1. INTRODUCTION
The Board of Directors of TSR Capital Berhad (“TSR” or “the Company”) is pleased to announce that TSR Ocean Park Sdn Bhd (“TSROP” or “Vendor”), a wholly-owned subsidiary of the Company had on 3 October 2022 entered into a conditional sale and purchase agreement (“SPA”) with NTS Development Sdn Bhd (“Purchaser”) for disposal of one single storey commercial building erected thereon on all that pieces of leasehold lands held under individual titles PN49063, No. Lot 20096 measuring approximately 7,374 square metres in area and H.S. (D) 38603 PT 817 measuring approximately 14,760 square metres in area both in Bandar Port Dickson, Daerah Port Dickson, Negeri Sembilan (“Property”) for a total disposal consideration of RM23,800,000 (“Disposal Consideration”) to be satisfied entirely via cash.
2. DETAILS OF THE DISPOSAL
On 3 October 2022, the terms and conditions of the Disposal have been mutually agreed upon between TSROP and the Purchaser through the execution of the SPA, in which TSROP agreed to sell and the Purchaser agreed to purchase the Property, free from all encumbrances and with legal possession on an “as is where is basis” for RM23,800,000 to be satisfied entirely via cash, subject to the terms and conditions of the SPA.
2.1 Description of the Property
The Property is situated within PD Waterfront, Port Dickson, Negeri Sembilan. Geographically, PD Waterfront is sited about twenty four kilometres south-east of Kuala Lumpur International Airport and about twenty seven kilometres south-west of Seremban town centre.
The subject Property is accessible from Seremban-Port Dickson Highway via Jalan Seremban-Port Dickson, Port Dickson Bypass, Jalan Pantai and finally onto Jalan Dato Haji Abdul Samad.
Further details of the Property are set out below:
Information on the Lands
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Land titles | : | PN 49063, Lot 20096 and H.S. (D) 38603 PT 817, both in Bandar Port Dickson, Daerah Port Dickson, Negeri Sembilan |
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Total land area | : | 22,134 square meter |
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Tenure | : | a) PN 49063, Lot 20096: Leasehold 74 years (expiring 8 May 2085) b) H.S. (D) 38603, PT 817: Leasehold 99 years (expiring 10 February 2115)
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Express condition | : | Both PN 49063, Lot 20096 and H.S. (D) 38603 PT 817: a) Tanah ini hendaklah digunakan untuk bangunan perniagaan sahaja b) Tanah yang diberimilik ini tidak boleh dipindahmilik dipajak, digadai melainkan dengan kebenaran bertulis daripada pihak Berkuasa Negeri
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Encumbrances | : | Both PN 49063, Lot 20096 and H.S. (D) 38603 PT 817 are presently charged to Al Rajhi Banking & Investment Corporation (Malaysia) Bhd (Company No. 200501036909 (719057-X)) (“Chargee Bank”) |
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Information on the Building |
Postal address | : | No.15, Jalan Waterfront 3, PD Waterfront, 71000 Port Dickson, Negeri Sembilan |
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Age of the Building | : | 11 years |
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Total floor area | : | 75,000 square feet |
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Existing use | : | The Property is tenanted to TF Value-Mart Sdn Bhd for business of supermarket cum department store |
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Rental income | : | RM99,825 per month |
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Other information |
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Net book value of the Property as at 30 June 2022 | : | RM16,925,000 |
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Valuation of the Property | : | There was no valuation carried out on the Property. |
2.2 Information on the Purchaser
NTS Development Sdn Bhd (“Purchaser”) was incorporated in Malaysia on 10 June 1993 as a private limited company under the Companies Act, 1965. The Purchaser has an issued share capital of RM2,050,000.00 comprising 2,050,000 ordinary shares. The nature of business of the Purchaser is property development and investment holdings.
