TIDMASPL
RNS Number : 3028M
Aseana Properties Limited
27 April 2018
27 April 2018
Aseana Properties Limited
("Aseana" or "the Company")
Full Year Results for the Year Ended 31 December 2017
Aseana Properties Limited (LSE: ASPL), a property developer in
Malaysia and Vietnam listed on the Main Market of the London Stock
Exchange, is pleased to announce its audited results for the year
ended 31 December 2017.
Operational highlights
-- Shareholders voted in favour of the Board's
proposals at a general meeting of the Company
held on 23 April 2018, to continue with the
Company's investment policy to enable a realisation
of the Company's assets in a controlled, orderly
and timely manner as well as supported Board's
recommendation to vote against the Discontinuation
Resolution proposed at the general meeting.
To the extent that the Company has not disposed
of all its assets by 31 December 2019, Shareholders
will be provided with an opportunity to review
the future of the Company, which would include
the option for shareholders to vote for the
continuation of the Company.
-- Sales at SENI Mont' Kiara progressed to 99.3%
to date based on sale and purchase agreements
signed
-- The sale of the last unit at Tiffani by i-ZEN
("Tiffani") was completed in October 2017.
-- Two plots of land ("D2 & D3 land") at the
International Healthcare Park ("IHP") were
divested for approximately US$5.4 million
and US$7.7 million respectively. The transaction
for D2 land was completed in May 2017 while
D3 land was completed in August 2017.
-- The RuMa Hotel and Residences achieved 56.7%
sales based on signed sale and purchase agreements.
-- The occupancy rate at Harbour Mall Sandakan
("HMS") improved to 71.4% to date (2016: 67.7%).
Four Points by Sheraton Sandakan Hotel ("FPSS")
achieved an occupancy rate of 42.1% for as
at 31 December 2017 and was 38.5% occupied
for the 3-month period to 31 March 2018.
-- The operation of the City International Hospital
("CIH") has been improving steadily over 2017
with outpatient and inpatient volumes increasing
by 58.0% and 67.2% respectively, compared
to 2016.
Financial highlights
-- Revenue decreased to US$19.1 million in 2017
(2016: US$112.5 million), mainly due to lack
of large asset sales compared with the previous
year, which included the disposal of Aloft
Kuala Lumpur Sentral ("AKLS").
-- Net loss before tax stood at US$5.0 million
in 2017 compared to a net profit before tax
of US$16.2 million in 2016. The divestment
of lands at IHP generated gains of US$5.0
million but were offset by operating losses
and finance costs of IHP of US$2.0 million,
CIH of US$5.4 million, FPSS and HMS totalling
US$1.6 million.
-- The consolidated comprehensive profit for
the year ended 31 December 2017 was US$2.0
million compared to US$10.5 million in 2016.
The consolidated comprehensive profit included
gains on foreign currency translation differences
for foreign operations of US$7.9 million compared
to a loss of US$2.5 million in 2016, attributable
to the strengthening of Ringgit against US
Dollars from RM4.4860/US$1.0 as at 31 December
2016 to RM4.0469/US$1.0 as at 31 December
2017.
-- Cash and cash equivalents stood at US$26.0
million (2016: US$26.6 million).
Included in the borrowings is a Dong loan
of US$16 million equivalent which would be
used to refinance part of the existing US
Dollars loan for CIH.
-- Loss per share of US$0.0210 (2016: Earning
per share of US$0.0889), based on voting share
capital.
-- Net asset value per share US$0.69 (2016: US$0.68),
based on voting share capital.
* These results have been extracted from the Annual Report and
financial statements, and do not constitute the Group's Annual
Report and financial statements for the year ended 31 December
2017. The financial statements for 2017 have been prepared under
International Financial Reporting Standards. The auditors, KPMG
LLP, have reported on those financial statements. Their report was
unqualified and did not include a reference to any matters to which
the auditors draw attention by way of emphasis without qualifying
their report.
Commenting on the Company's results and outlook, Mohammed Azlan
Hashim, Chairman of Aseana Properties Limited, said:
"Despite improvements shown in both the Malaysian and Vietnamese
economies, Aseana Properties is still facing challenges with its
investments in both these markets. However, the Company is making
progress in its Divestment Investment Policy, having divested of
two more plots of land at IHP during the year and completed the
sale of the final unit at Tiffani. With the extension of life of
the Company, the Board and the Manager will focus on disposing of
its remaining assets in an orderly and timely manner whilst
achieving optimum value for its shareholder."
-Ends-
For further information:
Aseana Properties Limited Tel: +603 6411 6388
Chan Chee Kian Email: cheekian.chan@ireka.com.my
N+1 Singer Tel: 020 7496 3000
James Maxwell/ Liz Yong/
James Moat (Corporate Finance)
Sam Greatrex (Sales)
Tavistock Tel: 020 7920 3150
Jeremy Carey Email: jeremy.carey@tavistock.co.uk
Notes to Editors:
London-listed Aseana Properties Limited (LSE: ASPL) is a
property developer investing in Malaysia and Vietnam.
Ireka Development Management Sdn Bhd ("IDM") is the exclusive
Development Manager for Aseana. It is a wholly-owned subsidiary of
Ireka Corporation Berhad, a company listed on the Bursa Malaysia
since 1993, which has over 51 years' experience in construction and
property development. IDM is responsible for the day-to-day
management of Aseana's property portfolio and the implementation of
the Divestment Investment Policy.
CHAIRMAN'S STATEMENT
Global economic growth was more evenly balanced in 2017. During
the year, many encouraging results were achieved across several
fronts. Economic powerhouses such as the United States of America,
the world's largest economy, got growth back on track, while the
Eurozone and Japan are set to register growth exceeding
expectations, courtesy of burgeoning global trade. On the back of a
rebound in investment and trade, accommodative policies and the
dissipating impact of the earlier commodity price collapse, global
growth is expected to be sustained over the next couple of years.
In tandem with this, The World Bank forecasts global economic
growth to edge up to 3.1% in 2018 after a stronger-than-expected
year in 2017. However, the global outlook is still vulnerable to
downside risks, including regional instability, possible financial
stress, rising geopolitical tensions and the recent trade dispute
between the United States of America and China.
The solid global growth has boded well for Aseana Properties'
core markets in Malaysia and Vietnam, with both countries
performing well above forecasts. Malaysia's real Gross Domestic
Product ("GDP") growth for instance, showed an impressive steady
upward trend to reach 5.9% for the whole of 2017, driven primarily
by strong domestic demand and robust exports. Malaysia leveraged
its strong economic fundamentals to record strong growth despite
the prevalence of cautious sentiment earlier in the year, given
that the Ringgit was by far the worst performing currency in Asia.
The local currency was kept in check due to prudent measures
implemented by Bank Negara Malaysia ("BNM"), Malaysia's Central
Bank and rebounded strongly from a 19-year low to deliver a total
appreciation of approximately 10.0%. In addition, in January 2018,
BNM increased the country's Overnight Policy Rate ("OPR") from 3.0%
to 3.25%, the first hike since July 2016, against a background of
steady growth. Despite the lingering uncertainties ahead of the
14(th) General Election, which could somewhat dampen sentiment,
analysts predict that Malaysia's economy will remain resilient in
2018.
Similarly, Vietnam has emerged as one of the most impressive
emerging market success stories with GDP growth of 6.8% in 2017,
the highest in the last decade. The country's strong GDP growth was
driven by the robust manufacturing and services sectors as well as
resilient domestic demand, underpinned by thriving Foreign Direct
Investment ("FDI") growth. Vietnam attracted a record US$35.9
billion of foreign investments in 2017 as a result of the low cost
of doing business in the country, an abundant labour force and
solid macroeconomic growth. Furthermore, the nation's average
inflation grew at 3.53% against the previous year, below the 4.0%
target set by the Government whilst the Vietnamese Dong was one of
the most stable Asian currencies in 2017. However, the unresolved
issues with the thinly-capitalised banks and non-performing loans
pose other medium-term risks to the country's economy.
Despite higher GDP growth and recovery in crude oil prices, the
Malaysian properties in both residential and commercial markets are
still hampered by factors such as the increased cost of living and
oversupply. The rising cost of living, the disparity between the
population's income and affordability level, as well as the
oversupply of both residential and commercial properties are the
main reasons why the nation's property market is still facing
headwinds. Completed-but-unsold residential units increased to
approximately RM12.3 billion during the first half of 2017, from
approximately RM8.6 billion a year ago. In addition, new
residential launches fell 9.1% to 28,397 units in the first half of
2017 from 31,257 units in the same period last year. With the
impending 14(th) General Election, consumers are exercising more
caution in big-ticket long-term purchases. On the other hand, the
Vietnamese property market saw positive growth, underpinned by the
country's strong economic performance, relatively stable currency
and rapid urbanisation, which have fuelled massive interest from
foreign investors into the Vietnamese real estate market. During
the year, there were a total of 64,000 real estate transactions in
Ho Chi Minh City ("HCMC") and Hanoi alone, up by 24,000
transactions compared to 2016. 2017 has also emerged as a landmark
year for mergers and acquisitions in the Vietnamese property
sector. According to Vietnam's Ministry of Construction, the
country currently has over US$145 billion of real estate
developments under construction.
Aseana Properties Limited and its subsidiaries ("the Group")
registered a significant decrease in revenue from US$112.5 million
in 2016 to US$19.1 million in 2017, largely due to the lack of
major asset sales during the year compared to the sale of the Aloft
Kuala Lumpur Sentral Hotel ("AKLS") in 2016. The Group recorded a
net loss before taxation of US$5.0 million compared to a net profit
of US$16.2 million in 2016. The disposal of lands at International
Healthcare Park ("IHP") generated gains of US$5.0 million but were
offset by operating losses and finance costs of IHP of US$2.0
million, City International Hospital ("CIH") of US$5.4 million,
Four Points by Sheraton Sandakan Hotel ("FPSS") and Harbour Mall
Sandakan ("HMS") totalling US$1.6 million. Aseana Properties
recorded a gain on foreign currency translation differences of
US$7.9 million compared to a loss of US$2.5 million in 2016, as a
result of the strengthening of Ringgit against US Dollars from
RM4.4860/US$1.00 as at 31 December 2016 to RM4.0469/US$1.00 as at
31 December 2017.
Progress of the property portfolio
Amidst the sluggish property market in Malaysia, sales of
properties at SENI Mont' Kiara ("SENI") and The RuMa Hotel and
Residences ("The RuMa") also progressed at a slower pace. Sales at
SENI to date progressed to approximately 99.3% and sales at The
RuMa increased marginally to 56.7% to date, based on signed sale
and purchase agreements. In addition, the last unit at Tiffani by
i-ZEN was sold during the year.
Meanwhile, the business environment and tourism in Sabah showed
signs of improvement over the year. International and Malaysian
tourist arrivals in Sabah reached 3.7 million in 2017, which
contributed approximately RM7.8 billion to tourism receipts. Of
this, 0.4 million were tourists from China, as a result of
increased flights to Sabah from China. Xiamen Airlines has recently
introduced direct flights from Beijing to Sabah and this move is
expected to spur the number of Chinese tourist arrivals including
those from southern and central China. In addition, the impending
extension of the Sandakan Airport runway will enable the airport to
accommodate larger aircraft, and this will also benefit local tour
operators and indirectly generate revenue for the local economy.
FPSS recorded an occupancy level of 42.1% as at the year ended 31
December 2017 and 38.5% for year 2018 to date. Home to the first
purpose-built cinema in Sandakan, the performance of HMS has also
improved to 71.4% occupancy to date, including a number of new
tenant signings over the past few months.
In Vietnam, two plots of land at IHP were divested for
approximately US$5.4 million and US$7.7 million respectively. On
the operations side, the performance of CIH has seen steady
improvement over the year, with a 58.0% increase in outpatient
volume, and 67.2% increase in inpatient volume compared to 2016.
Dr. John Lucas, a highly reputable and experienced former Medical
Director of FV Hospital, HCMC was appointed as the new Chief
Executive Officer ("CEO") of CIH with effect from January 2018.
Further information on each of the Company's properties is set
out in the Manager's report on pages 7 to 9.
Continuation vote
At a general meeting of the Company held on 23 April 2018,
Shareholders voted in favour of the Board's proposals to reject the
2018 Discontinuation Resolution and to continue with the Company's
investment policy, for a period of 18 months from the expected date
of the 2018 AGM, to enable a realisation of the Company's assets in
a controlled, orderly and timely manner, with the objective of
achieving a balance between periodically returning cash to
Shareholders and maximising the realisation value of the Company's
investments. The Board believes this will maximise the value of the
Company's assets and returns to Shareholders, both up to and upon
the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its
assets by 31 December 2019, Shareholders will be provided with an
opportunity to review the future of the Company, which would
include the option for shareholders to vote for the continuation of
the Company.
Outlook
Despite Malaysia's buoyant economic growth in 2017, the
repercussions of subdued investor confidence, political uncertainty
and weak currency have adversely affected the Malaysian property
market. On the other hand, Vietnam's property market has shown
noticeable improvements during the year, in tandem with its robust
economic growth. Nevertheless, The Board and the Manager are now
focusing on realising the remaining assets of the Company in line
with its divestment policy. Aseana Properties remains committed to
ensure optimum capital value is achieved for the portfolio in a
properly managed and timely manner.
On a final note, I wish to take this opportunity to thank the
Board of Aseana Properties, our advisors, shareholders and business
associates for their continued support and guidance throughout the
year.
