1. INTRODUCTION
The Board of Directors of KFM (“Board”) wishes to announce that the Company had on 10 July 2015 entered into 2 separate sale and purchase agreements (collectively referred to as the “SPA”), both dated 10 July 2015, with Singvest Sdn Bhd (“Singvest”) to dispose the following:
(i) 1 unit of one and a half (1½) storey terrace light industrial factory known as PT 182, intermediate lot, in a development known as Taman Industri Korakyat, Subang Mewah, bearing postal address of No. 33, Jalan Industri USJ 1/11, Taman Perindustrian USJ 1, 47600, Subang Jaya, Selangor (“Property 1”); and
(ii) 1 unit of one and a half (1½) storey terrace light industrial factory known as PT 183, intermediate lot, in a development known as Taman Industri Korakyat bearing postal address of No. 35, Jalan Industri USJ 1/11, Taman Perindustrian USJ 1, 47600, Subang Jaya, Selangor (“Property 2”)
(collectively referred to as the “Properties”)
for a total cash consideration of RM2.10 million (“Disposal Consideration”).
Further details on the Disposal are set out in the ensuing sections of this announcement.
2. THE DISPOSAL
2.1 Details of the Disposal
The Disposal involves the disposal of the Properties by KFM to Singvest free from all liens easement and all encumbrances with vacant possession subject to the conditions, express or implied, attached to the respective Properties and the individual title at the Disposal Consideration and upon the terms and conditions set out in the SPA. Further details of the salient terms of the SPA are set out in Section 2.9 of this announcement.
2.2 Details of the Properties
Details of the Properties are set out in Appendix I of this announcement.
2.3 Basis and justification of arriving at the Disposal Consideration
The Disposal Consideration was arrived at on a “willing buyer willing seller” basis and after taking into consideration the recent comparable transactions of industrial lots surrounding Taman Perindustrian USJ 1, Subang Jaya where the Properties are located.
The Disposal Consideration is justified after taking into consideration of the following:
(i) expected gain on disposal;
(ii) that the Company will be able to raise proceeds for, amongst others, the repayment of bank borrowings and working capital; and
(iii) the effects of the Disposal.
2.4 Mode of satisfaction of the Disposal Consideration
The Disposal Consideration will be satisfied by cash in the following manner:
Timing | Amount |
| (RM) |
Upon signing of the SPA | 250,000 |
On the Completion Date (as defined in Section 2.9 below) | 1,850,000 |
Total | 2,100,000 |
2.5 Original cost of investment and the date of such investment
The original cost of investment of KFM in the Properties and the dates of investment of the Properties are as follows:
Properties | Cost of investment | Date of investment |
| (RM) |
|
Property 1 | 428,000 | 26 July 2007 |
Property 2 | 438,000 | 23 April 2007 |
2.6 Expected gain on disposal
The Disposal is expected to result in an estimated gain of disposal of approximately RM1.37 million (computed based on the Disposal Consideration and the unaudited net book value of the respective Properties as at 31 March 2015). The final net gain of disposal is dependent on the net book value of the Properties upon completion of the Disposal.
2.7 Liabilities to be assumed by Singvest
There are no liabilities, including contingent liabilities or guarantees, to be assumed by Singvest arising from the Disposal.
2.8 Practice Note 17 or Cash Company
Upon completion of the Disposal, KFM will not be a Cash Company or a Practice Note 17 Company (as defined in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”)).
2.9 Salient terms of the SPA
The salient terms and conditions of the SPA are as follows:
2.9.1 Agreement to sell
Singvest agrees to purchase the Properties from KFM free from all liens easement and all encumbrances with vacant possession subject to the conditions, express or implied, attached to the respective Properties and the individual title at the Disposal Consideration and upon the terms and conditions set out in the SPA.
2.9.2 Condition precedent
The SPA shall be conditional upon the transfer of the Properties in favour of Singvest within 6 months from the date of the SPA with an automatic extension for a further 3 months. Upon fulfilment of the condition precedent, the SPA shall become unconditional (“Commencement Date”).
