1. INTRODUCTION
We refer to our announcement dated 4 December 2012 in relation to:

(a) Subscription and Shareholders’ Agreement (“SSA") between Sunway City Sdn Bhd (“SunCity”) (a wholly-owned subsidiary of Sunway), Iskandar Assets Sdn Bhd (“IASB”) (a wholly-owned subsidiary of Iskandar Investment Berhad) and Harmony Impulse Sdn Bhd (“HISB”) (a 60% owned subsidiary of Sunway) with the intention of establishing a joint venture via HISB to jointly undertake a mixed development project on the following parcels of freehold land located in Iskandar Malaysia (“the Land”) as well as to regulate the relationship of SunCity and IASB as shareholders of HISB:

(i) Land held under HSD 452850, PTD 75802, Mukim of Pulai, District of Johor Bahru, measuring approximately 412.75 acres ("Pendas North Land"); and
(ii) a portion of the Land held under HSD 452656, PTD 2398, Mukim of Tanjung Kupang, District of Johor Bahru measuring approximately 366.32 acres ("Western Pendas South Land").

(b) Two (2) Sale and Purchase Agreements (“SPA”) between HISB and IASB for the acquisition of the Land on an “as is where is” basis and free from encumbrances but otherwise subject only to the express or implied conditions of the land title and restrictions-in interest endorsed on the land title or otherwise affecting the Land for a total purchase consideration of up to RM412,727,480.36.

The Board of Directors of Sunway wishes to announce that IASB has agreed to sell and HISB has agreed to purchase the balance of the land held under HSD 452656, PTD 2398, Mukim of Tanjung Kupang, District of Johor Bahru measuring approximately 300 acres (“Second Plot”). For this purpose, SunCity has on 23 January 2013 entered into a Supplemental Subscription and Shareholders’ Agreement (“Supplemental SSA") with IASB and HISB to amend the SSA to document the additional equity to be injected by SunCity and IASB into HISB to finance part of the purchase price of the Second Plot.

HISB has on even date, entered into a Supplemental Agreement to the Western Pendas South Land SPA (“Supplemental SPA”) with IASB for the acquisition of the Second Plot on an “as is where is” basis and free from encumbrances but otherwise subject only to the express or implied conditions of the land title and restrictions-in interest endorsed on the land title or otherwise affecting the Second Plot for a total purchase consideration of up to RM183,882,441.60 (“Proposed Acquisition”).

2. INFORMATION ON SUNCITY, IASB AND HISB

2.1 SunCity

SunCity is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of SunCity are RM3,500,000,000/- and RM1,356.14 respectively. The principal activity of SunCity is investment holding. As at the date hereof, SunCity holds 60% of the issued share capital in HISB in accordance with the terms of the SSA.

2.2 IASB

IASB is a company incorporated in Malaysia and having its registered office at #G-12, Block 8, Danga Bay, Jalan Skudai, 80200 Johor Bahru, Johor. The authorised and paid-up share capital of IASB are RM5,000,000/- and RM2/- respectively. The principal activities of IASB are investment holding and dealing in land lease and land. As at the date hereof, IASB holds 40% of the issued share capital in HISB in accordance with the terms of the SSA.

2.3 HISB

HISB is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of HISB are RM100,000/- and RM100/- respectively. The principal activities of HISB are property development and property investment. Its shareholders are SunCity and IASB.

3. SALIENT TERMS OF THE SUPPLEMENTAL SSA AND SUPPLEMENTAL SPA

3.1 Supplemental SSA

SunCity, IASB and HISB have entered into the Supplemental SSA to amend the terms and conditions of the SSA to include the terms for the additional equity injection by SunCity and IASB for purposes of the acquisition of the Second Plot.

3.2 Supplemental SPA

Pursuant to the Supplemental SPA, HISB will acquire the Second Plot from IASB on an “as is where is” basis and free from encumbrances but otherwise subject only to the express or implied conditions of the land title and restrictions-in interest endorsed on the land title or otherwise affecting the Second Plot for a total purchase consideration of up to RM183,882,441.60.

The total purchase consideration of the land under the Western Pendas South Land SPA as supplemented by the Supplemental SPA of RM375,329,477.96 shall be satisfied by HISB in seven (7) instalments whereby the deposit for the Western Pendas South Land was paid within 14 days from the date of the SPA, the deposit for the Second Plot is to be paid upon 14 days of the date of the Supplemental SPA and the balance in five (5) annual instalments within a period of 120 months from the date of the SPA.

The amount of the purchase consideration is subject to adjustments upon verification by IASB relating to the conditions of the Second Plot.

