TIDMASPL
RNS Number : 4683D
Aseana Properties Limited
27 April 2017
26 April 2017
Aseana Properties Limited
("Aseana" or "the Company")
Full Year Results for the Year Ended 31 December 2016
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 2016*.
Operational highlights
-- In January 2017, the Company successfully
completed the distribution of US$10,000,500
by way of a tender offer through the repurchase
of 13,334,000 shares at US$0.75 per share.
The 13,334,000 repurchased shares, representing
6.29 per cent. of the Company's share capital,
are held as treasury shares.
-- In June 2016, Aseana Properties successfully
completed the disposal of the Aloft Kuala
Lumpur Sentral Hotel ("AKLS") to Prosper Group
Holdings Limited for a gross transaction value
of RM418.7 million (approximately US$104.2
million).
-- Aseana Properties divested its remaining shareholding
in Nam Long Investment Corporation ("Nam Long")
during the year, raising total proceeds of
approximately US$9.9 million (VND219.7 billion).
-- Sales at SENI Mont' Kiara progressed to 98.4%
to date based on signed sale and purchase
agreements.
-- The RuMa Hotel and Residences achieved 54.9%
sales based on signed sale and purchase agreements.
-- The occupancy rate at Harbour Mall Sandakan
improved to 67.7% (2015: 40.8%). Four Points
by Sheraton Sandakan Hotel ("FPSS") achieved
an occupancy rate of 39.0% as at 31 December
2016 and was 39.4% occupied by the end of
the period to 31 March 2017.
-- The operation of City International Hospital
("CIH") has been improving steadily over 2016
with outpatient and inpatient volumes increasing
by 84.7% and 61.0% respectively compared to
2015.
Financial highlights
-- Revenue increased to US$112.5 million in 2016
(2015: US$30.3 million (restated)), largely
due to recognition of revenue from the disposal
of AKLS during the year.
-- The disposal of AKLS resulted in a gain of
US$36.2 million which contributed to the net
profit before taxation of US$16.2 million
for the Group, compared to a net loss after
taxation of US$20.7 million in 2015. The net
profit included operating losses attributable
to CIH of US$6.2 million, Four Points by Sheraton
Sandakan Hotel and Harbour Mall Sandakan totalling
US$6.2 million, International Healthcare Park
of US$3.1 million, as well as the impairment
loss on inventory in relation to Four Points
by Sheraton Sandakan of US$2.4 million.
-- The consolidated comprehensive profit for
the year ended 31 December 2016 was US$10.5
million compared to a consolidated comprehensive
loss of US$35.6 million in 2015. The consolidated
comprehensive profit includes loss foreign
currency translation differences for foreign
operations of US$2.5 million (2015: US$15.9
million) due to weakening of the Ringgit against
the US Dollar from 4.294 as at 31 December
2015 to 4.486 as at 31 December 2016.
-- Cash and cash equivalents stood at US$26.6
million (2015: US$23.0 million). The cash
balance as at 31 December 2016 excludes other
receivables of approximately US$1.0 million
related to the balance proceeds from the disposal
of the Group's remaining shares in Nam Long.
-- Earnings per share of US$0.0889 (2015: Loss
per share of US$0.0744).
-- Net asset value per share US$0.68 (2015: US$0.61).
* 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
2016. The financial statements for 2016 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:
"It was a productive 2016 year for Aseana Properties with the
disposal of the Aloft Hotel Kuala Lumpur and the shares in Nam Long
amidst the challenging economic environment, both globally and
locally. 2017 is expected to be another challenging year with the
general business conditions affected by economic uncertainty and
subdued property market sentiment especially in Malaysia. The Board
and the Manager remain committed to their efforts in achieving
optimum value and performance for the Group's remaining assets in
line with the Company's Divestment Investment Policy".
-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 (Corporate
Finance)
Sam Greatrex (Sales)
Tavistock Tel: 020 7920 3150
Jeremy Carey / James Verstringhe 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 50 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
2016 was an eventful year with Brexit and the presidential
election in the United States of America ("USA") dominating
headlines around the globe. In addition, anxiety over China's
financial markets which had been prevalent at the beginning of the
year eased during the year as China's economy stabilised and
avoided the hard landing feared by many. Economic activities are
projected to pick up in 2017 and 2018, especially in developing and
emerging markets. The World Bank made an optimistic projection that
the global economy will grow at a rate of 2.7% in 2017 amid the
current stagnant global trade and subdued investment environment.
However, the global outlook is still clouded by uncertainty linked
to the future direction of major economies, in particular the
impact of any changes brought in by the new USA administration.
Against this background, Malaysia and Vietnam (Aseana
Properties' core markets) have shown moderate Gross Domestic
Product ("GDP") growth of 4.2% and 6.2% respectively, both lower
than in the previous year. In Malaysia, investors' confidence over
the last couple of years was affected by dwindling demand from
China, one of its major trading partners, and the down cycle of the
oil and gas industry. The Malaysian Ringgit declined further during
the year and was one of the worst performing currencies in the
Asean region in 2016, depreciating by 4.5% against the US Dollar to
RM4.4860/US$ at the end of the year compared to 4.2940/US$ at the
end of 2015. Malaysia's Central Bank, Bank Negara Malaysia ("BNM")
introduced a series of measures at the end of November 2016 to
reduce Ringgit speculative activities and rebalance the supply of
onshore FOREX. Nevertheless, Malaysian economic growth, which was
underpinned by private sector activity in 2016, is expected to
remain resilient in 2017, on the back of improving domestic
demand.
Meanwhile, Vietnam emerged as one of the strongest performing
economies in the Asean region in 2016. Robust domestic demand and
record high foreign investment inflows underpinned the continued
rapid growth of the Vietnamese economy during the year. As a result
of the diligent efforts of the Vietnamese Government, inflation was
kept at 4.7%, below the 5.0% ceiling forecasted. The combination of
stable macroeconomic conditions and low labour costs has led to
Vietnam becoming an attractive destination for Foreign Direct
Investment ("FDI"). Actual FDI disbursement rose by 9.0% in 2016,
reaching a record high of US$15.8 billion. In the meantime, the
Vietnamese Dong saw a 1.1% drop in value over the course of 2016
compared to the previous year. Foreign currency liquidity was
stable during the year as a result of proactive policy
management.
Malaysia's property market in both residential and commercial
segments saw an extension of the downtrend since 2015, amid the
country's weak economic situation and sentiment in the property
market. Factors such as the depreciation of the Ringgit, tightening
of lending policies by banks and efforts taken by the government to
curb property speculation have driven down property prices across
the country. According to the National Property Information Centre
("NAPIC"), 57.0% of residential property transactions in the third
quarter of 2016 were priced below RM250,000, while 43.0% were
RM250,000 and above. New supplies of completed office, retail and
condominium spaces introduced in 2016, coupled with the slowdown in
economic growth will continue to put pressure on the property
market in 2017.
However in Vietnam, an improved environment for bank lending,
along with strong GDP growth for the past two years, low inflation,
rising incomes and rapid urbanisation have contributed to the
robust growth in its property market. In addition, liberalisation
of the market for foreign purchasers in 2015 helped produce an
encouraging level of foreign investment into the country. The State
Bank of Vietnam ("SBV") announced half-way through 2016 that it
would raise the risk weight of property loans at commercial banks
from 150.0% to 200.0% on concerns that the housing market may
overheat. With the implementation of this rule, a real estate
company's capital base must be at least at 200.0% of its total loan
amount. The new ruling came into effect at the beginning of 2017.
Despite this, the Vietnamese property market is expected to remain
on an upswing, particularly relative to other markets in the Asean
region.
The Group registered a significant increase in revenue from
US$30.3 million (restated) in 2015 to US$112.5 million in 2016,
mainly due to sale of the Aloft Kuala Lumpur Sentral Hotel
("AKLS"). The sale resulted in a gain of US$36.2 million which
contributed to the net profit before taxation of US$16.2 million,
compared to a net loss after taxation of US$20.7 million in 2015.
The net profit included operating losses attributable to City
International Hospital ("CIH") of US$6.2 million, International
Healthcare Park ("IHP") of US$3.1 million, Four Points by Sheraton
Sandakan Hotel ("FPSS") and Harbour Mall Sandakan ("HMS") totalling
US$6.2 million, together with the impairment loss on inventory in
relation to FPSS of US$2.4 million. In addition, Aseana Properties
recorded a loss on foreign currency translation differences of
US$2.5 million compared to a loss of US$15.9 million in 2015, as a
result of the weakening of Ringgit against US Dollars from
RM4.2940/US$1.0 as at 31 December 2015 to RM4.4860/US$1.0 as at 31
December 2016.
Progress of the property portfolio
The highlight of the year for Aseana Properties was the disposal
in June 2016 of AKLS to Prosper Group Holdings Limited for a gross
transaction value of RM418.7 million (approximately US$ 104.2
million). The disposal represents a significant milestone to
realise the Company's assets in a controlled, orderly and timely
manner in accordance with its divestment investment policy.
Additionally, Aseana Properties also disposed of its remaining
shares in Nam Long Investment Corporation ("Nam Long") during the
year, raising total gross proceeds of approximately US$9.9 million.
Aside from these noteworthy achievements, sales at SENI Mont' Kiara
("SENI") and The RuMa Hotel and Residences ("The RuMa") have been
affected by the subdued market conditions in Malaysia. Sales at
SENI to date progressed to approximately 98.4% and sales at The
RuMa increased marginally to 54.9% based on sale and purchase
agreements signed. Similarly, business conditions in Sabah remained
sombre due to the kidnapping incidents which took place off the
east coast of Sabah during the year. However, tourist arrivals into
Sabah increased by 7.9% as compared to 2015. FPSS recorded an
occupancy rate of 39.4% to date. The performance of HMS improved
significantly with a more promising outlook since the opening of a
new cinema attraction in July 2016. The cinema, which is located on
the 11(th) floor of the mall, is a modern designed cinema and is
equipped with advanced audio and visual technology. The occupancy
rate of HMS stands at 67.7% to date. In Vietnam, the operational
performance of CIH has been improving steadily over the year.
Outpatient volumes and inpatient volumes increased by 84.7% and
61.0% respectively compared to 2015. The hospital is expected to
introduce several new service lines such as the ophthalmology,
cardiac, neurology and vascular angiographic services in 2017 which
will help to further boost patient volume.
Further information on each of the Company's properties is set
out in the Manager's report on pages 5 to 7.
