TIDMASPL
RNS Number : 5933X
Aseana Properties Limited
30 April 2019
30 April 2019
Aseana Properties Limited
('Aseana' or 'the Company')
Full Year Results for the Year Ended 31 December 2018
Aseana Properties Limited (LSE: ASPL) is a property developer in
Malaysia and Vietnam listed on the Main Market of the London Stock
Exchange. The Company and its subsidiary undertakings (together
with the 'Group') are pleased to announce its audited results for
the year ended 31 December 2018.
Operational highlights
-- The Group fully divested Seni Mont' Kiara in 2018.
-- Construction of The RuMa Hotel and Residences ('The RuMa')
was completed and Certificate of Completion and Compliance
('CCC') was obtained on 28 September 2018. To date, The
RuMa Residences recorded approximately 68.3% sales based
on sale and purchase agreements signed. The RuMa Hotel commenced
business on 30 November 2018 with limited inventory.
-- The occupancy rate at Harbour Mall Sandakan improved to
78.1% as at 31 December 2018 (2017: 71.4%). Four Points
by Sheraton Sandakan Hotel ('FPSS') achieved an occupancy
rate of 39.2% in the year ended 31 December 2018.
-- The operation of the City International Hospital ('CIH')
improved in 2018 with outpatient and inpatient volumes increasing
by 21.6% and 22.4% respectively compared to 2017.
Financial highlights
-- The Group recognised revenue of US$33.1 million (2017: US$33.5
million (restated)). The revenue was mainly attributable
to the sale of completed units at SENI Mont' Kiara and The
RuMa Residences.
-- Net loss before taxation of US$6.8 million (2017: US$4.3
million (restated)), largely due to losses recorded by The
RuMa Hotel of US$4.2 million, which was mainly attributable
to pre-opening expenses; and finance costs of US$7.0 million
which were mainly attributable to CIH, International Healthcare
Park ('IHP'), FPSS and HMS; and operating losses at CIH
and FPSS.
-- Consolidated comprehensive loss of US$7.5 million (2017:
US$3.1 million income (restated)), which included loss arising
from foreign currency translation differences of US$1.1
million (2017: gains of US$8.7 million(restated)) due to
a weakening of Ringgit against US Dollars from RM4.0469/US$1.0
as at 31 December 2017 to RM4.1356/US$1.0 as at 31 December
2018.
-- Cash and cash equivalents stood at US$12.6 million (2017:
US$26.0 million (restated)).
-- Loss per share of US$0.0246 (2017: Loss per share of US$0.0198
(restated)) based on voting share capital.
-- Net asset value per share US$0.69 (2017: US$0.72 (restated))
based on voting share capital.
* These results have been extracted from the Annual Report and
financial statements, and do not constitute the Group's Annual
Report and financial statements for the year ended 31 December
2018. The financial statements for 2018 have been prepared under
International Financial Reporting Standards. The auditors, Crowe UK
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.
The Company also announces that its 2018 Annual Report has been
submitted to the National Storage Mechanism
(http://www.morningstar.co.uk/uk/nsm) and can be obtained on the
Company's website
(http://www.aseanaproperties.com/annual_reports.htm).
Post Year End Company Announcements
On 20 March 2019, the Company announced that Nicholas Paris had
resigned as a non-executive Director, with effect from 19 March
2019. The Board will identify a suitable replacement Director.
On 22 March 2019, the Company announced that Ireka Development
Management Sdn Bhd ('IDM'), the current Development Manager for the
Company, had on 21 March 2019, submitted a notice to terminate its
appointment under the Management Agreement. IDM is a wholly-owned
subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's
issued share capital. Unless otherwise agreed, IDM's resignation is
subject to a three-month notice period which will enable the
orderly transition of operations currently carried out by IDM to
the Company itself or to third parties. Following the termination,
IDM has indicated that it would be prepared to work with the Board
to facilitate a smooth and orderly transition of the operations of
the Company. At the request of the Board, IDM is agreeable to
extend the notice period, should the Board require more time to put
in place the effected changes.
Commenting on the Company's results and outlook, Mohammed Azlan
Hashim, Chairman of Aseana Properties Limited, said:
'The economic situation in Malaysia remains challenging due to
uncertainties in fiscal policies subsequent to the change in
government back in 2018. In Vietnam, although the country's economy
continues to be robust, it is susceptible to risks posed by the
uncertainties from the ongoing USA-China trade war. While no major
asset sales were recorded during the year under review, the Group
is continuing its efforts in disposing of its remaining assets in
an orderly and timely manner to achieve optimum value for its
shareholder.'
-Ends-
For further information:
Aseana Properties Limited Tel: +603 6411 6388
Chan Chee Kian Email: cheekian.chan@ireka.com.my
N+1 Singer Tel: 020 7496 3000
James Maxwell/ James Moat (Corporate
Finance)
Tavistock Tel: 020 7920 3150
Jeremy Carey Email: jcarey@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 52 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
The global economy started 2018 with robust and synchronised
growth. However, as the year progressed, growth trends deviated and
momentum faltered as a result of the moderating activity and
heightened risks due to elevated trade tensions between the world's
two largest economies, the United States of America ('USA') and
China. Restrictive trade measures such as tariffs and import duties
introduced by these economic powerhouses have posed more downside
risks and threatened global economic growth. Similarly, some large
emerging markets and developing economies have experienced
significant financial market stress and struggled with tighter
liquidity and capital outflow. The global economic environment is
likely to remain challenging in 2019 amid increasing interest rates
and rising trade protectionism. The World Bank has estimated global
economic growth to soften to 2.9% in 2019 amid rising downside
risks.
Against the subdued global growth backdrop, Malaysian Gross
Domestic Product ('GDP') growth moderated to 4.7% in 2018, compared
to 5.9% in 2017. The Malaysian economy experienced a period of
uncertainty subsequent to the electoral transition in 2018 as the
nation anticipated the effects of the newly implemented economic
policies by the current Government. Nevertheless, measures are
being taken by the Malaysian Government to mitigate further
economic slowdown such as improving the nation's debt servicing
cost by securing the Samurai bonds at a coupon rate of 0.65%, which
is expected to avoid a credit rating downgrade. Bank Negara
Malaysia ('BNM') has kept the nation's overnight policy rate
('OPR') at 3.25% which indicates sustained economic expansion and
resilient domestic demand, with private consumption remaining as
the main growth pillar. The Ringgit saw a mixed performance in 2018
as the local currency was dragged down by a sharp change of
sentiment in the second quarter due to adverse external factors
such as the trade tensions between USA and China as well as the
prospect of higher interest rates in the USA. However, the Ringgit
improved slightly during the last quarter of 2018 and appreciated
marginally to close at RM4.1356/US$1.00.
