1.  INTRODUCTION

The Board of Directors of Sunway wishes to announce that Sunway Dimension Stones Sdn Bhd, (“SDSSB”), a wholly-owned subsidiary of Sunway Holdings Sdn Bhd (“SHSB”) which in turn is a wholly-owned subsidiary of Sunway has on 11 May 2015, entered into the following agreements:

(a)    a Share Sale and Purchase Agreement (“SSPA") with Kelana Resorts Sdn Bhd (“KRSB”) to acquire 293,653 ordinary shares of RM1/- each, representing 100% of the issued and paid-up share capital of Cleaver Fortune Sdn Bhd (“CFSB”) from KRSB at a purchase consideration of RM282,636,030/- (“Proposed Share Acquisition”) free from all encumbrances, charges and/or liens on the basis that CFSB is the beneficial owner of the following 4 plots of leasehold land measuring approximately 731,634 square feet:

(i)    PN 92838 Lot No. 72241 Seksyen 40 (approximately 722,689 square feet) (“Lot 72241”); 
(ii)    H.S.(D) 238244 PT No. 194 (approximately 2,379 square feet) (“PT No. 194”);
(iii)    H.S.(D) 238243 PT No. 193 (approximately 797 square feet); and
(iv)    H.S.(D) 240048 PT No. 215 (approximately 5,769 square feet),

all in Bandar Petaling Jaya, Daerah Petaling, Negeri Selangor (“Land 1”)

(b)    a Sale and Purchase Agreement (“SPA”) with Viva Variasi Sdn Bhd (“Viva”), a wholly-owned subsidiary of KRSB, for the acquisition of a freehold land held under H.S. (D) 63419, PT 252, Mukim Damansara, Daerah Petaling, Negeri Selangor measuring approximately 8,708 square feet (“Land 2”) on an as is where is basis, free from all encumbrances, charges and/or liens for a total purchase consideration of RM3,363,970/- (“Proposed Property Acquisition”).

Lot 72241, PT No. 194 and Land 2 are adjacent to each other. 

2.    INFORMATION ON SDSSB, KRSB, CFSB AND VIVA

2.1    SDSSB

SDSSB is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up capital of SDSSB are both RM100,000/-. The principal activity of SDSSB is property investment. 

2.2    KRSB

KRSB is a company incorporated in Malaysia and having its registered office at 130 Jalan Choo Cheng Khay, 50460 Kuala Lumpur. The authorised and paid-up capital of KRSB are both RM5,000,000/-. The principal activity of KRSB is investment holding. 

2.3    CFSB

CFSB is a company incorporated in Malaysia and having its registered office at 130, Jalan Choo Cheng Khay, 50460 Kuala Lumpur. The authorised and paid-up capital of CFSB are RM400,000/- and RM293,653/- respectively. The principal activity of CFSB is property investment. 

2.4    Viva

Viva is a company incorporated in Malaysia and having its registered office at 130, Jalan Choo Cheng Khay, 50460 Kuala Lumpur. The authorised and paid-up capital of Viva are RM100,000/- and RM2/- respectively. The principal activity of Viva is investment holding.

3.      SALIENT TERMS OF THE SSPA AND SPA

3.1    SSPA

Pursuant to the SSPA, SDSSB will acquire 293,653 ordinary shares of RM1 each, representing 100% equity interest in the share capital of CFSB from KRSB at a purchase consideration of RM282,636,030/- free from all encumbrances, charges and/or liens on the basis that CFSB is the beneficial owner of   Land 1.

The Proposed Share Acquisition is expected to be completed within 6 months from the date of the SSPA (“Completion Period”) and shall be automatically extended by a further period of 1 month in the event the balance purchase price of 90% is not paid on or before the expiry of the Completion Period.

Upon the completion of the Proposed Share Acquisition, CFSB will become a wholly-owned subsidiary of SDSSB.

3.2    SPA

SDSSB has entered into the SPA with Viva to acquire Land 2 at a total purchase consideration of RM3,363,970/-.

The SPA shall become unconditional when the State Authority consent for transfer of Land 2 is obtained by Viva which is expected to be within 4 months from the date of the SPA (“Unconditional Date”) while the completion of the SPA shall be within 6 months from the Unconditional Date (“Completion Period”). In the event the balance purchase price of 90% is not paid on or before the expiry of the Completion Period, the Completion Period shall be automatically extended by a further period of 1 month.

4.      BASIS OF ARRIVING AT THE PURCHASE CONSIDERATION FOR THE PROPOSED SHARE ACQUISITION AND PROPOSED PROPERTY ACQUISITION                                                  

The total purchase consideration of RM286,000,000/- is calculated at the rate of up to approximately RM386.31 per square foot based on a total land area of approximately 740,342 square feet.

The purchase consideration was arrived at pursuant to an open tender for the Proposed Share Acquisition and the Proposed Property Acquisition and accepted by KRSB and Viva. Sunway's bid price of RM386.31 per square feet was arrived at after taking into consideration the development potential of Land 1 and Land 2 (together, “Land”) and Sunway's required internal rate of return.

Given Sunway’s knowledge of the market value of the surrounding properties and the potential development value of similar land within the vicinity of the Land, i.e. Kelana Jaya, no valuation was carried out on the Land.

5.      LIABILITIES TO BE ASSUMED

There are no liabilities (including contingent liabilities and guarantees) to be assumed by Sunway arising from the Proposed Share Acquisition and Proposed Property Acquisition.

6.      RATIONALE

The Proposed Share Acquisition and Proposed Property Acquisition, will provide Sunway with additional land totaling approximately 16.99 acres, in line with its objective to replenish its landbank especially with land ready for immediate launch.