First distribution update
Following the disposal of investments by the Company in 2016,
Aseana Properties decided to return cash to shareholders via a
tender offer. On 8 December 2016, Aseana Properties announced that
the Company proposed to return US$10,000,500 to Shareholders via a
tender offer for up to 13,334,000 shares at a tender price
equivalent to the net asset value per share of the Company, as at
30 September 2016, of US$0.75 per share. The proposals were
approved by Shareholders at an Extraordinary General Meeting on 4
January 2017 and completed on 10 January 2017. The shares tendered
represent approximately 6.3% of the Company's current share capital
and are now held in treasury.
Outlook
Amidst the uncertainty in the global economy, Malaysia's
property market remains subdued, although we are optimistic that it
will improve going into second half of 2017. On the other hand, the
property market in Vietnam is expected to remain on the same strong
footing and will continue to grow in 2017. The Board and the
Manager remain committed to their efforts in achieving optimum
value and performance for the Group's remaining assets in line with
the Company's Divestment Investment Policy.
In closing, I wish to extend my sincere appreciation to my
fellow Directors and the Manager for their hard work and commitment
to the business. I would also like to thank the Government
authorities, financiers, shareholders and business associates who
have remained supportive of our business endeavours throughout the
year.
MOHAMMED AZLAN HASHIM
Chairman
26 April 2017
DEVELOPMENT MANAGER'S REVIEW
BUSINESS OVERVIEW
2016 was a milestone year for Aseana Properties in both Malaysia
and Vietnam as the Group successfully disposed of the AKLS to
Prosper Group Holdings Limited for a gross transaction value of
approximately US$104.2 million (RM418.7 million) and its remaining
shares in Nam Long for total proceeds of approximately US$9.9
million (VND219.7 billion). Despite these notable achievements, the
economic conditions both globally and locally were challenging.
Investors' confidence in Malaysia remained subdued due to political
headwinds, a weaker commodities market as well as the depreciating
Ringgit. On the property front, the declining number of property
transactions reflects the tightening of bank lending and slow
recovery in consumers' demand due to on-going concerns of the weak
Ringgit as well as a tepid employment outlook. Nevertheless, the
Board together with the Development Manager remain strongly
committed in taking positive steps to realise the Group's maturing
assets in a controlled, orderly and timely manner.
The sales performance of both SENI and The RuMa have been
affected by the soft market in the high-end residential segment in
Malaysia. Sale of properties at SENI and The RuMa improved
marginally to 98.4% and 54.9% to date respectively. Meanwhile,
performance of HMS improved significantly since the opening of the
Lotus Five Star Cinema in July 2016. The outlook for the Mall is
promising with increasing footfalls and the signing of several new
tenants.
Following the realisation of certain assets, in December 2016
the Company proposed its first capital distribution to Shareholders
by way of a tender offer. In January 2017, the Company successfully
completed the distribution of US$10,000,500 through the repurchase
of 13,334,000 shares at US$0.75 per share. The 13,334,000
repurchased shares, representing approximately 6.3 per cent of the
Company's share capital, are held as treasury shares. The issued
and paid up share capital of the Company remains unchanged at
212,025,002 (Ordinary shares: 198,691,000; Treasury shares:
13,334,000; Management shares:2).
Malaysia Economic Update
Despite falling revenue as a result of the weaker commodities
market and concerns over political uncertainties, Malaysia's
economy has maintained steady growth in 2016. The Malaysian economy
grew at 4.5% in the last quarter of 2016, exceeding economists'
forecasts of 4.4%, underpinned by the continued expansion in
private sector expenditure. This brings Malaysia's full year GDP
growth to 4.2%, lower than the 5.0% registered in 2015. The Ringgit
continued to depreciate against major currencies throughout 2016
due to weak export earnings, low foreign direct investment, drastic
fall in oil prices and general lack in confidence in the Malaysian
economy. The Ringgit fell 4.5% against the US Dollars to
RM4.4860/US$1.0 by the end of 2016, the weakest since the 1998
Asian financial crisis. This prompted BNM, Malaysia's Central Bank,
to implement a series of measures to stabilise the onshore market,
which included the requirement for exporters to convert 75.0% of
export proceeds received into Ringgit. In addition, BNM decided to
keep the Overnight Policy Rate ("OPR") unchanged at 3.0% during its
last meeting in March 2017. The bank last changed its OPR in July
2016, cutting it by 0.25%, the first reduction in seven years.
While the external environment might continue to remain demanding,
economists believe that the Malaysian economy will experience
sustained, albeit slower growth in 2017, with domestic demand being
the primary driver.
Meanwhile, RAM Rating Services Bhd ("RAM") has recently
reaffirmed its sovereign ratings of A2/stable and AAA/stable for
Malaysia. RAM is still supportive of Malaysia's current ratings
although the country's external-resilience parameters have worsened
amid a sustained decline in commodity prices and reduced foreign
exchange reserves. However, RAM has warned that Malaysia's ratings
could be revised downwards if its fiscal position deteriorates. In
addition, inflation, as measured by the annual change in the
Consumer Price Index ("CPI"), increased to 1.7% in the fourth
quarter of 2016 driven mainly by upward adjustments to domestic
fuel prices. Nonetheless, average inflation for the year remained
at 2.1%.
Foreign investments have played a major role in Malaysia's
economic development. Local small and medium enterprises have
benefitted a great deal from the presence of foreign companies in
the country as they provide access to valuable technology transfer
and the exchange of know-how. In April 2017, Indian and Malaysian
business leaders signed a US$36.0 billion (approximately RM156.7
billion) of trade deals which collectively represent one of the
biggest trade deals in Malaysian history. In addition, in late
2016, Malaysia and China signed fourteen agreements for proposed
investments worth almost RM144.0 billion, including projects in the
property development and steel production sectors. Malaysia has
also recently signed the highly anticipated bilateral agreement
with Singapore which will pave the way for the implementation of
the Singapore-Kuala Lumpur High Speed Rail project. Furthermore,
Malaysia may consider the possibility of pursuing bilateral Free
Trade Agreements with the relevant Trans-Pacific Partnership
("TPP") members should the TPP Agreement be cancelled. FDI for
Malaysia rose to RM10.8 billion in the last quarter of 2016, an
increase in inflows as compared to RM6.5 billion in the third
quarter of the year. Total FDI for the year stood at RM41.2
billion, down from RM43.4 billion from 2015.
Vietnam Economic Update
Notwithstanding the slowdown in the growth of emerging markets,
Vietnam's economy remained resilient due to robust domestic demand
and export-oriented manufacturing. Vietnam's GDP growth in 2016
reached 6.2% and is one of the top performers amongst other Asian
countries. The country's economic performance has rebounded from a
plunge in the first half of the year due to the impact of a severe
drought on agricultural production and slower industrial growth.
Although 2016's growth rate was lower than the 6.7% registered back
in 2015 and the targeted GDP of 6.7% for 2016, it was still seen as
an encouraging achievement given the tough global economic
conditions.
Inflationary pressures in Vietnam remained subdued as a result
of the country's macroeconomic stability. Vietnam's inflation rate
has been kept relatively low at 2.7%, an increase from 0.6% in
2015. The main reasons contributing to the increase were due to the
Government's upward price adjustment to healthcare services, higher
demand for food and construction before the Lunar New Year as well
as the impact of the crippling drought which affected agricultural
supplies.
In addition, Vietnam has boosted its international economic
integration by expanding the geographical reach of its market
during 2016. The Vietnamese Government signed several free trade
agreements with the Eurasian Economic Union, The European Union,
South Korea and the TPP Agreement during the year. Despite the
withdrawal of the TPP Agreement, these trade agreements are
expected to serve as an impetus for the long-needed structural
changes in the country. Underpinned by its resilient economy and
its highly competitive labour market as well as low cost, foreign
companies continue to invest in Vietnam. According to the Ministry
of Planning and Investment of Vietnam, in 2016 the disbursement of
FDI capital climbed 9.0% to a record high of US$15.8 billion and
the total FDI capital inflow totaled US$24.4 billion.
PORTFOLIO REVIEW
MALAYSIA
Property Market Review
The year ended on yet another gloomy note for the Malaysian
property market which has slowed down significantly in recent
years. Property developers are expected to register another year of
slow performance in 2017 as a result of the ongoing concerns of the
weak Ringgit as well as cooling measures introduced by BNM to rein
in speculation, which continues to be the main hurdle for property
developers. According to the latest property market report by
NAPIC, the value of Malaysian property market transactions has
declined 6.3% quarter-on-quarter to RM30.8 billion in the third
quarter of 2016, while transaction volume fell by 8.5%
quarter-on-quarter to 76,456 units.
Meanwhile, demand for office space in Klang Valley continued to
be subdued in 2016 mainly due to weak business sentiment and
economic uncertainties as well as weaker oil and commodity prices.
The challenging business operating environment continued to exert
pressure on the performance of the office market with the average
occupancy rate remaining flat at 79.0% in Q4 2016. As for the
retail market, the average occupancy rate declined by 1.0% to 81.5%
in the last quarter of 2016 from 82.5% compared to Q4 2015. Retail
sales were weak due to deteriorating consumer confidence caused by
the rising cost of living, weaker job prospects, the weakening
Ringgit and the uncertain economic outlook of the country.
The hotel and tourism sector remained sanguine despite concerns
of oversupply during the year. The weak Ringgit and the numerous
pro-tourism efforts and activities by the Government have
encouraged the influx of more local and foreign tourists, in
particular, the increase in the number of tourists from China. The
Government has introduced E-Visa facilities for selected major
countries and through the Tourism National Key Economic Area,
collaborative efforts between the Ministry of Tourism and Culture,
other Government agencies and the private sector have been enhanced
to help secure Malaysia's position as a leading tourist
destination. The Government's measures to stimulate the sector have
included the extension of the Investment Tax Allowance and the
Pioneer Status promotion for new four and five-star hotels to
December 2018. A total of 26.8 million tourists visited Malaysia in
2016, an increase of 4.0% compared to the same period in 2015. Of
this total, 3.4 million tourists visited Sabah, of which 0.4
million were from China. Room rates and occupancy rates have
remained stable but competitive in view of the increasing hotel
supply and alternative accommodation such as the popular
AirBNB.
Aseana Properties has five investments in Malaysia, following
the sale of one investment during the year. These investments range
from residential properties, hotels, commercial offices to a retail
mall:
-- SENI Mont' Kiara
Owned 100.0% by Aseana Properties, 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 98.4% to date. Debt on the project has been fully
repaid.