In contrast, the Vietnamese economy remained buoyant in 2018
with GDP growth of 7.1%, the strongest expansion since 2011,
exceeding the target of 6.8%. The strong GDP growth was driven by
strong domestic demand and a dynamic export-oriented manufacturing
sector. Foreign Direct Investment ('FDI') growth remained as one of
the primary factors for Vietnam's strong GDP growth, with a record
high of US$19.1 billion of FDI being disbursed in 2018. Low
business operating cost and strong macroeconomic growth continued
to attract foreign investments into Vietnam. However, given its
high trade openness and limited fiscal as well as monetary policy
buffer, Vietnam's economic outlook is susceptible to downside risks
and external volatilities amidst the ongoing USA-China trade war.
The country's GDP is expected to grow at a slower pace of 6.6% in
2019 as a result of the tightened monetary policies introduced by
the Vietnamese Government and the slowdown in global demand.
In parallel with the slowdown of the Malaysian economy, the
nation's property market remained soft in 2018. Imbalances observed
in the property market continued to persist, evidenced by the
increase in unsold completed units by 48.4% to 30,115 units based
on records from the Valuation and Property Services Department of
Malaysia. The recent increase in Real Property Gains Tax ('RPGT')
from 5% to 10% for foreigners and 0% to 5% for Malaysians, for
property disposals after the fifth year, could dampen the local
property market further. In a bid to boost the property sector, the
Government has proposed to implement certain measures such as
easing home financing requirements for first time home buyers,
reducing compliance cost and implementation of industrialised
building systems to reduce the cost of housing.
On the back of Vietnam's robust economic growth, the country's
property market in 2018 continued to be stable, with supply on the
rise and is expected to remain bullish in 2019. The number of
foreign investors purchasing luxury properties in Vietnam has been
on the rise following the easing of foreign ownership regulation
back in 2015. In addition, infrastructure improvements, including
the construction of Metro Line No.1 and the opening of the Ho Chi
Minh City-Long Thanh-Dau Giay Expressway, have significantly
improved the development landscape in the city's eastern area over
the last few years. However, Vietnam's property market is still
vulnerable to downside risks stemming from the new regulation set
by the State Bank of Vietnam ('SBV') which increases the risk
weighting for real estate loans from 200.0% to 250.0% from 2020
onwards which will significantly disincentivise banks from lending
to the property sector. Since January 2019, SBV has also reduced
the proportion of short-term funds available for medium and
long-term loans from 45.0 % to 40.0%, a move which will reduce
banks' liquidity and therefore hinder property developers' access
to funds.
In the financial year ended 31 December 2018, Aseana Properties
and its subsidiaries (the 'Group') registered revenue of US$33.1
million (2017: US$33.5 million (restated)), attributable to the
sale of completed units at SENI Mont' Kiara and The RuMa
Residences. The Group has adopted IFRS 15 Revenue from Contracts
with Customers with an initial application date of 1 January
2018.
The Group recorded a consolidated comprehensive loss of US$7.5
million, mainly due to losses of US$4.2 million incurred by The
RuMa Hotel which was mostly attributable to pre-opening expenses as
well as US$7.0 million of finance costs mainly attributable to City
International Hospital ('CIH'), International Healthcare Park
('IHP'), Four Points by Sheraton Sandakan Hotel ('FPSS') and
Harbour Mall Sandakan ('HMS'); and operating losses at CIH and
FPSS. The comprehensive loss included a loss on foreign currency
translation of US$1.1 million (2017: gains of US$8.7 million
(restated)), as a result of the weakened Ringgit Malaysia ('RM')
against the US Dollar from RM4.0469/US$1.00 at 31 December 2017 to
RM4.1356/US$1.00 at 31 December 2018.
Progress of the property portfolio
The sluggish property market in Malaysia has affected the sale
of properties at The RuMa Hotel and Residences ('The RuMa') in
2018. Construction of The RuMa was completed and the Certificate of
Completion and Compliance ('CCC') was obtained on 28 September
2018. Sales of The RuMa Residences to date stands at 68.3% based on
sale and purchase agreements signed. The Group will continue to
actively market the available residence units to local and overseas
buyers. Meanwhile, The RuMa Hotel commenced business on 30 November
2018 with limited inventory. Since its opening, it has received
positive reviews from local and international media including CNN,
Bloomberg and The UK's Independent newspaper. Based on the data
from Ministry of Tourism Malaysia, tourist arrivals to Malaysia in
2018 experienced a slight decrease of 0.45% as compared to the
previous year, with a total of 25.8 million tourist arrivals.
However, tourist receipts were 2.4% higher at RM84.1 billion. The
Ministry has set a target of 28.1 million tourist arrivals for
2019, while tourist receipts are targeted to increase to RM92.2
billion.
Meanwhile, tourism in Sabah showed a slight improvement with the
total number of tourist arrivals reaching 3.9 million in 2018,
which generated an estimated RM8.0 billion in tourism receipts.
Visitors from China continued to be the largest group with 0.6
million visitors during the year while the Sabah tourism board has
targeted approximately 4.0 million tourists in 2019. The
Government's decision to proceed with the Pan Borneo Highway is
expected to have a positive effect on the tourism sector in Sabah
upon its completion. It will allow travelling within Borneo to be
more accessible. FPSS recorded an occupancy level of 39.2% for year
ended 31 December 2018 and 35.2% for year 2019 to date. David
Scully was appointed as the new General Manager of FPSS on 29
February 2019; he has over 27 years' experience in the hotel
industry, across central and Southeast Asia. In the meantime,
performance of HMS has improved compared to last year with
occupancy recorded at 78.1% to date.