2.9.3 Settlement of the Disposal Consideration
The total purchase price for the Properties is RM2.10 million and shall be payable by Singvest in the following manner:
(i) a deposit sum amounting to RM250,000 shall be payable upon the execution of the SPA (“Deposit Sum”). The Deposit Sum will be used as part payment of the Disposal Consideration; and
(ii) the balance of RM1,850,000 shall be payable by Singvest to KFM or to Singvest’s solicitors (“Purchaser’s Solicitors”) (as stakeholder within 120 days from the Commencement Date (“Completion Date”) (“Balance Purchase Price”).
In the event Singvest fails to pay the Balance Purchase Price within the abovementioned period, KFM shall automatically grant Singvest an extension of a further 60 days to settle the Balance Purchase Price which shall be subject to an interest of 8% per annum on the unpaid balance of the Balance Purchase Price which shall accrue up to the Balance Purchase Price is deposited with the Purchaser’s Solicitors (“Extended Completion Date”).
2.9.4 Default
If Singvest fails to comply with the terms of the SPA, KFM shall be entitled to terminate the SPA and Singvest shall forfeit the Deposit Sum as agreed liquidated damaged. KFM shall refund to Singvest any other sum in excess of the Deposit Sum paid towards satisfaction of Singvest’s acquisition price for the Properties free from interest within 14 days from the date of the forfeiture failing which KFM shall pay an interest of 8% per annum on the amount that has yet to be refunded to Singvest.
If KFM fails to comply with the terms of the SPA, Singvest shall be entitled to:
(i) terminate the SPA and all monies paid towards satisfying Singvest’s acquisition price for the Properties shall be refunded free of interest together with an additional sum of RM105,000 as liquidated damages which shall be payable by KFM to Singvest within 14 days from the date of receipt of the notification to terminate from the Purchaser’s Solicitors failing which KFM shall pay an interest of 8% per annum on the amount that has yet to be refunded to Singvest; or
(ii) specific performance where all costs and expenses incurred in seeking the specific performance shall be bourne by KFM.
2.9.5 Vacant possession
Once the Balance Purchase Price has been deposited with the Purchaser’s Solicitors, Singvest shall grant KFM with an option (which is to be exercised within 5 workings days from the date the Purchaser’s Solicitors receives the Balance Purchase Price) to rent the Properties at a rental rate to be mutually agreed between the parties (“Rental Option”).
Legal possession shall be deemed delivered to Singvest if KFM decides to exercise the Rental Option subject to KFM depositing all rental and utility deposits to Singvest prior to the release of the Balance Purchase Price by the Purchaser’s Solictors to KFM.
If KFM elects not to exercise its option the Rental Option or in the event the KFM and Singvest are unable to come to an agreement on the terms of the rental, KFM shall deliver vacant possession to Singvest on an as-is where is basis (subject to certain rectifications as set out in the SPA) free from all encumbrances within 10 working days from the date the final amount of the Balance Purchase Price (including any late interest payments, if any is deposited with the Purchaser’s Solicitors).
In the event KFM fails to deliver vacant possession of the Properties within the abovementioned period, interest at 8% per annum shall be payable on the Disposal Consideration until Singvest receives vacant possession.
2.9.6 Costs and expenses
Each party shall bear their own costs in connection with the Disposal.
2.9.7 Governing law
The SPA shall be governed by and construed in all respect in accordance with the laws of Malaysia.
2.10 Information on the purchaser
Singvest is a private limited company incorporated in Malaysia under the Companies Act, 1965 and has its registered office at D117, Block D, Tingkat 1, Kelana Square, 17 Jalan SS7/26, Kelana Jaya, Petaling Jaya, Selangor.
As at 10 July 2015, Singvest authorised share capital was RM1,000,000 comprising RM1,000,000 ordinary shares of RM1.00 each of which RM50,000 comprising 50,000 ordinary shares of RM1.00 each have been issued and fully paid-up.
Singvest’s principal activity is the trading of textiles.
