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General Announcement
Reference No HR-060926-60789 |
| Company Name |
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HAISAN RESOURCES BERHAD |
| Stock Name |
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HAISAN |
| Date Announced |
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26/09/2006 |
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| Type : |
Announcement |
| Subject : |
PROPOSED ACQUISITION OF THE LAND USE RIGHT OF A PIECE OF LAND BY HRB THROUGH ITS WHOLLY-OWNED SUBSIDIARY, IGLO INTERNATIONAL LIMITED ("IIL"), FROM T&D CO., LTD, VIETNAM ("T&D") FOR A CASH CONSIDERATION OF USD3,600,000/RM13,275,000 OR APPROXIMATELY USD40 PER SQUARE METER ("PROPOSED ACQUISITION")
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Contents
1. INTRODUCTION The Board of Directors of Haisan Resources Berhad (“HRB”, “the Company” or “Board”) is pleased to announce that its wholly-owned subsidiary, IIL, had on 25 September 2006 entered into a Land Lease Contract (“Contract”) with T&D for the Proposed Acquisition of the land use right of a piece of land measuring approximately 90,000 square meters within Viet Hoa Industrial Park – Duc Hoa III, Industrial Park III, Duc Lap Ha Commune, Duc Hoa District, Long An Province, Vietnam (“Land”) for a total cash consideration of USD3,600,000/RM13,275,000 or approximately USD40 per square meter, subject to the terms and conditions as set out in the Contract.
2. BACKGROUND INFORMATION 2.1 Information on T&D T&D is a company incorporated in Vietnam and having its registered office at 79/5B Phan Dang Luu, Ward 7, Phu Nhuan District, Ho Chi Minh City, Vietnam with an legal capital of Vietnam Dong (VND) 2,000,000,000 only divided into 20,000 Ordinary Shares of VND100,000 each. The principal activity of T&D is trading, leasing and forwarding services. 2.2 Information on the Land The Land measures approximately 90,000 square meters and is situated within Viet Hoa Industrial Park – Duc Hoa III, Industrial Park III, Duc Lap Ha Commune, Duc Hoa District, Long An Province, Vietnam. 2.3 Information on IIL IIL is a wholly-owned subsidiary company of HRB. The principal activity of IIL is that of investment holding. The authorized share capital as at 31 December 2005 of IIL is USD10,000 comprising of 10,000 ordinary shares at USD1.00 each. The paid-up share capital of IIL as at 31 December 2005 is USD10,000 comprising of 10,000 ordinary shares at USD1.00 each. 2.4 Basis of Arriving at the Purchase Consideration The purchase consideration was arrived at on "a willing-buyer willing-seller" basis. 2.5 Mode of satisfaction of the purchase consideration The purchase consideration will be satisfied by way of cash from internally generated funds and borrowings. 2.6 Liabilities to be assumed by the HRB Group There are no liabilities to be assumed by the HRB Group pursuant to the Land Acquisition. 3. SALIENT TERMS OF THE CONTRACT a) T&D would lease the land use right to IIL and the land rental for the leased land site shall be USD40 per square meter. b) The term of lease is 50 years. c) IIL shall pay the land rental, with funding from its parent company, HRB, as follows:
| Point of time |
% |
Amount (USD) |
| - Upon signing this Contract or upon after obtaining approval from the Malaysian Central Bank for the Exchange Control Regulation and other Malaysian regulatory requirements whichever date is later - Within 30 days from the date of receipt of the Investment Certificate by IIL or upon obtaining approval from the Malaysian Central Bank for the Exchange Control Regulation and other Malaysian regulatory requirements whichever date is later - Within 30 days from the date of receipt of the Land Use Right Certificate by IIL or upon obtaining approval from the Malaysian Central Bank for the Exchange Control Regulation and other Malaysian regulatory requirements whichever date is later |
25% 50% 25% |
900,000 1,800,000 900,000 |
| Total |
100% |
3,600,000 |
d) IIL shall acquire physically the Land site from T&D within ten (10) days after having made the payment of seventy five percent (75%) of the total payable land rental. IIL shall acquire the Certificate of Land Use Right for the Land site from T&D within thirty (30) days after having made the payment for seventy five percent (75%) of the total payable Land Rental. e) IIL and/or HRB will ensure that appropriate steps are taken to obtain all the relevant approvals from the respective local government authorities within the timeframe/schedule as indicated. f) If the payment for the land rental or any other amounts to T&D as per the Contract has not been paid as per the terms agreed, then IIL will have to pay for the interest on the unpaid amount, except for the events of force majeure and the interest rate applicable shall be the rate announced by VN Argibank at the time of payment by IIL. g) In the event T&D fails to perform its obligations within 6 months from the signing date, the Contract shall not be effective or binding and T&D shall refund all monies which IIL has contributed and any payable amounts as stipulated in the Contract.