In Vietnam, the Group has entered into an agreement to divest a
plot of land at IHP for approximately US$6.6 million, completion of
which is still pending regulatory approval. Operational performance
at CIH for the year ended 2018 has seen a 21.6% increase in
outpatient volume and 22.4% increase in inpatient volume compared
to 2017. The operation of the angiographic intervention service
since the end of April 2018 has contributed to the overall increase
inpatient volume of the hospital. Apart from that, a new Stroke
Centre for emergency care and interventional therapies, which are
jointly managed by CIH and the founder of Vietnam Stroke
International Services, came into operation at the end of 2018.
Further information on each of the Group's properties is set out
in the Development Manager's report on pages 9 to 11.
Post Year End Company Announcements
On 20 March 2019, the Company announced that Nicholas Paris had
resigned as a non-executive Director, with effect from 19 March
2019. The Board will identify a suitable replacement Director.
On 22 March 2019, the Company announced that Ireka Development
Management Sdn Bhd ('IDM'), the current Development Manager for the
Company, had on 21 March 2019, submitted a notice to terminate its
appointment under the Management Agreement. IDM is a wholly-owned
subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's
issued share capital. Unless otherwise agreed, IDM's resignation is
subject to a three-month notice period which will enable the
orderly transition of operations currently carried out by IDM to
the Company itself or to third parties. Following the termination,
IDM has indicated that it would be prepared to work with the Board
to facilitate a smooth and orderly transition of the operations of
the Company. At the request of the Board, IDM is agreeable to
extend the notice period, should the Board require more time to put
in place the effected changes.
Outlook
2018 was a challenging year for the Malaysian property market as
a result of the post-election sentiment which affected investors'
confidence and consumer spending. For 2019, the general outlook for
the Malaysian property market seems to be one of cautious optimism,
with recovery expected in the mid to longer term. In contrast, the
property market in Vietnam has performed well in 2018 and is
expected to be sustainable with robust growth in 2019. Disposal of
the Group's remaining assets will continue to be the primary focus
of the Board.
In closing, I wish to take this opportunity to thank my Board
colleagues at Aseana Properties, our advisors, shareholders and
business associates for their continued support and guidance
throughout the year.
MOHAMMED AZLAN HASHIM
Chairman
30 April 2019
DEVELOPMENT MANAGER'S REVIEW
BUSINESS OVERVIEW
2018 was a challenging year for Aseana Properties as
uncertainties in the Malaysian and the global economy continued to
impact the performance of the Group. In Malaysia, the Group
successfully sold the remaining units at SENI and construction of
The RuMa was completed in September 2018 with the hotel commencing
business on 30 November 2018. The sluggish property market in
Malaysia has affected the sale of The RuMa Residences, which has
sold 68.3% of units to date. HMS has shown improvement in
performance against a tough economic landscape, although FPSS is
still impacted by the slow recovery of tourist to Sandakan.
In Vietnam, the economy remained resilient with robust growth
throughout 2018 notwithstanding the global economic slowdown. The
Group entered into an agreement to divest a plot of land in Vietnam
for approximately US$6.6 million during the year, the completion of
which is still pending approval from regulatory authorities. CIH
has performed well with an increased number of patients and
revenue. This was partially due to the introduction of the
angiographic intervention services which began operations in April
2018.
Looking forward to 2019, the Malaysian economy is expected to
experience modest growth underpinned by stronger domestic demand
and increasing public spending. On the property front, the market
is expected to remain challenging, in particular with high-end
residential properties. The Malaysian Government has introduced
further measures to curb property speculation and to encourage
long-term buyers by increasing the RPGT for disposal of properties
from 5% to 10% for foreigners and 0% to 5% for locals after the
fifth year of purchase. On the other hand, Vietnam's growth in 2019
is envisaged to be marginally lower than 2018 due to constricting
monetary policies and reduced global demand.
Malaysia Economic Update
Malaysia's economy grew at 4.7% in 2018, marginally above
earlier expectations due to better growth in the fourth quarter of
2018. Private sector activity was the main driver of growth, whilst
a rebound in exports of goods and services contributed towards net
export growth. However, growth was still below the stellar growth
of 5.9% in 2017. This was largely due to external economic factors
caused by the ongoing trade tensions between USA and China which
led to the introduction of various restrictive trade measures such
as tariffs and import duties on a multitude of goods. On the back
of the subdued economic conditions, the International Monetary Fund
('IMF') has projected Malaysia's 2019 GDP growth to be at 4.5% to
5.0%. Domestic demand is expected to remain the driving force of
growth amid moderating global demand. In tandem, BNM has kept the
nation's OPR at 3.25% which is intended to reduce capital outflows
and maintain the stability of the Ringgit. The Ringgit weathered
the emerging currency turmoil in 2018 despite being dragged down by
a sharp change of sentiment in the second quarter due to adverse
external factors and improved slightly against the US Dollar to
close at RM4.1356/US$1.00.
Meanwhile, as Malaysia continues the journey of restoring its
fiscal stability through the implementation of several key election
promises by the current Government, including the repeal of the
Goods and Services Tax and the review of infrastructure projects,
Fitch Ratings has affirmed the nation's Long-Term Foreign-Currency
Issuer Default Rating at 'A-' with a stable outlook. This reflects
higher growth rates supported by solid economic growth and steady
current account surpluses. Malaysia's Consumer Price Index ('CPI')
recorded a nine-year low growth of 1.0% compared to the previous
year. This was achieved as a result of the abolishment of the Goods
and Services Tax in September 2018.
Foreign investment remains a vital growth driver for the
Malaysian economy as the country aims to achieve developed nation
status in the near future. An uncertain political environment
coupled with global trade slowdown have affected foreign
investments in the region. Malaysia was not spared as it recorded
FDI net inflow of RM32.6 billion in 2018, a decrease of
approximately 19.3% from the prior year. Renegotiations of a number
of mega infrastructure projects such as the East Coast Rail Line
and High-Speed Rail have had an adverse effect on the country's
relationship with its largest trading partner, China. However,
despite these difficulties, Malaysia-China bilateral trade volume
recorded a high of RM443.0 billion in 2018. In addition, Malaysia's
trade surplus widened to RM120.3 billion in 2018, its largest in
recent years.