The directors and shareholder of the Purchaser and their shareholdings in the Purchaser are set out below:-
Name | Direct | Indirect |
No. of shares | % | No. of shares | % |
Shareholder |
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Damai Capital Sdn Bhd | 2,050,000 | 100 | - | - |
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Directors |
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Datin Sia Kim Kiat *1 | - | - | 2,050,000 | 100 |
Dato’ Ng Chin Hoong *1 | - | - | 2,050,000 | 100 |
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Note:
1. Dato’ Ng Chin Hoong and Datin Sia Kim Kiat by virtue of their deemed interest in shares in Damai Capital Sdn Bhd (“DCSB”) are also deemed interested in the shares of the Purchaser to the extend DCSB has an interest.
2.3 Basis and justification of arriving at the Disposal Consideration
The Disposal Consideration was arrived at on a willing-buyer willing-seller basis, through negotiation between Vendor and Purchaser after taking into consideration the following:-
(i) Disposal Consideration represents a premium of RM6,875,000 or approximately 40% over its unaudited net book value of the Property as at 30 June 2022 of RM16,925,000.
(ii) Rationale and benefits to be derived from the Disposal as set out in Section 3 of this announcement.
2.4 Mode of Settlement for the Disposal Consideration
The Disposal Consideration will be satisfied entirely via cash and will be settled in the following manner:-
Date of settlement |
| Payment terms | Payment Amount RM |
Prior to execution of SPA |
| 2% of the Disposal Consideration paid to the Vendor | 476,000 |
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Upon execution of the SPA |
| (a) 3% of the Disposal Consideration (Retention Sum)(1) | 714,000 |
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| (b) 5% of the Disposal Consideration to be paid to the Vendor (“Balance Deposit”) | 1,190,000 |
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On Completion Date (2) |
| 90% of the Disposal Consideration to be paid to the Vendor (“Balance Purchase Price”) | 21,420,000 |
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Disposal Consideration |
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| 23,800,000 |
Notes:
- The Retention Sum is to be paid to the Purchaser’s Solicitors as stakeholder to be remitted to the Director General of Inland Revenue, being payment of Real Property Gains Tax payable by the Vendor under the provisions of the Real Property Gains Tax Act, 1976.
2. Within 3 months from the date all the conditions precedent of the SPA are fulfilled.
2.5 Liabilities to be remained with TSROP or TSR
Save for the obligations and liabilities in and arising from the SPA, there are no other liabilities including contingent liabilities and guarantees expected to be remained with TSROP or TSR upon completion of the Disposal.
2.6 Original cost and date of investment for the Property
The Lands was acquired by TSROP in 2011 and the construction of the Building was completed on 17 October 2011. The original cost incurred for the Property was RM22,783,000.
2.7 Expected gain arising from the Disposal
The Disposal is expected to result in an estimated gain on disposal approximately RM6.57 million to TSR and its subsidiaries (“TSR Group” or the “Group”).
The estimated gain on disposal of approximately RM6.57 million is derived as below:-
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| RM |
Disposal Consideration |
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| 23,800,000 |
Less: Carrying amount of the Property as at 30 June 2022 | (16,925,000) |
Less: Estimated expenses for the Disposal *1 | (300,000) |
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Total |
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| 6,575,000 |
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Notes:
*1 The breakdown of the estimated expenses is set out below:-
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| RM |
Professional fees and authorities fees | 20,000 |
Real Property Gains Tax | 280,000 |
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Total |
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| 300,000 |
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3. RATIONALE AND JUSTIFICATIONS FOR THE DISPOSAL
The Disposal is expected to allow TSR Group to achieve the following:-
(i) opportunity to realise and unlock the value of its investment in the Property. In this respect, the Group is expected to record a net gain on disposal of RM6.57 million as set out in Section 2.7;
(ii) monetise its investment in the Property. The Disposal will enable the Group to raise proceeds of RM23.80 million to be utilised for purposes set out in Section 4.
(iii) The net gain on disposal of RM6.57 million is expected to increase the net asset of the Group.