MOHAMMED AZLAN HASHIM
Chairman
26 April 2018
DEVELOPMENT MANAGER'S REVIEW
BUSINESS OVERVIEW
Aseana Properties has come through another challenging year in
2017. There were however some encouraging signs of improved
performances in Malaysia and Vietnam. During the year under review,
the Group successfully sold its remaining unit at Tiffani by i-ZEN
and divested two plots of land in Vietnam for a total consideration
of approximately US$13.1 million. Furthermore, performance at each
of the Company's three operating assets has shown encouraging
improvements and losses have narrowed. This is in line with the
robust Vietnamese economy and the recovery in Malaysia's economic
conditions, which have remained resilient despite being dampened by
the weak currency and subdued investor confidence at the beginning
of the year. In addition, the recent positive economic indicators
should bode well for the Malaysian property market, which will be
supported by strong economic fundamentals. However, the higher-end
properties remain flat and challenging for at least the near future
as supply is still growing faster than demand at the moment. The
current freeze in new approvals for properties above RM1.0 million
will help to re-dress this imbalance in the coming years.
On the back of the lukewarm property market in Malaysia, sales
at both SENI and The RuMa have progressed marginally to 99.3% and
56.7% to date respectively. Meanwhile, HMS showed notable
improvement in its performance during the year under review with
increased occupancy and footfall contributed by the addition of a
number of new tenants. Similarly, in Vietnam, CIH performed well
over the year with increased revenue and patient numbers.
Malaysia Economic Update
Malaysia's economic growth improved during 2017, surpassing
expectations, largely underpinned by strong domestic demand with
additional impetus provided by improved external demand. The
nation's solid performance saw the International Monetary Fund
("IMF") upgraded its outlook on Malaysia's GDP growth to between
5.5% and 6.0%, while the World Bank made an upward revision to the
country's GDP growth forecast to 5.8% in 2017. The Malaysian
economy grew at 5.9% in 2017, the strongest pace of expansion in
three years and was among the top performers in Asia, underpinned
by solid private consumption growth. Meanwhile, a series of good
news towards the year end boosted investors' confidence and the
Ringgit rebounded from being one of the worst performing currencies
in Asia at the beginning of the year, to climb almost 10.0% against
the US Dollar towards the end of the year. The Ringgit took its cue
from sturdier crude oil prices to rise from a low of
RM4.4860/US$1.0 at the end of 2016 to approximately RM4.0469/US$1.0
by the end of 2017. Market interventions such as BNM's policy that
requires exporters to convert 75.0% of their proceeds back to
Ringgit have enhanced liquidity and demand for the currency. On the
back of stronger growth and a manageable inflation rate as well as
upbeat results in the last quarter of 2017, BNM increased the
country's OPR from 3.0% to 3.25% in January 2018. The rate was kept
unchanged by the Malaysian Central Bank since July 2016.
Echoing the country's resilient economic performance, Moody's
Investors Service ("Moody's") had in December 2017, reaffirmed the
Government's local and foreign currency issuer and senior unsecured
bond ratings at A3, with the outlook being maintained at "stable".
Similarly, in August 2017, Fitch Ratings affirmed Malaysia's
Long-Term Foreign and Local-Currency Issuer Default Ratings
("IDRs") at "A-" with a stable outlook. During 2017, domestic
inflation was driven mostly by movements in global oil prices.
Malaysia's Consumer Price Index ("CPI") stood at 3.7% for the whole
of 2017, which is within its Central Bank's target of 3.0% to
4.0%.
FDI plays a major role in stimulating the Malaysian economy and
it serves as an impetus to the development of the country. Emerging
markets, such as Malaysia, will continue to reap benefits as global
investors undertake risk diversification in the region. Mega
infrastructure projects such as the Mass Rapid Transit ("MRT") in
Kuala Lumpur, High-Speed Rail, East Coast Rail Link and China's One
Belt One Road initiatives will create new job opportunities and
expand high value-added activities, which will pave the way for
higher-income jobs. The weaker Ringgit over the past few years has
also made Malaysia a more attractive investment destination. China
remained as Malaysia's largest trading partner for the ninth
consecutive year. The Malaysia-China bilateral trade reached a
total amount of RM237.96 billion in the first 10 months of 2017, up
24.1% from the same period last year. In addition, the nation's
trade and export activities to the European Union, Japan and the
United States have also increased. The favourable news of Malaysia
and China signing RM144.0 billion worth of agreements and the Saudi
Aramco and Petronas RM31.0 billion deals have been noteworthy in
lifting the positive business sentiment in Malaysia. Following a
record high FDI in 2016, Malaysia recorded an FDI net inflow of
RM39.2 billion in 2017. Notwithstanding the positive developments
in the nation's FDI growth, the lingering uncertainties ahead of
the 14(th) General Election ("GE14") will be seen as a risk to the
country's political health. The 13(th) Malaysian Parliament was
dissolved on 7 April 2018 to pave way for the GE14 which is now
scheduled to be held on 9 May 2018.
Vietnam Economic Update
Vietnam saw a very positive year for its economic development
notwithstanding that the year started off on a subdued note due to
a prolonged drought. The country's economy expanded by 6.8% in
2017, the highest growth of the last decade and slightly higher
than the Government's initial target of 6.7%. The robust GDP growth
was driven by strong activity in the manufacturing and services
sector as well as an increase in domestic demand and sturdy retail
sales growth. Additionally, during the last quarter of the year,
Vietnam's economy expanded 7.65% compared to the same period in the
previous year. Vietnam emerged as one of the world's most
impressive emerging market countries, achieving high growth rates
and attracting significant foreign direct investment.
Meanwhile, through the implementation of market stabilisation
measures by the Vietnamese Government, as well as the adoption of
timely monetary policies by its Central Bank to bolster
macroeconomic stability, Vietnam's core inflation growth was
contained at 1.4% in 2017. Despite the nation's average CPI edging
up by 3.53% against the previous year, it is still below the
Vietnamese Government's target of 4.0%. Strong increases were
recorded in the healthcare and education services, with hikes of
42.3% and 9.1% respectively, mainly caused by scheduled fee
adjustments.
In July 2017, The State Bank of Vietnam unexpectedly eased the
country's monetary policy by cutting its benchmark interest rate
for the first time in three years from 6.5% to 6.25%. This was
positive for the country's economic growth and as a result, the
emergence of new companies hit a record high, with 127,000 new
companies registered in 2017, well above the record of 110,000
firms set up the year before. Vietnam remained an attractive
destination to foreign investors with total FDI inflow hitting a
record high of US$35.9 billion, an increase of 44.4% against 2016.
The nation's export revenue expanded by 21.0% in 2017 to reach
US$213.7 billion, the highest in the past five years. Despite these
notable achievements, there remain shortcomings in the country's
economy, such as high public debt and non-performing loans,
dependence on a low-cost labour force and depleting natural
resources which need to be addressed soon.
PORTFOLIO REVIEW
MALAYSIA
Property Market Review
The Malaysian Property market remained in a lull in 2017,
although some believed that the country's property market was on
the road to recovery. Despite the country's improved economic
growth, Malaysia's commercial and housing property markets
continued to face a glut of supply. The key issues of price
unaffordability, overhang of high-rise homes, rising cost of living
and tight lending guidelines have had a dampening effect on the
property market. According to the National Property Information
Centre ("NAPIC"), the number of unsold properties in the country
increased by 41.0% to 21,000 units, valued at RM12.3 billion, in
the first half of 2017 compared to the corresponding period in the
previous year. In a bid to avoid the oversupply issue affecting the
nation's economy, the Government has recently frozen the approvals
for developments of four components of the property market which
include condominiums and serviced apartments priced at RM1.0
million and above. On a brighter side, the Malaysian Government has
not proceeded with the proposal to increase stamp duty rates from
3.0% to 4.0% on transfer instruments for properties worth more than
RM1.0 million, which was initially planned for 1 January 2018.
Malaysia's tourism sector remains as the third largest
contributor to the country's economy and is one of the twelve
National Key Economic Areas in the Government's vision to propel
Malaysia to be a high-income nation by 2020. The Malaysian
Government aspires to attract 36.0 million tourists to Malaysia
which will generate income of RM168.0 billion by 2020. Sabah has,
for instance, welcomed 3.68 million international and Malaysian
tourists in 2017, representing an increase of 7.5% compared to the
same period in 2016. Of this, 0.4 million of them were tourists
from China. Room rates remained competitive and the average
occupancy for hotels located in the Klang Valley for January to
September increased by 5.0% year-on-year. From the beginning of
September 2017, tourism tax was officially enforced by the
Malaysian Government. A flat rate of RM10 per room per night for
all hotel classifications has been imposed on foreign tourists. In
addition, the nation has been recognised as the "Medical Travel
Destination of the Year" for the third consecutive year at the
International Medical Travel Journal's Medical Travel Awards 2017.
The RM30.0 million allocations to the Malaysia Healthcare Travel
Council under Budget 2018 will further spur the growth of the
country's medical tourism industry.
Aseana Properties currently has five investments in Malaysia.
These investments consist of residential properties, hotels and a
retail mall:
SENI Mont' Kiara
SENI is a completed upmarket condominium development situated on
one of the highest points in Mont' Kiara. The project consists of
two 12-storey blocks and two 40-storey blocks, comprising 605
residential units. The majority of units command impressive views
of the city skyline including the 88-storey Petronas Twin Towers
and the KL Tower. Sales at SENI have progressed to 99.3% to date,
with only four large units remaining unsold. Debt on the project
was fully repaid.
The RuMa Hotel and Residences
This project is strategically located in the heart of Kuala
Lumpur City Centre ("KLCC") on Jalan Kia Peng, near landmarks such
as the world-famous Petronas Twin Towers, KLCC Convention Centre,
Suria KLCC shopping mall, KLCC Park and the Grand Hyatt Kuala
Lumpur. Aseana Properties owns 70.0% of this project and remaining
30.0% is owned by Ireka Corporation Berhad. The project consists of
199 units of luxury residences (The RuMa Residences) and a 253-room
luxury bespoke hotel (The RuMa Hotel), built on 43,559 sq ft of
development land. The RuMa Hotel will be managed by Urban Resort
Concepts, a renowned bespoke hotel management company based in
Shanghai, which created and operates the award-winning The Puli
Hotel in Shanghai.
Construction of the main building is expected to complete in
June 2018. The RuMa Hotel and Residences was first launched in
2013. Sales were affected by the cooling measures imposed by the
Government to curb property speculation as well as the current
subdued property market in Malaysia. To date, total sales at The
RuMa have increased marginally to 56.7%, based on signed sale and
purchase agreements. During 2017 and year-to-date, the Manager has
participated in various marketing and promotional events to boost
sales of the remaining units, both locally and internationally, but
the results were below expectation. Debt on the project was fully
repaid.
Harbour Mall Sandakan
HMS commenced operations in July 2012. The occupancy rate at HMS
is currently recorded at 71.4%. Notable tenants include Lotus Five
Star Cinema, Popular Bookstore, Levi's, The Body Shop, Watsons and
McDonalds, amongst others. Leasing initiatives at HMS to both local
and international retailers are ongoing. The outlook for HMS is
promising, particularly with the opening of the cinema which has
significantly increased the footfall to the Mall.
HMS is funded by medium term notes amounting to approximately
US$24.3 million (RM100.0 million) as at 31 December 2017.
Four Points by Sheraton Sandakan Hotel
FPSS recorded an occupancy rate of 38.5% for year 2018 to date,
with an Average Daily Rate of about US$57 (RM230). Sandakan's hotel
occupancy has been greatly affected by on-going negative travel
advisories issued by some countries in response to previous cases
of kidnapping for ransom along the coast of Eastern Sabah.
Occupancy has improved over the last two years in line with the
marked improvement in coastal security in Sabah. The management of
FPSS continues to improve the efficiency of its operations and to
work with the relevant authorities to improve tourist arrivals to
Sandakan. The impending extension of Sandakan Airport Runway will
attract more commercial airlines and charter flights, especially
from China, to fly directly to Sandakan.
Kota Kinabalu Seafront resort & residences
Aseana Properties acquired three adjoining plots of land
totalling approximately 80 acres in September 2008 with the
intention of developing a resort hotel, resort villas and resort
homes at the seaside area in Kota Kinabalu, Sabah. In 2012, the
Board decided not to proceed with the development and to dispose of
the land instead. Marketing efforts are on-going and the Manager is
currently in negotiation with a potential buyer.
VIETNAM
Property Market Review
The property market in Vietnam was buoyant in 2017 on the back
of the nation's robust economic growth, a relatively stable
currency, more stringent Government lending controls and interest
rates, as well as the removal of barriers to foreign ownership. The
announcement made in August 2017 concerning a draft amendment to
the Land Law which allows foreigners to own properties for up to 99
years, as well as mortgaging of assets associated with land-use
rights at foreign credit institutions, have created an impetus in
the Vietnamese property market. FDI in the real estate sector has
continually increased over the last five years and is ranked third
in attracting FDI to Vietnam, accounting for 8.5% of the total
registered capital of the country during the year.
The Vietnamese property market performed well as the country
celebrated stellar GDP growth in 2017. The demand for residential
property in the nation's two largest housing markets remained at
strong levels in 2017. In HCMC, record sales of villas and
townhouses were achieved during the last quarter of the year as new
launches in the mid-end segment reached new heights. In addition,
apartment sales in HCMC were over 15,100 units in Q4 2017,
increasing 44.0% compared to last year.