Vietnam Economic Update
In contrast to the subdued global economy, Vietnam remains as
one of the strongest performing nations in the region with
impressive growth during the year. The country's economy expanded
by 7.1% in 2018, the highest rate since 2011 and exceeding the
Government's initial target of 6.7%, driven by robust domestic
demand, increased exports, manufacturing and foreign investment.
The Vietnamese Government is taking advantage of the USA-China
trade tensions to boost the nation's profile as a manufacturing and
export powerhouse. In addition, the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership ('CPTPP'), the
eleven-country trade pact, took effect in Vietnam in January 2019.
According to Vietnam's Ministry of Industry and Trade, CPTPP is
expected to create as many as 26,000 jobs by 2035 and also amplify
the country's GDP growth.
Although registered FDI slipped by 1.2% to US$35.46 billion in
2018 compared to the prior year, disbursed FDI jumped to a record
high of US$19.1 billion, representing a year-on-year increase of
9.1%. Processing and manufacturing industries accounted for 46.7%
of all registered FDI capital in 2018, with US$16.58 billion
invested across 1,065 newly granted projects. The Vietnamese
Government has astutely negotiated numerous free-trade agreements
('FTA'), integrating its economy more closely with key trading
partners across the world. The country is part of the Asean FTA and
is close to concluding an FTA with the European Union. These FTAs
have improved the country's access to foreign markets and improved
competitiveness. Meanwhile, the Vietnamese Government's efforts to
strengthen macroeconomic stability have proven to be successful as
the country's core inflation rate was contained at a manageable
rate of 1.5% in 2018. CPI rose to 3.6%, below the 4.0% target, as a
result of the Government's efforts in curbing prices. CPI growth
was mainly driven by upward adjustment of prices in healthcare and
education services.
The State Bank of Vietnam ('SBV') continued to introduce
measures to tighten monetary policies which have resulted in growth
of only 14.0% in total outstanding credit in 2018, the lowest rate
since 2014. Moody's Investors Service ('Moody's') has recently
changed its 12 to 18-month outlook on the Vietnamese banking system
from positive to Ba3 on the back of robust economic growth which
will support the banks' operating environment and improve asset
quality. Moody's expects the Vietnamese credit growth in 2019 to
remain at approximately 14.0% due to the slow progress of raising
new capital by state-owned banks and also SBV's efforts in
maintaining control over credit growth.
PORTFOLIO REVIEW
MALAYSIA
Property Market Review
The Malaysian property market remained lacklustre in 2018,
partly due to the 14(th) General Election. Uncertainties and
apprehension pre and post-election drove many investors and buyers
to the side-lines. Although investors and homebuyers are expected
to slowly return to the market in 2019 due to improved confidence
in the newly elected government, with a clearer picture of
Government policies, the current property market continues to
experience challenges such as a property oversupply, a tight
lending environment and the affordability of property. The slight
upward revision in the rates of the RPGT and stamp duty as
announced in Budget 2019 are unlikely to have significant impact on
the high-end condominium sector. However, it may impact the
acquisition and disposal costs in property transactions.
In the retail property market, the average occupancy rates
remained stable at 78.2% in 2018 due to the diminishing amount of
new retail spaces coming onto the market as compared to the prior
year. However, the retail market is expected to remain challenging
for the coming year in tandem with deteriorating consumer sentiment
caused by the dull economic environment and rising costs of living.
This is evidenced by the drop of 10.7 points to 96.8 points in the
Consumer Sentiment Index, in the last quarter of 2018, measured by
the Malaysian Institute of Economic Research
Meanwhile, growth in Malaysia's hospitality sector suffered a
setback in 2018. Tourist arrivals in 2018 fell short of its target
for the eighth consecutive year to a total of 25.8 million,
compared to the target of 26.4 million. This was also a 0.4%
decline from the 26.0 million recorded in 2017. In Sabah, the
tourism sector remained a major contributor to its State economy as
tourist receipts in 2018 generated approximately RM8.0 billion
(US$1.9 million). Sabah welcomed a total of 3.9 million visitors in
2018, representing an increase of 5.3% compared to 2017. The
largest group of tourists came from China, with 0.6 million
visitors throughout the year. The decision to proceed with the Pan
Borneo Highway is expected to positively impact the tourism sector
in Sabah as travelling within the region becomes more
accessible.
Aseana Properties currently has four investments in Malaysia.
These investments consist of residential properties, hotels and a
retail mall:
á The RuMa Hotel and Residences
This project is strategically located in the heart of Kuala
Lumpur City Centre ('KLCC') on Jalan Kia Peng, near landmarks such
as the world-famous Petronas Twin Towers, KLCC Convention Centre,
Suria KLCC shopping mall and KLCC Central Park. The RuMa Hotel and
Residences is owned by Aseana Properties 70.0% and Ireka
Corporation Berhad 30.0%. 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 is 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.
á Harbour Mall Sandakan
The occupancy rate at HMS is currently recorded at 78.1%.
Notable tenants include Lotus Five Star Cinema, Popular Bookstore,
Levi's, The Body Shop, Watsons and McDonalds. The outlook for HMS
is promising, as leasing initiatives were undertaken to increase
the occupancy rate to above 85% this year.
HMS is funded by medium term notes amounting to approximately
US$23.8 million (RM100.0 million) as at 31 December 2018.
á Four Points by Sheraton Sandakan Hotel
FPSS recorded an occupancy rate of 39.2% for 2018, with an
Average Daily Room Rate of approximately US$56 (RM232). Sandakan's
hotel occupancy has been greatly affected by on-going negative
travel advisories issued by some countries in response to previous
cases of kidnapping for ransom along the coast of Eastern Sabah.
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. David Scully was appointed as the new
General Manager of FPSS on 29 February 2019 and has over 27 years'
experience in the hotel industry, across central and Southeast
Asia. In addition, the on-going expansion of the runway at Sandakan
Airport is expected to attract more commercial airlines and charter
flights, in particular from China, to fly directly to Sandakan in
the future.
á Kota Kinabalu Seafront resort & residences
Aseana Properties acquired three adjoining plots of land
totalling approximately 80 acres in September 2008 with the
intention of developing a resort hotel, resort villas and resort
homes at the seaside area in Kota Kinabalu, Sabah. In 2012, the
Board decided not to proceed with the development and to dispose of
the land instead. Marketing efforts are on-going and the Group is
currently working with various consultants/agents for the disposal
of the lands to potential buyers.
