Nov 18, 2016 - Ingens Sdn Bhd) [âMDSBâ], has on 18 November 2016, entered into a Warehouse. Construction Agreement w
MMAG HOLDINGS BERHAD (Formerly known as Ingenuity Consolidated Berhad) CONSTRUCTION OF NEW TWO (2) STOREY OFFICE WITH ONE (1) STOREY WAREHOUSE
1.
INTRODUCTION The Board of Directors of MMAG Holdings Berhad (“MMAG” or “the Company”) wishes to announce that its wholly owned subsidiary, MMAG Digital Sdn Bhd (formerly known as Ingens Sdn Bhd) [“MDSB”], has on 18 November 2016, entered into a Warehouse Construction Agreement with Tristar Union Sdn Bhd (Company No. 1160203-W) [“TUSB”] of 9.02, 9th Floor, Persoft Tower, 6B Persiaran Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor, to appoint TUSB as the contractor for the construction of a new two (2) storey office with one (1) storey warehouse (“Construction of the New Office and Warehouse”) on a piece land of land located at No.3 Jalan TP2, Taman Perindustrian UEP Subang Jaya, 47620 Subang Jaya, Selangor Darul Ehsan. On the same date, MDSB has also entered into an agreement with Acer Sales and Services Sdn Bhd (Company No. 204410-A) (“Acer”), being the owner of the said land for which the Construction of the New Office and Warehouse will be on, to lease the land at a monthly cost of RM60,000. The commencement date of the lease is 1 January 2017 (to coincide with the construction period for the completion of the office and warehouse as mentioned below). Payment for the lease will commence on 1 January 2018 (a 1 year rent free period is given while awaiting the Construction of the New Office and Warehouse). The lease is for a period of three (3) years with an option to renew the lease period after every three (3) years for a further three (3) years up to a total lease period of twelve (12) years. There is no obligation for MDSB to purchase the leased land during the duration of the lease. However, MDSB has the first (1st) right of refusal should Acer finds a buyer during the lease period or after the expiry of the total lease period of twelve (12) years. All costs relating to the Construction of the New Office and Warehouse during the construction period (of one (1) year) will be funded by TUSB. Upon the completion of the office and warehouse (which is expected to be one year from the date of the Warehouse
Construction
Agreement),
MDSB
will
make
payments
totalling
approximately
RM16,800,000.00 to be fully settled in cash for the construction cost of the office and warehouse. Payments will be made on a deferred basis (monthly payment of RM210,000.00 for a period of twelve (12) months with the final payment of RM14,280,000.00 to be made on the 13th month from commencement of payment).
2.
BACKGROUND The existing three (3) storey office cum warehouse located at Hicom Glenmarie Industrial Park, Shah Alam was acquired in year 2012 and currently houses the business operation of Line Clear Express & Logistics Sdn Bhd (“Line Clear”), a wholly owned sub-subsidiary of the Company. The total built up area of the existing office cum warehouse in Shah Alam is 53,558 sq. ft. (37,100 sq. ft. warehouse and 16,218 sq. ft. office) and the land area is 51,419 sq. ft. The New Office and Warehouse has a built up area of 131,132 sq. ft. (office space of 20,914 sq. ft. and warehouse of 110,218 sq. ft.), with a land area of 203,694 sq. ft. The Construction of the New Office and Warehouse is to support the expansion of Line Clear’s logistics business. Both the Line Clear’s headquarters which is currently located at Hicom Glenmarie Industrial Park and the corporate office of MMAG will relocate to the New Office and Warehouse.
3.
RATIONALE FOR THE CONSTRUCTION OF THE NEW OFFICE AND WAREHOUSE The New Office and Warehouse will enable Line Clear to increase its warehouse capacity from the current 3,000 deliveries per day to the range of 6,000 to 9,000 deliveries per day and also house the corporate office of MMAG. The Construction of the New Office and Warehouse is expected to commence in December 2016. Barring any unforeseen circumstances, it is expected to be completed by December 2017.
4.
FINANCIAL EFFECT OF THE CONSTRUCTION OF THE NEW OFFICE AND WAREHOUSE (a) Share Capital The Construction of the New Office and Warehouse is not expected to have any effect on the share capital of the Company and the shareholdings of the substantial shareholders of the Company as it will be fully settled in cash. (b) Net Assets and gearing The Construction of the New Office and Warehouse is not expected to have any material effect on the net assets of MMAG and its subsidiaries (“MMAG Group”) for the financial year ending 31 March 2017. As disclosed in Section 7 of this announcement, the MMAG Group intends to fund the leasing of the land and Construction of the New Office and Warehouse via a combination of part of the proceeds to be raised from the fund raising exercises announced on 17 October 2016, internally generated funds and/or bank borrowings. Thus, the effect on gearing cannot be ascertained at this juncture. MMAG has on 17 October 2016 announced, among others, a proposed special Bumiputera issue, proposed rights issue of shares with warrants and proposed rights issue of irredeemable convertible preference shares (ICPS). (c) Earnings The Construction of the New Office and Warehouse is not expected to have any material effect on the earnings of the MMAG Group for the financial year ending 31 March 2017 and subsequent year until the completion of the said construction, which is expected to be in December 2017. Thereafter, the depreciation cost of the new office and warehouse is expected to reduce the earnings of the MMAG Group accordingly.
5.
CAPITAL COMMITMENT There is a capital commitment of RM16,800,000.00 for the Construction of the New Office and Warehouse.
6.
SOURCES OF FUNDING The leasing of the land and Construction of the New Office and Warehouse will be funded via a combination of part of the proceeds to be raised from the fund raising exercises announced on 17 October 2016, internally generated funds and/or bank borrowings. In view that the costs to be incurred for the said construction will be increased progressively as disclosed in Section 1 of this announcement (i.e. commencing with the monthly land lease payments from 1 January 2018 and monthly settlement of construction cost upon completion of the New Office and Warehouse with the final payment to be made on the 13th month), the exact mix of funding via the said proceeds, internally generated funds and/or bank borrowings has not been finalised at this juncture.
7.
INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED None of the Directors and/or major shareholders of MMAG and persons connected to them have any interest, direct or indirect, in the Construction of the New Office and Warehouse.
8.
DIRECTORS’ RECOMMENDATION The Board is of the opinion that the Construction of the New Office and Warehouse is in the best interest of the Company.
9.
APPROVAL REQUIRED The Construction of the New Office and Warehouse is not subject to the approval of the shareholders of MMAG and/or any regulatory authorities.
10. DOCUMENTS AVAILABLE FOR INSPECTION The Warehouse Construction Agreement is available for inspection at the registered office of MMAG at Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur during office hours from Mondays to Fridays for a period of three (3) months from the date of this announcement.
This announcement is dated 18 November 2016.