-- Tiffani by i-ZEN
Tiffani by i-ZEN, wholly-owned by Aseana Properties, is a
completed luxury condominium project located in Mont' Kiara. To
date, only 1 unit out of the 399 residential units remains to be
sold. Debt on the project has been 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 Grand Hyatt Kuala Lumpur, KLCC Convention Centre, Suria KLCC
shopping mall, KLCC Park and the world-famous Petronas Twin Towers.
Aseana Properties owns 70.0% of this project and 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 underway with completion
expected in Q4 2017. 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 economic condition of Malaysia. To date, total sales at
both The RuMa have increased marginally to approximately 54.9%
based on signed sales and purchase agreements. A further 6.0% have
been booked with deposits paid. During 2016 and year-to-date, the
Manager participated in marketing and promotional events to boost
sales both locally and internationally, and is planning for further
activities focusing on the Chinese and Taiwanese markets throughout
the remainder of 2017.
Debt on the project was fully repaid in 2016.
-- Aloft Kuala Lumpur Sentral Hotel
AKLS is part of the Kuala Lumpur Sentral project which consists
of two office towers and a business class hotel, centrally located
in Kuala Lumpur's urban transportation hub and was jointly
developed by Aseana Properties and Malaysian Resources Corporation
Berhad ("MRCB") on a 40:60 basis. The 482-room AKLS is now managed
by Starwood Hotels & Resorts Asia Pacific Hotels & Resorts
Pte Ltd under the 'Aloft' brand and operations of the hotel
commenced on 22 March 2013.
The disposal of AKLS to Prosper Group Holdings Limited for a
gross transaction value of approximately US$104.2 million (RM418.7
million) was completed on 23 June 2016. The disposal represented a
significant milestone in line with the divestment investment policy
approved by shareholders in 2015. The proceeds from the disposal
were used to fully repay the medium term notes issued for AKLS, and
to partly to repay the medium term notes issued for FPSS.
-- Sandakan Harbour Square
Sandakan Harbour Square, which is wholly-owned by Aseana
Properties, is an urban redevelopment project in the commercial
centre of Sandakan, Sabah. Sandakan is a 'Nature City' with a
population of approximately 500,000, with eco-tourism and palm oil
plantations as the main drivers of the local economy. The Sandakan
Harbour Square project consists of four phases; Phases One and Two
comprised 129 shop lots that are fully sold, while Phases Three and
Four consist of the only retail mall, HMS and the only
international four-star hotel in Sandakan, known as FPSS.
HMS and FPSS commenced operations in July and May 2012
respectively. The occupancy rate at HMS is currently recorded at
67.7%. Notable tenants include Popular Bookstore, Levi's, The Body
Shop, Watson's and McDonald's amongst others. In addition, a
national cinema chain, Lotus Five Star, the first modern designed
cinema in Sandakan, was opened in July 2016. 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.
Meanwhile, FPSS recorded an occupancy rate of 39.4% to date, with
an Average Daily Rate of about US$49 (RM220). 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. Kidnapping incidents in the east coast of Sabah continued
to affect the business climate in Sabah which in turn has affected
the performance of FPSS during the past twelve months. In March
2017, in conjunction with the Prime Minister's visit to Sandakan,
the Government pledged to improve security and air transport
connectivity to Sandakan including extending the runway of the
Sandakan Airport. This bodes well for the Sandakan tourism industry
in the coming years.
The project was originally funded by guaranteed medium term
notes of about US$54.6 million (RM245.0 million). Following the
completion of the AKLS disposal in 2016, approximately US$27.9
million (RM125.0 million) of the medium term notes were repaid.
Approximately US$26.7 million (RM120.0 million) remain to date.
-- Kota Kinabalu Seafront resort & residences
Aseana Properties acquired three adjoining plots of land
totaling approximately 80 acres in September 2008 with the
intention of developing a boutique 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 but
prospects have been affected by the subdued business environment
and tourism in Sabah.
VIETNAM
Property Market Review
Growth in the Vietnamese property market has been the most
visible sign of the country's economic expansion over the last few
years. Investments into the Vietnamese real estate market saw a
boost in 2016 buoyed by stable economic conditions, a growing
middle class and improved legislative climate. Residential property
sales have been robust, construction of office towers and
condominiums are underway in major cities and the number of
industrial parks are rising in areas outside the city. The property
markets in both Hanoi and Ho Chi Minh City ("HCMC") reported solid
growth during the year, with property prices remaining on the
uptrend across all markets, in line with the favourable sentiment
in both demand and supply. In addition, mergers and acquisitions
("M&A") activity within the real estate sector in Vietnam has
witnessed a substantial increase in both transaction value and
volume in the last two years. Notwithstanding the positive
sentiment in the property market, the Vietnamese Government has
planned and issued policies that aim to regulate the growth of many
sectors of the market. In particular, the State Bank of Vietnam has
issued a circular that will force developers to reduce their
dependence on bank credit and as a result, some developers may have
to look to other sources of funding such as foreign investors and
private investment funds. This will pose a challenge for small
scaled and under capitalised developers.
On the back of sound macroeconomic factors, the residential
market has performed well during the year. In HCMC, a total of
37,419 condominium units were launched in 2016, of which 35,008
units were sold. The mid-end segment of the market continued to
perform well and accounted for more than 48.0% of total units sold.
Likewise, in Hanoi, of the 30,000 condominium units launched in
2016, 21,188 units were sold and 56.0% of the sales were in the
mid-end segment.
Meanwhile, on the commercial front in HCMC, the office market
continued to be robust with little new supply coming into the
market and with increasing demand for premium offices. Average
occupancy increased 2.0% year-on-year to 97.0%, while average rent
increased 3.0% year-on-year. Likewise, in Hanoi, average rent
increased by 1.1% year-on-year whilst average occupancy increased
4.0% year-on-year. With its fast-growing population and rapid
urbanisation, Vietnam has for several years been a favourite for
investment in the retail sector. The growth in infrastructure, an
increasing young middle class population and the demand for modern
shopping experiences, have attracted many international brands and
retailers. The retail sector has seen a large number of mergers and
acquisitions over the past year, leading to the expansion of both
foreign retailers such as Aeon and Lotte and current market players
such as Vincom and Co-op Mart.
Although still lagging behind some of its neighbouring
countries, Vietnam has seen a steady increase in the number of
international tourists in 2016, reaching approximately 10.0 million
visitors, an increase of 26.0% year-on-year. The Vietnamese
Government has begun to see the potential of tourism and is taking
measures to make travelling to Vietnam easier through relaxed visa
regulations for citizens from five European countries coupled with
various tourism marketing strategies. Asian visitors, particularly
from China, South Korea and Japan topped the list with more than
7.2 million visitors, followed by Europe with 1.6 million and
American with 0.7 million.
Aseana Properties now has two investments in Vietnam, following
the sale of one investment during the year.
-- International Healthcare Park
IHP is a planned mixed development on 37.5 hectares of land
comprising world-class 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. Approximately 20 hectares will be dedicated to the
hospital and commercial developments and five hectares have been
allocated for residential developments. Of a total of 19 plots of
land, four have been sold to date. As at 31 December 2016, the
Manager has secured a buyer for two plots of residential land of
approximately 1.2 hectares each. These transactions are expected to
complete by Q2 2017 and Q3 2017 respectively.
To part finance the payment for the land and working capital,
total loan facilities of US$24.4 million have been secured, of
which US$19.8 million remained outstanding as at 31 December
2016.
-- City International Hospital
Construction of CIH was completed in March 2013 and commenced
business in January 2014. CIH is a modern private care hospital
conforming to international standards with 320 beds (Phase 1: 168
beds). Parkway Pantai Limited was the operator of CIH but the
contract was mutually terminated on 31 December 2015, in line with
the Manager's long-term strategy to localise the management of the
hospital to optimise operating costs and to improve doctors' and
patients' engagement with CIH. In early 2016, the hospital
appointed Dr. Le Quoc Su as the Chief Executive Officer ("CEO") to
lead the operations team. Prior to joining CIH, Dr. Su was the
Group CEO of Hoan My Medical Corporation, Vietnam's largest
healthcare group. With the new management team in place, the
operation of CIH has been improving steadily. Outpatient and
inpatient volumes increased by 84.7% and 61.0% respectively
compared to 2015.
The development of City International Hospital is funded by a
syndicated term loan of US$43.3 million and a revolving credit
facility of US$1.0 million, of which US$37.4 million remained
outstanding as at 31 December 2016.
-- Nam Long Investment Corporation
In 2008, Aseana Properties acquired a strategic minority stake
in Nam Long, a private property development company in Vietnam with
market leadership in the low to medium-end segment of the market.
Nam Long was subsequently listed on the Ho Chi Minh Stock Exchange
on 8 April 2013. Aseana Properties has strategically divested its
entire shareholding in Nam Long in 2016, for total proceeds of
approximately US$15.0 million (VND333.1 billion).
OUTLOOK
The overall economic outlook for Malaysia appears to be plagued
by the ongoing concern about the weak Ringgit and the low crude oil
and commodity prices coupled with the global economic slowdown.
Malaysia's property market is expected to remain stable but flat in
2017 and loan growth is expected to slow further due to economic
uncertainties and concerns about over supply in the market. To the
contrary, the real estate market in Vietnam however is buoyant,
boosted by the recovery in the housing market, a booming economy
and also the deregulation of house and real estate ownership.
The disposal of AKLS and the Company's entire shareholding in
Nam Long represents significant milestones for the Company's
divestment plans. Alongside this, Aseana Properties completed a
tender offer exercise at the beginning of 2017 as a means of
returning cash to Shareholders. The Manager and the Board of
Directors are focused on preparing the remaining assets for sale
and are working together closely to explore all opportunities to
divest and realise Aseana Properties' remaining assets in both
Malaysia and Vietnam in order to make further capital distributions
to Shareholders at the earliest opportunity.
Lastly, I would like to take this opportunity to thank the Board
of Aseana Properties, our advisors and business associates for all
the guidance and support rendered throughout the year.
LAI VOON HON
President / Chief Executive Officer
Ireka Development Management Sdn. Bhd.