VIETNAM
Property Market Review
The property market in Vietnam witnessed a stable development
during the period under review on the back of continued strong
economic growth, rapid urbanisation and increased foreign
investments into the property sector as well as the fast-growing
number of local middle-class buyers. The real estate sector lured
nearly US$6.6 billion in foreign investment, doubling from the same
period last year and accounted for 18.5% of the country's total
foreign investment. According to the Real Estate Association of
Vietnam, inventory sank to a low of US$1.0 billion as of November
2018, down from the peak of US$105.6 billion in the first quarter
of 2013.
In tandem with Vietnam's buoyant economic growth, the country's
residential property market recorded strong demand throughout 2018.
In Ho Chi Minh City ('HCMC'), a total of 31,083 condominium units
were sold and 30,792 units were launched during the year.
Meanwhile, office markets in both HCMC and Hanoi continued to
favour landlords as supply was scarce while demand remained strong.
In 2018, HCMC's overall office market occupancy rate increased to
more than 96.0% while occupancy in Hanoi's office market stood at
92.0%. The year was also an exceptional year for the co-working
space market in HCMC and Hanoi. Total supply of flexible workspace
in HCMC has surged up to 37,780 square metres gross floor area,
increasing by 109.0% compared to 2017. Correspondingly, competition
in the Vietnamese retail market continued to intensify, underpinned
by massive expansion plans from domestic and foreign retailers.
Retailers from across Asia are flooding into Vietnam as the country
loosens its restrictions on foreign companies, racing to bring
convenience stores and supermarkets to an economy dominated by
small businesses. The overall shopping centres and departmental
stores' occupancy rate remained stable at 90.0% in HCMC and 88.0%
in Hanoi.
The hospitality sector emerged as one of Vietnam's most
lucrative sectors in its real estate industry in 2018, drawing
attention from international and local developers as well as
investors. The tourism industry of Vietnam contributed
approximately US$26.8 billion in tourism revenue during 2018 with a
total of 15.5 million tourist arrivals, an increase of 19.9%
compared to the year before. Further to that, Vietnam won a series
of international awards, recognising it as a safe and friendly
destination and was crowned 'Asia's Leading Destination' for the
first time at the 2018 World Travel Awards,
With robust economic development and better living conditions,
Vietnam witnessed an increasing demand for higher quality products
and services, including medical care. To fulfil demand, modernised
hospitals and clinics have been growing in numbers in Hanoi and
HCMC to accommodate a majority of the Vietnamese middle-class. In
tandem with the overall policy to transform the nation into a
market economy, the Vietnamese Government has been encouraging
foreign investors to engage in the health-related sector. According
to the Business Monitor International ('BMI'), Vietnam's healthcare
expenditure in 2017 reached US$16.1 billion, representing 7.5% of
the country's GDP. BMI forecasts that healthcare spending will grow
to US$22.7 billion in 2021, a compound annual growth rate of
approximately 12.5% from 2017 to 2021.
Aseana Properties now has two investments in Vietnam:-
á International Healthcare Park
IHP is a planned mixed development on 37.5 hectares of land
comprising private hospitals, mixed commercial, hospitality and
residential developments. It is located in the Binh Tan District,
close to District 5 (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
local partner, Hoa Lam Group holds a significant minority stake
together with a consortium of investors from Singapore, Malaysia
and Vietnam. A total of 19 plots of land were approved for
development and Land Use Right ('LUR') was issued and paid for a
69-year lease. Of the 19 plots, 6 plots are dedicated to hospital
and related functions. To date, 8 plots have been developed or
divested. Apart from the international-class City International
Hospital, IHP also boasts the largest AEON retail mall in Ho Chi
Minh City.
US$14.6 million of loan facilities to part finance the land and
working capital remained outstanding as at 31 December 2018.
á City International Hospital
CIH is a modern private care tertiary hospital conforming to
international standards with 320 beds (Phase 1: 168 beds). In April
2018, the hospital introduced the angiographic intervention service
which has improved the overall patient volume of the hospital.
Additionally, a new Stroke Centre for emergency care and
interventional therapies, which is jointly managed by CIH and the
founder of Vietnam Stroke International Services, came into
operation at the end of 2018.
The development of City International Hospital is funded by
total facilities of US$41.0 million as at 31 December 2018.
OUTLOOK
The Board and the Manager remain focused and committed on
divesting the remaining investments in its portfolio and enhancing
the value of its operating assets through diligent management. The
Malaysian economy in particular, is expected to face another
difficult year in 2019 as it is being challenged by the on-going
domestic market adjustments and rising external headwinds.
Recalibration of fiscal policies and structural reforms by the
Malaysian Government will continue to put pressure on the nation's
economic performance. In addition, Vietnam's economy is expected to
grow at a slower pace as a result of tightened monetary policies as
well as the slowdown in global demand despite its broad
macroeconomic stability.
On a personal note, I would like to take this opportunity to
extend my warmest gratitude to the Board of Directors of Aseana
Properties, our advisors, shareholders and business associates for
their unrelenting support and guidance throughout the year.
LAI VOON HON
President
Ireka Development Management Sdn. Bhd.
Development Manager
30 April 2019
PERFORMANCE SUMMARY
Year ended Year ended
31 December 2018 31 December 2017
(Restated)
--------------------------------------- ------------------ ------------------
Total Returns since listing
Ordinary share price -45.75% -47.00%
FTSE All-share index 10.30% 26.71%
FTSE 350 Real Estate Index -50.03% -39.43%
One Year Returns
Ordinary share price 2.36% 1.92%
FTSE All-share index -12.95% 9.00%
FTSE 350 Real Estate Index -17.49% 10.34%
Capital Values
Total assets less current liabilities
(US$ million) 186.60 178.29
Net asset value per share (US$) 0.69 0.72
Ordinary share price (US$) 0.54 0.53
FTSE 350 Real Estate Index 468.71 568.05
Debt-to-equity ratio
Debt-to-equity ratio (1) 90.82% 82.72%
Net debt-to-equity ratio (2) 81.54% 64.53%
(Loss)/ Earnings Per Share
Earnings per ordinary share - basic
(US cents) -2.46 -1.98
- diluted (US cents) -2.46 -1.98
Notes:
(1) Debt-to-equity ratio = (Total Borrowings / Total Equity) x
100%
(2) Net debt-to-equity ratio = (Total Borrowings less Cash and
Cash Equivalents / Total Equity) x 100%
FINANCIAL REVIEW
INTRODUCTION
The Group recorded a consolidated comprehensive loss of US$7.5
million for the financial year ended 31 December 2018, mainly due
to losses incurred by The RuMa Hotel and finance costs attributable
to its four operating assets.
