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SUNWAY HOLDINGS BERHAD (FORMERLY KNOWN AS SUNWAY HOLDINGS INCORPORATED BERHAD) ["SUNWAY"]
- JOINT VENTURE AGREEMENT BETWEEN SUNWAY DEVELOPMENTS PTE LTD (A WHOLLY-OWNED SUBSIDIARY OF SUNWAY), HOI HUP REALTY PTE LTD AND HOI HUP J.V. DEVELOPMENT PTE LTD
1. INTRODUCTION
We refer to our announcement dated 26 August 2008 in relation to the acceptance of tender by the Housing and Development Board of Singapore for the lease of State Land Parcel Toa Payoh PH1 measuring approximately 2.75ha located at Lorong 1A Toa Payoh for a 103-year lease term at S$198.82 million (equivalent to approximately RM469.22 million) for the public housing development which was jointly submitted by Hoi Hup Realty Pte Ltd Group and Sunway Developments Pte Ltd ("Sunway Developments"), a wholly-owned subsidiary of Sunway.
The Board of Directors of Sunway wishes to announce that Sunway Developments had on 5 September 2008, entered into a Joint Venture Agreement ("JVA") with Hoi Hup Realty Pte Ltd ("Hoi Hup Realty") and Hoi Hup J.V. Development Pte Ltd ("Hoi Hup JV") to set up a joint venture company known as Hoi Hup Sunway J.V. Pte Ltd ("Hoi Hup Sunway JV") for the execution and performance of the design, construction, completion and development of the Project under the Design, Build and Sell Scheme ("the Project").
2. INFORMATION ON SUNWAY DEVELOPMENTS, HOI HUP REALTY AND HOI HUP JV
2.1 SUNWAY DEVELOPMENTS
Sunway Developments is a company incorporated in Singapore and having its business address at No. 4, Tampines Industrial Street 62, Singapore 528817. The issued and paid-up share capital of Sunway Developments is S$2. The principal activities of Sunway Developments are investment holding and general contractors (building construction including upgrading works).
2.2 HOI HUP REALTY
Hoi Hup Realty is a company incorporated in Singapore and having its business address at No. 2, Jalan Kilang Barat, Panasonic Building #09-01, Singapore 159346. The issued and paid-up share capital of Hoi Hup Realty is S$3,000,000. The principal activities of Hoi Hup Realty are construction of building and civil works and property and housing development.
2.3 HOI HUP JV
Hoi Hup JV is a company incorporated in Singapore and having its business address at No. 2, Jalan Kilang Barat, Panasonic Building #09-01, Singapore 159346. The issued and paid-up share capital of Hoi Hup JV is S$10,000,000. The principal activity of Hoi Hup JV is property and housing development.
3. SALIENT TERMS OF THE JVA
Sunway Developments, Hoi Hup Realty and Hoi Hup JV have entered into the JVA to undertake and carry out the Project as well as to record their joint venture arrangement and their rights and obligations as shareholders in Hoi Hup Sunway JV ("the Proposed Joint Venture").
Pursuant to the JVA, the issued and paid-up capital of Hoi Hup Sunway JV shall be S$1,000,000 and the shareholding structure is as set out in Table 1 below.
4. RATIONALE
The Project represents Sunway's second property development venture in Singapore following its successful maiden project at Boon Keng, also through a joint venture with Hoi Hup group of companies.
The Project is located strategically at Toa Payoh, a well established residential area in Singapore, which enjoys all the urban amenities for instance, the MRT and Expressway, education institutions, Government offices and stadiums. This will allow it to tap on housing market demand generated from the existing population. The Project will also benefit from the continued growth of Singapore's economy, especially in the property development sector.
Sunway is confident that the superior quality high-rise residential development of the Project will receive good response.
5. FEASIBILITY STUDY
A feasibility study was conducted jointly by Sunway and Hoi Hup Realty prior to the entering of the JVA.
The preliminary feasibility of the Project is expected to generate an estimated gross development value of S$680 million (approximately equivalent to RM1,605 million) to Hoi Hup Sunway JV.
Based on the results of the studies, Sunway's management is of the view that the project financials are sufficiently attractive for Sunway to proceed with the Project.
6. PROSPECTS
The Singapore property market has weathered the storm from the United States sub-prime crisis, soaring oil prices and overall inflation pretty well.
New engines for growing the Singapore economy have been put in place and this to some extent may help shield the island and its property market from the full impact of what’s happening in the United States.
Population growth, global and regional wealth creation, sustained government investment in infrastructure, the perennial sharpening of Singapore's competitive edge, limited land, security and political stability, internationalisation of the property market are good factors for Singapore real estate prices in the long run.
(Source : Extracted from Business Times, 9 August 2008)
7. RISKS FACTORS
Hoi Hup Sunway JV is subject to certain risks in the property and construction sector. These include changes in general economic conditions such as, but not limited to inflation, taxation, foreign exchange, interest rates, constraints in labour and material supply, changes in business and operating conditions such as, but not limited to government and statutory regulations, deterioration in prevailing market conditions, machinery breakdown, technological and facilities obsolescence and industrial disputes.
Hoi Hup Sunway JV may face competition from other property developers. Although it seeks to become competitive by taking all the necessary steps, no assurance can be given that Hoi Hup Sunway JV will be able to maintain its competitive edge and gain market acceptance.
Similar to any other business enterprise, the breakout of fire, floods, social unrest or other emergencies could adversely affect the performance and business of Hoi Hup Sunway JV. In an effort to mitigate such risks, proper fire and other safety procedures will be emphasised at the company's premises and facilities and its physical assets will be adequately insured.
8. SOURCE OF FUNDS
Sunway Developments will fund its investment in Hoi Hup Sunway JV through internally generated funds.
9. EFFECTS OF THE PROPOSED JOINT VENTURE
9.1 On Share Capital and Substantial Shareholders' Shareholding
The Proposed Joint Venture will not have any effect on the share capital and substantial shareholders' shareholding of Sunway as the Proposed Joint Venture does not involve any allotment or issuance of new shares by Sunway.
9.2 On Earnings Per Share, Net Assets Per Share and Gearing
The Proposed Joint Venture is 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 30 June 2009 but is expected to contribute positively to the future earnings of Sunway Group.
10. APPROVALS REQUIRED
The Proposed Joint Venture does not require approval from the shareholders of Sunway or any government authorities in Malaysia but it is subject to approval of the relevant authorities in Singapore.
11. 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 Joint Venture.
12. STATEMENT BY THE BOARD OF DIRECTORS
The Board of Directors of Sunway is of the opinion that the Proposed Joint Venture is in the best interests of Sunway Group.
13. DOCUMENT AVAILABLE FOR INSPECTION
The JVA is 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 9 September 2008.
Announcement Details:
Table 1
| Name of shareholder |
No. of shares |
Percentage of shareholding |
| Hoi Hup Realty |
600,000 |
60 |
| Sunway Developments |
300,000 |
30 |
| Hoi Hup JV |
100,000 |
10 |
|
Total: |
1,000,000 |
100 |
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