S P SETIA BERHAD (19698-X) ("S P SETIA" or "THE COMPANY")
PROPOSED ACQUISITION BY SETIA HICON SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF S P SETIA, OF APPROXIMATELY 673.27 ACRES OF LAND HELD UNDER GERAN 30905 FOR LOT 1812 AND GERAN 50544 FOR LOT 650, BOTH IN MUKIM SEMENYIH, DAERAH ULU LANGAT, NEGERI SELANGOR (“SAID LAND”) FROM SPEKTRUM MEGAH (M) SDN BHD FOR A TOTAL PURCHASE CONSIDERATION OF RM381,259,333.
The Board of Directors of S P Setia (“Board”) wishes to announce that on 3 October 2011, Setia Hicon Sdn Bhd (“Setia Hicon” or “Purchaser”), a wholly-owned subsidiary of S P Setia, entered into a sale and purchase agreement (“SPA”) with Spektrum Megah (M) Sdn Bhd (“Spektrum Megah” or “Vendor”) for the proposed purchase of approximately 673.27 acres of freehold land out of the 737.87 acres held under Geran 30905 for Lot 1812 and Geran 50544 for Lot 650, Mukim Semenyih, Daerah Ulu Langat, Negeri Selangor for a purchase consideration of RM381,259,333 (“Purchase Consideration”) or RM13 per square foot. (“Proposed Acquisition”)
2. INFORMATION ON SETIA HICON
Setia Hicon is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 26 January 1999. The present authorized share capital is RM100,000 comprising 100,000 ordinary shares of RM1.00 each of which 1,000 shares are issued and fully paid up. Setia Hicon is presently dormant.
3. INFORMATION ON SPEKTRUM MEGAH
Spektrum Megah is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 17 October 1991. The present authorized share capital is RM10,000,000 comprising 10,000,000 ordinary shares of RM1.00 each of which 8,025,000 shares are issued and fully paid up. Spektrum Megah is presently dormant.
4. INFORMATION ON THE SAID LAND
The Said Land measuring approximately 673.27 acres or 29,327,641 square feet forms part of the land held under Geran 30905 for Lot 1812 (“Lot 1812”) and Geran 50544 for Lot 650 (“Lot 650”), both of which are in the Mukim Semenyih, Daerah Ulu Langat, Negeri Selangor and measure in total area approximately 737.87 acres or 32,141,617 square feet.
Lot 1812 is subject to the category of land use “building” and Lot 650 is subject to the category of land use “industry”.
A portion of Lot 1812 measuring approximately 44.60 acres (“Leased Portion”) is subject to a registered lease and another portion of Lot 650 measuring approximately 20 acres (“Acquired Portion”) has been compulsorily acquired under the Land Acquisition Act, 1976.
Lot 650 is presently charged in favour of Bank Bumiputra Malaysia Berhad (now known as CIMB Bank Berhad).
The terrain of the Said Land is generally undulating and is zoned for mixed housing development. The land is currently planted with oil palm trees.
The Said Land is located at Rinching and also situated midway between the towns of Semenyih, Bangi Old Town and Beranang. It is approximately 4 kilometres south of Semenyih; 12 kilometres east of Bangi Old Town; and 6 kilometres north-west of Beranang. The Said Land is also located approximately 13 kilometres south of Kajang town and 35 kilometres south of Kuala Lumpur City Centre.
The travel time to Kuala Lumpur City Centre from the Said Land via Jalan Semenyih, which connects onto the Kajang SILK Highway and further onto the North-South Highway and Kuala Lumpur-Seremban Highway is approximately 40 minutes.
The Said Land is approximately 15 minutes from the Proposed Bandar Kajang MRT Station on the Sungai Buloh-Kajang Line.
Please refer to the attached map for location details of the Said Land.
5. DETAILS OF THE PROPOSED ACQUISITION
5.1. Salient Terms of the Proposed Acquisition
5.1.1. Basis of Consideration
The Purchase Consideration of RM381,259,333 is calculated at the rate of RM13 per square foot based on a net land of 673.27 acres or 29,327,641 square feet after excluding the Leased Portion and the Acquired Portion, which together measure in total area approximately 64.6 acres or 2,813,976 square feet.
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 its existing category of land use being a combination of “building” and “industry” with premiums paid and layout approval obtained. Given the Group’s knowledge of the market value of properties around the area, no valuation was carried out on the Said Land.
S P Setia is unable to disclose the net book value of the Said Land as it is not privy to such information.
5.1.2. Conditions Precedent and Estimated Time Frame for Completion
The Proposed Acquisition is conditional upon, inter alia, the freehold separate title deed for the remaining part of Lot 1812 without the Leased Portion, free from encumbrances, and subject to the category of land use “building” being issued by the relevant land authority in the name of the Vendor within four (4) months from the date of the SPA or such further period as may be mutually agreed in writing between the parties.
The SPA shall become unconditional on the date on which the last of the conditions precedent has been fulfilled (“Unconditional Date”).