Development Manager
26 April 2017
PERFORMANCE SUMMARY
Year ended Year ended
31 December 31 December
2016 2015
----------------------------- ------------- -------------
Total Returns since listing
Ordinary share price -48.00% -55.00%
FTSE All-share index 16.25% 3.38%
FTSE 350 Real Estate Index -45.11% -37.33%
One Year Returns
Ordinary share price 15.56% 0.00%
FTSE All-share index 12.45% -2.50%
FTSE 350 Real Estate Index -12.42% 8.22%
Capital Values
Total assets less current
liabilities (US$ million) 188.62 197.75
Net asset value per share
(US$) 0.68 0.61
Ordinary share price (US$) 0.52 0.45
FTSE 350 Real Estate Index 514.80 587.81
Debt-to-equity ratio
Debt-to-equity ratio (1) 58.75% 142.74%
Net debt-to-equity ratio
(2) 40.01% 125.28%
Earnings Per Share
Earnings per ordinary share
- basic (US cents) 8.89 (7.44)
- diluted (US cents) 8.89 (7.44)
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 less Held-For-Trading Financial Instrument ÷ Total
Equity) x 100%
FINANCIAL REVIEW
INTRODUCTION
The Group recorded comprehensive profit of US$10.5 million due
to a gain on sale of AKLS, offset by losses of its operating assets
and losses on foreign currency translation differences for foreign
operations, for financial year ended 31 December 2016.
STATEMENT OF COMPREHENSIVE INCOME
The Group registered a four times increase in revenue from
US$30.3 million (restated) in 2015 to US$112.5 million in 2016,
mainly due to sale of the AKLS. The sale resulted in a gain of
US$36.2 million which contributed to the net profit before taxation
of US$16.2 million, compared to a net loss after taxation of
US$20.7 million in 2015. The net profit included operating losses
attributable to CIH of US$6.2 million, IHP of US$3.1 million, FPSS
and HMS totalling US$6.2 million, together with the impairment loss
on inventory in relation to FPSS of US$2.4 million.
Net profit attributable to equity holders of the parent was
US$18.8 million in 2016, compared to a net loss of US$15.8 million
in 2015. Tax charged for the year was lower at US$0.6 million
(2015: US$1.3 million) due to fewer completed units of SENI and
Tiffani sold in 2016.
The consolidated comprehensive profit for the year ended 31
December 2016 was US$10.5 million compared to a consolidated
comprehensive loss of US$35.7 million in 2015. The former included
losses on foreign currency translation differences for foreign
operations of US$2.5 million (2015: US$15.9 million) due to
weakening of the Ringgit against the US Dollar from 4.294 as at 31
December 2015 to 4.486 as at 31 December 2016; and fair value
adjustment in relation to shares of Nam Long Investment Corporation
("Nam Long") of US$2.4 million (2015: increase of US$2.19 million)
following the complete disposal of the 9,784,653 shares in Nam Long
resulting in a gain on disposal of US$2.28 million.
Basic and diluted gain per share for the year ended 31 December
2016 were both US cents 8.89 (2015: Loss per share of US cents
7.44).
STATEMENT OF FINANCIAL POSITION
Total assets at 31 December 2016 were US$294.3 million, compared
to US$368.9 million for 2015, representing a decrease of US$74.6
million. This was mainly due to a decrease in inventories following
the disposal of the AKLS, completed units of SENI and Tiffani; and
translation effect due to the weaker Ringgit against the US Dollar.
The contributions from the disposal of the inventories were used to
repay the Group's debt. Cash and cash equivalents were higher at
US$26.6 million (2015: US$23million). The decrease in other
receivables was largely due to the receipt of US$6,4million
representing the balance of consideration receivable for the
disposal of Waterside Estates project, via the Group's 55% equity
interest in ASPL PLB-Nam Long Ltd Liability Co, a subsidiary of the
Group in year 2015.
Total liabilities have decreased from US$237.4 million in 2015
to US$152.1 million in 2016, mainly due to repayment of medium term
notes of US$87.8 million.
Net Asset Value per share at 31 December 2016 was US$ 0.68
(2015: US$ 0.61).
CASH FLOW AND FUNDING
Cash flow generated from operation before interest and tax paid
was US$105.1 million in 2016, compared to cash flow of US$4.3
(restated) million in 2015. The positive cash flow was mainly
attributable to the profit from the disposal of AKLS.
During the year, the Group generated net cash flow of US$9.3
million from investing activities (2015: US$9.0 million), mainly
due to disposal of the remaining shares in Nam Long.
The Group's subsidiaries borrow to fund property development
projects. At 31 December 2016, the Group had gross borrowings of
US$83.5 million (2015: US$187.8 million), a decrease of 55.5 % over
the previous year. Net debt-to-equity ratio decreased from 125.3%
in 2015 to 40.0% in 2016 due to repayment of medium term notes and
an increase in shareholders' funds attributable to gain on sale of
AKLS.
Finance income was US$0.40 million in 2016 compared to US$0.35
million in 2015. Finance costs decreased from US$11.0 million in
2015 to US$9.6 million in 2016. The finance costs were mainly
attributable to CIH, IHP, AKLS, FPSS and HMS.
event after statement of financial position date
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$0.75 per share for 13,334,000 shares
representing 6.29 per cent of the Company's share capital to
Shareholders through N+1 Singer. The capital distribution was
completed on 10 January 2017 and the repurchased shares of
13,334,000 are currently held as Treasury Shares. The issued and
paid up share capital of the Company remains unchanged at
212,025,002.
DIVID
No dividend was declared or paid in 2016.
PRINCIPAL RISKS AND UNCERTAINTIES
A review of the principal risks and uncertainties facing the
Group is set out in the Directors' Report of the Annual Report.
TREASURY AND FINANCIAL RISK MANAGEMENT
The Group undertakes risk assessments and identifies the
principal risks that affect its activities. The responsibility for
the management of each key risk has been clearly identified and
delegated to the senior management of the Development Manager. The
Development Manager's senior management team is involved in the
day-to-day operation of the Group.
A comprehensive discussion on the Group's financial risk
management policies is included in the notes to the financial
statements of the Annual Report.
MONICA LAI VOON HUEY
Chief Financial Officer
Ireka Development Management Sdn. Bhd.
Development Manager
26 April 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 DECEMBER 2016
2016 2015
Continuing activities Notes US$'000 US$'000
Restated*
------------------------------------ ------ -------------------- ----------
Revenue 3 112,535 30,323
Cost of sales 5 (77,547) (29,164)
------------------------------------ ------ -------------------- ----------
Gross profit 34,988 1,159
Other income 6 21,963 28,886
Administrative expenses (1,466) (1,787)
Foreign exchange loss 7 (5,051) (2,915)
Management fees 8 (3,331) (3,115)
Marketing expenses (99) (288)
Other operating expenses (21,625) (31,916)
------------------------------------ ------ -------------------- ----------
Operating profit/(loss) 25,379 (9,976)
-------------------- ----------
Finance income 401 355
Finance costs (9,616) (11,031)
-------------------- ----------
Net finance costs 9 (9,215) (10,676)
Net profit /(loss) before
taxation 10 16,164 (20,652)
Taxation 11 (686) (1,278)
------------------------------------ ------ -------------------- ------------
Profit /(loss) for the year 15,478 (21,930)
------------------------------------ ------ -------------------- ------------
Other comprehensive income/(expense),
net of tax
Items that are or may be reclassified
subsequently to profit or loss
Foreign currency translation differences
for foreign operations (2,534) (15,920)
Fair value adjustment in
relation to available-for-sale
investments 14 (2,441) 2,190
------------------------------------ ------ -------------------- ------------
Total other comprehensive
expense for the year 12 (4,975) (13,730)
------------------------------------ ------ -------------------- ------------
Total comprehensive profit/(loss)
for the year 10,503 (35,660)
-------------------------------------------- -------------------- ------------
* see note 29.
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2016 2015
Continuing activities Notes US$'000 US$'000
Restated*
------------------------------------ ------- -------- ----------
Profit/(loss) attributable
to:
Equity holders of the parent 18,856 (15,784)
Non-controlling interests (3,378) (6,146)
------------------------------------ ------- -------- ----------
Total 15,478 (21,930)
------------------------------------ ------- -------- ----------
Total comprehensive profit/(loss)
attributable to:
Equity holders of the parent 13,674 (29,748)
Non-controlling interests (3,171) (5,912)
------------------------------------ ------- -------- ----------
Total 10,503 (35,660)
------------------------------------ ------- -------- ----------
Earnings /(loss) per share
Basic and diluted (US cents) 13 8.89 (7.44)
------------------------------ --- ------ -------
* see note 29.