Apart from the strength in the residential market, the office
market in both HCMC and Hanoi was positive, recording healthy
occupancy rates with the average occupancy in HCMC reaching as much
as 96.0%. In tandem with the increase in newly registered
businesses, Vietnam's office market is expected to continue to
experience healthy absorption momentum and bustling new supply.
Similarly, Vietnam's retail sector is attracting investments from
many foreign enterprises owing to its favourable economic outlook,
improved standard of living, increasingly open economy with rising
employment opportunities and large population. The Government's
policy of allowing foreign retailers to establish businesses with
100.0% foreign capital since 2015 has made Vietnam one of the
world's leading investment destinations. According to AT Kearney,
Vietnam is ranked 6(th) in the Global Retail Development Index in
2017, which signifies the nation's appeal in the retail market.
In line with the buoyant retail sector, Vietnam's tourism
industry bore encouraging results in 2017. According to the Vietnam
National Administration of Tourism, the number of international
visitors during the year reached 12.9 million with tourism revenue
reaching more than US$23.0 billion, an uplift of 29.1% and 25.0%
respectively, compared to 2016. China and South Korea were still
the largest sources of visitors with 6.4 million arrivals during
the year. Furthermore, Vietnam jumped eight notches to the 67(th)
position in the Travel and Tourism Competitiveness Report 2017,
published by the World Economic Forum.
Aseana Properties now has two investments in Vietnam:-
International Healthcare Park
IHP is a planned mixed development on 37.5 hectares of land
comprising private hospitals, mixed commercial, hospitality and
residential developments. It is located in the Binh Tan District,
close to Chinatown and is approximately 11 km from District 1, the
central business and commercial district of HCMC. Aseana Properties
has a 72.4% stake in this development and its minority partner, Hoa
Lam Group holds a significant minority stake together with a
consortium of investors from Singapore, Malaysia and Vietnam. There
is a total of 19 plots of land which have been fully approved for
development and Land Use Right ("LUR") issued and paid for 69 years
lease. Of the 19 plots, 6 plots are dedicated to hospital and
related functions. To date, 7 plots have been developed or
divested. Apart from the international-class City International
Hospital, IHP also boasts the largest AEON retail mall in Ho Chi
Minh City.
US$14.3 million of loan facilities to part finance the land and
working capital remain outstanding as at 31 December 2017.
City International Hospital
Construction of CIH was completed in March 2013 and it commenced
business in January 2014. CIH is a modern private care hospital
conforming to international standards with 320 beds (Phase 1: 168
beds). In early 2018, the hospital appointed Dr John Lucas as the
Chief Executive Officer ("CEO") to lead the operations team and to
replace Dr Le Quoc Su, who left his position as the CEO of the
hospital at the end of 2017. Prior to joining CIH, Dr John Lucas
was the Medical Director of FV Hospital, where he was instrumental
in achieving the first Joint Commission International ("JCI")
accreditation in HCMC and transformed a stand-alone hospital into
an integrated healthcare system. Dr Lucas has an excellent track
record in managing world-class hospitals.
The development of City International Hospital is funded by
total facilities of US$37.1 million as at 31 December 2017.
OUTLOOK
Overall, Malaysia has fared well in 2017 as the country's
economy remained bullish amid a combination of daunting domestic
and external factors, which included the weak currency and low
commodity prices at the beginning of the year. However, the
country's property market is expected to remain flat and
challenging going into 2018, with oversupply and affordability
issues remaining unresolved. The impending 14(th) General Election
brings with it lingering uncertainties that could somewhat dampen
sentiment. Nevertheless, the recent curbs implemented by the
Government on high-end properties are expected to provide a
breather for the tough luxury residential sector. On the other
hand, Vietnam's real estate market continues to maintain a positive
growth rate due to the country's thriving and robust economic
growth, which has propelled the nation's domestic property
market.
Given the extension of life of Aseana Properties to 31 December
2019, the Manager, together with the Board of Directors of Aseana
Properties remain focused on exploring all possible opportunities
to divest the remaining assets in its portfolio in an orderly and
timely manner.
In closing, please allow me to take this opportunity to express
my warmest thanks to the Board of Directors of Aseana Properties,
our advisors, shareholders and business associates for the
relentless support and guidance rendered throughout the year.
LAI VOON HON
President
Ireka Development Management Sdn. Bhd.
Development Manager
26 April 2018
PERFORMANCE SUMMARY
Year ended Year ended
31 December 31 December
2017 2016
----------------------------- ------------- -------------
Total Returns since listing
Ordinary share price -47.00% -48.00%
FTSE All-share index 26.71% 16.25%
FTSE 350 Real Estate Index -39.43% -45.11%
One Year Returns
Ordinary share price 1.92% 15.56%
FTSE All-share index 9.00% 12.45%
FTSE 350 Real Estate Index 10.34% -12.42%
Capital Values
Total assets less current
liabilities (US$ million) 189.03 188.62
Net asset value per share
(US$) 0.69 0.68
Ordinary share price (US$) 0.53 0.52
FTSE 350 Real Estate Index 568.05 514.80
Debt-to-equity ratio
Debt-to-equity ratio (1) 68.26% 58.75%
Net debt-to-equity ratio
(2) 48.93% 40.01%
(Loss)/ Earnings Per Share
Earnings per ordinary share
- basic (US cents) -2.10 8.89
- diluted (US cents) -2.10 8.89
Notes:
(1) Debt-to-equity ratio = (Total Borrowings ÷ Total Equity) x
100%
(2) Net debt-to-equity ratio = (Total Borrowings less Cash and
Cash Equivalents ÷ Total Equity) x 100%
FINANCIAL REVIEW
INTRODUCTION
The Group recorded consolidated comprehensive profit of US$2.0
million for the financial year ended 31 December 2017, attributable
to gains on disposal of lands and gains on foreign currency
translation differences for foreign operations, offset by operating
losses and finance costs of its International Healthcare Park, City
International Hospital, Four Points by Sheraton Sandakan Hotel and
Harbour Mall Sandakan.
STATEMENT OF COMPREHENSIVE INCOME
The Group registered revenue of US$19.1 million for the
financial year ended 31 December 2017, compared to US$112.5 million
for previous financial year. The revenue was mainly attributable to
the sale of two plots of land at International Healthcare Park
during the year, generating US$13.1 million, while the sale of
Aloft Kuala Lumpur Sentral Hotel in 2016 generated revenue of
US$104.3 million.
The Group recorded a net loss before taxation of US$5.0 million
for the financial year ended 31 December 2017, compared to a net
profit before taxation of US$16.2 million for the previous
financial year. The disposal of the two plots of land at
International Healthcare Park generated gains on disposal of US$5.0
million but were offset by operating losses and finance costs of
International Healthcare Park of US$2.0 million, City International
Hospital of US$5.4 million, Four Points by Sheraton Sandakan and
Harbour Mall Sandakan of total US$1.6 million.
Net loss attributable to equity holders of the parent was US$4.2
million for the year ended 31 December 2017, compared to a net
profit of US$18.9 million for previous financial year. Taxation for
the year was higher at US$0.9 million (2016: US$0.7 million) due to
an increase in the number of completed units of SENI and Tiffani
sold in 2017.
The consolidated comprehensive income for the year ended 31
December 2017 was US$2.0 million (2016: US$10.5 million), which
included gains on foreign currency translation differences for
foreign operations of US$7.9 million (2016: losses of US$2.5
million) due to strengthening of Ringgit against US Dollars from
RM4.4860/US$1.00 as at 31 December 2016 to RM4.0469/US$1.00 as at
31 December 2017. There was no fair value adjustment on
available-for-sale assets in the financial year as the remaining
shares in Nam Long Investment Corporation were sold in 2016.
Basic and diluted loss per share for the year ended 31 December
2017 were both US cents 2.10 (2016: Basic and diluted earnings per
share of US cents 8.89).
STATEMENT OF FINANCIAL POSITION
Total assets as at 31 December 2017 were US$325.7 million,
compared to US$294.4 million for previous year, representing an
increase of US$31.3 million. This was mainly due to an increase in
The RuMa inventories of US$32.7 million which is under
construction.
Total liabilities as at 31 December 2017 were US$191.2 million,
compared to US$152.2 million for previous year, representing an
increase of US$39.0 million. This was mainly due to an increase of
trade and other payables of US$29.1 million, which are attributable
to The RuMa.
Net Asset Value per share at 31 December 2017 was US$ 0.69
(2016: US$ 0.68).
CASH FLOW AND FUNDING
Cash flow generated from operations before interest and tax paid
was US$8.9 million for financial year ended 31 December 2017,
compared to US$105.1 million for previous year. The latter was
mainly due to disposal of Aloft Kuala Lumpur Sentral Hotel.
The Group generated net cash flow of US$2.1 million from
investing activities, compared to US$9.4 million for previous year.
The latter was mainly due to the disposal of the remaining shares
in Nam Long Investment Corporation.
The Group's subsidiaries borrow to fund property development
projects. As at 31 December 2017, the Group's gross borrowings
stood at US$91.8 million (2016: US$83.6 million). The borrowings
included a Dong loan of US$16.0 million equivalent which would be
used to refinance part of the existing US Dollar loan for the City
International Hospital. Net debt-to-equity ratio was 49.0% (2016:
40.0%). The Group will continue to focus on parring down its
borrowings.
Finance income was US$0.39 million for financial year ended 31
December 2017 (2016: US$0.4 million). Finance costs were US$5.7
million (2016: US$9.6 million), incurred by International
Healthcare Park, City International Hospital, Four Points by
Sheraton Sandakan Hotel and Harbour Mall Sandakan.
On 10 January 2017 the Company returned US$10,000,500 to
Shareholders by way of a Tender Offer, purchasing 13,334,000
shares, representing 6.29 per cent of the Company's share capital,
at a price of US$0.75 per share.
event after statement of financial position date
At a general meeting of the Company held on 23 April 2018,
Shareholders voted in favour of the Board's proposals to reject the
2018 Discontinuation Resolution and to continue with the Company's
investment policy, for a period of 18 months from the expected date
of the 2018 AGM, to enable a realisation of the Company's assets in
a controlled, orderly and timely manner, with the objective of
achieving a balance between periodically returning cash to
Shareholders and maximising the realisation value of the Company's
investments. The Board believes this will maximise the value of the
Company's assets and returns to Shareholders, both up to and upon
the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its
assets by 31 December 2019, Shareholders will be provided with an
opportunity to review the future of the Company, which would
include the option for shareholders to vote for the continuation of
the Company.
DIVID
No dividend was declared or paid in 2017 and 2016.
PRINCIPAL RISKS AND UNCERTAINTIES
A review of the principal risks and uncertainties facing the
Group is set out in the Directors' Report of the Annual Report.
TREASURY AND FINANCIAL RISK MANAGEMENT
The Group undertakes risk assessments and identifies the
principal risks that affect its activities. The responsibility for
the management of each key risk has been clearly identified and
delegated to the senior management of the Development Manager. The
Development Manager's senior management team is involved in the
day-to-day operation of the Group.
A comprehensive discussion on the Group's financial risk
management policies is included in the notes to the financial
statements of the Annual Report.
MONICA LAI VOON HUEY
Chief Financial Officer
Ireka Development Management Sdn. Bhd.
Development Manager
26 April 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 DECEMBER 2017
2017 2016
Continuing activities Notes US$'000 US$'000
------------------------------------ ------ --------- ---------
Revenue 3 19,098 112,535
Cost of sales 5 (13,383) (77,547)
------------------------------------ ------ --------- ---------
Gross profit 5,715 34,988
Other income 6 14,176 21,963
Administrative expenses (927) (1,466)
Foreign exchange gain/(loss) 7 3,419 (5,051)
Management fees 8 (3,129) (3,331)
Marketing expenses (496) (99)
Other operating expenses (18,417) (21,625)
------------------------------------ ------ --------- ---------
Operating profit 341 25,379
--------- ---------
Finance income 392 401
Finance costs (5,744) (9,616)
--------- ---------
Net finance costs 9 (5,352) (9,215)
Net (loss)/profit before
taxation 10 (5,011) 16,164
Taxation 11 (863) (686)
------------------------------------ ------ --------- ---------
(Loss)/Profit for the year (5,874) 15,478
------------------------------------ ------ --------- ---------
Other comprehensive income/(loss),
net of tax
Items that are or may be reclassified
subsequently to profit or loss
Foreign currency translation differences
for foreign operations 7,863 (2,534)
Fair value adjustment in
relation to available-for-sale
investments 12 - (2,441)
------------------------------------ ------ --------- ---------
Total other comprehensive
income/(loss) for the year 12 7,863 (4,975)
------------------------------------ ------ --------- ---------
Total comprehensive income for
the year 1,989 10,503
-------------------------------------------- --------- ---------
The notes to the financial statements form an integral part of
the financial statements.
