BURSA ANNOUNCEMENT
Announcement to Bursa-Disposal of Property
1. INTRODUCTION
The Board of Directors of Kobay Technology Bhd. ("Kobay or “the Company") wishes to announce that its wholly owned subsidiary company, Bend Weld Engineering Sdn. Bhd. (“BWE” or “the Vendor”), had on 6 December 2013, entered into a Sale and Purchase Agreement (“SPA”) with Messrs. Amazing Vestrax Sdn. Bhd. (688963-U) (“the Purchaser”), to dispose of its all that piece of leasehold industrial land and a single storey factory building erected thereon bearing assessment address Plot 38, Hilir Sungai Kluang 2,Phase IV, Bayan Lepas Non-FTZ, 11900 Pulau Pinang ("the Property") for total cash consideration of RM7.7 million (hereinafter referred to as “the Proposed Disposal”).
2. BACKGROUND INFORMATION
2.1 Information on BWE
BWE is a company incorporated in Malaysia under the Companies Act, 1965 with an authorized share capital of RM5,000,000 comprising 3,000,000 ordinary shares of RM1.00 each and 10,000,000 redeemable non-convertible non-cumulative preference shares of RM0.20 each, of which 2,600,000 ordinary shares of RM1.00 each and 7,000,000 preference share of RM0.20 each have been issued and fully paid-up as total paid-up capital of RM4,000,000. Its existing principal activity is manufacturing of metal works and structures, modules and parts for oil and gas extraction equipment.
BWE is the registered and beneficiary owner of the Property.
2.2 Information on the Purchaser
Amazing Vestrax Sdn. Bhd., a wholly owned subsidiary company of Zhulian Corporation Berhad, was incorporated in Malaysia under the Companies Act, 1965 on 20 April 2005. Its authorized share capital stood at RM500,000 with RM380,000 ordinary share capital consisting of 380,000 ordinary shares of RM1 each and RM120,000 preference share capital consisting of 120,000 preference shares of RM1 each of which 100,000 ordinary shares of RM1 each and 120,000 preference shares of RM1 each have been fully paid up and credited to the capital in Amazing Vestrax Sdn. Bhd..
2.3 Information on the Property
The industrial land was acquired by BWE in year 1992 and construction of the factory was completed in 1995. Details of the Property are set out in the table below :
Title No. / : / Pajakan Negeri Hakmilik No. 5865Lot No. / : / Lot 12344, Mukim 12, Daerah Barat Daya, Pulau Pinang
Postal Address / : / Plot 38, Kawasan Perindustrian Bayan Lepas, Phase 4, 11900 Penang
Tenure / : / 60-year lease expiring 24 November 2053
Category of land use / : / Industrial
Land area / : / Approximately 46,037 square feet
Built up area / : / Approximately 21,566 square feet
Approximate age of building / : / Approximately 19 years
Existing use / : / previously was used for manufacturing of metal works and structures, but was vacant after relocation of its operations to Johor in August 2013. The Johor plant has been in full operations since October 2013, thus, the disposal shall not have any effect on BWE’s operations.
Original cost of investment / : / RM1.76 million
Audited Net book value as at 30 June 2013 (revalued in year 1996) / : / RM1.93 million
Encumbrances / : / Nil
2.4 Sale Consideration
The sale consideration of RM7.7 million is arrived at on a willing buyer-willing seller basis through direct negotiation between the Vendor and Purchaser. No valuation was carried out on the Property. The management has taken into consideration of property transactions within Bayan Lepas Industrial Estate area. Based on the management’s survey, a property situated at Lot No. PT 1242, Mukim 12, Barat Daya at Perindustrian PDC with similar land size of 46,941 square feet was transacted for RM5.2 million in November 2011 (Source: Page 240, Volume 23, Million Ringgit Property Deals Report, Valuation and Property Service Department, Ministry of Finance, Malaysia). As such, the management is of the view that the sale consideration of RM7.7 million is fair and reasonable, and not detrimental to the Company.
2.5 On Liabilities assumed by Purchaser
There are no liabilities to be assumed by the Purchaser pursuant to the SPA.
2.6 Proposed utilization of proceeds from the Proposed Disposal
The proceeds arising from the Proposed Disposal shall be utilized for the working capital of BWE and Kobay Group of which shall be utilized within the current financial year ending 30 June 2014.