STATEMENT OF COMPREHENSIVE INCOME
The Group recognised revenue of US$33.1 million, compared to
US$33.5 million (restated) for the previous financial year. The
revenue was mainly attributable to the sale of completed units at
SENI Mont' Kiara and The RuMa Residences. The Group adopted and
applied IFRS 15 Revenue from Contracts with Customers
retrospectively. The adjustments to revenue were made for property
development activities of The RuMa Hotel Suites and Residences (the
'RuMa Project'), where no revenue was previously recognised under
IFRIC 15 Ð Agreements for Construction of Real Estate, which
prescribes that revenue to be recognised only when the properties
are completed and occupancy permits are issued. With the adoption
of IFRS 15, which requires the revenue from the development of the
RuMa Project to be recognised over the contract period. In respect
of the revenue from the sale of the The RuMa Hotel Suites, the
Group also has a contractual arrangement with the buyer for the
leaseback of the hotel suites to operate for the hotel operation.
Under this sale and leaseback arrangement, which prescribes that
control of the hotel suites has yet to be transferred to the buyers
of the hotel suites. Hence, revenue of US$38 million is deferred
until such time that
control is passed to the buyers of the hotel suites.
The Group recorded a net loss before taxation of US$6.8 million
compared to a net loss before taxation of US$4.3 million (restated)
for the previous financial year. The losses were largely due to The
RuMa Hotel of US$4.2 million which mostly was attributable to
pre-opening expenses; and finance costs of US$7.0 million which
mainly were attributable to City International Hospital,
International Healthcare Park, Four Points by Sheraton Sandakan
Hotel and Harbour Mall Sandakan; and operating losses of City
International Hospital and Four Points by Sheraton Sandakan
Hotel.
Net loss attributable to equity holders of the parent company
was US$4.9 million, compared to a net loss of US$3.9 million
(restated) for the previous financial year. Tax income for the year
at US$0.4 million (2017: Tax expenses of US$1.2 million
(restated)).
The consolidated comprehensive loss was US$7.5 million (2017:
comprehensive income of US$3.1 million (restated)), which included
a loss of US$1.1 million (2017: gains of US$8.7 million(restated))
arising from foreign currency translation differences for foreign
operations due to a weakening of the Ringgit against the US Dollar,
during the year.
Basic and diluted loss per share were both US cents 2.46 (2017:
US cents 1.98 (restated)).
STATEMENT OF FINANCIAL POSITION
Total assets were US$307.5 million, compared to US$304.1 million
(restated) for the previous year, representing an increase of
US$3.4 million.
Total liabilities were US$172.1 million, compared to US$161.3
million (restated) for the previous year, representing an increase
of US$10.8 million. This was mainly due to an increase of US$20.2
million in trade and other payables.
Net Asset Value per share was US$ 0.69 (31 December 2017: US$
0.72 (restated)).
CASH FLOW AND FUNDING
Cash flow used in operations before interest and tax paid was
US$1.9 million, compared to cash flow generated from operation of
US$15.7 (restated) million for the previous year.
The Group generated net cash flow of US$1.1 million from
investing activities, compared to US$2.1 million in the previous
year.
Changes in cash flow in 2018 were positive at US$ 0.1million,
compared to the negative cash flow of US$7.1 million in 2017.
The borrowing of the Group undertakings to fund property
development projects and for working capital. As at 31 December
2018, the Group's gross borrowings stood at US$85 million (31
December 2017: US$91.8 million). Net debt-to-equity ratio was 53.0%
(31 December 2017: 46.0%(restated)).
Finance income was US$1.24 million for financial year ended 31
December 2018 (2017: US$0.39million). Finance costs were US$7.0
million (2017: US$12.4 million (restated)), which were mostly
incurred by City International Hospital, International Healthcare
Park, Four Points by Sheraton Sandakan Hotel and Harbour Mall
Sandakan.
event after statement of financial position date
On 22 March 2019, the Company announced that Ireka Development
Management Sdn Bhd ('IDM'), the current Development Manager for the
Company, had on 21 March 2019, submitted a notice to terminate its
appointment under the Management Agreement. IDM is a whollyowned
subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's
issued share capital. Unless otherwise agreed, IDM's resignation is
subject to a three-month notice period which will enable the
orderly transition of operations currently carried out by IDM to
the Company itself or to third parties. Following the termination,
IDM has indicated that it is be prepared to work with the Board to
facilitate a smooth and orderly transition of the operations of the
Company. At the request of the Board, IDM is agreeable to extend
the notice period, should the Board require more time to put in
place the effected changes.
DIVID
No dividend was declared or paid in financial years 2018 and
2017.