2017 2016
Continuing activities Notes US$'000 US$'000
------------------------------ ------ -------- --------
(Loss)/Profit attributable
to:
Equity holders of the parent 13 (4,176) 18,856
Non-controlling interests (1,698) (3,378)
------------------------------ ------ -------- --------
(Loss)/Profit for the year (5,874) 15,478
------------------------------ ------ -------- --------
Total comprehensive income
attributable to:
Equity holders of the parent 3,825 13,674
Non-controlling interests (1,836) (3,171)
------------------------------ ------ -------- --------
Total comprehensive income
for the year 1,989 10,503
------------------------------ ------ -------- --------
(Loss)/Earnings per share
Basic and diluted (US cents) 13 (2.10) 8.89
------------------------------ --- -------- -----
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS at 31 DECEMBER 2017
2017 2016
Notes US$'000 US$'000
------------------------------- ------ --------- ---------
Non-current assets
Property, plant and equipment 663 743
Intangible assets 14 4,201 7,081
Deferred tax assets 15 4,268 1,623
------------------------------- ------ --------- ---------
Total non-current assets 9,132 9,447
------------------------------- ------ --------- ---------
Current assets
Inventories 16 278,879 244,959
Trade and other receivables 11,012 11,571
Prepayments 293 1,093
Current tax assets 372 660
Cash and cash equivalents 25,984 26,650
Total current assets 316,540 284,933
------------------------------- ------ --------- ---------
TOTAL ASSETS 325,672 294,380
------------------------------- ------ --------- ---------
Equity
Share capital 17 10,601 10,601
Share premium 18 208,925 218,926
Capital redemption reserve 19 1,899 1,899
Translation reserve (21,141) (29,142)
Accumulated losses (62,614) (58,922)
------------------------------- ------ --------- ---------
Shareholders' equity 137,670 143,362
Non-controlling interests (3,216) (1,148)
------------------------------- ------ --------- ---------
Total equity 134,454 142,214
------------------------------- ------ --------- ---------
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS at 31 DECEMBER 2017 (cont'd)
2017 2016
Notes US$'000 US$'000
------------------------------- -------- --------- ---------
Non-current liabilities
Loans and borrowings 21 54,572 46,405
Total non-current liabilities 54,572 46,405
------------------------------- -------- --------- ---------
Current liabilities
Trade and other payables 83,040 53,880
Amount due to non-controlling
interests 20 13,400 12,573
Loans and borrowings 21 12,882 10,807
Medium term notes 22 24,324 26,343
Current tax liabilities 3,000 2,158
------------------------------- -------- --------- ---------
Total current liabilities 136,646 105,761
------------------------------- -------- --------- ---------
Total liabilities 191,218 152,166
------------------------------- -------- --------- ---------
TOTAL EQUITY AND LIABILITIES 325,672 294,380
------------------------------- -------- --------- ---------
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 december 2017
Total
Equity
Attributable
to Equity
Redeemable Capital Fair Holders Non-
Ordinary Management Share Redemption Translation Value Accumulated of the Controlling Total
Shares Shares Premium Reserve Reserve Reserve Losses Parent Interests Equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
1 January 2016 10,601 - * 218,926 1,899 (26,401) 2,441 (77,301) 130,165 1,433 131,598
Issuance of
management
shares (Note 17) - - * - - - - - - - -*
Changes in
ownership
interests in
subsidiaries
(Note 24) - - - - - - (477) (477) 477 -
Non-controlling
interests
contribution - - - - - - - - 113 113
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Profit for the
year - - - - - - 18,856 18,856 (3,378) 15,478
Total other
comprehensive
loss for the
year - - - - (2,741) (2,441) - (5,182) 207 (4,975)
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Total
comprehensive
income for the
year - - - - (2,741) (2,441) 18,856 13,674 (3,171) 10,503
At 31 December
2016/ 1 January
2017 10,601 -* 218,926 1,899 (29,142) - (58,922) 143,362 (1,148) 142,214
Share buy back
(Note 18) - - (10,001) - - - - (10,001) - (10,001)
Changes in
ownership
interests in
subsidiaries
(Note 24) - - - - - - 484 484 (484) -
Non-controlling
interests
contribution - - - - - - - - 252 252
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Loss for the
year - - - - - - (4,176) (4,176) (1,698) (5,874)
Total other
comprehensive
income for the
year - - - - 8,001 - - 8,001 (138) 7,863
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Total
comprehensive
income for the
year - - - - 8,001 - (4,176) 3,825 (1,836) 1,989
Shareholders'
equity at 31
December
2017 10,601 -* 208,925 1,899 (21,141) - (62,614) 137,670 (3,216) 134,454
----------------- ------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
*represents 2 management shares at US$0.05 each
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED Statement OF Cash FlowS
For the year ended 31 december 2017
2017 2016
Notes US$'000 US$'000
Cash Flows from Operating Activities
Net (loss)/profit before taxation (5,011) 16,164
Finance income (392) (401)
Finance costs 5,744 9,616
Unrealised foreign exchange (gain)/loss 7 (2,973) 4,939
Disposal/Impairment of intangible
assets 14 2,880 152
Depreciation of property, plant
and equipment 10 84 98
Gain on disposal of available-for-sale
investments - (2,285)
Gain on disposal of property,
plant and equipment - (5)
Operating profit before changes
in working capital 332 28,278
Changes in working capital:
(Increase)/Decrease in inventories (20,459) 55,303
Decrease in trade and other receivables
and prepayments 1,449 6,103
Increase in trade and other payables 27,589 15,426
---------------------------------------------- ------ --------- --------
Cash generated from operations 8,911 105,110
Interest paid (5,744) (9,616)
Tax paid (2,606) (318)
---------------------------------------------- ------ --------- --------
Net cash from operating activities 561 95,176
---------------------------------------------- ------ --------- --------
Cash Flows from Investing Activities
Proceeds from disposal of available-for-sale
investments (iii) 893 8,955
Purchase of property, plant and
equipment (5) -
Proceeds from disposal of property,
plant and equipment - 5
Proceeds from disposal of an indirectly
held subsidiary 23 800 -
Finance income received 392 401
Net cash from investing activities 2,080 9,361
---------------------------------------------- ------ --------- --------
2017 2016
Notes US$'000 US$'000
Cash Flows from Financing Activities
Advances from non-controlling
interests 327 2,819
Issuance of ordinary shares of
subsidiaries to non-controlling
interests (ii) 252 113
Issuance of management shares - -*
Share buy back 18 (10,001) -
Repayment of loans and borrowings 21 (14,773) (17,057)
Repayment of medium term notes 22 (4,615) (87,823)
Drawdown of loans and borrowings 21 25,038 1,571
Net decrease/(increase) in pledged
deposits for loans and borrowings
and Medium Term Notes 7,923 (698)
Deposits subject to restriction (iv)
in use (13,867) -
------------------------------------------ ------ --------- ----------
Net cash used in financing activities (9,716) (101,075)
------------------------------------------ ------ --------- ----------
Net changes in cash and cash equivalents
during the year (7,075) 3,462
Effect of changes in exchange
rates (270) (155)
Cash and cash equivalents at the
beginning of the year (i) 16,639 13,332
Cash and cash equivalents at the
end of the year (i) 9,294 16,639
------------------------------------------ ------ --------- ----------
*represents 2 management shares at US$0.05 each
(i) Cash and Cash Equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following consolidated statement of
financial position amounts:
Cash and bank balances 10,343 14,858
Short term bank deposits 15,641 11,792
-------------------------------------- ----- ---------- -----------
25,984 26,650
Less Deposits subject to restriction (iv)
in use (13,867) -
Less: Deposits pledged (v) (2,823) (10,011)
-------------------------------------- ----- ---------- -----------
Cash and cash equivalents 9,294 16,639
-------------------------------------- ----------------- -----------
(ii) During the financial year, US$252,000 (2016: US$113,000) of
ordinary shares of subsidiaries were issued to non-controlling
shareholders which was satisfied via cash consideration.
(iii) In the previous financial year, the Group disposed the
entire balance representing 9,784,653 shares in Nam Long for a
consideration of US$9,848,000 of which US$8,955,000 was received in
2016. The balance consideration of US$893,000 was received during
the financial year.
(iv) Included in short term bank deposits in 2017 is
US$13,867,000 obtained from the term loan granted to City
International Hospital Company Ltd ("CIH") by Vietbank during the
year where the utilisation of this balance is restricted solely for
the purpose of refinancing the existing syndicated term loan under
CIH.
(v) Included in short term bank deposits and cash and bank
balance is US$2,823,000 (2016US$10,011,000) pledged for loans and
borrowings and Medium Term Notes of the Group
The notes to the financial statements form an integral part of
the financial statements.
Notes to the Financial Statements
1 General Information
The principal activities of the Group are development of upscale
residential and hospitality projects, sale of development land and
operation and sale of hotel, mall and hospital in Malaysia and
Vietnam.
2 BASIS OF PREPARATION
2.1 Statement of compliance and going concern
The Group and the Company financial statements have been
prepared in accordance with International Financial Reporting
Standards ("IFRS"), and IFRIC interpretations issued, and
effective, or issued and early adopted, at the date of these
financial statements.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of expenses during
the reporting period. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual
results ultimately may differ from those estimates. The Board has
reviewed the accounting policies set out below and considers them
to be the most appropriate to the Group's business activities.
The financial statements have been prepared on the historical
cost basis and on the assumption that the Group and the Company are
going concerns.
The Group has prepared and considered prospective financial
information based on assumptions and events that may occur for at
least 12 months from the date of approval of the financial
statements and the possible actions to be taken by the Group.
Prospective financial information includes the Group's profit and
cash flow forecasts for the ongoing projects. In preparing the cash
flow forecasts, the Directors have considered the availability of
cash, adequacy of bank loans and medium term notes and also the
refinancing of the medium term notes (as described in Notes 21 and
22) and the Directors believe that the business will be able to
realise its assets and discharge its liabilities in the normal
course of business for at least 12 months from the date of the
approval of these financial statements.
The Directors expect to raise sufficient funds to finance the
completion of the Group's existing projects and the necessary
working capital via the disposal of its development lands in
Vietnam and East Malaysia, its existing units of condominium
inventories in West Malaysia, and through the disposals of the City
International Hospital, the Four Points Sheraton Sandakan Hotel and
the Harbour Mall Sandakan.
Should the planned disposals of the assets not materialise, or
are delayed, the Directors expect to "roll-over" the medium term
notes which are due to expire in the next 12 months, given that the
notes are "AAA" rated and secured by two completed inventories of
the Group with carrying amount of US$81.31 million as at 31
December 2017. Included in the terms of the medium term notes
programme is an option for the Group to refinance the notes, as and
when they expire. This option to refinance is available until
2021.
The Group also has significant borrowings in Vietnam secured by
the City International Hospital and development lands. The
Directors expect to repay the short term portion of the borrowings
via sale of land in Vietnam. The remaining scheduled installments
are due in 2019
and 2020.
The forecasts also incorporate current payables, committed
expenditure and other future expected expenditure, along with sales
of all completed inventories and disposal of all development
lands.
2.1.1 2018 Discontinuation Resolution
When the Company was launched in 2007, the Board considered it
desirable that Shareholders should have an opportunity to review
the future of the Company at appropriate intervals. Accordingly, at
the 2015 AGM, held on 22 June 2015, the Board put forward a
resolution to Shareholders to determine if the Company should
continue in existence. Shareholders voted for the Company to
continue in existence, at the same time as approving the adoption
of a divestment investment policy to enable the controlled, orderly
and timely realisation of the Company's assets, with the objective
of achieving a balance between periodically returning cash to
Shareholders and maximising the realisation value of the Company's
investments (the "Divestment Investment Policy"). Pursuant to the
Divestment Investment Policy, the Company committed to dispose of
all of its assets by June 2018, ahead of the annual general meeting
of the Company to be held in 2018 (the "2018 AGM"), at which,
pursuant to the Existing Articles, the Board is required to propose
a discontinuation resolution for the Company to cease trading as
presently constituted (the "2018 Discontinuation Resolution").
Whilst significant progress has been made in realising the
Company's assets in an orderly manner and paying down project debts
since the Divestment Investment Policy was adopted, not all of the
Company's assets have yet been realised. Although discussions are
ongoing in relation to the realisation of the Company's remaining
assets, the Board cannot be certain that these discussions will
successfully conclude by June 2018 and therefore ahead of the 2018
AGM and the 2018 Discontinuation Resolution.
At a general meeting of the Company held on 23 April 2018,
Shareholders voted in favour of the Board's proposals to reject the
2018 Discontinuation Resolution and to continue with the Company's
investment policy, for a period of 18 months from the expected date
of the 2018 AGM, to enable a realisation of the Company's assets in
a controlled, orderly and timely manner, with the objective of
achieving a balance between periodically returning cash to
Shareholders and maximising the realisation value of the Company's
investments. The Board believes this will maximise the value of the
Company's assets and returns to Shareholders, both up to and upon
the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its
assets by 31 December 2019, Shareholders will be provided with an
opportunity to review the future of the Company, which would
include the option for shareholders to vote for the continuation of
the Company.
The Directors have considered the appropriateness of preparing
the accounts on a going concern basis in light of the decision to
realise the Group's investments in an orderly manner. There is no
certainty over the timeframe over which the investments will be
realised. The Directors note that other viable alternative
strategies to a wind-down remain available and they will continue
to evaluate whether to propose continuation of the current
divestment investment policy or a
change to an alternative strategy.
2.1.2 Statement of Compliance
The Group and the Company have not applied the following
new/revised accounting standards that have been issued by
International Accounting Standards Board but are not yet
effective.