4. BASIS OF ARRIVING AT THE PURCHASE CONSIDERATION FOR THE SUPPLEMENTAL SPA

The purchase consideration of up to RM183,882,441.60 is calculated at the rate of approximately RM14.07 per square foot based on a total land area of approximately 300 acres. The amount of the purchase consideration is subject to adjustments upon verification by IASB relating to the conditions of the Second Plot.

The purchase consideration was arrived at on a willing-buyer willing-seller basis between HISB and IASB after taking into account the following:

(a) the development potential and prospects of the Second Plot in view of its strategic location adjacent to the Land and Zone F within Medini, Iskandar Malaysia i.e. the land leased to Sunway Iskandar Sdn Bhd commencing from 1 September 2012. The proposed mixed development on the Second Plot is expected to generate gross development value (“GDV”) amounting to approximately RM6 billion;
(b) the Group’s strategy to further strengthen its foothold in Johor as well as the potential cost savings from synergistic benefits that may arise in areas such as sales and marketing and operations; and
(c) the attractive payment terms that are staggered and deferred over a period of 120 months.

No valuation of the Second Plot was carried out, given Sunway’s knowledge of the market value of the surrounding properties and the potential development value of similar land within the vicinity. Sunway is not able to disclose the net book value of the Second Plot as it is not privy to this information.

5. LIABILITIES TO BE ASSUMED

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

6. RATIONALE

Subsequent to the acquisition of the Land on 4 December 2012, HISB was presented with the opportunity to acquire the Second Plot which is strategically located to enhance the development value of the Land. The Second Plot is located immediately to the east of the Western Pendas South Land and across Sungai Pendas from the Pendas North Land. As such, the Proposed Acquisition represents a natural extension and allows Sunway to have full control of the river front development on both sides of the river bank along Sungai Pendas. It is expected to generate substantial synergies with Sunway’s proposed development as well as create the potential for an even larger and more integrated township development. With the Proposed Acquisition, Sunway will be able to benefit from better master planning in terms of development components integration, accessibility and transport network circulation.

Further, the Proposed Acquisition will increase Sunway’s landbank in Iskandar Malaysia to approximately 1,858 acres and propel Sunway to become one of the largest land owners in this high growth region.

In addition, the balance of the purchase consideration for the Second Plot which is payable in five (5) annual installments from 72 months to 120 months from the date of the SPA, will reduce the holding cost for HISB. The attractive land price of RM14.07 per square foot is expected to generate an estimated GDV of RM6 billion. The Proposed Acquisition is expected to contribute positively to Sunway’s future earnings and improve shareholders’ value over the medium to long term.

7. PROSPECTS

The Malaysian economy, despite the challenging economic conditions, recorded a GDP growth of 5.2% in the third quarter (Second Quarter 2012: 5.6%). The economy is expected to remain on its sustainable growth path throughout 2013 to 2017. Its rate of expansion will slow slightly in 2013, to 4.5%, compared with an estimated 5.2% in 2012. The expected strengthening of the ringgit against the US dollar, together with moderating global fuel and food prices, should help to contain inflationary pressures in Malaysia in 2013. However, the gradual withdrawal of fuel and food subsidies will put some upward pressure on consumer prices, with annual inflation averaging 2.2% in 2013, compared with an estimated 1.7% in 2012. (Sources: Malaysia: Economic Overviews, Bloomberg, 8 January 2013 and Quarterly Bulletin, Third Quarter 2012, Bank Negara Malaysia, November 2012).

Iskandar Malaysia has made substantial progress over the years, and is expected to attract more investors, both local and foreign. Iskandar Malaysia recorded RM20.36 billion in committed investments between January and November of 2012. This surpassed the targeted investment of RM100 billion with cumulative committed investments in various sectors reaching RM105.14 billion. Increased domestic investors’ interest and confidence was evident as about 64% of the total investments in Iskandar Malaysia came from local investors. This figure compares to only 45% local investment in 2008 (Source: “Iskandar M’sia Jan-Nov investments at RM20.36b”, The Edge, 11 December 2012).

In future years, Johor is expected to receive much attention and interest from tourists and property buyers, both local and foreign, as more high profile projects are completed in the region, particularly in Iskandar Malaysia. Amongst the projects completed in late 2011 and 2012 are Legoland and Puteri Harbour Indoor Theme Park for tourism, Newcastle University and Marlborough College in EduCity, etc. Transportation has also improved with the recent completion of the Coastal Highway connecting Johor Bahru to Nusajaya and with the planning of the Southern Link.