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
30 April 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 DECEMBER 2018
2018 2017
Continuing activities Notes US$'000 US$'000
Restated*
----------------------------------------- ------ --------- -----------
Revenue 3 33,054 33,548
Cost of sales 5 (24,601) (20,448)
----------------------------------------- ------ --------- -----------
Gross profit 8,453 13,100
Other income 6 19,149 14,176
Administrative expenses (1,027) (927)
Foreign exchange (loss)/gain 7 (1,353) 3,419
Management fees 8 (1,460) (3,129)
Marketing expenses (671) (496)
Other operating expenses (24,095) (18,417)
----------------------------------------- ------ --------- -----------
Operating (loss)/profit (1,004) 7,726
--------- -----------
Finance income 1,242 392
Finance costs (7,034) (12,444)
--------- -----------
Net finance costs 9 (5,792) (12,052)
Net loss before taxation 10 (6,796) (4,326)
Taxation 11 390 (1,207)
----------------------------------------- ------ --------- -----------
Loss for the year (6,406) (5,533)
----------------------------------------- ------ --------- -----------
Other comprehensive (loss)/income, net of
tax items
that are or may be reclassified subsequently
to profit
or loss
Foreign currency translation differences
for foreign operations (1,082) 8,671
Total other comprehensive (loss)/income
for the year 12 (1,082) 8,671
----------------------------------------- ------ --------- -----------
Total comprehensive (loss)/income for the
year (7,488) 3,138
------------------------------------------------- --------- -----------
* See Note 28
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 DECEMBER 2018 (cont'd)
2018 2017
Continuing activities Notes US$'000 US$'000
Restated*
------------------------------------------------ ------ -------- -----------
Loss attributable to:
Equity holders of the parent company 13 (4,885) (3,937)
Non-controlling interests (1,521) (1,596)
------------------------------------------------ ------ -------- -----------
Loss for the year (6,406) (5,533)
------------------------------------------------ ------ -------- -----------
Total comprehensive (loss)/income attributable
to:
Equity holders of the parent company (6,154) 4,629
Non-controlling interests (1,334) (1,491)
------------------------------------------------ ------ -------- -----------
Total comprehensive (loss)/income
for the year (7,488) 3,138
------------------------------------------------ ------ -------- -----------
Loss per share
Basic and diluted (US cents) 13 (2.46) (1.98)
------------------------------ --- -------- -------
* See Note 28
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS at 31 DECEMBER 2018
31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Notes Restated* Restated*
------------------------------- ------ ------------ ------------ -----------
Non-current assets
Property, plant and equipment 678 663 743
Intangible assets 14 4,148 4,201 7,081
Deferred tax assets 15 5,186 5,058 1,606
------------------------------- ------ ------------ ------------ -----------
Total non-current assets 10,012 9,922 9,430
------------------------------- ------ ------------ ------------ -----------
Current assets
Inventories 16 267,160 250,173 234,920
Trade and other receivables 16,991 17,394 14,136
Prepayments 635 293 1,093
Current tax assets 157 372 660
Cash and cash equivalents 12,573 25,984 26,650
Total current assets 297,516 294,216 277,459
------------------------------- ------ ------------ ------------ -----------
TOTAL ASSETS 307,528 304,138 286,889
------------------------------- ------ ------------ ------------ -----------
Equity
Share capital 17 10,601 10,601 10,601
Share premium 18 208,925 208,925 218,926
Capital redemption reserve 19 1,899 1,899 1,899
Translation reserve (22,265) (20,996) (29,562)
Accumulated losses (62,786) (57,898) (53,422)
------------------------------- ------ ------------ ------------ -----------
Shareholders' equity 136,374 142,531 148,442
Non-controlling interests (937) 331 1,031
------------------------------- ------ ------------ ------------ -----------
Total equity 135,437 142,862 149,473
------------------------------- ------ ------------ ------------ -----------
* See Note 28
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS at 31 DECEMBER 2018 (cont'd)
Notes 31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Restated* Restated*
------------------------------- ------- ------------ ------------ -----------
Non-current liabilities
Trade and other payable 37,976 26,392 19,004
Loans and borrowings 21 13,188 54,572 46,405
Total non-current liabilities 51,164 80,964 65,409
------------------------------- ------- ------------ ------------ -----------
Current liabilities
Trade and other payables 34,128 25,552 20,143
Amount due to non-controlling
interests 20 13,194 13,400 12,573
Loans and borrowings 21 48,084 12,882 10,807
Medium term notes 22 23,761 24,324 26,343
Current tax liabilities 1,760 4,154 2,141
------------------------------- ------- ------------ ------------ -----------
Total current liabilities 120,927 80,312 72,007
------------------------------- ------- ------------ ------------ -----------
Total liabilities 172,091 161,276 137,416
------------------------------- ------- ------------ ------------ -----------
TOTAL EQUITY AND LIABILITIES 307,528 304,138 286,889
------------------------------- ------- ------------ ------------ -----------
* See Note 28
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 december 2018
Total
Equity
Attributable
to Equity
Redeemable Capital Holders Non-
Ordinary Management Share Redemption Translation Accumulated of the Controlling Total
Shares Shares Premium Reserve Reserve Losses Parent Interests Equity
Consolidated US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------- ------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
Balance at 1
January 2017 10,601 -* 218,926 1,899 (29,142) (58,922) 143,362 (1,148) 142,214
Impact of change
in accounting
policy - - - - (420) 5,500 5,080 2,179 7,259
----------------- ------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
Adjusted balance
at 1 January
2017 10,601 - 218,926 1,899 (29,562) (53,422) 148,442 1,031 149,473
Share buy back
(Note 18) - - (10,001) - - - (10,001) - (10,001)
Changes in
ownership
interests
in subsidiaries
(Note 23) - - - - - (539) (539) 539 -
Non-controlling
interests
contribution - - - - - - - 252 252
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
Restated loss
for the year - - - - - (3,937) (3,937) (1,596) (5,533)
Restated total
other
comprehensive
income for the
year - - - - 8,566 - 8,566 105 8,671
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
Restated total
comprehensive
income/(loss)
for the year - - - - 8,566 (3,937) 4,629 (1,491) 3,138
Restated balance
at 31 December
2017/ 1 January
2018 10,601 - 208,925 1,899 (20,996) (57,898) 142,531 331 142,862
Changes in
ownership
interests
in subsidiaries
(Note 23) - - - - - (3) (3) 3 -
Non-controlling
interests
contribution - - - - - - - 63 63
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
Loss for the
year - - - - - (4,885) (4,885) (1,521) (6,406)
Total other
comprehensive
loss for the
year - - - - (1,269) - (1,269) 187 (1,082)
------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
Total
comprehensive
loss
for the year - - - - (1,269) (4,885) (6,154) (1,334) (7,488)
Shareholders'
equity at
31 December
2018 10,601 -* 208,925 1,899 (22,265) (62,786) 136,374 (937) 135,437
----------------- ------------ ----------- --------- ------------ ------------- ------------- ------------- ------------- -------------------
*represents 2 management shares at US$0.05 each
The notes to the financial statements form an integral part of
the financial statements.