New/Revised International Issued/Revised Effective
Financial Reporting Standards Date
----------------------------------------------------- --------------- -------------------
IFRS 9 Financial Finalised version, July 2014 Effective
Instruments incorporating requirements for annual
for classification periods beginning
and measurement, on or after
impairment, general 1 January
hedge accounting 2018
and derecognition
-------------------- ------------------------------- --------------- -------------------
IFRS 10 Amendments regarding December Deferred
Consolidated the sale or contribution 2015 indefinitely
Financial of assets between
Statements an investor and
its associate or
joint venture
-------------------- ------------------------------- --------------- -------------------
IFRS 15 IASB defers effective April 2016 Effective
Revenue date to annual periods for annual
from Contracts beginning on or periods beginning
with Customers after 1 January on or after
2018 1 January
2018
-------------------- ------------------------------- --------------- -------------------
IFRS 16 Original Issue January Effective
Leases 2016 for annual
periods beginning
on or after
1 January
2019
-------------------- ------------------------------- --------------- -------------------
IFRIC 22 clarifies December Effective
IFRIC 22 that the date of 2016 date to be
Foreign the transaction confirmed.
Currency - which is used
Transactions to determine the
and Advance spot exchange rate
Consideration for translating
the related item
on initial recognition
- is the date of
the initial recognition
of the non-monetary
asset or liability
arising from the
payment or receipt
of the advance consideration.
-------------------- ------------------------------- --------------- -------------------
Annual Improvements Amendments to IFRS December Effective
to IFRSs 1 delete the short-term 2016 for annual
2014-2016 exemptions provided periods beginning
Cycle (Amendments by Appendix E6-E7 on or after
to IFRS of IFRS 1. As a 1 January
1 First-time result, a first-time 2018
Adoption adopter transitioning
of IFRSs to IFRS on or after
and IAS 1 January 2018 assesses
28 Investments whether it qualifies
in Associates as an investment
and Joint entity retrospectively.
Ventures)
-------------------- ------------------------------- --------------- -------------------
The Directors anticipate that the adoption of the above
standards, amendments and interpretations in future periods will
have no material impact on the financial information of the Group
or Company except as mentioned below.
(a) IFRS 9, Financial instruments
IFRS 9 is applicable to the Group's Consolidated Financial
Statements for the year ending 31 December 2018. The new standard
addresses the classification, measurement and recognition of
financial assets and financial liabilities. It simplifies the
existing categories of financial instruments, introduces an
expected credit loss model and redefines the criteria required for
hedge effectiveness. On adoption of the new standard, these changes
are not expected to have a material impact on the consolidated
financial statements of the Group. There will however be limited
changes to presentation and disclosure.
(b) IFRS 15, Revenue from contracts with customers
IFRS 15 replaces the guidance in IFRS 11, Construction
Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programmes,
IFRIC 15, Agreements for Construction of Real Estate and IFRIC 18,
Transfer of Assets from Customers which is applicable to the
Group's Consolidated Financial Statements for the year ending 31
December 2018.
The Group currently applies IAS 18, Revenue and IFRIC 15,
Agreements for Construction of Real Estate for revenue recognition
from its sales of land held for property development,
work-in-progress and stock of completed units. Revenue is
recognised at a point in time when the effective control of
ownership of the properties is transferred to the customers when
the completion certificate or occupancy permit has been issued.
The adoption of the new standard is not expected to have a
material impact on the consolidated financial statements of the
Group, except for the effect of changes to the timing of revenue
recognition for the property development activities of serviced
residences under The RuMa Hotel and Residences ("The RuMa").
Revenue from the development of serviced residences is
recognised as and when the control of the asset is transferred to
the customer and it is probable that the Group will collect the
consideration to which it will be entitled in exchange for the
asset that will be transferred to the customer. In light of the
terms of the contract and the laws that apply to the contract,
control of the asset is transferred over time as the Group's
performance does not create an asset with an alternative use to the
Group and the Group has an enforceable right to payment for
performance completed to date.
Revenue from the development of serviced residences is
recognised over the period of the contract by reference to the
progress towards complete satisfaction of that performance
obligation.
The Directors are currently assessing and have yet to quantify
the potential financial impact of the initial application of the
standard to the Group.
(c) IFRS 16, Leases
IFRS 16 replaces, the guidance in IAS 17, Leases, IFRIC 4,
Determining whether an Arrangement contains a Lease, SIC-15,
Operating Leases - Incentives and SIC-27, Evaluating the Substance
of Transactions Involving the Legal Form of Lease. The Directors
are currently determining the impact of IFRS 16.
3 revenue AND SEGmeNTAL information
The Company is an investment holding company and has no
operating revenue. The Group's operating revenue for the year was
mainly attributable to the sale of completed units in Malaysia and
land held for property development in Vietnam.
Income earned from hotel, mall and hospital operations are
included in other income in line with management's intention to
dispose of the properties.
3.1 Revenue recognised during the year as follows:
2017 2016
US$'000 US$'000
--------------------------------- -------- --------
Sales of land held for property
development 13,132 411
Sale of completed
units 5,966 112,124
19,098 112,535
------------------------------------ -------- --------
3.2 Segmental Information
The Group's assets and business activities are managed by Ireka
Development Management Sdn. Bhd. ("IDM") as the Development Manager
under a Management Agreement dated 27 March 2007.
Segmental information represents the level at which financial
information is reported to the Executive Management of IDM, being
the chief operating decision maker as defined in IFRS 8. The
Executive Management consists of the Chief Executive Officer, the
Chief Financial Officer, Chief Operating Officer and Chief
Investment Officer of IDM. The management determines the operating
segments based on reports reviewed and used by the Executive
Management for strategic decision making and resource allocation.
For management purposes, the Group is organised into project
units.
The Group's reportable operating segments are as follows:
(i) Investment Holding Companies - investing activities;
(ii) Ireka Land Sdn. Bhd. - develops Tiffani ("Tiffani") by i-ZEN;
(iii) ICSD Ventures Sdn. Bhd. - owns and operates Harbour Mall
Sandakan ("HMS") and Four Points by Sheraton Sandakan Hotel
("FPSS");
(iv) Amatir Resources Sdn. Bhd. - develops SENI Mont' Kiara ("SENI");
(v) Iringan Flora Sdn. Bhd. - owns and operates Aloft Kuala Lumpur Sentral Hotel ("AKLS");
(vi) Urban DNA Sdn. Bhd.- develops The RuMa Hotel and Residences("The Ruma"); and
(vii) Hoa Lam Shangri-La Healthcare Group - master developer of
International Healthcare Park ("IHP"); owns and operates the City
International Hospital ("CIH").
Other non-reportable segments comprise the Group's development
projects. None of these segments meets any of the quantitative
thresholds for determining reportable segments in 2017 and
2016.
Information regarding the operations of each reportable segment
is Notes 3.3. The Executive Management monitors the operating
results of each segment for the purpose of performance assessments
and making decisions on resource allocation. Performance is based
on segment gross profit/(loss) and profit/(loss) before taxation,
which the Executive Management believes are the most relevant in
evaluating the results relative to other entities in the industry.
Segment assets presented are inclusive of inter-segment balances
and inter-segment pricing is determined on an arm's length
basis.
The Group's revenue generating development projects are in
Malaysia and Vietnam.
3.3 Analysis of the group's reportable operating segments are as follows:-
Operating Segments - ended 31 December 2017
Hoa Lam
Investment Ireka ICSD Amatir Urban Shangri-La
Holding Land Ventures Resources DNA Healthcare
Companies Sdn. Sdn. Sdn. Sdn. Group Total
Bhd. Bhd. Bhd. Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------- ------------- -------- ----------- ------------ --------- ------------ ----------
Segment profit/ (loss)
before taxation 1,077 (432) (1,554) 193 (1,413) (2,852) (4,981)
--------------------------- ------------- -------- ----------- ------------ --------- ------------ ----------
Included in the measure
of segment profit/
(loss) are:
Revenue - 935 - 5,031 - 13,132 19,098
Other income from
hotel operations - - 3,842 - - - 3,842
Other income from
mall operations - - 1,440 - - - 1,440
Other income from
hospital operations - - - - - 8,234 8,234
Disposal of intangible
assets - - - (53) - (2,827) (2,880)
Marketing expenses - - - (8) (488) - (496)
Expenses from hotel
operations - - (3,939) - - - (3,939)
Expenses from mall
operations - - (1,488) - - - (1,488)
Expenses from hospital
operations - - - - - (10,491) (10,491)
Depreciation of property,
plant and equipment - - - - - (84) (84)
Finance costs - - (1,713) - - (4,031) (5,744)
Finance income 6 2 236 12 23 113 392
Segment assets 735 523 83,525 15,438 106,355 104,829 311,405
--------------------------- ------------- -------- ----------- ------------ --------- ------------ ----------
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
-------------------------------------- --------
Total profit for reportable segments (4,981)
Other non-reportable segments 30
Consolidated profit before taxation (5,011)
-------------------------------------- --------
3.3 Analysis of the group's reportable operating segments are as follows:-
Operating Segments - ended 31 December 2016
Hoa Lam
Investment Ireka ICSD Amatir Iringan Urban Shangri-La
Holding Land Ventures Resources Flora DNA Healthcare
Companies Sdn. Sdn. Sdn. Sdn. Sdn. Group Total
Bhd. Bhd. Bhd. Bhd. Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
Segment profit/
(loss)
before taxation (4,410) 135 (6,237) 515 37,223 (1,338) (9,359) 16,529
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
Included in the
measure
of segment profit/
(loss) are:
Revenue - 1,306 - 6,529 104,289 - 411 112,535
Other income from
hotel operations - - 3,435 - 8,762 - - 12,197
Other income from
mall operations - - 1,041 - - - - 1,041
Other income from
hospital
operations - - - - - - 5,754 5,754
Impairment of
inventory
* - - (2,408) - - - - (2,408)
Disposal of
intangible
assets - - - (79) - - (73) (152)
Marketing expenses - - - - - (99) - (99)
Expenses from
hotel
operations - - (3,763) - (5,719) - - (9,482)
Expenses from mall
operations - - (1,399) - - - - (1,399)
Expenses from
hospital
operations - - - - - - (9,039) (9,039)
Depreciation of
property,
plant and
equipment - - (6) - (3) - (89) (98)
Finance costs - - (2,992) - (1,957) - (4,363) (9,312)
Finance income 57 2 258 9 2 7 66 401
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
Segment assets 12,160 1,843 76,174 18,722 - 69,618 97,833 276,350
------------------- ------------- -------- ----------- ------------ ---------- -------- ------------ ---------
* The amount relates to impairment of FPSS as the recoverable
amount, estimated based on its net realisable
value, is below its carrying amount (refer to Note 16).
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
-------------------------------------- --------
Total profit for reportable segments 16,529
Other non-reportable segments (61)
Finance cost (304)
Consolidated profit before taxation 16,164
-------------------------------------- --------
There were no additions to non-current assets other than
financial instruments and deferred tax assets for the financial
year ended 2016.
Additions
2017 Finance Finance Segment to non-current
US$'000 Revenue Depreciation costs income assets assets
---------------------- --------- ------------- -------- -------- --------- -----------------
Total reportable
segment 19,098 (84) (5,744) 392 311,405 -
Other non-reportable
segments - - - - 14,267 5
---------------------- --------- ------------- -------- -------- --------- -----------------
Consolidated total 19,098 (84) (5,744) 392 325,672 5
---------------------- --------- ------------- -------- -------- --------- -----------------
Additions
2016 Finance Finance Segment to non-current
US$'000 Revenue Depreciation costs income assets assets
---------------------- --------- ------------- -------- -------- --------- -----------------
Total reportable
segment 112,535 (98) (9,312) 401 276,350 -
Other non-reportable
segments - - (304) - 18,030 -
---------------------- --------- ------------- -------- -------- --------- -----------------
Consolidated total 112,535 (98) (9,616) 401 294,380 -
---------------------- --------- ------------- -------- -------- --------- -----------------
There were no additions to non-current assets other than
financial instruments and deferred tax assets for financial year
ended 2016.
Geographical Information - ended 31 December 2017
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 5,966 13,132 19,098
Non-current assets 4,954 4,178 9,132
-------------------- --------- -------- -------------
Included in the revenue of the Group for the financial year
ended 31 December 2017 is revenue from the sale of two plots of
land (Lot D2 and D3) at the International Healthcare Park
("IHP").
For the year ended 31 December 2017, two customers exceeded 10%
of the Group's total revenue as follows:
US$'000 Segments
--------------------------------- -------- -------------------
Tien Phat Consultancy Investment Hoa Lam Shangri-La
Co. Ltd 5,399 Healthcare Group
Tri Hanh Consultancy Co. Hoa Lam Shangri-La
Ltd 7,733 Healthcare Group
--------------------------------- -------- -------------------
Geographical Information - ended 31 December 2016
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 112,124 411 112,535
Non-current assets 2,359 7,088 9,447
-------------------- --------- -------- -------------
Included in the revenue of the Group for the financial year
ended 31 December 2016 is revenue from the sale of Aloft Kuala
Lumpur Sentral Hotel ("AKLS") and a plot of land (Lot GD1) at the
IHP.
For the year ended 31 December 2016, one customer exceeded 10%
of the Group's total revenue as follows:
US$'000 Segments
----------------------- -------------- --------------
Prosper Group Holdings Iringan Flora
Limited 104,289 Sdn. Bhd.
----------------------- -------------- --------------
4 SEASONALITY
The Group's business operations are not materially affected by
seasonal factors for the period under review.