4. RATIONALE FOR THE PROPOSED ACQUISITION In conjunction with the HRB Group’s expansion plan, HRB is planning to expand its temperature-controlled logistics (“TCL”) business into Vietnam and the Land Acquisition is primarily to facilitate the construction of a building for its future TCL operations in Vietnam. The rapid economic growth in Vietnam has seen the increasing demands for high quality food products, in particular the perishable foods segment, both for the domestic and export market. The growing importance of ensuring freshness of perishable foods has called for increased attention to be given to agricultural, health and food safety issues, in particular to ensure access to domestic and international food market. This has translated to a rising demand for TCL infrastructures and Vietnam currently does not have sufficient quality TCL facilities to cater for the influx of food products that require such services. Infrastructures such as cold storage and value-added facilities are vital for the export of perishable agricultural products. Fresh products may be host to certain pests and require treatment prior to shipping. Hence, cold storage is a necessity to ensure the freshness and safety of the food products. The increasing volume of production and trade in the area of perishable products from internal and external factors are expected to increase the demand for cold rooms by next year due to the impending ascension of Vietnam into the WTO. The HRB Group views that the facility to be built in Ho Chi Minh City will allow the HRB Group to strategically position itself to capitalize on the opportunity to venture into Vietnam successfully.
5. RISK FACTORS 5.1 Business Risk The inherent risk of the TCL sector include occupational health and safety, environment and property management, business continuity, contractual obligations, financial and capital management, risk financing and insurance, and development and use of information systems and technology. Although the HRB Group seeks to limit these risks, by inter-alia, effect management and cost-control policy, no assurance can be given that any change in these factors will not have a material adverse impact on the HRB Group. 5.2 Competition The industry comprising of numerous local, regional and small-scale so called “logistics businesses” that are incapable of providing quality services in a professional matter. Hence, enormous potential for highly integrated logistics companies to invest in Vietnam. 5.3 Political, economical and social risk The HRB Group will be venturing into a new market and will be exposed to political, economical and social risk which the HRB Group might not have much control of. 6. PROSPECTS 6.1 Malaysian economy Notwithstanding the persistently high oil prices and the downturn in the global electronics cycle, real gross domestic product (“GDP”) expanded by 5.3%. Growth was private-sector driven and was underpinned by supportive macroeconomic policies and favourable financial conditions. Private consumer demand was sustained at a strong pace while the resilience in private investment further supported economic expansion. The public sector continued to take the opportunity of a favourable environment to consolidate its finances to more sustainable levels. Value added in the agriculture sector recorded a moderate increase of 2.1% in 2005. Palm oil production was markedly higher, growing by 7%, although higher yields were offset by the weaker performance in the other agriculture activities including rubber, fisheries and paddy. Growth in the mining sector also moderated (0.8%) due to lower production of crude oil, though natural gas output was substantially higher. The decline in crude oil production was a result of shutdowns of several oil installation facilities during the year for maintenance and repair purposes. Value added in the construction sector contracted for the second consecutive year (-1.6%; 2004: -1.5%) as civil engineering activities were subdued following the completion of several large infrastructure projects in recent years. However, the residential and non-residential segments continued to expand due to resilient demand for houses and firm interest for office and retails space. The Malaysian economy is expected to strengthen further in 2006. Real GDP is projected to grow at a faster rate of 6%, driven by strengthening exports and resilient domestic demand. The global and semiconductor upcycle, sustained global growth and higher prices for primary commodities are expected to have positive effects on exports, as well as private consumption and investment. Current inductors suggest that the upturn in the global semiconductor industry, which began in the second half of 2005, would gain momentum in 2006. Malaysia is expected to benefit from this favourable development with a stronger growth in manufactured exports, particularly in the computer and semiconductor segments. Domestic demand would be driven by the private sector for the fourth consecutive year as household spending remains an important sources of growth. Equally significant, the continued expansion in private investment would ensure the long-term sustainability of growth by expanding the stock of productive capital. In this regard, efforts will be intensified to enhance the contribution of private investment to growth. The Government will continue to focus on strengthening