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 DECEMBER 2016
2016 2015
Notes US$'000 US$'000
-------------------------------- ------ --------- ---------
Non-current assets
Property, plant and equipment 743 861
Available-for-sale investments 14 - 9,917
Intangible assets 15 7,081 7,233
Deferred tax assets 16 1,623 1,337
-------------------------------- ------ --------- ---------
Total non-current assets 9,447 19,348
-------------------------------- ------ --------- ---------
Current assets
Inventories 17 244,959 307,328
Trade and other receivables 11,571 17,741
Prepayments 1,093 218
Current tax assets 660 1,360
Cash and cash equivalents 26,650 22,978
Total current assets 284,933 349,625
-------------------------------- ------ --------- ---------
TOTAL ASSETS 294,380 368,973
-------------------------------- ------ --------- ---------
Equity
Share capital 18 10,601 10,601
Share premium 19 218,926 218,926
Capital redemption reserve 20 1,899 1,899
Translation reserve (29,142) (26,401)
Fair value reserve - 2,441
Accumulated losses (58,922) (77,301)
-------------------------------- ------ --------- ---------
Shareholders' equity 143,362 130,165
Non-controlling interests (1,148) 1,433
-------------------------------- ------ --------- ---------
Total equity 142,214 131,598
-------------------------------- ------ --------- ---------
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2016 2015
Notes US$'000 US$'000
------------------------------- -------- --------- ---------
Non-current liabilities
Loans and borrowings 22 46,405 55,823
Medium term notes 23 - 10,330
------------------------------- -------- --------- ---------
Total non-current liabilities 46,405 66,153
------------------------------- -------- --------- ---------
Current liabilities
Trade and other payables 53,880 37,336
Amount due to non-controlling
interests 21 12,573 10,014
Loans and borrowings 22 10,807 13,500
Medium term notes 23 26,343 108,190
Current tax liabilities 2,158 2,182
------------------------------- -------- --------- ---------
Total current liabilities 105,761 171,222
------------------------------- -------- --------- ---------
Total liabilities 152,166 237,375
------------------------------- -------- --------- ---------
TOTAL EQUITY AND LIABILITIES 294,380 368,973
------------------------------- -------- --------- ---------
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended 31 december 2016
Total
Equity
Attributable
to Equity
Redeemable Capital Fair Holders Non-
Ordinary Management Share Redemption Translation Value Accumulated of the Controlling Total
Shares Shares Premium Reserve Reserve Reserve Losses Parent Interests Equity
Consolidated US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
1 January 2015 10,601 - 218,926 1,899 (10,247) 251 (60,932) 160,498 10,187 170,685
Issuance of
management
shares (Note 18) - - * - - - - - - - -*
Changes in
ownership
interests in
subsidiaries
(Note 25) - - - - - - (585) (585) (5,340) (5,925)
Non-controlling
interests
contribution - - - - - - - - 2,498 2,498
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Loss for the
year - - - - - - (15,784) (15,784) (6,146) (21,930)
Total other
comprehensive
expense - - - - (16,154) 2,190 - (13,964) 234 (13,730)
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Total
comprehensive
loss - - - - (16,154) 2,190 (15,784) (29,748) (5,912) (35,660)
At 31 December
2015/ 1 January
2016 10,601 - * 218,926 1,899 (26,401) 2,441 (77,301) 130,165 1,433 131,598
Changes in
ownership
interests in
subsidiaries
(Note 25) - - - - - - (477) (477) 477 -
Non-controlling
interests
contribution - - - - - - - - 113 113
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Profit for the
year - - - - - - 18,856 18,856 (3,378) 15,478
Total other
comprehensive
expense - - - - (2,741) (2,441) - (5,182) 207 (4,975)
------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
Total
comprehensive
profit - - - - (2,741) (2,441) 18,856 13,674 (3,171) 10,503
Shareholders'
equity at 31
December
2016 10,601 -* 218,926 1,899 (29,142) - (58,922) 143,362 (1,148) 142,214
----------------- ------------ ----------- --------- ------------ ------------- --------- ------------- ------------- ------------- ---------
* represents 2 management shares at US$0.05 each
CONSOLIDATED Statement OF Cash FlowS
For the year ended 31 december 2016
2016 2015
Notess US$'000 US$'000
Restated*
Cash Flows from Operating Activities
Net profit /(loss) before taxation 16,164 (20,652)
Finance income (401) (355)
Finance costs 9,616 11,031
Unrealised foreign exchange loss 4,939 2,544
Write down/Impairment of intangible
assets 152 1,565
Depreciation of property, plant
and equipment 98 105
Gain on disposal of available-for-sale
investments (2,285) (806)
Gain on disposal of property, plant -
and equipment (5)
Fair value loss on amount due to
non-controlling interests - 320
Operating profit/(loss) before changes
in working capital 28,278 (6,248)
Changes in working capital:
Decrease in inventories 55,303 7,424
Decrease/(Increase) in trade and
other receivables and prepayments 6,103 (4,105)
Increase in trade and other payables 15,426 7,249
---------------------------------------------- -------- ----------
Cash generated from operations 105,110 4,320
Interest paid (9,616) (11,031)
Tax paid (318) (4,321)
---------------------------------------------- -------- ----------
Net cash from/ (used in) operating
activities 95,176 (11,032)
---------------------------------------------- -------- ----------
Cash Flows from Investing Activities
Proceeds from disposal of available-for-sale
investments (iii) 8,955 5,359
Proceeds from disposal of property, -
plant and equipment 5
Disposal of held-for-trading financial
instrument - 3,291
Finance income received 401 355
Net cash from investing activities 9,361 9,005
---------------------------------------------- -------- ----------
* see note 29
CONSOLIDATED Statement OF Cash FlowS
2016 2015
Notes US$'000 US$'000
Restated*
Cash Flows from Financing Activities
Advances from non-controlling interests 2,819 1,067
Issuance of ordinary shares of subsidiaries
to non-controlling interests (ii) 113 1,058
Issuance of management shares - - #
Repayment of loans and borrowings (104,880) (15,854)
Drawdown of loans and borrowings 1,571 16,046
Increase in pledged deposits placed
in licensed banks (698) (1,537)
--------------------------------------------- ---------- ----------
Net cash (used in)/generated from
financing activities (101,075) 780
--------------------------------------------- ---------- ----------
Net changes in cash and cash equivalents
during the year 3,462 (1,247)
Effect of changes in exchange rates (155) (1,632)
Cash and cash equivalents at the beginning
of the year (i) 13,332 16,211
Cash and cash equivalents at the end
of the year (i) 16,639 13,332
--------------------------------------------- ---------- ----------
(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 14,858 9,143
Short term bank deposits 11,792 13,835
--------------------------- --------- --------
26,650 22,978
Less: Deposits pledged (10,011) (9,646)
--------------------------- --------- --------
Cash and cash equivalents 16,639 13,332
--------------------------- --------- --------
(ii) During the financial year, US$113,000 (2015: US$2,498,000)
of ordinary shares of subsidiaries were issued to non-controlling
shareholders which was satisfied via cash consideration (2015:
US$1,058,000 was satisfied via cash consideration). In 2015, the
remaining amount of US$1,440,000 was satisfied via capitalisation
of amount due to non-controlling interests.
(iii) During the financial year, the Group disposed the entire
balance representing 9,784,653 (2015: 5,800,000) shares in Nam Long
for a consideration of US$9,848,000 (2015: US$5,359,000) of which
US$8,955,000 was received during the year. The balance
consideration recoverable of US$ 893,000 was received on 23
February 2017.
# represents 2 management shares at US$0.05 each
* see note 29
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 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 except for available-for-sale investments which are
measured at fair value 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 23 and
24) 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 project 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 CIH,
FPSS and the HMS.
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 (a highly sought after investment in
Malaysia) and secured by two completed inventories of the Group
with carrying amount of US$74.12 million as at 31 December 2016.
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 CIH 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 only 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.
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,
and as required under the Company's Articles, at the 2015 AGM the
Company proposed an ordinary resolution for it to cease trading
(the "Discontinuation Resolution").
At an extraordinary general meeting of the Company held on 22
June 2015, Shareholders voted in favour of the Board's proposals to
amend the Company's investment policy 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. Shareholders also supported the
Board's recommendation to vote against the Discontinuation
Resolution proposed at the 2015 AGM, in order to allow a policy of
orderly realisation of the Company's assets over a period of up to
three years in order to 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 the time of the AGM in 2018, in accordance with the
Articles, 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. Accordingly, the financial statements have been prepared
on the going concern basis.
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
----------------- ---------------------------- --------------- -------------------
IAS 7 Statement Amendments resulting January Effective
of Cash from the disclosure 2016 for annual
Flows initiative periods beginning
on or after
1 January
2017
----------------- ---------------------------- --------------- -------------------
IAS 12 Income Amendments regarding January Effective
Taxes the recognition 2016 for annual
of deferred tax periods beginning
assets for unrealised on or after
losses 1 January
2017
----------------- ---------------------------- --------------- -------------------
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, which becomes mandatory for the Group's 2018
Consolidation Financial Statements, could change the classification
and measurement of financial assets. The Directors are currently
determining the impact of IFRS 9.
(b) IFRS 15, Revenue from contracts with customers
IFRS 15 replaces the guidance in IFRS 11, Construction
Contracts, IFRS 18, Revenue, IC Interpretation 13, Customer Loyalty
Programmes, IC Interpretation 15, Agreements for Construction of
Real Estate, IC Interpretation 18, Transfer of Assets from
Customers and IC Interpretation 131, Revenue - Barter Transactions
Involving Advertising Services. The Directors are currently
determining the impact of IFRS 15.
(c) IFRS 16, Leases
IFRS 16 replaces, the guidance in IAS 17, Leases, IC
Interpretation 4, Determining whether an arrangement contains a
Lease, IC interpretation ILS, Operating Leases-Incentive and IC
interpretation 127, Evaluating the Substance of Transactions
Involving The Legal Form of a Lease. The Directors are currently
determining the impact of IFRS 16.
3 revenue AND SEGmeNTAL information
The gross revenue represents the sales value of development
properties where the effective control of ownership of the
properties is transferred to the purchasers when the completion
certificate or occupancy permit has been issued.
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.
3.1 Revenue recognised during the year as follows:
Group
2016 2015
US$'000 US$'000
Restated
-------------------------------- --- -------- ---------
Sale of land held for property
development 411 8,227
Sale of completed
units 112,124 22,096
112,535 30,323
------------------------------------ -------- ---------
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");
(vii)Hoa Lam-Shangri-La Healthcare Group - master developer of
International Healthcare Park ("IHP"); owns and operates the City
International Hospital ("CIH"); and
(viii)ASPL PLB-Nam Long Limited Liability Co - developer of
Waterside Estates residential project.
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 2016 and
2015.
Information regarding the operations of each reportable segment
is included below. 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 2016
Hoa
Investment Ireka ICSD Amatir Iringan Urban Lam-Shangri-La
Holding Land Ventures Resources Flora DNA Healthcare
Companies Sdn. Sdn. Sdn. Bhd. Sdn. Sdn. Group Total
Bhd. Bhd. Bhd. Bhd.
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------- ------------- -------- ----------- -------------- ---------- -------- --------------- ---------
Segment
profit/
(loss)
before
taxation (4,410) 135 (6,237) 515 37,223 (1,338) (9,359) 16,529
-------------- ------------- -------- ----------- -------------- ---------- -------- --------------- ---------
Included in
the measure
of segment
profit/
(loss) are:
Revenue - 1,306 - 6,529 104,289 - 411 112,535
Revenue from
hotel
operations - - 3,435 - 8,762 - - 12,197
Revenue from
mall
operations - - 1,041 - - - - 1,041
Revenue from
hospital
operations - - - - - - 5,754 5,754
Impairment of
inventory
* - - (2,408) - - - - (2,408)
Write down of
intangible
assets - - - (79) - - (73) (152)
Marketing
expenses - - - - - (193) - (193)
Expenses from
hotel
operations - - (3,763) - (5,719) - - (9,482)
Expenses from
mall
operations - - (1,399) - - - - (1,399)
Expenses from
hospital
operations - - - - - - (9,039) (9,039)
Depreciation
of property,
plant and
equipment - - (6) - (3) - (89) (98)
Finance costs - - (2,992) - (1,957) - (4,363) (9,312)
Finance
income 57 2 258 9 2 7 66 401
-------------- ------------- -------- ----------- -------------- ---------- -------- --------------- ---------
Segment
assets 12,160 1,843 76,174 18,722 - 69,618 97,833 276,350
* The amount relates to impairment of FPSS as the recoverable
amount, estimated based on its net realisable value, is below its
carrying amount (see note 17).