5 Cost of Sales
2017 2016
US$'000 US$'000
Direct costs attributable to:
Completed units (Note 16) 5,212 74,796
Sales of land held for property
development (Note 16) 5,291 191
Impairment of inventory (Note
16) - 2,408
Disposal/Impairment of intangible
assets (Note 14) 2,880 152
13,383 77,547
----------------------------------- -------- --------
Included in the cost of sales of the Group for the financial
year ended 31 December 2017 is cost of sales related to the sale of
two plots of land (Lot D2 and D3) at the IHP (2016: sale of Aloft
Kuala Lumpur Sentral and a plot of land (Lot GD1) at the IHP).
6 Other Income
2017 2016
US$'000 US$'000
Dividend income - 208
Gain on disposal of available-for-sale
investments - 2,285
Gain on disposal of property,
plant and equipment - 5
Rental income 260 211
Other income from hotel operations
(a) 3,842 12,197
Other income from mall operations
(b) 1,440 1,041
Other income from hospital operations
(c) 8,234 5,754
Sundry income 400 262
14,176 21,963
---------------------------------------- -------- ---------
(a) Other income from hotel operations
The income in 2017 relates to the hotel operations of FPSS which
is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd.
The income in 2016 includes the income from hotel operations of
FPSS and AKLS amounting to US$3,435,000 and US$8,762,000
respectively. AKLS was owned by a subsidiary of the Company,
Iringan Flora Sdn. Bhd which was disposed of in 2016. The income
earned from hotel operations is included in other income in line
with management's intention to dispose of the hotel.
(b) Other income from mall operations
The income relates to the operation of HMS which is owned by a
subsidiary of the Company, ICSD Ventures Sdn. Bhd.. The income
earned from mall operations is included in other income in line
with management's intention to dispose of the mall.
(c) Other income from hospital operations
The income relates to the operation of CIH which is owned by a
subsidiary of the Company, City International Hospital Company
Limited. The income earned from hospital operations is included in
other income in line with management's intention to dispose of the
hospital.
7 Foreign exchange GAIN/(LOSS)
2017 2016
US$'000 US$'000
--------------------------------------- -------- --------
Foreign exchange gain/(loss) comprises:
Realised foreign exchange gain/(loss) 446 (112)
Unrealised foreign exchange
gain/(loss) 2,973 (4,939)
--------------------------------------- -------- --------
3,419 (5,051)
--------------------------------------- -------- --------
8 Management Fees
2017 2016
US$'000 US$'000
------------------- -------- --------
Management fees 3,129 3,331
------------------- -------- --------
The management fees payable to the Development Manager are based
on 2% per annum of the Group's net asset value calculated on the
last business day of June and December of each calendar year and
payable quarterly in advance. The management fees were allocated to
the subsidiaries and the Company based on where the service was
provided.
In addition to the annual management fee, the Development
Manager is entitled to a performance fee calculated at 20% of the
out performance of the net asset value over a total compounded
return hurdle rate of 10% per annum. No performance fee has been
paid or accrued during the year (2016: US$Nil).
9 Finance (Costs)/ INCOME
2017 2016
US$'000 US$'000
Interest income from banks 392 401
Agency fees (34) (194)
Arrangement fee - (621)
Bank guarantee commission - (50)
Interest on bank loans (4,031) (4,313)
Interest on financial liabilities
at amortised cost - (1)
Interest on medium term notes (1,679) (4,437)
----------------------------------- -------- --------
(5,352) (9,215)
----------------------------------- -------- --------
10 net (Loss) /PROFIT BEFORE TAXATION
2017 2016
US$'000 US$'000
----------------------------------------------------- ----------- ---------
Net (loss)/profit before taxation is stated after charging/(crediting):
Auditor's remuneration 202 205
Directors' fees/emoluments 235 297
Depreciation of property, plant
and equipment 84 98
Expenses of hotel operations 3,939 9,482
Expenses of mall operations 1,488 1,399
Expenses of hospital operations 10,491 9,039
Unrealised foreign exchange (gain)/loss (2,973) 4,939
Realised foreign exchange (gain)/loss (446) 112
Disposal/impairment of intangible
assets 2,880 152
Loss on disposal of an indirectly -
held subsidiary (Note 23) 1,298
Gain on disposal of available-for-sale
investments - (2,285)
Gain on disposal of property,
plant and equipment - (5)
Tax services 13 8
11 TAXATION
2017 2016
US$'000 US$'000
Current tax- Current year 3,096 796
- Prior year 412 262
Deferred tax credit- Current
year (2,046) (354)
- Prior year (599) (18)
------------------------------------------- -------------------- ------------------
Total tax expense for the
year 863 686
------------------------------------------- -------------------- ------------------
The numerical reconciliation between the income tax expenses and
the product of accounting results multiplied by the applicable tax
rate is computed as follows:
2017 2016
US$'000 US$'000
---------------------------------------- -------- -------------------
Net (loss)/profit before taxation (5,011) 16,164
Income tax at a rate of 24% (2016:24%) (1,203) 3,879
Add :
Tax effect of expenses not deductible
in determining taxable profit 592 6,854
Current year losses and other tax
benefits for which no deferred
tax asset was recognised 1,742 2,029
Tax effect of different tax rates
in subsidiaries 590 1,521
Less :
Tax effect of income not taxable
in determining taxable profit (671) (13,841)
(Over)/Under provision in respect
of prior years (187) 244
---------------------------------------- -------- -------------------
Total tax expense for the year 863 686
---------------------------------------- -------- -------------------
The applicable corporate tax rate in Malaysia is 24% (2016:
24%).
The Company is treated as a tax resident of Jersey for the
purpose of Jersey tax laws and is subject to a tax rate of 0%.
The applicable corporate tax rates in Singapore and Vietnam are
17% and 20% (2016: 17% and 20%) respectively.
A subsidiary of the Group, CIH is granted preferential corporate
tax rate of 10% for the results of the hospital operations. The
preferential income tax is given by the government of Vietnam due
to the subsidiary's involvement in the healthcare industry.
A Goods and Services Tax was introduced in Jersey in May 2008.
The Company has been registered as an International Services Entity
so it does not have to charge or pay local GST. The cost for this
registration is GBP200 per annum.
The tax effect of income not taxable in determining taxable
profit for the prior year mainly relates to the net gain on
disposal from the sale of the AKLS.
The Directors intend to conduct the Group's affairs such that
the central management and control is not exercised in the United
Kingdom and so that neither the Company nor any of its subsidiaries
carries on any trade in the United Kingdom. The Company and its
subsidiaries will thus not be residents in the United Kingdom for
taxation purposes. On this basis, they will not be liable for
United Kingdom taxation on their income and gains other than income
derived from a United Kingdom source.
12 COMPRENHENSIVE income/(LOSS)
Items that are or may be reclassified 2017 2016
subsequently to profit or loss, US$'000 US$'000
net of tax
--------------------------------------- --------- ---------
Foreign currency translation
differences for foreign operations
--------- ---------
Gains/(Losses) arising during
the year 8,944 (3,522)
Reclassification to profit or
loss on disposal of land held
for property development 61 988
Reclassification to profit or
loss on disposal of an indirectly
held subsidiary (1,142) -
--------- ---------
7,863 (2,534)
Fair value of available-for-sale
investment
--------- ---------
Losses arising during the year - (233)
Reclassification adjustments
for gain on disposal included
in profit or loss - (2,208)
--------- ---------
- (2,441)
7,863 (4,975)
--------------------------------------- --------- ---------
13 (LOSS)/EARNINGS Per Share
Basic and diluted (loss)/earnings per ordinary share
The calculation of basic and diluted (loss)/earnings per
ordinary share for the year ended 31 December 2017 was based on the
(loss)/profit attributable to equity holders of the parent and a
weighted average number of ordinary shares outstanding, calculated
as below:
2017 2016
----------------------------------- ------------- ------------
(Loss)/Profit attributable to
equity holders of the parent
(US$000) (4,176) 18,856
Weighted average number of shares 199,019,784 212,025,002
(Loss)/Earnings per share
Basic and diluted (US cents) (2.10) 8.89
----------------------------------- ------------- ------------
Weighted average number of ordinary shares
2017 2016
------------------------------------- -------------- ------------
Issued ordinary shares at 1
January 212,025,002 212,025,002
Effect of share buy back (Note
18) (13,005,218) -
-------------- ------------
Weighted average number of ordinary
shares at
31 December 199,019,784 212,025,002
-------------- ------------
14 Intangible Assets
Licence
Contracts
and Related
Relationships Goodwill Total
US$'000 US$'000 US$'000
------------------------------ --------------- --------- --------
Cost
At 1 January 2016/ 31
December 2016 / 31 December
2017 10,695 6,479 17,174
------------------------------ --------------- --------- --------
Accumulated impairment
At 1 January 2016 4,276 5,665 9,941
Disposals 73 79 152
------------------------------ --------------- --------- --------
At 31 December 2016 /
1 January 2017 4,349 5,744 10,093
Disposals 2,827 53 2,880
------------------------------ --------------- --------- --------
At 31 December 2017 7,176 5,797 12,973
------------------------------ --------------- --------- --------
Carrying amounts
At 31 December 2016 6,346 735 7,081
------------------------------ --------------- --------- --------
At 31 December 2017 3,519 682 4,201
------------------------------ --------------- --------- --------
The licence contracts and related relationships represent the
Land Use Rights ("LUR") for the Group's lands in Vietnam. LUR
represents the rights to develop the IHP within a lease period
ending on 9 July 2077. In 2017, the Group disposed of its
undeveloped land in the IHP (Lot D2 and D3) to third party
purchasers (2016: Lot GD1).
For the purpose of impairment testing, goodwill and licence
contracts and related relationships are allocated to the Group's
operating divisions which represent the lowest level within the
Group at which the goodwill and licence contracts and related
relationships are monitored for internal management purposes.
The aggregate carrying amounts of intangible assets allocated to
each unit are as follows:
2017 2016
US$'000 US$'000
------------------------------- --------- ---------
Licence contracts and related
relationships
International Healthcare
Park 3,519 6,346
-------------------------------- --------- ---------
Goodwill
SENI Mont' Kiara 132 185
Sandakan Harbour Square 550 550
-------------------------------- --------- ---------
682 735
------------------------------- --------- ---------
The recoverable amount of licence contracts and related
relationships has been tested based on the net realisable value of
the LUR owned by the subsidiaries. The key assumption used is the
expected market value of the LUR. The Group believes that any
reasonably possible changes in the above key assumptions applied is
not likely to materially cause the recoverable amount to be lower
than its carrying amounts.
The recoverable amount of goodwill has been tested by reference
to underlying profitability of the ongoing operations of the
developments using discounted cash flow projections (refer to Note
16).
Intangible assets of US$53,000 (2016: US$79,000) and
US$2,827,000 (2016: US$73,000) in relation to SENI and IHP projects
respectively were written down as certain components from the
developments were sold during the year.
15 Deferred Tax Assets
2017 2016
US$'000 US$'000
------------------------------- --------- ---------
At 1 January 1,623 1,337
Exchange adjustments 311 (86)
Deferred tax credit relating
to origination of
temporary differences during
the year 2,334 372
At 31 December 4,268 1,623
------------------------------- --------- ---------
The deferred tax assets comprise:
2017 2016
US$'000 US$'000
----------------------------------------- --------- ---------
Taxable temporary differences
between accounting profit and
taxable profit of property development
units sold 4,268 1,623
At 31 December 4,268 1,623
----------------------------------------- --------- ---------
Deferred tax assets have not been recognised in respect of
unused tax losses of US72,240,000 (2016: US$65,440,000) and other
tax benefits which includes temporary differences between net
carrying amount and tax written down value of property, plant and
equipment, accrual of construction costs and other deductible
temporary differences of US$4,920,000 (2016: US$4,460,000) which
are available for offset against future taxable profits. Deferred
tax assets have not been recognised due to the uncertainty of the
recovery of the losses.
16 INVENTORIES
2017 2016
Notes US$'000 US$'000
--------------------------- ------- --------- ---------
Land held for property
development (a) 19,021 22,514
Work-in-progress (b) 95,450 62,708
Stock of completed units,
at cost (c) 163,880 159,334
Consumables 528 403
At 31 December 278,879 244,959
------------------------------------ --------- ---------
Carrying amount of inventories
pledged as security for Loans
and borrowings and Medium Term
Notes 156,857 148,427
-------- --------
(a) Land held for property development
2017 2016
US$'000 US$'000
----------------------------------- ---------- --------
At 1 January 22,514 23,223
Add :
Exchange adjustments 925 (604)
Additions/(disposal) 873 86
At 31 December 24,312 22,705
------------------------------------ ---------- --------
Less: Costs recognised
as expenses in the consolidated
statement of comprehensive
income during the year
(Note 5) (5,291) (191)
------------------------------------ ---------- --------
At 31 December 19,021 22,514
------------------------------------ ---------- --------
(b) Work-in-progress
2017 2016
US$'000 US$'000
----------------------------------- -------- --------
At 1 January 62,708 53,182
Add :
Exchange adjustments 6,809 (3,967)
Work-in-progress incurred during
the year 25,933 13,493
At 31 December 95,450 62,708
----------------------------------- -------- --------
Included in the previous financial year are the borrowing costs
capitalised at interest rate ranging from 5.50% to 10.00% per annum
of US$0.2 million.
(c) Stock of completed units, at cost
2017 2016
US$'000 US$'000
--------------------------------- --------- ---------
At 1 January 159,334 230,436
Less :
Exchange adjustments 9,758 6,102
Costs recognised as expenses
in the consolidated statement
of comprehensive income during
the year (Note 5) (5,212) (74,796)
Impairment of inventory - (2,408)
At 31 December 163,880 159,334
--------------------------------- --------- ---------
The net realisable value of completed units have been tested by
reference to underlying profitability of the ongoing operations of
the developments using discounted cash flow projections and/or
comparison method with the similar properties within the local
market which provides an approximation of the estimated selling
price that is expected to be achieved in the ordinary course of
business.