The Property is currently tenanted and is not used for TSR Group’s existing operation. As such, the Disposal will not affect the operations of the Group. Nonetheless, the Board takes cognisance of the loss of rental income upon completion of the Disposal but is of the view that it is in the best interest of TSR Group having considered the rationale and benefits mentioned above.
4. UTILISATION OF PROCEEDS
The proceeds arising from the Disposal shall be utilised as follows:-
Purposes |
| Estimated timeframe for utilisation upon receipt of proceeds | Total RM’000 |
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General working capital*1 |
| within 12 months | 16,191 |
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Repayment of term loan*2 |
| Upon completion of the Disposal | 7,309 |
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Estimated expenses in relation to the Disposal*3 |
| Within 3 months | 300 |
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Total |
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| 23,800 |
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Notes:
*1 The Board has earmarked approximately RM16.19 million to partially finance the working capital requirements of the Group’s existing and/or new construction and property development projects, the proportion of the working capital requirements to be utilised from the Disposal Consideration are as follows:-
| RM'000 |
Payment to trade and other payables such as suppliers, contractors and other professionals | 14,000 |
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General administrative and operating expenses such as utilities, rental cost, salaries and any other operating expenditures, which cannot be determined at this juncture | 2,191 |
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Total | 16,191 |
The actual amount to be utilised for working capital requirements as disclosed above may differ subject to the operating requirements at the time of utilisation. In the event of a surplus and/or deficit in the allocated amounts for the abovementioned working capital, such variance will be adjusted to/from the proceeds allocated for other working capital depending on the respective funding requirements at that point of utilisation.
*2 As at 30 September 2022, the outstanding amount of the term loan owing to the Chargee Bank stood at approximately RM7.30 million. The monthly principal repayment of the term loan is approximately RM270,000. As per the terms of the SPA, part of the Balance Purchase Price will be utilised to pay off the outstanding amount owing to the Chargee Bank.
Any variance from the stated outstanding term loan amount and the actual amount payable for the term loan shall be drawn from or channeled towards the general working capital of the Group.
*3 Part of the proceeds of approximately RM300,000 has been earmarked to defray the estimated expenses of the Disposal, the breakdown of which is set out below:-
| RM'000 |
Estimated real property gains tax arising from the Disposal
| 280* |
Professional fees and other incidental expenses in relation to the Disposal | 20 |
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Total | 300 |
* the stated amount is only the estimation by the internal management team of TSR and will be determined by the Inland Revenue Board of Malaysia at a later stage. Therefore, any discrepancies from the stated amount and actual amount payable for such tax shall be drawn from/ channeled towards the general working capital of the Group.
5. RISK FACTOR
5.1 Non-completion of the Disposal
The completion of the Disposal is conditional upon the SPA's conditions precedent or terms being fulfilled. In the event any one or more of the condition precedent and/or terms is/are not fulfilled by the parties involved within the stipulated time as set out in the SPA, or any breach of the representations or warranties or failure to perform any covenant or agreement by the parties involved pursuant to the SPA, the Disposal may be delayed or terminated. As such, there can be no assurance that the conditions precedent can be fulfilled and the Disposal can be completed within the time period permitted under the SPA.
In addition, should a delay or non-completion of the Disposal occurs, TSR Group may not be able to realise the investment gain from the Property and may not realise the benefits that may accrue to it from the proposed utilisation of proceeds as disclosed in Section 4 of this announcement.
Notwithstanding the foregoing, TSR and TSROP shall endeavor to ensure that the conditions precedent and/or terms set out in the SPA are fulfilled in a timely manner to facilitate the completion of the Disposal.
6. FINANCIAL EFFECTS OF THE DISPOSAL
6.1 Issued share capital and substantial shareholders’ shareholding
The Disposal will not have any effect on the issued share capital of TSR nor the substantial shareholders' shareholdings in TSR as the Disposal does not involve any issuance of new ordinary shares of TSR.
6.2 Earnings per share
Save for the expected gain arising from the Disposal, the Disposal is not expected to have any other material effect on the earnings of TSR Group for the financial year ending 30 June 2023.