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
-------------------------------------- --------
Total profit for reportable segments 16,529
Other non-reportable segments (61)
Finance cost (304)
Consolidated profit before taxation 16,164
-------------------------------------- --------
Operating Segments - ended 31 December 2015 (Restated)
Hoa ASPL
Investment Ireka ICSD Amatir Iringan Urban Lam-Shangri-La PLB
Holding Land Ventures Resources Flora DNA Healthcare Limited
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 US$'000
----------------- ------------ -------- ---------- ----------- --------- -------- --------------- -------- ---------
Segment profit/
(loss)
before taxation (297) 79 (9,168) 4,156 1,621 (863) (16,090) (4) (20,566)
----------------- ------------ -------- ---------- ----------- --------- -------- --------------- -------- ---------
Included in the
measure
of segment
profit/
(loss) are:
Revenue - 1,322 - 20,774 - - - 8,227 30,323
Revenue from
hotel
operations - - 3,701 - 18,314 - - - 22,015
Revenue from
mall
operations - - 1,033 - - - - - 1,033
Revenue from
hospital
operations - - - - - - 4,244 - 4,244
Impairment of
inventory
* - - (3,200) - - - - - (3,200)
Write
down/impairment
of intangible
assets - - (1,397) (168) - - - - (1,565)
Marketing
expenses - - - (57) - (231) - - (288)
Expenses from
hotel
operations - - (4,256) - (12,351) - - - (16,607)
Expenses from
mall
operations - - (1,401) - - - - - (1,401)
Expenses from
hospital
operations - - - - - - (11,110) - (11,110)
Depreciation of
property,
plant and
equipment - - (7) - (7) - (90) - (104)
Finance costs - - (3,635) - (4,133) - (3,263) - (11,031)
Finance income 19 2 268 19 4 7 34 - 353
----------------- ------------ -------- ---------- ----------- --------- -------- --------------- -------- ---------
Segment assets 26,589 3,903 80,392 22,271 62,112 56,776 98,362 - 350,405
* The amount relates to impairment of FPSS as the recoverable
amount, estimated based on its net realisable value, is below its
carrying amount (see note 17).
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
Restated
----------------------------------------------- ------------
Total loss for reportable segments (20,566)
Other non-reportable segments (87)
Depreciation (1)
Finance income 2
----------------------------------------------- ------------
Consolidated loss before taxation (20,652)
----------------------------------------------- ------------
There are no additions to non-current assets other than
financial instruments and deferred tax assets for the
financial year ended 2016 and 2015 respectively.
2016 Finance Finance Segment
US$'000 Revenue Depreciation costs income assets
---------------------- --------- ------------- --------- -------- ---------
Total reportable
segment 112,535 (98) (9,312) 401 276,350
Other non-reportable
segments - - (304) - 18,030
---------------------- --------- ------------- --------- -------- ---------
Consolidated total 112,535 (98) (9,616) 401 294,380
---------------------- --------- ------------- --------- -------- ---------
2015 Finance Finance Segment
US$'000 (Restated) Revenue Depreciation costs income assets
---------------------- --------- ------------- --------- -------- ---------
Total reportable
segment 30,323 (104) (11,031) 353 350,405
Other non-reportable
segments - (1) - 2 18,568
---------------------- --------- ------------- --------- -------- ---------
Consolidated total 30,323 (105) (11,031) 355 368,973
---------------------- --------- ------------- --------- -------- ---------
There are no additions to non-current assets other than
financial instruments and deferred tax assets for the financial
year ended 2016 and 2015 respectively.
Geographical Information - ended 31 December 2016
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 112,124 411 112,535
Non-current assets 2,359 7,088 9,447
-------------------- --------- -------- -------------
Included in the revenue of the Group for the financial year
ended 31 December 2016 is revenue from the sale of AKLS and a plot
of land (GD1) at the IHP.
For the year ended 31 December 2016, one customer exceeded 10%
of the Group's total revenue
as follows:
US$'000 Segments
----------------------- -------------- ---------------
Prosper Group Holdings Iringan Flora
Limited 104,289 Sdn Bhd
----------------------- -------------- ---------------
Geographical Information - ended 31 December 2015 (Restated)
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 22,096 8,227 30,323
Non-current assets 2,172 17,176 19,348
-------------------- --------- -------- -------------
For the year ended 31 December 2015, one customer exceeded 10%
of the Group's total revenue as follows:
US$'000 Segments
------------------------ -------------- --------------
Nam Long Investment
Corporation
("Nam Long") and
Nam Khang Construction
Investment ASPL PLB-Nam
Development Limited Long Limited
Liability Company Liability
("Nam Khang") 8,227 Co.
------------------------ -------------- --------------
4 SEASONALITY
The Group's business operations are not materially affected by
seasonal factors for the period under review.
5 Cost of Sales
2016 2015
US$'000 US$'000
Restated
------------------------------------- -------- ---------
Direct costs attributable to:
Completed units 74,796 16,847
Sales of Land held for property
development (Note 17) 191 7,552
Impairment of inventory (Note
17) 2,408 3,200
Write down/Impairment of intangible
assets (Note 15) 152 1,565
77,547 29,164
------------------------------------- -------- ---------
Included in the cost of sales of the Group for the financial
year ended 31 December 2016 is cost of sales related to the sale of
AKLS and a plot of land (GD1) at the IHP (2015: Sale of Waterside
Estates residential project).
6 Other Income
2016 2015
Group US$'000 US$'000
Restated
---------------------------------------- -------- ---------
Dividend income 208 293
Gain on disposal of available-for-sale
investments 2,285 806
Gain on disposal of property,
plant and equipment 5 -
Rental income 211 115
Revenue from hotel operation
(a) 12,197 22,015
Revenue from mall operation
(b) 1,041 1,033
Revenue from hospital operation
(c) 5,754 4,244
Sundry income 262 380
21,963 28,886
---------------------------------------- -------- ---------
(a) Revenue from hotel operations
The revenue relates to the operations of two hotels - FPSS and
AKLS, which are owned by subsidiaries of the Company, ICSD Ventures
Sdn. Bhd. and Iringan Flora Sdn. Bhd. respectively. The revenue
earned from hotel operations is included in other income in line
with management's intention to dispose of the hotels.
(b) Revenue from mall operations
The revenue relates to the operation of HMS which is owned by a
subsidiary of the Company, ICSD Ventures Sdn. Bhd. The revenue
earned from mall operations is included in other income in line
with management's intention to dispose of the mall.
(c) Revenue from hospital operations
The revenue relates to the operation of CIH which is owned by a
subsidiary of the Company, City International Hospital Company
Limited. The revenue earned from hospital operations is included in
other income in line with management's intention to dispose of the
hospital.
7 Foreign exchange LOSS
2016 2015
US$'000 US$'000
-------------------------------- -------- -----------
Foreign exchange loss comprises:
Realised foreign exchange loss (112) (371)
Unrealised foreign exchange
loss (4,939) (2,544)
-------------------------------- -------- --------
(5,051) (2,915)
-------------------------------- -------- --------
8 Management Fees
2016 2015
US$'000 US$'000
------------------- -------- --------
Management fees 3,331 3,115
------------------- -------- --------
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 (2015: US$Nil).
9 Finance (Costs)/ INCOME
2016 2015
US$'000 US$'000
Interest income from banks 401 355
Agency fees (194) (83)
Arrangement fee (621) -
Bank guarantee commission (50) (49)
Interest on bank loans (4,313) (3,214)
Interest on financial liabilities
at amortised cost (1) (2)
Interest on medium term notes (4,437) (7,683)
(9,215) (10,676)
----------------------------------- -------- ---------
10 net PROFIT /(Loss) BEFORE TAXATION
2016 2015
US$'000 US$'000
-------------------------------------------- -------- --------
Net profit /(loss) before taxation is stated
after charging/(crediting):
Auditor's remuneration
- current year 205 226
Directors' fees 297 317
Depreciation of property, plant
and equipment 98 105
Expenses of hotel operations 9,482 16,607
Expenses of mall operations 1,399 1,401
Expenses of hospital operations 9,039 11,110
Fair value loss on amount due
to non-controlling interests - 320
Unrealised foreign exchange loss 4,939 2,544
Realised foreign exchange loss 112 371
Write down/impairment of intangible
assets 152 1,565
Gain on disposal of available-for-sale
investments (2,285) (806)
Gain on disposal of property,
plant and equipment (5) -
Tax services 8 15
11 TAXATION
2016 2015
US$'000 US$'000
Current tax- Current year 796 1,468
- Prior year 262 (227)
Deferred tax (credit) /expense-
Current year (354) 678
- Prior year (18) (641)
------------------------------------------------------------- ------------------ ------------------
Total tax expense for the
year 686 1,278
------------------------------------------------------------- ------------------ ------------------
The numerical reconciliation between the income tax expenses and
the product of accounting results multiplied by the applicable tax
rate is computed as follows:
2016 2015
US$'000 US$'000
---------------------------------------- --------- ---------
Net profit/(loss) before taxation 16,164 (20,652)
Income tax at a rate of 24% (2015:25%) 3,879 (5,163)
Add :
Tax effect of expenses not deductible
in determining taxable profit 6,854 3,689
Current year losses and other tax
benefits for which no deferred
tax asset was recognised 2,059 2,449
Tax effect of different tax rates
in subsidiaries 1,521 2,703
Less :
Tax effect of income not taxable
in determining taxable profit (13,841) (1,532)
Under/(over) provision in respect
of prior years 244 (868)
---------------------------------------- --------- ---------
Total tax expense for the year 686 1,278
---------------------------------------- --------- ---------
The applicable corporate tax rate in Malaysia is 24% (2015:
25%).
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% (2015: 22%) 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 are 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 OTHER COMPREHENSIVE EXPENSE
Items that are or may be reclassified 2016 2015
subsequently to profit or loss, US$'000 US$'000
net of tax
--------------------------------------- --------- ---------
Foreign currency translation
differences for foreign operation
--------- ---------
Loss arising during the year (3,522) (15,374)
Reclassification to profit or
loss on disposal of subsidiary 988 (546)
--------- ---------
(2,534) (15,920)
Fair value of available-for-sale
investment
--------- ---------
(Loss)/Gain arising during the
year (233) 2,680
Reclassification adjustments
for gain on disposal included
in profit or loss (2,208) (490)
--------- ---------
(2,441) 2,190
(4,975) (13,730)
--------------------------------------- --------- ---------
13 EARNINGS /(LOSS) Per Share
Basic and diluted earnings /(loss) per ordinary share
The calculation of basic and diluted earnings/(loss) per
ordinary share for the year ended 31 December 2016 was based on the
profit/(loss) attributable to equity holders of the parent and a
weighted average number of ordinary shares outstanding, calculated
as below:
2016 2015
US$'000 US$'000
----------------------------------- --------- ---------
Profit/(loss) attributable to
equity holders of the parent 18,856 (15,784)
Weighted average number of shares 212,025 212,025
Profit/(loss) for the year
Basic and diluted (US cents) 8.89 (7.44)
----------------------------------- --------- ---------
14 Available-for-Sale Investments
The available-for-sale investments represent
the investment in shares of Nam Long Investment
Corporation ("Nam Long") which the Group acquired
over four tranches in 2008 and 2009.