5.1.3. Payment of Purchase Consideration and Time Frame for Completion
The Purchase Consideration will be satisfied wholly in cash by the Purchaser in the following manner:-
(i) deposit amounting to RM38,125,933.30 representing 10% of the Purchase Consideration upon the execution of the SPA; and
(ii) the balance of the Purchase Consideration of RM343,133,399.70 representing 90% of the Purchase Consideration is payable within three (3) months from the Unconditional Date.
The funding for the purchase consideration and development cost of the project will be through a combination of internal funds and/or bank borrowings, the actual mix of which can only be determined later.
5.2. 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.
5.3. Completion of the Proposed Acquisition
Barring unforeseen circumstances, the Proposed Acquisition is expected to be completed during the second half of financial year ending 31 October 2012.
6. ECONOMIC OUTLOOK AND PROSPECTS
The Malaysian economy expanded faster than expected at 4.0% year-on-year in the second quarter of 2011 amid a weaker external environment. The growth for the second quarter continued to be underpinned by the sustained expansion of private domestic demand. Major consumption indicators such as manufacturing sales of food and beverages, credit card spending and imports of consumption goods, registered improvements. These positive growths were supported by sustainable income and favorable labor market conditions which saw the number of retrenchments declined by more than half from the preceding quarter.
In Malaysia, while the global supply disruptions affected production and trade in the second quarter, the underlying strength of the domestic economy remained intact as domestic demand would continue to support growth. Going forward, the downside risks to external demand have increased following heightened uncertainties in the external environment. Nevertheless, domestic demand is expected to remain resilient and support growth amidst sustained private consumption, strong private investment and faster pace of implementation of public sector projects in the second half of the year.
(Source: Quarterly Bulletin, Second Quarter 2011, Bank Negara Malaysia)
In light of these factors, the management of S P Setia is of the view that the prospects for property development activities in Malaysia remain positive and is not aware of any risks factors arising from the Proposed Acquisition other than the normal market and global economic risks.
7. RATIONALE FOR THE PROPOSED ACQUISITION
S P Setia has been the market leader in township developments for more than a decade and has been recognised locally and internationally for its award-winning master plans. The Group strongly believes in creating meaningful environments for all with its LiveLearnWorkPlay development philosophy.
The Group’s success in transforming relatively undeveloped locations into prime residential and commercial hubs is well charted, with its most notable township developments in the Klang Valley being Setia Alam and Setia Eco Park.
Both Setia Alam and Setia Eco Park originated from a single 4,000 acre oil-palm plantation acquired by the Group in 2002. The large size of the land provided an opportunity for the Group to craft twin projects to cater to both the mass and upgrader markets at the same time. Substantial upfront investments in infrastructure to improve connectivity along with continued enhancement in amenities and services have made both townships highly sought after addresses today. A standard-sized 20X70 double-storey terrace house which sold for RM218,000 in 2004 was most recently launched by Setia Alam at RM688,000; similarly semi-dees in Setia Eco Park which were first launched at around RM600,000 in 2005 now command prices above RM2 million. Despite the significant increase in prices, property buyers continue to flock to both townships, as attested by the strong sales achieved of RM995 million combined in the first 10 months of FY2011.
On 12 August 2011, S P Setia had announced the acquisition of 1,010 acres of land in Mukim Beranang (“Beranang Land”) to offer starter homes to first-time owners and other house buyers in a new corridor presently unserved by the Group’s more matured projects. The Said Land’s close proximity to the Beranang Land will enable the Group to reap economies of scale on infrastructure spending and optimise amenities enhancement.
Layout approval has been obtained by the Vendor for the Said Land. However the Group will be submitting a revised layout to the relevant authorities to maximize the development potential of the Said Land. Due to the Said Land’s better accessibility, the Group is planning a more up-scale product mix to target upgraders planning to invest in the Semenyih-Kajang corridor, thus complementing the mass market products to be offered at the Beranang Land.
Subject to the necessary development approvals being obtained, the Group targets to launch the development on the Said Land towards the end of 2012.
The estimated Gross Development Value (“GDV”) of mixed township development project on the Said Land is approximately RM4 billion. Along with the RM3.5 billion GDV estimated for the Beranang Land, the Proposed Acquisition therefore offers the Group an unrivalled opportunity to repeat the twin project success of Setia Alam / Setia Eco Park in the southern region of the Klang Valley.
Whilst it is currently too preliminary to ascertain the exact product mix, total development cost, expected completion date or expected profits to be derived, Management is confident that the proposed development on the Said Land will be well received and is expected to contribute positively to the future earnings and cashflow 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 S P Setia.
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
The highest percentage ratio applicable for the Proposed Acquisition, pursuant to Chapter 10 of the Main Market Listing Requirements of Bursa Securities is 12.82%.
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 after having considered all aspects of the Proposed Acquisition is of the opinion that it is in the best interest of S P Setia.
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 authority's approval as set under Section 5 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 3 months from the date of this announcement.
This announcement is dated 3 October 2011.
LOCATION OF SAID LAND
Another SP Setia's Semenyih Land