Announcements

Date : 29 December 2011

OTHERS CENTURY LOGISTICS HOLDINGS BERHAD ("CENTURY" or "COMPANY") - SUB-LEASE OF AN AREA WITHIN THE PORT OF TANJUNG PELEPAS ("SUB-LEASE")

CENTURY LOGISTICS HOLDINGS BERHAD

TypeAnnouncement
SubjectOTHERS
DescriptionCENTURY LOGISTICS HOLDINGS BERHAD ("CENTURY" or "COMPANY")
- SUB-LEASE OF AN AREA WITHIN THE PORT OF TANJUNG PELEPAS ("SUB-LEASE")
1.INTRODUCTION

The Board of Directors of Century is pleased to announce that its wholly-owned subsidiary, Century Total Logistics Sdn Bhd ("CTL"), had on 29 December 2011 accepted the sub-lease of Plots D28-B, D28-C and D28-D, Pelepas Free Zone, Port of Tanjung Pelepas, Gelang Patah, Johor Darul Takzim ("the Land") from Pelabuhan Tanjung Pelepas Sdn Bhd ("Sub-Lessor"). The Sub-Lease rental is RM17,151,750 for the whole Sub-Lease period (see below).

2.DETAILS OF THE SUB-LEASE

2.1 Information on the Land

The Land measures approximately 15 acres and is located within the port area of Pelepas Free Zone.

By a Privatisation Agreement dated 24 March 1995, Pelabuhan Tanjung Pelepas Sdn Bhd has been granted the right and authority by the Government of Malaysia to plan, design and construct a new port at Tanjung Pelepas, Johor Darul Takzim and thereafter to operate and manage the port for a period of sixty (60) years commencing 24 March 1995 (“PTP”).

The Sub-Lease period will commence on 1 January 2012 or upon the approval of Lembaga Pelabuhan Johor, whichever is the later (“Commencement Date”). The tenure of the Sub-lease will be for a term of approximately 43 years until 23 March 2055.

Century intends to construct distribution centres totalling approximately 400,000 square feet on the Land. At this juncture, the built-up size as well as the costs of the buildings have not been finalized.

Century is unable to procure the original date and cost of investment of the Sub-Lease.

2.2 Information on the Sub-Lessor

The Sub-Lessor is a private limited company incorporated in Malaysia under the Companies Act, 1965 and having its principal office address at Blok A, Wisma PTP, Jalan Pelabuhan Tanjung Pelepas, TST 507, 81560 Gelang Patah, Johor Darul Takzim.

The principal activities of the Sub-Lessor is constructing, operating, maintaining, managing PTP together with the provision of port facilities & other related services.


2.3 Basis for the Sub-Lease Rental

The Sub-Lease rental for the whole sub-lease period was arrived at based on negotiations between CTL and the Sub-Lessor, after taking into consideration the Sub-Lease rental rates of neighbouring lots.

2.4 Source of Funding

The Sub-Lease rental will be funded by internally generated funds. However, bank borrowings may be procured at a later stage for the construction of buildings and/or facilities on the Land.

2.5 Liabilities to be Assumed

Other than the Sub-Lease rental, the Century Group will not be assuming any liability on the Sub-Lease.

3. SALIENT TERMS OF THE SUB-LEASE

(i) The Sub-Lease rental shall be paid as follows:-
- RM1,715,175 to be paid upon signing acceptance of the letter of offer;
- RM1,715,175 to be paid upon the date of execution of the sublease agreement;

    - RM2,286,900 to be paid within 6 months from the date of signing acceptance of the letter of offer;
- RM2,286,900 to be paid within 12 months from the date of signing acceptance of the letter of offer;
- RM2,286,900 to be paid within 18 months from the date of signing acceptance of the letter of offer;
- RM2,286,900 to be paid within 24 months from the date of signing acceptance of the letter of offer;
- RM2,286,900 to be paid within 30 months from the date of signing acceptance of the letter of offer; and
- RM2,286,900 to be paid within 36 months from the date of signing acceptance of the letter of offer.

(ii) CTL to complete construction of its buildings and/or facilities within 24 months from the Commencement Date.

(iii) CTL shall undertake to contribute a minimum throughput contribution of 100 Twenty-Footer Equivalent Units (TEU) of containers per acre per month to the container volume of PTP. The requirement will commence within 6 months of completion of the buildings and/or facilities.

4. RATIONALE

The Sub-Lease is in line with Century’s strategy to expand further its distribution centre storage capacity within PTP. CTL currently has 3 other distribution centre facilities, totalling 456,000 sq feet of storage capacity, within PTP.
The entire 456,000 sq feet of space is currently fully occupied.

5. PROSPECTS AND RISK FACTORS

Prospects

PTP continued its impressive growth track record by handling a throughput of 6.5 million TEUs in 2010, which is 9% higher than the previous year’s. It consolidated its position as the 17th busiest container port in the world. The higher volume was achieved on the back of the on-going global economic recovery, which has generally improved global trade. The volumes on long haul routes continue to be strong; the new build container ships delivery market has been very active and ocean freight rates have nearly recovered to pre-crisis levels, pointing towards a sustainable growth in world trade ahead.

Operationally, PTP continued to maintain its world-class 35 gross moves per hour and recorded excellent safety statistics throughout the year.

[Source: MMC Corporation Berhad Annual Report 2010]

Risk Factors

Century expects to fund the Sub-Lease rental, as well as the construction costs of the distribution centres, via a combination of internally generated funds and/or bank borrowings. The Group will be subject to the vagaries of interest rate movements as well as the risks of having to meet its financial commitments on time.

However, the above is mitigated by the fact that the distribution centres are intended to generate income to Century, where the income to be generated is expected to exceed the financing costs as well as the construction costs of the distribution centres.

6. FINANCIAL EFFECTS OF THE SUB-LEASE

The Sub-Lease will not have any effect on the issued and paid-up share capital of Century and the shareholdings of the substantial shareholders of Century.

The Sub-Lease is not expected to have any immediate effect on the net assets and earnings of the Century Group. However, upon commencement of the operations, it is expected to contribute positively to the future earnings of Century.

7. APPROVALS REQUIRED

The Sub-Lease does not require the approval of Century's shareholders.


8. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

None of the Directors and/or major shareholders of Century or persons connected to them have any interest, direct or indirect, in the Sub-Lease.

As far as the Directors are aware, none of the Directors and/or major shareholders of the Sub-Lessor are connected to any Directors and/or major shareholders of Century.

9. STATEMENT BY THE BOARD OF DIRECTORS

The Board of Directors of Century is of the opinion that the Sub-Lease is in the best interest of the Company.

10. HIGHEST PERCENTAGE RATIO

The highest percentage ratio applicable to the transaction is 9.7%.

This announcement is dated 29 December 2011.



Announcement Info

Company NameCENTURY LOGISTICS HOLDINGS BERHAD  
Stock Name CENTURY    
Date Announced29 Dec 2011  
CategoryGeneral Announcement
Reference NoCS-111229-A7F75

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