the fiscal position with the ultimate aim of supporting the fiscal position with the ultimate aim of supporting economic growth without compromising long-term fiscal sustainability. In 2006, prices are expected to increase, driven largely by cost-push factors. Nevertheless, inflation is expected to remain at manageable levels during the year as capacity expansion and productivity improvements in the domestic economy will help contain price pressures. Monetary policy, will therefore, remain supportive of growth. While downside risks remain, the strong macroeconomic fundamentals and diversified economic structure will provide economic resilience. (Source: Bank Negara Annual Report 2005) 6.2 Cold-Chain Logistics Industry The HRB Group’s core business is provision of temperature-controlled logistics/warehousing for currently mainly the food related sector. During the Ninth Malaysian Plan period, the food commodities sector is expected to grow at an average rate of 7.6 per cent per annum through improvements in efficiency and productivity as well as expansion in hectarage. Exports of food commodities will be increased to achieve a positive trade balance. Fish production will focus on expanding aquaculture and deepsea fishing activities. The development of the livestock industry will centre on various activities along the value chain including production of breeders and animal feed. To cater for the increase in demand for animal feeds and to reduce imports, efforts will be undertaken to increase the utilisation of feedrice and local forage including kenaf, oil palm fronds as well as its by-products. The output of livestock products, particularly poultry and eggs will be further increased using more modern production systems to meet local and export demand. Production of halal food will be further promoted to take advantage of the vast potential of the halal export market. This will include processing and packaging of meat, fisheries and other food-based products. In addition, Malaysia will be developed as the centre for the certification of halal products and the Jabatan Kemajuan Islam Malaysia halal certification will be promoted worldwide. The food manufacturing industry will be encouraged to leverage on Malaysia’s strong credentials in halal certification to tap the growing global halal market. In this regard, efforts will be intensified to develop Malaysia as a regional hub for halal food. While upgrading the existing infrastructure and facilities for halal food production, a number of new halal food parks will be established. Greater attention will also be given to promote the country’s image as a source of safe and quality halal food products as well as to position the country’s halal certification standard MS1500:2004, General Guidelines on the Production, Preparation, Handling and Storage of Halal Foods, as a premium standard for halal food. Focus will also be given to improve the efficiency of marketing delivery services and strengthening the global network through strategic alliances. Towards this end, efforts will be undertaken and to strengthen traditional markets and diversify into new markets. Promotional programmes will be intensified to increase consumption of foods with high nutritional value and create greater awareness among Malaysians on the safety of food products. The market for convenience and functional foods is expected to grow rapidly in view of the changing consumption patterns and greater awareness of healthy lifestyles. In this regard, the production and supply of ready-to-use seafood, livestock products and vegetable-based convenience food will be promoted as new areas of investment. Existing programmes to assist industries will be strengthened to facilitate the application of modern processing technologies, innovative packaging and branding to meet varying consumer preferences and market demand at home and abroad. Emphasis will also be placed on facilitating small and medium-enterprises to network with multinational companies in order to penetrate new export markets. (Source: Ninth Malaysian Plan, 2006-2010) HRB is also embarking on diversifying its base of cold room services to other higher end low volume related sectors like pharmaceuticals and industrial products. These higher end products will require smaller space but command a higher value to HRB in terms of warehousing and distribution services. This will enable HRB and its subsidiaries to derive a better return and margins for its integrated cold room services. 6.3 Vietnam economy prospects GDP is estimated to have grown by 8.4 percent in 2005, the highest level in nine years. This strong performance has been accompanied by a continuation of Vietnam's remarkable success in reducing poverty, which by now has declined to under 20 percent. Even though macroeconomic policymaking in 2005 was complicated by supply shocks, external and internal balances were maintained at manageable levels. Rising international commodity prices while benefiting exports and government revenues added to inflationary pressures. Real GDP originating in the industrial sector is estimated to have risen to 10.6 percent in 2005, with the manufacturing sub-sector growing by 13 percent. Construction activity picked up especially in the second half of the year to record an increase of 10.8 percent. Services sector growth strengthened to record 8.5 percent in 2005. The