As such, the proposed integrated development to be undertaken will fit in well amongst the other developments in the area, including Sunway’s own proposed integrated development on the Land and in Zone F within Medini Iskandar. In view of the above, the Board of Directors of Sunway is optimistic of the prospects of the Second Plot.

8. FEASIBILITY STUDY

A feasibility study was conducted by Sunway and external consultants prior to the entering of the Supplemental SSA and Supplemental SPA.

The preliminary feasibility of the Proposed Acquisition indicates that the proposed development of the Second Plot is expected to generate an estimated GDV of RM6 billion. Market studies were conducted by the internal experts to assess the relevant property market conditions and financial feasibility.

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

9. RISK FACTORS

The Proposed Acquisition to be undertaken by HISB is subject to the risks inherent in the property development and construction industries including expertise required to rehabilitate the land due to its terrain. The property development and construction risks include but are not limited to competition risks, unstable global and domestic economic conditions, currency fluctuations, unfavourable interest rate movements, inflation hike, shortages of raw materials and labour, increase in the cost of capital, political instability, changes in Government’s initiatives, including the continued commitment by Iskandar Region Development Authority in promoting Iskandar Malaysia, 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 operations and financial performance.

10. SOURCE OF FUNDS

The Proposed Acquisition and the development costs of the Second Plot will be funded through bank borrowings and/or internally generated funds.

11. EFFECTS OF THE PROPOSED ACQUISITION

11.1 On Share Capital and Substantial Shareholders' Shareholding

The Proposed 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 Acquisition is not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of Sunway for the current financial year ending 31 December 2013. However, the Proposed Acquisition is expected to contribute positively to the future earnings of Sunway Group.

12. APPROVALS REQUIRED

Pursuant to Chapter 10, Paragraph 10.08(9) of the Main Market Listing Requirements, the Proposed Acquisition is exempted from the obtaining the approval of the shareholders of Sunway. However, the Proposed Acquisition is subject to approval/consent of the relevant authorities.

13. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

IASB is a major shareholder of HISB and the vendor of the Second Plot. Therefore, IASB is interested in the Proposed Acquisition.

Save as disclosed above, none of the directors or major shareholders of Sunway or persons connected with them has any interest, whether direct or indirect, in the Proposed Acquisition.

14. OTHER TRANSACTIONS WITH RELATED PARTIES

Save as disclosed below, there has been no other transactions entered into between companies within Sunway Group and IASB during the twelve (12) months preceding the date of this announcement.

(i) SSA between SunCity, IASB and HISB dated 4 December 2012 to set out the terms and conditions of the subscription of shares by SunCity and IASB in HISB, to undertake the joint venture as well as to regulate the relationship of SunCity and IASB as shareholders of HISB, which was announced on 4 December 2012.

(ii) Two (2) SPA between IASB and HISB dated 4 December 2012 whereby HISB will acquire the Land from IASB for a total purchase consideration of up to RM412,727,480.35, which was announced on 4 December 2012.

15. SUNWAY’S AUDIT COMMITTEE’S RECOMMENDATION

The Audit Committee of Sunway, after having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of Sunway Group and is not detrimental to the interests of the non-interested shareholders of Sunway. The Audit Committee of Sunway is of the view that the Proposed Acquisition is fair, reasonable and on normal commercial terms.

16. STATEMENT BY THE BOARD OF DIRECTORS

The Board of Directors of Sunway, having considered all aspects of the Proposed Acquisition including but not limited to the rationale, fairness of consideration, the Supplemental SSA and Supplemental SPA and recommendation by the Audit Committee, is of the opinion that the Proposed Acquisition is in the best interests of Sunway Group and is not detrimental to the interests of the non-interested shareholders of Sunway. The Board of Directors are of the view that the Proposed Acquisition is fair, reasonable and on normal commercial terms.

17. HIGHEST PERCENTAGE RATIOS PURSUANT TO PARAGRAPH 10.02(G) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD

The highest percentage ratios as set out in Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad applicable to the Proposed Acquisition and the capital contribution by SunCity in HISB are 12.0% and 3.7% respectively, which is the value of the purchase consideration compared with the net assets of Sunway and the value of assets compared to net assets of Sunway based on the audited financial statements of Sunway for the financial year ended 31 December 2011.

18. ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED ACQUISITION

Barring any unforeseen circumstances and subject to the approval of the relevant authorities and fulfillment of all conditions precedent, the Proposed Acquisition is expected to be completed by 2022.

19. DOCUMENTS AVAILABLE FOR INSPECTION

The Supplemental SSA and Supplemental SPA are available for inspection at the registered office of Sunway at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling 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 23 January 2013.