Quoted Shares
2016 US$'000
-------------------------------------- ---------------
1 January - fair value 9,917
Disposal (7,562)
Exchange adjustments 86
Recognised in other comprehensive
expense (233)
Reclassified from equity to
profit or loss (2,208)
At 31 December - fair value -
---------------------------------------- ---------------
Quoted Shares
2015 US$'000
------------------------------------ ----- --------------
1 January - fair
value 12,822
Disposal (4,553)
Exchange adjustments (542)
Recognised in other comprehensive
income 2,680
Reclassified from equity to profit
or loss (490)
-------------------------------------- --- --------------
At 31 December -
fair value 9,917
-------------------------------------------- --------------
During the financial year, the Group disposed of the entire
balance representing 9,784,653 (2015: 5,800,000) numbers of shares
in Nam Long for a consideration of US$9,850,945 (2015:
US$5,359,000) at an average market price of US$1.01 (2015: US$0.92)
per share. The Group recognised a gain on disposal of US$ 2,285,000
during the year (2015: US$806,000).
15 Intangible Assets
Licence Contracts
and Related
Relationships Goodwill Total
Group US$'000 US$'000 US$'000
------------------------ ------------------ --------- --------
Cost
At 1 January 2015/
31 December 2015 /
31 December 2016 10,695 6,479 17,174
------------------------ ------------------ --------- --------
Accumulated impairment
losses
At 1 January 2015 4,276 4,100 8,376
Impairment - 1,397 1,397
Write down - 168 168
------------------------ ------------------ --------- --------
At 31 December 2015
/ 1 January 2016 4,276 5,665 9,941
Write down 73 79 152
------------------------ ------------------ --------- --------
At 31 December 2016 4,349 5,744 10,093
------------------------ ------------------ --------- --------
Carrying amounts
At 31 December 2015 6,419 814 7,233
------------------------ ------------------ --------- --------
At 31 December 2016 6,346 735 7,081
------------------------ ------------------ --------- --------
The licence contracts and related relationships represent the
land use rights ("LUR") for the Group's land in Vietnam. LUR
represents the rights to develop the IHP within a lease period
ending on 9 July 2077. In 2016, the Group sold a selected plot of
its undeveloped land in the IHP Lot, GD1 to third party
purchasers.
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:
2016 2015
US$'000 US$'000
------------------------------- --------- ---------
Licence contracts and related
relationships
International Healthcare
Park 6,346 6,419
-------------------------------- --------- ---------
Goodwill
SENI Mont' Kiara 185 264
Sandakan Harbour Square 550 550
-------------------------------- --------- ---------
735 814
------------------------------- --------- ---------
The recoverable amount of licence contracts and related
relationships has been tested based on the net realisable value of
the Land Use Rights ("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 Note
17).
In the previous financial year, impairment losses of
US$1,397,000 in relation to the FPSS, have been recognised as the
recoverable amount of the cash generating unit, estimated based on
net realisable value, is below its carrying amount. Intangible
assets of US$79,000 (2015: US$168,000) and US$73,000 (2015: US$Nil)
in relation to SENI and IHP projects respectively were written down
as certain components from the developments were sold during the
year.
16 Deferred Tax Assets
2016 2015
US$'000 US$'000
------------------------------- --------- ---------
At 1 January 1,337 1,683
Exchange adjustments (86) (309)
Deferred tax credit relating
to origination and reversal
of
temporary differences during
the year 372 (37)
At 31 December 1,623 1,337
------------------------------- --------- ---------
The deferred tax assets comprise:
2016 2015
US$'000 US$'000
----------------------------------------- --------- ---------
Taxable temporary differences
between accounting profit and
taxable profit of property development
units sold 1,623 1,337
At 31 December 1,623 1,337
----------------------------------------- --------- ---------
Deferred tax assets have not been recognised in respect of
unused tax losses of US$65,440,000 (2015: US$55,000,000) 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$4,460,000 (2015: US$3,100,000) which
are available for offset against future taxable profits. Deferred
tax assets have not been recognised due to the uncertainty of the
recovery of the losses.
17 INVENTORIES
2016 2015
Note US$'000 US$'000
--------------------------- ---------- --------- --------
Land held for property
development (a) 22,514 23,223
Work-in-progress (b) 62,708 53,182
Stock of completed units,
at cost (c) 159,334 230,436
Consumables 403 487
At 31 December 244,959 307,328
--------------------------------------- --------- --------
Carrying amount of inventories
pledged as security for Loan
and borrowings and Medium Term
Notes 148,427 237,059
-------- ---------
(a) Land held for property development
2016 2015
US$'000 US$'000
------------------------------------ -------- ---------
At 1 January 23,223 40,560
Add :
Exchange adjustments (604) (3,466)
Additions 86 451
22,705 37,545
Less: Costs recognised as expenses
in the statement of comprehensive
income during the year (note
5) (191) (14,322)
------------------------------------- -------- ---------
At 31 December 22,514 23,223
------------------------------------- -------- ---------
(b) Work-in-progress
2015 2015
US$'000 US$'000
---------------------------------- -------- ---------
At 1 January 53,182 55,332
Add :
Exchange adjustments (3,967) (10,273)
Work-in-progress incurred during
the year 13,493 8,123
At 31 December 62,708 53,182
---------------------------------- -------- ---------
The above amounts included borrowing costs capitalised at
interest rate ranging from 5.50% to 10.00% per annum (2015: 5.50%
to 10.00% per annum) of US$1,620,000 (2015: US$1,670,000) during
the financial year.
(c) Stock of completed units, at cost
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, Tiffani by
i-ZEN as well as the following completed units:
Four Points by Sheraton Sandakan Hotel ("FPSS")
The recoverable amount of FPSS was determined based on a
valuation by an external, independent valuer with appropriate
recognised professional qualification. The carrying amount of FPSS
including the attached goodwill was determined to be higher than
its recoverable amount of US$37,012,000 (2015: US$40,949,000) and
impairment losses of US$Nil (2015: US$1,397,000) and US$2,408,000
(2015: US$3,200,000) in relation to the goodwill and inventory
amounts was recognised respectively. The impairment loss 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 2016 and the 10 years budget of FPSS adjusted
by the valuer;
(2) The occupancy rate of FPSS will improve to an optimum level
of 75% in 2026;
(3) Projected gross margin reflects the average historical gross
margin, adjusted for projected market and economic conditions and
internal resources efficiency; and
(4) Pre-tax discount rate of 9% was applied in discounting the
cash flows. The discount rates takes 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$4,828,000)/US$6,199,000.
(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$684,000/
(US$684,000).
Harbour Mall Sandakan ("HMS")
The recoverable amount of HMS was determined based on an
internal valuation performed by management. The recoverable amount
of HMS was determined to be higher than its carrying amount and no
impairment losses in relation to the inventory amounts 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 an optimum level of 95%;
(2) Capitalisation period of 73 years covering the period of HMS
achieving optimum operations to expiration of the title term;
(3) Outgoing rate was projected at 35% against gross annual
income;
(4) Capitalisation rate was assumed at 6%;
Sensitivity analysis
The above estimates are sensitive in the following key
areas:
(a) an increase/(decrease) of 1% in capitalisation rate used
would have (decreased)/ increased the recoverable amount by
approximately (US$5,652,000)/ US$7,555,000.
(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$435,000/ (US$435,000).
City International Hospital ("CIH")
The recoverable amount 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 on a depreciated replacement
cost approach which entails estimating the land value for its
existing use, and the depreciated replacement costs of the site
improvements and related expenditure. The followings are the key
assumptions:
(1) The underlying land value is based on the current prices
quoted by the similar properties to potential investors who are
looking to set up the private hospital in the area;
(2) Replacement costs for the improvements on site was made with
reference to construction cost data and research on similar
structures, taking into considerations of professional fees,
finance cost and depreciation expense in relation to the
improvements on site and related expenditure; and
(3) Plant and machinery that form part of the building services
installations are reflective of its carrying amounts.
Sensitivity analysis
The above estimates are sensitive in the following key
areas:
(a) an increase/(decrease) of 1% in land value would have
increased/(decreased) the recoverable amount by approximately
US$149,700/(US$149,700).
(b) an increase/(decrease) of 1% in depreciation charges used
would have (decreased)/ increased the recoverable amount by
approximately (US$30,000)/US$30,000.
18 Share Capital
Number Number of
of shares Amount shares Amount
2016 2016 2015 '000 2015
'000 US$'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
At previous financial year end, 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$0.05 each at par via cash
consideration.
In accordance with the compulsory redemption scheme, the
Company's ordinary shares were converted into redeemable ordinary
shares.
The ordinary shares and the management shares shall have
attached thereto the rights and privileges, and shall be subjected
to the limitations and restrictions, as are set out below:
(a) Distribution of dividend:
(i) The ordinary shares carry the right to receive all the
profits of the Company available for distribution by way of interim
or final dividend at such times as the Directors may determine from
time to time; and
(ii) The management shares carry no right to receive dividends
out of any profits of the Company.
(b) Winding-up or return of capital:
(i) The holders of the management shares shall be paid an amount
equal to the paid-up capital on such management shares; and
(ii) Subsequent to the payment to holders of the management
shares, the holders of the ordinary shares shall be repaid the
surplus assets of the Company available for distribution.
(c) Voting rights:
(i) The holders of the ordinary shares and management shares
shall have the right to receive notice of and to attend and vote at
general meetings of the Company; and
(ii) Each holder of ordinary shares and management shares being
present in person or by a duly authorised representative (if a
corporation) at a meeting shall upon a show of hands have one vote
and upon a poll each such holder present in person or by proxy or
by a duly authorised representative (if a corporation) shall have
one vote in respect of every full paid share held by him.
19 Share Premium
Share premium represents the excess of proceeds raised on the
issuance of shares over the nominal value of those shares. The
costs incurred in issuing shares were deducted from the share
premium.
2016 2015
US$'000 US$'000
-------------------------- --------- ---------
At 1 January/31 December 218,926 218,926
--------------------------- --------- ---------
20 CAPITAL REDEMPTION RESERVE
The capital redemption reserve was incurred after the Company
cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per
share in 2009 and 2013 respectively.