Included in the stock of completed units are SENI as well as the
following completed units:
Four Points by Sheraton Sandakan Hotel ("FPSS")
The recoverable amount of FPSS was determined based on an
internal valuation performed by management, supported by valuation
undertaken by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$40,788,000 (2016: US$37,012,000) of FPSS was determined to
approximate with its carrying amount. In 2016, impairment loss of
US$2,408,000 in relation to inventory amount was included in cost
of sales.
The valuation of FPSS was determined by discounting the future
cash flows expected to be generated from the continuing operations
of FPSS and was based on the following key assumptions:
(1) Cash flows were projected based on past experience, actual
operating results in 2017 and the 10 years budget of FPSS;
(2) The occupancy rate of FPSS will improve to 73% in 2027 which
is when the hotel's operations are expected to stabilise;
(3) Average daily rates of the hotel will improve to US$103 in
2027 which is when the hotel's operations are expected to
stabilise;
(4) Projected gross margin reflects the average historical gross
margin, adjusted for projected market and economic conditions and
internal resources efficiency; and
(5) Pre-tax discount rate of 9% was applied in discounting the
cash flows. The discount rates take into the prevailing trend of
the hotel industry in Malaysia.
Sensitivity analysis
The above estimates are sensitive in the following key
areas:
(a) an increase/(decrease) of 1% in discount rate used would
have (decreased)/ increased the recoverable amount by approximately
(US$5,342,000)/US$6,624,000;
(b) an increase/(decrease) of 1% in occupancy rate throughout
the entire projection term used would have increased/ (decreased)
the recoverable amount by approximately US$758,000/ (US$758,000);
and
(c) an increase/(decrease) of 5% in average daily rates
throughout the entire projection term used would have increased/
(decreased) the recoverable amount by approximately US$3,476,000/
(US$3,476,000).
Harbour Mall Sandakan ("HMS")
The recoverable amount of HMS was determined based on an
internal valuation performed by management, supported by valuation
undertaken by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$43,490,000 (2016: US$41,237,000) of HMS was determined to be
higher than its carrying amount and no impairment losses in
relation to the inventory amount was recognised.
The valuation of HMS was determined by the capitalisation of net
income expected to be generated from the continuing operations of
HMS ("investment approach") when the mall operates at an optimum
occupancy rate and was based on the following key assumptions:
(1) Occupancy rate will improve to 95% by 2020 which is when the
mall's operations are expected to stabilise;
(2) Projected optimum average rental rates to improve to US$1.44
per square feet over a ten-year period;
(3) Outgoing rate projected at 35% against gross annual
income;
(4) Capitalisation rate assumed at 6%; and
(5) Capitalisation period of 84 years covering the period of HMS
achieving optimum operations to expiration of the title term.
Sensitivity analysis
The above estimates are sensitive in the following key
areas:
(a) an increase/(decrease) of 0.25% in capitalisation rate used
would have (decreased) /increased the recoverable amount by
approximately (US$1,730,000)/ US$1,730,000;
(b) an increase/(decrease) of 1% in optimum occupancy rate
throughout the entire projection term would have
increased/(decreased) the recoverable amount by approximately
US$494,000/ (US$494,000); and
(c) an increase/(decrease) of 5% in average rental rate used
would have increased /(decreased) the recoverable amount by
approximately US$1,977,000/ (US$2,224,000).
City International Hospital ("CIH")
The recoverable amount US$75,200,000 (2016: US$75,200,000) of
CIH was determined based on a valuation by an external, independent
valuer with appropriate recognised professional qualification. The
recoverable amount of CIH was determined to be higher than its
carrying amount and no impairment losses in relation to the
inventory amounts was recognised.
The valuation of CIH was determined by discounting the future
cash flows expected to be generated from the continuing operations
of CIH. The followings are the key assumptions:
(1) Cash flows were projected based on past experience, actual
operating results in 2017 and the 5 years budget of CIH adjusted by
the valuer;
(2) Projected revenue growth reflects the increase in average
historical growth figures, adjusted for projected market and
economic conditions and internal resources efficiency. Revenue is
projected to grow at a compound annual growth rate of 25% from 2018
to 2022;
(3) Pre-tax discount rate of 12% was applied in discounting the
cash flows. The discount rates take into the prevailing trend of
the hospital industry in Vietnam; and
(4) Terminal capitalisation rate of 10% was applied. The rates
take into the prevailing trend of the hospital industry in
Vietnam.
Sensitivity analysis
The above estimates are sensitive in the following key
areas:
(a) an increase/(decrease) of 1% in revenue growth rates would
have increased/(decreased) the recoverable amount by approximately
US$2,100,000/(US$3,900,000);
(b) an increase/(decrease) of 1% in discount rate used would
have (decreased)/increased the recoverable amount by approximately
(US$5,502,000)/ US$6,023,000; and
(c) an increase/(decrease) of 1% in capital terminalisation rate
used would have (decreased)/increased the recoverable amount by
approximately (US$3,739,000)/ US$4,481,000.
17 Share Capital
Number Number of
of shares Amount shares Amount
2017 2017 2016 '000 2016
'000 US$'000 US$'000
-------------------------- ----------- --------- ----------- ---------
Authorised Share Capital
Ordinary shares of
US$0.05 each 2,000,000 100,000 2,000,000 100,000
Management shares - * - *
of US$0.05 each - * - *
-------------------------- ----------- --------- ----------- ---------
2,000,000 100,000 2,000,000 100,000
-------------------------- ----------- --------- ----------- ---------
Issued Share Capital
Ordinary shares of
US$0.05 each 212,025 10,601 212,025 10,601
Management shares - # - #
of US$0.05 each - # - #
---------------------- -------- ------- -------- -------
212,025 10,601 212,025 10,601
---------------------- -------- ------- -------- -------
*represents 10 management shares at US$0.05 each
# represents 2 management shares at US$0.05 each
In 2015, the shareholders of the Company approved the creation
and issuance of management shares by the Company as well as a
compulsory redemption mechanism that was proposed by the Board.
The Company increased its authorised share capital from
US$100,000,000 to US$100,000,000.50 by the creation of 10
management shares of US$0.05 each for cash.
The Company also increased its issued and paid-up share capital
from US$10,601,250 to US$10,601,250.10 by way of an allotment of 2
new management shares of US$0.05 each at par via cash
consideration.
In accordance with the compulsory redemption scheme, the
Company's ordinary shares were converted into redeemable ordinary
shares.
The ordinary shares and the management shares shall have
attached thereto the rights and privileges, and shall be subjected
to the limitations and restrictions, as are set out below:
(a) Distribution of dividend:
(i) The ordinary shares carry the right to receive all the
profits of the Company available for distribution by way of interim
or final dividend at such times as the Directors may determine from
time to time; and
(ii) The management shares carry no right to receive dividends
out of any profits of the Company.
(b) Winding-up or return of capital:
(i) The holders of the management shares shall be paid an amount
equal to the paid-up capital on such management shares; and
(ii) Subsequent to the payment to holders of the management
shares, the holders of the ordinary shares shall be repaid the
surplus assets of the Company available for distribution.
(c) Voting rights:
(i) The holders of the ordinary shares and management shares
shall have the right to receive notice of and to attend and vote at
general meetings of the Company; and
(ii) Each holder of ordinary shares and management shares being
present in person or by a duly authorised representative (if a
corporation) at a meeting shall upon a show of hands have one vote
and upon a poll each such holder present in person or by proxy or
by a duly authorised representative (if a corporation) shall have
one vote in respect of every full paid share held by him.
18 Share Premium
Share premium represents the excess of proceeds raised on the
issuance of shares over the nominal value of those shares. The
costs incurred in issuing shares were deducted from the share
premium.
2017 2016
US$'000 US$'000
----------------- --------- ---------
At 1 January 218,926 218,926
Treasury shares (10,001) -
As at 31 December 208,925 218,926
-------------------- -------- --------
On 4 January 2017, the Shareholders of the Company at an
Extraordinary General Meeting approved a proposal to return
US$10,000,500 or US$0.75 per share for 13,334,000 shares
representing 6.29 per cent of the Company's share capital to
Shareholders. The capital distribution was completed on 10 January
2017 and the repurchased shares of 13,334,000 are currently held as
Treasury Shares. The issued and paid up share capital of the
Company remains unchanged at 212,025,002.
19 CAPITAL REDEMPTION RESERVE
The capital redemption reserve was incurred after the Company
cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per
share in 2009 and 2013 respectively.
20 AMOUNT DUE TO NON-CONTROLLING INTERESTS
2017 2016
US$'000 US$'000
----------------------------------------------------------- -------- --------
Current
Minority Shareholder of Bumiraya
Impian Sdn. Bhd.:
* Global Evergroup Sdn. Bhd. 1,225 1,105
Minority Shareholders of Hoa
Lam Services Co Ltd:
* Tran Thi Lam 1,756 1,752
* Tri Hanh Consultancy Co Ltd 3,954 3,944
* Hoa Lam Development Investment Joint Stock Company 2,560 2,228
* Duong Ngoc Hoa 227 226
Minority Shareholder of The
RuMa Hotel KL Sdn. Bhd.:
* Ireka Corporation Berhad 2 2
Minority Shareholder of Urban
DNA Sdn. Bhd.:
* Ireka Corporation Berhad 3,676 3,316
13,400 12,573
----------------------------------------------------------- -------- --------
The current amount due to non-controlling interests amounting to
US$13,400,000 (2016: US$12,573,000) is unsecured, interest free and
repayable on demand.
21 Loans AND BORROWINGS
2017 2016
US$'000 US$'000
--------------------------- -------- --------
Non-current
Bank loans 54,572 46,405
54,572 46,405
--------------------------- -------- --------
Current
Bank loans 12,882 10,804
Finance lease liabilities - 3
---------------------------- -------- --------
12,882 10,807
--------------------------- -------- --------
67,454 57,212
--------------------------- -------- --------
The effective interest rates on the bank loans for the year
ranged from 5.35% to 10.50% (2016: 5.25% to 10.50%) per annum. In
2016, the effective interest rates for finance lease arrangements
was at 2.50% per annum.
Borrowings are denominated in Ringgit Malaysia, United State
Dollars and Vietnam Dong.
Bank loans are repayable by monthly, quarterly or semi-annually
instalments.
Bank loans are secured by land held for property development,
work-in-progress, operating assets of the Group, pledged deposits
and some by the corporate guarantee of the Company.
Reconciliation of movement of loan and borrowings to cash flows
arising from financing activities:
As at Foreign As at
1 January Drawdown Repayment exchange 31 December
2017 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
Bank loans 57,209 25,038 (14,770) (23) 67,454
Finance lease
liabilities 3 - (3) - -
----------- --------- ---------- ----------- -------------
Total 57,212 25,038 (14,773) (23) 67,454
----------- --------- ---------- ----------- -------------
Finance lease liabilities are payable as follows:
Present Present
Future value Future value
minimum of minimum minimum of minimum
lease lease lease lease
payment Interest payment payment Interest payment
2017 2017 2017 2016 2016 2016
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------- ---------- ---------- ------------- --------- --------- ------------
Within
one year -* - - 3 - 3
Between
one and
five - - - - - -
years
----------- ---------- ---------- ------------- --------- --------- ------------
-* - - 3 - 3
---------- ---------- ------------------------- --------- --------- ------------
* Finance lease liabilities has been repaid in the current
financial year.
22 MEDIUM TERM NOTES
2017 2016
US$'000 US$'000
----------------------------------- --------- ---------
Outstanding medium term notes 24,710 26,748
Net transaction costs (386) (405)
Less:
Repayment due within twelve
months * (24,324) (26,343)
Repayment due after twelve months - -
----------------------------------- --------- ---------
Reconciliation of movement of medium term notes to cash flows
arising from financing activities:
As at Foreign As at
1 January Drawdown Repayment exchange 31 December
2017 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ----------- --------- ---------- ----------- -------------
Medium Term
Notes 26,343 - (4,615) 2,596 24,324
----------- --------- ---------- ----------- -------------
* Includes net transaction costs in relation to medium term
notes due within twelve months of US$0.39 million (2016: US$0.40
million).
The medium term notes ("MTNs") were issued pursuant to a
programme with a tenure of ten (10) years from the first issue date
of the notes. The MTNs were issued by a subsidiary, to fund two
development projects known as Sandakan Harbour Square and Aloft
Kuala Lumpur Sentral ("AKLS") in Malaysia.
In the previous financial year, the Group completed the sale of
the AKLS. The net adjusted price value for the sale of AKLS, which
included the sale of the entire issued share capital of ASPL M3B
Limited and Iringan Flora Sdn. Bhd. (the "Aloft Companies") were
used to redeem the MTN Series 2 and Series 3. Following the
completion of the disposal of AKLS, US$97.35 million (RM394.0
million) of MTN associated with the AKLS (Series 3) and the Four
Points Sheraton Sandakan (Series 2) were repaid on 19 August 2016.
The charges in relation to AKLS was also discharged following the
completion of the disposal.