The details on the Directors of Singvest and their respective direct shareholdings interest in Singvest as at 10 July 2015 are as follows:
Directors | Direct interest |
| No. of shares | (%) |
Goh Ah Kau @ Goh Kwang Sing | - | - |
Low Ching Hock | 49,000 | 98.00 |
The details on the shareholders of Singvest and their respective direct shareholdings in Singvest as at 10 July 2015 are as follows:
Shareholders | Direct interest |
| No. of shares | (%) |
Low Ching Hock | 49,000 | 98.00 |
Tang Hou Wei | 1,000 | 2.00 |
(Source: Companies Commission of Malaysia search dated 10 July 2015)
3. UTILISATION OF PROCEEDS
The proceeds from the Disposal of RM2.10 million will be utilised in the following manner:
[td]Item | Estimated timeframe from the completion of the Disposal | Amount |
|
| (RM) |
Repayment of borrowings(1) | 1 month | 350,000 |
Working capital | 1 month | 1,750,000 |
Total |
| 2,100,000 |
Note:
(1) Any excess or shortfall in the actual amount of proceeds to be utilised for the repayment of borrowings at the time the proceeds are intended to be utilised will be adjusted against the amount allocated for working capital accordingly. The interest saving arising from repayment of bank borrowings are set out in Section 5.4 of this announcement.
The proceeds to be received from the Disposal will be placed into interest bearing bank account(s) pending its utilisation.
4. RATIONALE OF THE DISPOSAL
The Disposal is undertaken to raise funds to meet the KFM Group’s working capital requirements.
5. EFFECTS OF THE DISPOSAL
5.1 Share capital and substantial shareholders’ shareholding
The Disposal will not have any effect on the issued and paid-up share capital of KFM and the substantial shareholders’ shareholding of KFM as it does not involve the issuance of any new ordinary shares of RM0.50 each in KFM (“Shares”).
5.2 Net assets (“NA”) and NA per Share
The Disposal is expected to increase the NA and NA per Share of KFM upon its completion as it is expected to result in an estimated gain of disposal of approximately RM1.37 million (computed based on the Disposal Consideration and the unaudited net book value of the respective Properties as at 31 March 2015). The final net gain of disposal is dependent on the net book value of the Properties upon completion of the Disposal.
5.3 Gearing
The Disposal is expected to reduce the gearing ratio of KFM as a result of the repayment of bank borrowings in relation to the Properties.
5.4 Earnings and earnings per Share
The Disposal is expected to result in an estimated gain of disposal of approximately RM1.37 million (computed based on the Disposal Consideration and the unaudited net book value of the respective Properties as at 31 March 2015). The final net gain of disposal is dependent on the net book value of the Properties upon completion of the Disposal.
Further, KFM is expected to enjoy interest savings of approximately RM18,000 per annum as part of the proceeds raised from the Disposal will be utilised to repay the bank borrowings in relation to the Properties.
The above is not expected to have a material effect on the earnings and earnings per Share for the 18-month financial period ended 30 September 2015.
6. APPROVALS REQUIRED
The Disposal is not subject to the approval of the shareholders of KFM or any regulatory authorities.
7. ESTIMATED TIME FRAME TO COMPLETE THE TRANSACTION
Barring any unforeseen circumstances and subject to all the requisite approvals being obtained, the Disposal is expected to be completed within the 1st quarter of 2016.
8. HIGHEST PERCENTAGE RATIO APPLICABLE TO THE DISPOSAL PURSUANT TO PARAGRAPH 10.02(G)
The highest percentage ratio applicable to the Disposal pursuant to Paragraph 10.02(g) of the Listing Requirements is 12.69% computed based on the total consideration over the audited consolidated NA of the KFM Group for the financial year ended 31 March 2014.
9. DIRECTORS' AND/OR MAJOR SHAREHOLDERS' INTEREST
None of the Directors and/or major shareholders of KFM and/or persons connected to them have any interest, direct or indirect, in the Disposal.
10. DIRECTORS' STATEMENT
The Board having considered all other aspects of the Disposal including but not limited to the rationale for the Disposal and the effects of the Disposal is of the opinion that the Disposal is in the best interest of the Company.
11. DOCUMENTS AVAILABLE FOR INSPECTION
A copy of the SPA will be made available for inspection at the registered office of KFM at Kawasan Lembaga Pelabuhan Kuantan, KM25, Jalan Kuantan/Kemaman, Tanjung Gelang 25740 Kuantan during normal business hours from Monday to Friday (except for public holiday) for a period of 3 months from the date of this announcement.
This announcement is dated 13 July 2015.
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