21 AMOUNT DUE TO NON-CONTROLLING INTERESTS
2016 2015
US$'000 US$'000
Current
Minority Shareholder of Bumiraya
Impian Sdn. Bhd.:
* Global Evergroup Sdn. Bhd. 1,105 1,155
Minority Shareholders of Hoa
Lam Services Co Ltd:
* Tran Thi Lam 1,752 1,727
* Tri Hanh Consultancy Co Ltd 3,944 3,257
* Hoa Lam Development Investment Joint Stock Company 2,228 244
* Duong Ngoc Hoa 226 163
Minority Shareholder of The
RuMa Hotel KL Sdn. Bhd.:
* Ireka Corporation Berhad 2 1
Minority Shareholder of Urban
DNA Sdn. Bhd.:
* Ireka Corporation Berhad 3,316 3,467
12,573 10,014
----------------------------------------------------------- -------- --------
The current amount due to non-controlling interests amounting to
US$12,573,000 (2015: US$10,014,000) is unsecured, interest free and
repayable on demand.
In the previous financial year, amount due to non-controlling
interests amounting to US$1,440,000 was capitalised as share
capital of Shangri-La Healthcare Investment Pte Ltd.
22 Loans AND BORROWINGS
2016 2015
US$'000 US$'000
--------------------------- -------- --------
Non-current
Bank loans 46,405 55,813
Finance lease liabilities - 10
---------------------------- -------- --------
46,405 55,823
--------------------------- -------- --------
Current
Bank loans 10,804 13,489
Finance lease liabilities 3 11
---------------------------- -------- --------
10,807 13,500
--------------------------- -------- --------
57,212 69,323
--------------------------- -------- --------
The effective interest rates on the bank loans and finance lease
arrangement for the year ranged from 5.25% to 12.50% (2015: 5.25%
to 12.50%) per annum and 2.50% (2015: 2.50% to 3.50%) per annum
respectively.
Borrowings are denominated in Ringgit Malaysia, United States
Dollars and Vietnam Dong.
Bank loans are repayable by monthly, quarterly or semi-annually
instalments.
Bank loans are secured by land held for property development,
work-in-progress, operating assets of the Group, pledged deposits
and some by the corporate guarantee of the Company.
Finance lease liabilities are payable as follows:
Present Present
Future value Future value
minimum of minimum minimum of minimum
lease lease lease lease
payment Interest payment payment Interest payment
2016 2016 2016 2015 2015 2015
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------- --------- --------- ------------ --------- --------- ------------
Within
one year 3 - 3 12 1 11
Between
one and
five
years - - - 12 2 10
----------- --------- --------- ------------ --------- --------- ------------
3 - 3 24 3 21
----------- --------- --------- ------------ --------- --------- ------------
23 MEDIUM TERM NOTES
2016 2015
US$'000 US$'000
----------------------------------- --------- ----------
Outstanding medium term notes 26,748 119,711
Net transaction costs (405) (1,191)
Less:
Repayment due within twelve
months * (26,343) (108,190)
Repayment due after twelve months - 10,330
----------------------------------- --------- ----------
* Includes net transaction costs in relation to medium term
notes due within twelve months of US$0.40 million (2015: US$1.04
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 AKLS in
Malaysia. US$54.61 million (RM245.00 million) was drawn down in
2011 for Sandakan Harbour Square. US$3.34 million (RM15.00 million)
was drawn down in 2012 for AKLS and the remaining US$56.62 million
(RM254 million) in 2013.
During the financial year, the Group completed the sale of the
AKLS. The net adjusted price for the sale of AKLS, which includes
the sale of the entire issued share capital of ASPL M3B Limited and
Iringan Flora Sdn. Bhd is approximately US$104.3 million. Proceeds
received from the sale of AKLS were used to redeem the MTNs Series
2 and Series 3. Following the completion of the disposal of AKLS,
US$87.8 million (RM394.0 million) of MTNs associated with the AKLS
(Series 3) and the FPSS (Series 2) was repaid on 19 August 2016.
The charges in relation to AKLS was also discharged following the
completion of the disposal. Subsequent to the repayment of MTNs
Series 2 and Series 3, MTNs Series 1 of US$26.75 million (RM120
million) remains. The Group secured a
rollover of US$16.72 million (RM75 million) on 7 December 2016 to expire on 8 December 2017.
The weighted average interest rate of the MTNs was 5.93% per
annum at the statement of financial position date. The effective
interest rates of the MTNs and their outstanding amounts are as
follows:
Interest
Maturity rate % per US$'000
Dates annum
------------------ ------------ ------------ ----------------
Series 1 Tranche 8 December
FG 003 2017 5.90 5,572
Series 1 Tranche 8 December
BG 003 2017 5.85 4,458
Series 1 Tranche 8 December
FG 004 2017 6.00 10,031
Series 1 Tranche 8 December
BG 004 2017 5.92 6,687
26,748
------------------------------- ------------ ----------------
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 Venture 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.
24 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.
2016 2015
Group 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 1,591 833
Construction progress claims charged
by an ICB subsidiary 9,960 6,423
Acquisition of SENI units by an
ICB subsidiary - 2,008
Management fees charged by an ICB
subsidiary 3,331 3,115
Marketing commission charged by
an ICB subsidiary 248 281
Project staff costs reimbursed
to an ICB subsidiary 2 289
Rental expenses charged by an ICB
subsidiary - 4
Rental expenses paid on behalf
of ICB 493 512
Secretarial and administrative
services fee charged by an ICB
subsidiary 50 50
Key management personnel
Remuneration of key management
personnel - Directors' fees 297 317
Remuneration of key management
personnel - Salaries 123 49
-------------------------------------- --------- ---------
Transactions between the Group with other significant related
parties are as follows:
2016 2015
Group US$'000 US$'000
--------------------------- -------- --------
Non-controlling interests
Advances - non-interest
bearing 2,819 1,067
Capitalisation of amount
due to non-
controlling interests
as share capital - 1,440
---------------------------- -------- --------
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 2016 and 31 December 2015 are as
follows:
2016 2015
Group Note US$'000 US$'000
Amount due from an ICB subsidiary
for advance payment to its
contractors (ii) 2,903 1,997
Amount due to an ICB subsidiary
for construction progress
claims charged (i) (928) (38)
Amount due from an ICB subsidiary
for acquisition of SENI units (i) 1,760 1,840
Amount due (to)/from an ICB
subsidiary for management
fees (ii) (22) 25
Amount due to an ICB subsidiary
for marketing commissions (ii) (13) (43)
Amount due to an ICB subsidiary
for reimbursement of project
staff costs (ii) - (24)
Amount due to an ICB subsidiary
for rental expenses (ii) - (3)
Amount due from ICB for rental
expenses paid on behalf (ii) 114 1,415
(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 2016 and 31 December 2015 are as
follows:
2016 2015
US$'000 US$'000
--------------------------- --------- ---------
Non-controlling interests
Advances - non-interest
bearing (Note 21) (12,573) (10,014)
---------------------------- --------- ---------
Transactions between the parent company and its subsidiaries are
eliminated in these consolidated financial statements.
25 Business COMBINATION
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
79.76% to 81.50% (2015: 75.38% to 79.76%) arising from an issue of
new shares in the subsidiary for cash consideration of 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, Hoa Lam - Shangri-La 3 Ltd Liability
Co, Hoa Lam - Shangri-La 5 Ltd Liability Co and Hoa Lam -
Shangri-La 6 Ltd Liability Co, subsidiaries of SHIPL, increased to
72.35% (2015: 71.13%).
The Group recognised an increase in non-controlling interests of
US$477,000 (2015: US$585,000) and an increase in accumulated losses
of US$477,000 (2015: US$585,000) resulting from the increase in
equity interest in the above subsidiaries. The transaction was
accounted for using the acquisition method of accounting.
26 DIVID
The Company has not paid or declared any dividends during the
financial year ended 31 December 2016.
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
Under the par down medium term notes programme of up to
US$26.748 million, Silver Sparrow Berhad ("SSB") had opened a
Ringgit Malaysia debt service reserve account ("DSRA") and shall
ensure that an amount equivalent to RM30.0 million (US$6.69
million) (the "Minimum Deposit") be maintained in the DSRA at all
times. The amount is disclosed as deposits 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
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 through N+1 Singer. 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.
29 prior year restatement
In the previous financial year, the Group disposed of its 55%
interest in ASPL PLB-Nam Long Limited Liability Co. ("ASPL PLB-Nam
Long"), a subsidiary of the Group, who is the developer of the
Waterside Estates residential project in Vietnam, to Nam Long
Investment Corporation ("Nam Long") and Nam Khang Construction
Investment Development Limited Liability Company ("Nam Khang") for
a cash consideration of US$8.2 million.
As the Group is principally a property developer, the disposal
of ASPL PLB-Nam Long represents a disposal of the Waterside Estates
residential project. Accordingly, the Group has more appropriately
reflected the disposal of ASPL PLB-Nam Long as a disposal of the
Group's inventory, the Waterside Estates residential project. Thus
reflecting the transaction as revenue from sale of the inventory
with the relevant costs being recognised as its cost of sales,
instead of gain on disposal of a subsidiary which was reflected in
the previous year's financial statements.
The cash generated from Operating profit/(loss) before changes
in working capital has been adjusted by the gain on disposal of
subsidiary of US$675,000, this has now been reflected into changes
in working capital in net cash from operating activities rather
than Operating profit/(loss) before changes in working capital as
previously stated. The operating cash flows have been adjusted by
the net cash outflows on disposal, which was made up of proceeds
received in 2015 (US$1,517,000), offset by the cash and cash
equivalents disposed of (US$1,663,000), this has been reflected in
net cash from operating activities rather than net cash from
investing activities as previously stated.
The effects of restatement are disclosed below:
Group
31.12.2015
As previously
As restated stated
US$'000 US$'000
Consolidated statement of comprehensive
income
Revenue 30,323 22,096
Cost of sales (29,164) (21,612)
Other income 28,886 29,561
------------ --------------
Consolidated statement of cash
flows
Operating profit/(loss) before
changes in working capital (6,248) (6,923)
Cash generated from operations
(before interest and tax paid) 4,320 4,466
Net cash used in operating activities (11,032) (10,886)
Net cash from investing activities 9,005 8,859
------------ --------------
The comparatives in notes 3, 5 and 6 to the financial statements
were restated to reflect the above.
The restatement had no impact on the profit for the financial
year or the total assets or total equity or net cash flow for any
of the periods presented of the Group.
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 3 July 2017.
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 have 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 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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