oil palm trees. On top of that, the Purchaser will continue selling all the FFB from the Property to the Vendor’s related company oil mill. The Board is therefore of the opinion that the Proposed Disposal will improve the Group’s overall financial position, liquidity and reducing the Group’s exposure to external borrowings.
7.
FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL 7.1
Share capital and substantial shareholders’ shareholdings The Proposed Disposal will not have any effect on the paid-up share capital and substantial shareholders’ shareholdings in Kwantas, as the Proposed Disposal does not involve any issuance of shares in Kwantas, and the Disposal Consideration shall be satisfied fully in cash.
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7.2
Earnings Upon the completion of the Proposed Disposal, the Group is expected to realise an estimated loss on disposal of RM31.5 million, equivalent to approximately 10.1 sen per Kwantas share, after taking into consideration of real property gains tax and the estimated expenses in respect of the Proposed Disposal. Nonetheless, the Proposed Disposal will strengthen the net cash flow position of the Group by RM94.0 million. The audited earnings as compared to the pro forma earnings after the completion of the Proposed Disposal are illustrated as follows: Audited for the FYE 30 June 2016
Pro forma financials after completion of Proposed Disposal
Loss net of tax attributable to owners of Kwantas (RM’000)
(23,967)
(55,439)1
Weighted average number of ordinary shares in issue (‘000)
311,678
311,678
(7.69)
(17.79)
Kwantas Group
Loss per share (sen)
Note: 1 Reconciliation of the pro forma earnings is shown as follows: Audited loss net of tax attributable to owners of Kwantas Disposal Consideration Less: Book value of the Property Less: Real property gains tax Less: Estimated incidental expenses related to Proposed Disposal Estimated loss from Proposed Disposal Pro forma loss net of tax attributable to owners of Kwantas
7.3
RM’000 (23,967) 100,448 (125,420) (4,000) (2,500) (31,472) (55,439)
Net Assets and Gearing Upon the completion of the Proposed Disposal, the Net Assets of the Group is expected to decrease by 2.6%, whereas the gearing ratio is expected to improve from 0.50 to 0.44 based on the audited financial statements as at 30 June 2016 as compared to the pro forma financials after the completion of the Proposed Disposal, in which such financials are illustrated as follows:
Page 9
Kwantas Group Share capital Share premium Other reserves Retained profits Equity attributable to owners of Kwantas Non-controlling interests Shareholders’ equity Weighted average number of ordinary shares in issue (‘000) Net Asset per share (RM) Total borrowings Less: Cash and cash equivalents Net borrowings Gearing / Debt-to-equity ratio (times)
Audited as at 30 June 2016 RM’000
Pro forma financials after completion of Proposed Disposal RM’000
155,839 53,727 852,887 138,875 1,201,328
155,839 53,727 771,4871 188,8031 1,169,856
(2,249) 1,199,079
(2,249) 1,167,607
311,678 3.85
311,678 3.75
673,021 (67,844) 605,177 0.50
673,021 (161,792)2 511,229 0.44
Note: 1
Reconciliation of pro forma retained profits is shown as follows: Audited retained profits attributable to owners of Kwantas Estimated loss from Proposed Disposal (as shown in Part 7.2 of this Announcement) Derecognition of revaluation reserve for the Properties, reclassified from other reserves (estimated) [ RM852,887,000 – RM771,487,000 ] Pro forma retained profits attributable to owners of Kwantas
2
RM’000 138,875 (31,472)
81,400 188,803
Reconciliation of pro forma cash and cash equivalents is shown as follows: Audited cash and cash equivalents Disposal Consideration Less: Real property gains tax Less: Estimated incidental expenses related to Proposed Disposal Net cash flows from the Proposed Disposal Pro forma cash and cash equivalents, before utilisation working capital and repayment of bank borrowings
RM’000 67,844 100,448 (4,000) (2,500) 93,948 161,792
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8.
DIRECTORS’ STATEMENT The Board of Directors of Kwantas, having considered all aspects of the Proposed Disposal, including but not limited to the basis of arriving at the Disposal Consideration, rationale and the financial effects of the Proposed Disposal, is of the opinion that the Proposed Disposal is in the best interest of Kwantas and is not detrimental to the interests of the minority shareholders of the Group.
9.
DIRECTORS AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS None of the Directors and/or substantial shareholders of Kwantas, including KPSB and persons connected with them has any interest, direct or indirect, in the Proposed Disposal.
10.
RISK FACTORS Except for the general risks such as non-completion of the SPA, the Board is not aware of any anticipated risk arising from the Proposed Disposal. The Board will use its best endeavours to ensure the completion of the Proposed Disposal and will take all reasonable steps to ensure that the CPs to the SPA are fulfilled in a timely manner, to avoid delays or termination and to facilitate the completion of the Proposed Disposal. Completion of the Proposed Disposal is subject to the full settlement of net proceeds of the Disposal Consideration by KMPSB. However, there is no assurance that KMPSB will be able to settle the balance Disposal Consideration on the completion date of the SPA.
11.
APPROVALS REQUIRED The Proposed Disposal is not subject to and does not require the approval of the shareholders of Kwantas. The Proposed Disposal is not conditional upon any other corporate proposals and/or arrangement undertaken or to be undertaken by the Company.
12.
PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Disposal pursuant to paragraph 10.02(g) of the Listing Requirements of Bursa is 10.46%, derived from the value of the assets which are the subject matter of the transaction, as compared with the net assets the listed issuer.
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13.
ESTIMATED TIMEFRAME FOR COMPLETION Apart from unforeseen circumstances, the Proposed Disposal is expected to be completed by fourth quarter of year 2017.
14.
DOCUMENTS AVAILABLE FOR INSPECTION The following documents will be made available for inspection at Kwantas’ registered office during normal office hours on any working day for a period of 3 months from the date of this announcement: a. The SPA in relation to the Proposed Disposal; and b. Valuation report for the Property dated 03 April 2017
This announcement is dated 19th April 2017.
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