For illustration purpose, assuming the Disposal had been completed on 1 July 2020, being the beginning of the latest audited financial year ended (“FYE”) 30 June 2021, the pro forma effects of the Disposal on the earnings/(loss) of TSR Group are set out below:-
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Loss after taxation attributable to owners of the Company for the audited FYE 30 June 2021 |
(37,550) |
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Add: Expected gain from the Disposal *1 | 6,575 |
Add: Interest savings from the repayment of borrowings *2 | 417 |
Less: Loss of rental income arising from the Disposal *3 | (1,198) |
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Pro forma loss after taxation | (31,756) |
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Loss per share for the audited FYE 30 June 2021(sen) | (21.52) |
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Pro forma loss per share (sen) | (18.20) |
Notes:
*1 Expected gain from the Disposal as set out in Section 2.7 of this announcement.
*2 Assuming repayment of borrowings of RM7.30 million to the Chargee Bank which carries an interest cost of 5.70% per annum.
*3 The Property is tenanted which on a full year basis will generate rental income of approximately RM1,198,000 for the Group.
6.3 Net assets (“NA”) per share and gearing
Based on the latest audited consolidated financial statements of TSR Group as at 30 June 2021, the pro forma effects of the Disposal on the consolidated NA and gearing level of TSR Group are as follows:
[td]
| Audited FYE 30 June 2021
| Pro forma |
| After the Disposal
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| RM'000 | RM'000 |
Share capital | 113,299 | 113,299 |
Reserves | 25,544 | 31,338*1 |
Shareholders' Equity/ NA | 138,843 | 144,637 |
Non-controlling interests | (1,007) | (1,007) |
Total Equity | 137,836 | 143,630 |
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No. of TSR shares in issue ('000 unit) | 174,450 | 174,450 |
NA per TSR share (RM) | 0.80 | 0.82 |
Total borrowings (interest-bearing) | 32,381 | 25,072*2 |
Gearing level (times)*3 | 0.23 | 0.17 |
Notes:
(a) the expected gain of approximately RM6.57 million arising from the Disposal as
illustrated in Section 2.7 of this announcement;
(b) Interest savings of RM417,000 from the repayment of borrowings;
(c) Loss of rental income of RM1,198,000 arising from the Disposal.
2. Assuming after the loan repayment of approximately RM7.30 million via the cash proceeds upon completion of the Disposal, as set out in Section 4 of this announcement.
3. Calculated based on total borrowings divided by total equity.
7. APPROVALS REQUIRED
The Disposal is not subject to the approval of TSR’s shareholders but subject to relevant authorities’ approval.
8. INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS
None of the Directors and/or major shareholders of TSR and/or any persons connected to them have any interest, whether direct or indirect, in the Disposal.
9. DIRECTORS’ STATEMENT
The Board, having considered all aspects of the Disposal, including the rationale and justification for the Disposal, the basis and justification of arriving at the Disposal Consideration as well as the financial effects of the Disposal, is of the opinion that the Disposal is in the best interest of the Company.
10. ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances and subject to all relevant approvals being obtained, the Disposal is expected to be completed by the third quarter of financial year ending 30 June 2023.
11. HIGHEST PERCENTAGE RATIO APPLICABLE PURSUANT TO PARAGRAPH 10.02 (G) OF BURSA MALAYSIA SECURITES BERHAD
The highest percentage ratio applicable to the Disposal pursuant to paragraph 10.02(g) of Bursa Malaysia Securities Berhad’s Main Market Listing Requirements is 17.14%, calculated based on the disposal consideration of RM23.8 million against the total net assets of approximately RM138.84 million, based on the latest audited consolidated financial statement for financial year ended 30 June 2021 of the Group.
12. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the SPA will be made available for inspection at the Company’s registered office at Level 16, Menara TSR, No.12, Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya, Selangor Darul Ehsan during normal business hours from Monday to Friday (Except public holidays) for a period of 3 months from the date of this announcement.
This announcement is dated 3 October 2022.
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