main areas of expansion included retail trade, and sub-sectors related to tourism such as hotels, restaurants and transport. Agricultural production is estimated to have grown by around 4 percent despite the resurgence of avian influenza and drought conditions in parts of the country. It is estimated that in 2005 the direct impact of avian influenza amounted to around 0.1 percent of GDP. While the real impacts of avian influenza outbreaks appear minimal for now, this is an area requiring a high level of vigilance by the authorities. The outbreaks have had non-negligible impacts on inflation in the short-term, as they have resulted in rises in the prices of poultry products, with knock-on effects on prices of substitute meat products. Investment continued to remain strong rising from 38.4 percent of GDP in 2004 to 38.9 percent in 2005, according to MPI data. As in recent years, private sector investment showed rapid expansion. An additional 40,000 new businesses were registered in 2005, representing an increase of 9 percent in number and 45 percent in registered capital. Revised estimates show a steep rise in FDI commitments from 4.2 billion dollars in 2004 to 6.3 billion dollars in 2005. Disbursements, including domestic borrowing by joint ventures, reached 3.3 billion dollars implying an increase of 15 percent over the past year. On the external front, export earnings grew by 22 percent in 2005. Crude oil exports, benefiting from high international prices, rose 30 percent in value terms. Rice exports reached a record of 5 million tons, and with the help of better prices, 1.5 billion dollars in value. The main manufactured export, garments, after being flat in the first half of 2005, recovered in the second half to grow by 10 percent over the whole year. Destination data for 2005 reveals that garment export growth to the United States slowed to 5.2 percent, but experienced growth of over 18 percent in the European Union and Japanese markets. In the first two months of 2005, overall exports have grown at a robust 28 percent y-o-y, with garments growing by 45 percent y-o-y. Compared with the first half of 2005, imports slowed down in the second half. Their growth rate over the entire year stood at 15.4 percent. Part of the slowdown was due to the softening of international commodity prices, which were a key driver of the 25 percent growth rate of imports during 2004. Imports of machinery which had picked up in the first four months of 2005 have since flattened out, showing almost no change compared with 2004. (Source: The World Bank East Asia update March 2006) 7. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION
7.1 Share Capital and Substantial Shareholdings The Proposed Acquisition shall not have any effect on the share capital and substantial shareholdings of the Company as the purchase consideration will be satisfied entirely by cash. 7.2 Earnings The Proposed Acquisition is not expected to have any material impact on the earnings for the financial year ending 31 December 2006 of the Group. However, the Proposed Acquisition is expected to contribute positively to the medium and long-term earnings of the Group once the Land is developed. 7.3 Net Assets The Proposed Acquisition is not expected to have material impact on the Net Assets of the Group. 8. APPROVALS REQUIRED The Proposed Acquisition is subject to:-
(a) The approval of the Foreign Investment Committee for the Contract therein upon terms and conditions as may be reasonably acceptable to both T&D and IIL/HRB; (if applicable); (b) Bank Negara Malaysia (if applicable); and (c) The approval of the Long An Provincial IP Management Board to the lease and transfer of the said Land by T&D to IIL.
The Proposed Acquisition is not subject to the approval of the shareholders of HRB. However, an information circular will be issued to shareholders pursuant to paragraph 10.05 of the Listing Requirements. 9. Departure from the SeCurities commissions’ guidelines To the best knowledge of the Board, the Proposed Acquisition has not departed from the Commissions’ Policies and Guidelines on Issue/Offer of Securities. 10. SOURCE OF FUNDS The purchase consideration shall be financed via internally generated funds and bank borrowings. 11. DIRECTORS' AND/OR MAJOR SHAREHOLDERS' INTERESTS None of the Directors and/or Major Shareholders of the Company and persons connected with such Directors and/or Major Shareholders have any interests, direct or indirect in the Proposed Acquisition.
12. STATEMENT BY DIRECTORS The Directors, having taken into consideration all aspect of the Proposed Acquisition, are of the opinion that the terms and conditions of the Proposed Acquisition are fair and are in the best interest of the Company. 13. ESTIMATED TIME FRAME FOR THE COMPLETION
Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed within six (6) months upon fulfillment of all the conditions precedent of the Contract unless otherwise extended.
14. DOCUMENTS FOR INSPECTION The Contract is available for inspection at the registered office of the Company at Lot 506, Jalan Pelabuhan Utara, Bandar Sultan Suleiman, 42000 Pelabuhan Klang, Selangor Darul Ehsan during the normal working hours from Monday to Friday (except public holidays) for a period of two (2) weeks from the date of this announcement.
This announcement is dated 26 September 2006.
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