2.7 Sale Consideration Payment Manner
The sale consideration will be paid in the following manner :-
(i) The deposit of Ringgit Malaysia Seven Hundred and Seventy Thousand (RM770,000) only shall be paid to the Vendor’s Solicitors upon execution of the SPA as deposit and part payment of the purchase price, subject to the retention sum of two per centum (2%) of the purchase price or such higher sum considered sufficient to be retained by the Purchase’s Solicitors as stakeholder for the payment pursuant to Section 21B of the Real Property Gain Tax Act 1976; and
(ii) The balance purchase price of Ringgit Malaysia Six Million Nine Hundred Thirty Thousand (RM6,930,000) only shall be paid to the BWE’s Solicitors within three (3) months from the date of the SPA or within one (1) month from the Compliance Date (i.e. last date of State Authorities’ consents for the sale of the Property), whichever shall be later.
2.8 Risk and liabilities assumed
There is no risk and liability to be assumed by Kobay arising from the Proposed Disposal.
2.9 Salient terms of the SPA
The said property is sold under “as is, where is” basis and subject to a lease of thirty (30) years in favour of Tenaga Nasional Berhad registered vide Lease Presentation No. 0799SC1996006632 Jilid 10 Folio 73.
Under the SPA, BWE shall obtain, procure or comply with the followings within three (3) months from the date of SPA and in the event that either one (1) hereof not obtained or procured within the said three (3) months period not due to any fault, failure, refusal and/or neglect of either party, the said period shall be extended on a month to month basis for up to three (3) months, subject to mutual consent.
(i) the State Authority Consent for the sale of the said Property to the Purchaser for the purpose of the restriction in interests of the title; and
(ii) BWE having at its own cost and expense obtained the consent of Penang Development Corporation to the sale of the said Property.
3. RATIONALE FOR THE PROPOSED DISPOSAL
BWE has re-located its operations to Johor state and the current factory land and building was an excess to the Group. Hence, the management is of the view that it shall be disposed of so to utilize the cash consideration for the Group’s working capital.
4. EFFECTS OF THE PROPOSED DISPOSAL
The effects of the Proposed Disposal on Kobay Group for the financial year ending 30 June 2014 are as listed below :
4.1 On Earnings per share
The Proposed Disposal, is expected to contribute a net gain of RM5.4million to the Group, of which shall increase the group’s earnings per share for the financial year ending 30 June 2014 by 8 sen.
4.2 On net assets per share
The Proposed Disposal is expected to increase the net assets per share of Kobay Group for the current financial year ending 30 June 2014 by 8 sen.
4.3 On gearing
The Proposed Disposal is not expected to have any material impact on the gearing of Kobay Group or BWE.
Upon completion, the Group will have a net cash proceed of approximately RM7.4 million. Kobay shall reserve the proceeds from the disposal for the Group’s working capital purpose.
4.4 On share capital
The Proposed Disposal does not have any impact on the share capital of the Company.
4.5 On substantial shareholders’ shareholding
The Proposed Disposal does not have any impact on the substantial shareholders’ shareholding.
5. RISK FACTORS
The Board of Directors of Kobay is not aware of any material risk arising from the Proposed Disposal, save for the Proposed Disposal is subject to the approvals of the state authorities. In the event any of the said approvals is not obtained or fulfilled by the due date or are rejected, the SPA shall lapse and be no further effect and the deposit withheld by the solicitors shall forthwith be refunded to the Purchaser.
6. HIGHEST PERCENTAGE RATIO APPLICABLE
The highest percentage ratio applicable to the Proposed Disposal pursuant to Chapter 10.02(g) of Bursa Securities Malaysia Berhad’s Main Market Listing Requirements is 6.5%.
7. APPROVALS REQUIRED
Save for the Penang State Authority’s consent, the Proposed Disposal does not require approval from the shareholders of Kobay, Securities Commission and Foreign Investment Committee and other regulatory authorities.
8. ESTIMATED TIME FRAME FOR COMPLETION
Completion of the SPA shall take place within six (6) months from the date of the SPA.
9. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS
None of the directors and/or substantial shareholder of Kobay or any person connected with them have any interest, direct or indirect, in the Proposed Disposal.
10. COMPLIANCE WITH THE SECURITIES COMMISSION’S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES
The Proposed Disposal is not subjected to the approval of the Securities Commission and does not fall under the Securities Commission’s Policies and Guidelines on the Issue/Offer of Securities or any amendments thereof.
11. DIRECTORS’ STATEMENT
The Board, after due consideration of all aspects of the Proposed Disposal, is of the opinion that the sale consideration is reasonable and the Proposed Disposal is in the best interest of Kobay, fair and reasonable to the Company and is not to the detriment of the Company and its shareholders.
12. DOCUMENT FOR INSPECTION
Copy of the SPA is available for inspection at the registered office of the Company at Plot 30, Hilir Sungai Kluang Satu, Bayan Lepas Industrial Park, Phase 4, 11900 Penang during normal office hours (8.30 am to 6.00 pm) on Mondays to Fridays (except public holidays) for a period of fourteen (14) days from the date of this announcement.
This announcement is dated 6 December 2013.
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