During the year, Silver Sparrow Berhad ("SSB") obtained consent
from the lenders to utilise proceeds of US$4.94 million in the
Sales Proceeds Account and Debt Service Reserve Account to
partially redeem the MTNs in November 2017. SSB also secured a
"roll-over" for the remaining MTNs of US$24.3mil which is due on 8
December 2017 (now repayable on 10 December 2018). The MTNs are
rated AAA.
The weighted average interest rate of the MTN was 6.00% per
annum at the statement of financial position date. The effective
interest rates of the MTN and their outstanding amounts are as
follows:
Interest
Maturity rate % per US$'000
Dates annum
------------------ ------------- ------------ -----------
Series 1 Tranche 10 December
FGI 2018 6.00 10,625
Series 1 Tranche 10 December
BG 2018 6.00 14,085
24,710
-------------------------------- ------------ -----------
The medium term notes are secured by way of:
(i) bank guarantee from two financial institutions in respect of the BG Tranches;
(ii) financial guarantee insurance policy from Danajamin
Nasional Berhad ("Danajamin") in respect to the FG Tranches;
(iii) a first fixed and floating charge over the present and
future assets and properties of Silver Sparrow Berhad and ICSD
Ventures Sdn. Bhd. by way of a debenture;
(iv) a third party first legal fixed charge over ICSD Ventures Sdn. Bhd.'s assets and land;
(v) a corporate guarantee by Aseana Properties Limited;
(vi) letter of undertaking from Aseana Properties Limited to
provide financial and other forms of support to ICSD Ventures Sdn.
Bhd. to finance any cost overruns associated with the development
of the Sandakan Harbour Square;
(vii) assignment of all its present and future rights, interest
and benefits under the ICSD Ventures Sdn. Bhd.'s Put Option
Agreements in favor of Danajamin, Malayan Banking Berhad and OCBC
Bank (Malaysia) Berhad (collectively as "the guarantors") where
once exercised, the sale and purchase of HMS and FPSS shall take
place in accordance with the provision of the Put Option Agreement;
and the proceeds
from HMS and FPSS will be utilised to repay the MTNs;
(viii) assignment over the disbursement account, revenue
account, operating account, sale proceed account, debt service
reserve account and sinking fund account of Silver Sparrow Berhad,
revenue account of ICSD Ventures Sdn. Bhd. and escrow account of
Ireka Land Sdn. Bhd.;
(ix) assignment of all ICSD Ventures Sdn. Bhd.'s present and
future rights, title, interest and benefits in and under the
insurance policies; and
(x) a first legal charge over all the shares of Silver Sparrow
Berhad, ICSD Ventures Sdn. Bhd. and any dividends, distributions
and entitlements.
23 DISPOSAL OF AN INDIRECTLY HELD SUBSIDIARY
During the financial year, the Group disposed Hoa Lam Shangri-La
3 Limited Liability Co. ("HLSL 3"), an indirectly held subsidiary
of the Group. The condition precedent for the completion of the
disposal was met on 25 December 2017 when the shares were
transferred to the purchaser.
Details of disposal of the financial position of the Group
2017
US$'000
---------------------------------------------- ---------
Trade and other receivables 16,326
Current tax assets 392
Cash and cash equivalents 198
Exchange fluctuation reserve 1,142
Trade and other payable (15,762)
---------------------------------------------- ---------
Net assets and liabilities 2,296
Net disposal proceeds (998)
---------------------------------------------- ---------
Loss on disposal to the Group 1,298
---------------------------------------------- ---------
The net cash flow on disposal was determined
as follow:
Consideration received, satisfied in
cash 998
Cash and cash equivalent disposed of (198)
---------------------------------------------- ---------
Net cash inflow 800
---------------------------------------------- ---------
Loss on disposal of an indirectly held subsidiary amounting to
US$1,298,000 has been included in other operating expense in the
consolidated statement of other comprehensive income.
24 change in equity interest in subsidiaries
During the financial year, the Group increased its equity
interest in Shangri-La Healthcare Investment Pte Ltd ("SHIPL") from
81.50% to 81.58% (2016: 79.76% to 81.50%) arising from an issue of
new shares in the subsidiary for cash consideration of US$1.5
million.(2016: US$4.3 million.) Consequently, the Company's
effective equity interest in Hoa Lam - Shangri-La Healthcare Ltd
Liability Co, City International Hospital Co Ltd, subsidiaries of
SHIPL, increased to 72.41% (2016: 72.35%). The Group recognised an
decrease/increase in non-controlling interests of US$484,000 (2016:
US$477,000) and an decrease/increase in accumulated losses of
US$484,000 (2016: US$477,000) resulting from the decrease/increase
in equity interest in the above subsidiaries. The transaction was
accounted for using the acquisition method of accounting.
25 Related Party Transactions
Transactions between the Group and the Company with Ireka
Corporation Berhad ("ICB") and its group of companies are
classified as related party transactions based on ICB's 23.07%
shareholding in the Company.
Related parties also include key management personnel defined as
those persons having authority and responsibility for planning,
directing and controlling the activities of the Group either
directly or indirectly. The key management personnel includes all
the Directors of the Group, and certain members of senior
management of the Group.
2017 2016
US$'000 US$'000
-------------------------------------- --------- ---------
ICB Group of Companies
Accounting and financial reporting
services fee charged by an ICB
subsidiary 50 50
Advance payment to the contractors
of an ICB subsidiary 732 1,591
Construction progress claims charged
by an ICB subsidiary 21,099 9,960
Management fees charged by an ICB
subsidiary 3,129 3,331
Marketing commission charged by
an ICB subsidiary 114 248
Project staff cost reimbursed to
an ICB subsidiary 311 2
Rental expenses charged by an ICB 4 -
subsidiary
Rental expenses paid on behalf
of ICB 516 493
Secretarial and administrative
services fee charged by an ICB
subsidiary 50 50
Key management personnel
Remuneration of key management
personnel - Directors' fees 235 297
Remuneration of key management
personnel - Salaries 143 123
-------------------------------------- --------- ---------
Liquidated and Ascertained Damages ("LADs")
Ireka Engineering & Construction Sdn. Bhd. ("IECSB"), a
subsidiary of ICB, is the project contrator of The RuMa Hotel and
Residences ("The RuMa"). The expected completion date of the RuMa
development has been deferred to 15 June 2018, with vacant
possession expected to be issued from 15 June 2018. Based on the
Sale and Purchase Agreements ("SPAs") signed, the contractual date
of issuance of vacant possession to purchasers starts from June
2017 (48 months from date of signed SPAs). For hotel suites, Urban
DNA Sdn. Bhd ("the Developer") is given three months from the date
of delivery of vacant possession letter for installation of the
furniture and fittings as stipulated in the respective buyers' SPA
for hotel suites. The delay will potentially result in Liquidated
Ascertained Damages ("LADs") being imposed to the Developer.
However, the Developer is entitled to recover these LADs from the
project contractor, IECSB.
Transactions between the Group with other significant related
parties are as follows:
2017 2016
US$'000 US$'000
--------------------------- -------- --------
Non-controlling interests
Advances - non-interest
bearing (Note 20) 327 2,819
---------------------------- -------- --------
The above transactions have been entered into in the normal
course of business and have been established under negotiated
terms.
The outstanding amounts due from/ (to) ICB and its group of
companies as at 31 December 2017 and 31 December 2016 are as
follows:
2017 2016
Notes US$'000 US$'000
Amount due from an ICB subsidiary
for advance payment to its
contractors (ii) 3,993 2,903
Amount due to an ICB subsidiary
for construction progress
claims charged (i) (2,046) (928)
Amount due from an ICB subsidiary
for acquisition of SENI Mont'
Kiara units (i) 1,952 1,760
Amount due to an ICB subsidiary
for management fees (ii) - (22)
Amount due to an ICB subsidiary
for marketing commissions (ii) (15) (13)
Amount due to an ICB subsidiary
for reimbursement of project
staff costs (ii) (55) -
Amount due to an ICB subsidiary
for rental expenses (ii) (5) -
Amount due from ICB for rental
expenses paid on behalf (ii) 137 114
Amount due to an ICB subsidiary
for staff cost paid on behalf (ii) (4) -
----------------------------------- ------- --------- ---------
(i) These amounts are trade in nature and subject to normal trade terms.
(ii) These amounts are non-trade in nature and are unsecured,
interest-free and repayable on demand.
The outstanding amounts due to the other significant related
parties as at 31 December 2017 and 31 December 2016 are as
follows:
2017 2016
US$'000 US$'000
--------------------------- --------- ---------
Non-controlling interests
Advances - non-interest
bearing (Note 20) (13,400) (12,573)
---------------------------- --------- ---------
Transactions between the parent company and its subsidiaries are
eliminated in these consolidated financial statements.
26 DIVID
The Company has not paid or declared any dividends during the
financial year ended 31 December 2017.
27 cOMMITMENTS AND Contingencies
The Group and Company do not have any contingencies at the
statement of financial position date except as follows:
Debt service reserve account
During the year, Silver Sparrow Berhad obtained consent from the
lenders to utilise proceeds of US$4.94 million in the Sales
Proceeds Account and Debt Service Reserve Account ("DSRA") to
partially redeem the MTNs. Thereafter, amount equivalent to RM10.0
million (US$2.47 million) (the "Minimum Deposit") is maintained in
the DSRA at all times and the amount is disclosed as deposit
pledged.
In the event the funds in the DSRA falls below the Minimum
Deposit, SSB shall within five (5) Business Days from the date of
receipt of written notice from the facility agent or upon SSB
becoming aware of the shortfall, whichever is earlier, deposit such
sums of money into the DSRA to ensure the Minimum Deposit is
maintained.
28 event after statement of financial position date
At a general meeting of the Company held on 23 April 2018,
Shareholders voted in favour of the Board's proposals to reject the
2018 Discontinuation Resolution and to continue with the Company's
investment policy, for a period of 18 months from the expected date
of the 2018 AGM, to enable a realisation of the Company's assets in
a controlled, orderly and timely manner, with the objective of
achieving a balance between periodically returning cash to
Shareholders and maximising the realisation value of the Company's
investments. The Board believes this will maximise the value of the
Company's assets and returns to Shareholders, both up to and upon
the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its
assets by 31 December 2019, Shareholders will be provided with an
opportunity to review the future of the Company, which would
include the option for shareholders to vote for the continuation of
the Company.
30 REPORT CIRCULATION
Copies of the Annual Report and Financial Statements will be
sent to shareholders for approval at the Annual General Meeting
("AGM") to be held on 2 July 2018.
Principal Risks and Uncertainties
The Group's business is property development in Malaysia and
Vietnam. Its principal risks are therefore related to the property
market in these countries in general, and also the particular
circumstances of the property development projects it is
undertaking. More detailed explanations of these risks and the way
they are managed are contained under the heading of Financial and
Capital Risk Management Objectives and Policies in the Annual
Report.
Other risks faced by the Group in Malaysia and Vietnam include
the following:
Economic Inflation, economic recessions and
movements in interest rates could
affect property development activities.
-------------- ---------------------------------------------
Strategic Incorrect strategy, including sector
and geographical allocations and use
of gearing, could lead to poor returns
for shareholders.
-------------- ---------------------------------------------
Regulatory Breach of regulatory rules could lead
to suspension of the Company's Stock
Exchange listing and financial penalties.
-------------- ---------------------------------------------
Law and Changes in laws and regulations relating
regulations to planning, land use, development
standards and ownership of land could
have adverse effects on the business
and returns for the shareholders.
-------------- ---------------------------------------------
Tax regimes Changes in the tax regimes could affect
the tax treatment of the Company and/or
its subsidiaries in these jurisdictions.
-------------- ---------------------------------------------
Management Changes that cause the management
and control and control of the Company to be exercised
in the United Kingdom could lead to
the Company becoming liable to United
Kingdom taxation on income and capital
gains.
-------------- ---------------------------------------------
Operational Failure of the Development Manager's
accounting system and disruption to
the Development Manager's business,
or that of a third party service providers,
could lead to an inability to provide
accurate reporting and monitoring
leading to a loss of shareholders'
confidence.
-------------- ---------------------------------------------
Financial Inadequate controls by the Development
Manager or third party service providers
could lead to misappropriation of
assets. Inappropriate accounting policies
or failure to comply with accounting
standards could lead to misreporting
or breaches of regulations or a qualified
audit report.
-------------- ---------------------------------------------
Going Concern Failure of property development projects
due to poor sales and collection,
construction delay, inability to secure
financing from banks may result in
inadequate financial resources to
continue operational existence and
to meet financial liabilities and
commitments.
-------------- ---------------------------------------------
The Board seeks to mitigate and manage these risks through
continual review, policy setting and enforcement of contractual
rights and obligations. It also regularly monitors the economic and
investment environment in countries that it operates in and the
management of the Group's property development portfolio. Details
of the Group's internal controls are described in the Annual
Report.
RESPONSIBILITY STATEMENT
The Directors of the Group and the Company confirm that to the
best of their knowledge that:
(a) the consolidated financial statement has been prepared in
accordance with International Financial Reporting Standards,
including International Accounting Standards and Interpretations
adopted by the International Accounting Standards Board; and
(b) the sections of this Report, including the Chairman's
Statement, Development Manager's Review, Financial Review and
Principal Risks and Uncertainties, which constitute the management
report include a fair review of all information required to be
disclosed by the Disclosure and Transparency Rules 4.1.8 to 4.1.11
issued by the Financial Services Authority of the United
Kingdom.
On behalf of the Board
Mohammed Azlan Hashim Christopher Henry Lovell
Director Director
26 April 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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