Sunway is proposing a mixed development comprising service apartments and retail shops. The proposed development on the Land is estimated to generate a total gross development value of approximately RM1.8 billion when fully developed. This complements its steady growing supply of properties from its existing prime land in strategic locations. The first launch is expected to be in financial year 2016 over a development period of approximately 5 years.

The Land, situated next to Western Digital in the Sungei Way Free Trade Zone, is strategically located within the prime area of Petaling Jaya, Sunway Resort City and Subang Jaya, which are affluent and mature neighborhoods. The renowned Kelab Golf Negara Subang with two 18-hole golf courses is in its close vicinity. In addition, it is adjacent to a 15-acre water retention pond which Sunway plans to improve its landscape by working together with the local authorities to provide additional recreational activities to its residents. The terrain of the Land is flat and part of the Land is currently being leased and used by a third party as an open space car park. The dwelling units will be designed to capture the scenic view of the golf courses and beautified water retention pond. 

The Land enjoys a wide frontage to the Lebuhraya Damansara-Puchong which sits on its northern boundary. It is easily accessible from major highways and local roads, amongst others via an underpass on Lebuhraya Damansara-Puchong, Federal Highway via Jalan Majlis and local road to New Klang Valley Expressway and the Subang Airport. In addition, the Land is located approximately 600 meters from the Setia Jaya KTM and BRT- Sunway Line stations which provides  residents access to public transportation networks to Kuala Lumpur City Center, Subang Jaya, Sunway Resort City, Shah Alam and Klang.

7.      PROSPECTS

Properties in Petaling Jaya are welcomed due to scarcity of land and continuous population growth. Petaling Jaya, being one of the most developed areas in term of population and economy, has long been an area of focus in Sunway’s strategy in relation to its Klang Valley land bank profile.

Hence, with innovative and customer centric products, coupled with the strategic location of the Land, Sunway is confident that the project will receive positive response when it is launched.

8.      FEASIBILITY STUDY

A feasibility study was conducted by Sunway and its external consultants prior to the open tender.

The preliminary feasibility indicates that the proposed development of the Land is expected to generate an estimated gross development value of RM1.8 billion. Market studies on the surrounding property development were also undertaken to assess its viability.

Based on the results of the studies, the management of Sunway is of the view that the project financials meet the internal investment hurdle rate for Sunway to proceed with the Proposed Share Acquisition and Proposed Property Acquisition.

9.      RISK FACTORS

The Proposed Share Acquisition and Proposed Property Acquisition and the subsequent proposed development on the Land to be undertaken by SDSSB are subject to the risks inherent in the property development and construction industries, which include but are not limited to competition risks, unstable global and domestic economic conditions, currency fluctuations, unfavorable interest rate movements, inflation hike, shortages of raw materials and labour, increase in cost of capital, political instability, changes in government initiatives, changes in statutory regulations and legal disputes.

Sunway, with many years of experience in the business of property development and construction, will take the necessary steps to mitigate the various risks identified. However, no assurance can be given that significant changes in any of these factors will not materially affect Sunway’s operation and financial performance.

In addition, the Land is sold on “as is where is” basis. The Land is adjacent to a parcel of land owned by the State Government of Selangor which has a water retention pond. Soil investigation will be conducted to determine the soil profile of the Land before detailed development planning is carried out. Sunway will engage with the local authorities to jointly improve the landscape surrounding the retention pond to serve as an additional recreational area to the residents.

10     SOURCE OF FUNDS

The Proposed Share Acquisition and Proposed Property Acquisition will be funded through bank borrowings and/or internally generated funds.

11.    EFFECTS OF THE PROPOSED SHARE ACQUISITION AND PROPOSED PROPERTY ACQUISITION   

11.1  On Share Capital and Substantial Shareholders’ Shareholding

The Proposed Share Acquisition and Proposed Property Acquisition will not have any effect on the share capital and substantial shareholders' shareholding of Sunway as they do not involve any allotment or issuance of new shares by Sunway.

11.2  On Earnings Per Share, Net Assets Per Share and Gearing

The Proposed Share Acquisition and Proposed Property Acquisition are not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of Sunway for the financial year ending 31 December 2015. However, the Proposed Share Acquisition and Proposed Property Acquisition are expected to contribute positively to the future earnings of Sunway Group.

12.    APPROVAL REQUIRED

The Proposed Share Acquisition and Proposed Property Acquisition do not require approval from the shareholders of Sunway. The Proposed Property Acquisition is subject to the State Authority consent to transfer the Land 2 from Viva to SDSSB.  

13.    DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

Insofar as the Directors are aware, none of the directors or major shareholders of Sunway or persons connected with them has any interest, whether direct or indirect, in the Proposed Share Acquisition and Proposed Property Acquisition.

14.    STATEMENT BY THE BOARD OF DIRECTORS

The Board of Directors of Sunway is of the opinion that the Proposed Share Acquisition and Proposed Property Acquisition are in the best interests of Sunway.

15.    ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED SHARE ACQUISITION AND PROPOSED PROPERTY ACQUISITION    

Barring any unforeseen circumstances and subject to the approval of the relevant authorities and fulfillment of all conditions precedent, the Proposed Share Acquisition and Proposed Property Acquisition are expected to be completed by the second half of 2015.

16.    DOCUMENTS AVAILABLE FOR INSPECTION

The SSPA and SPA are available for inspection at the registered office of Sunway at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan during normal business hours (9.00 a.m. to 6.00 p.m.) from Monday to Friday (except public holidays) for a period of 3 months from the date of this announcement.

This announcement is dated 11 May 2015.