CONSOLIDATED Statement OF Cash FlowS
For the year ended 31 december 2018
2018 2017
Notes US$'000 US$'000
Restated*
Cash Flows from Operating Activities
Net loss before taxation (6,796) (4,326)
Finance income (1,242) (392)
Finance costs 7,034 12,444
Unrealised foreign exchange loss/(gain) 1,382 (2,973)
Write down/Impairment of goodwill 53 2,880
Depreciation of property, plant and equipment 92 84
Operating profit before changes in working
capital 523 7,717
Changes in working capital:
Increase in inventories (22,243) (2,847)
(Increase)/Decrease in trade and other receivables
and prepayments (987) 14,295
Increase/(Decrease) in trade and other payables 20,768 (3,509)
------------------------------------------------------------- --------- -----------
Cash (used in)/from operations (1,939) 15,656
Interest paid (7,034) (12,444)
Tax paid (1,955) (2,606)
------------------------------------------------------------- --------- -----------
Net cash (used in)/from operating activities (10,928) 606
------------------------------------------------------------- --------- -----------
Cash Flows from Investing Activities
Proceeds from disposal of available-for-sale
investments (iii) - 893
Purchase of property, plant and equipment (121) (5)
Proceeds from disposal of an indirectly held
subsidiary - 800
Finance income received 1,242 392
Net cash from investing activities 1,121 2,080
------------------------------------------------------------- --------- -----------
* See Note 28
CONSOLIDATED Statement OF Cash FlowS
For the year ended 31 december 2018 (cont'd)
2018 2017
Notes US$'000 US$'000
Restated*
Cash Flows from Financing Activities
Advances from non-controlling interests 82 327
Issuance of ordinary shares of subsidiaries
to non-controlling interests (ii) 63 252
Purchase of own share - (10,001)
Repayment of loans and borrowings (24,197) (14,773)
Repayment of medium term notes - (4,615)
Drawdown of loans and borrowings 20,308 25,038
Net decrease in pledged deposits for loans
and borrowings and Medium Term Notes 13,623 7,923
Deposits subject to restriction in use (iv) - (13,867)
---------------------------------------------- ------- --------- -----------
Net cash from/(used in) financing activities 9,879 (9,716)
------------------------------------------------------- --------- -----------
Net changes in cash and cash equivalents
during the year 72 (7,030)
Effect of changes in exchange rates 497 (315)
Cash and cash equivalents at the beginning
of the year 9,294 16,639
Cash and cash equivalents at the end of the
year (i) 9,863 9,294
---------------------------------------------- ------- --------- -----------
* See Note 28
(i) Cash and Cash Equivalents
Cash and cash equivalents included in the consolidated statement
of cash flows comprise the following consolidated statement of
financial position amounts:
31 December 31 December
2018 2017
Notes US$'000 US$'000
----------------------------------------- ---------- -------- ------------
Cash and bank balances 9,372 10,343
Short term bank deposits 3,201 15,641
----------------------------------------- ---------------- ------------
12,573 25,984
Less Deposits subject to restriction in
use (iv) - (13,867)
Less: Deposits pledged (v) (2,710) (2,823)
----------------------------------------- ---------- -------- ---------------
Cash and cash equivalents 9,863 9,294
----------------------------------------- -------------------- ------------
(ii) During the financial year, US$63,000 (2017: US$252,000) of
ordinary shares of subsidiaries were issued to non-controlling
shareholders which was satisfied via cash consideration.
(iii) In the 2016, the Group disposed the entire balance
representing 9,784,653 shares in Nam Long for a consideration of
US$9,848,000 of which US$8,955,000 was received in 2016. The
balance consideration of US$893,000 was received in previous
financial year.
(iv) Included in short term bank deposits in 2017 is
US$13,867,000 obtained from the term loan granted to City
International Hospital Company Ltd ('CIH') by Vietbank during the
year where the utilisation of this balance is restricted solely for
the purpose of refinancing the existing syndicated term loan under
CIH.
(v) Included in short term bank deposits and cash and bank
balance is US$2,710,000 (2017: US$2,823,000) pledged for loans and
borrowings and Medium Term Notes of the Group.
The notes to the financial statements form an integral part of
the financial statements.
Notes to the Financial Statements
1 General Information
Aseana Properties Limited (the 'Company') was incorporated in
Jersey as a limited liability par value company. The Company's
registered office is 12 Castle Street, St Helier, Jersey JE2
3RT.
The consolidated financial statements comprise the financial
information of the Company and its subsidiary undertakings
(together the 'Group').
The principal activities of the Group are development of upscale
residential and hospitality projects, sale of development land and
operation of hotel, mall and hospital in Malaysia and Vietnam.
The financial statements are presented in US Dollar (US$), which
is the Group's presentation currency. All financial information is
presented in US$ and has been rounded to the nearest thousand
(US$'000), unless otherwise stated.
2 BASIS OF PREPARATION
The financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by European Union ('EU'), and IFRIC
interpretations issued, and effective, or issued and early adopted,
at the date of these financial statements.
As permitted by Companies (Jersey) Law 1991 only the
consolidated financial statements are presented.
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.
2.1 Going concern
The financial statements have been prepared on the historical
cost basis and on the assumption that the Group are going
concerns.
The Group has prepared and considered prospective financial
information based on assumptions and events that may occur for at
least 12 months from the date of approval of the financial
statements and the possible actions to be taken by the Group.
Prospective financial information includes the Group's profit and
cash flow forecasts for the ongoing projects. In preparing the cash
flow forecasts, the Directors have considered the availability of
cash, adequacy of bank loans and medium term notes and also the
refinancing of the medium term notes (as described in Notes 21 and
22) and the Directors believe that the business will be able to
realise its assets and discharge its liabilities in the normal
course of business for at least 12 months from the date of the
approval of these financial statements.
At 31 December 2018, one of the Group's subsidiary undertakings
had not complied with the Debt to Equity ratio covenant in respect
of a loan of US$27.8million. In accordance with the term set out in
the Facility Agreement, in the event of non-compliance of the
financial covenant, the loan shall be immediately due and payable
together with accrued interest thereon upon notification by the
lenders. The group's subsidiary undertaking has requested a waiver
from the lenders in respect of this non-compliance. At the date of
approving these financial statements, one of the lenders has
approved the waiver and approval from the other lender has not been
received. These conditions indicate the existence of a material
uncertainty which may cast significant doubt about the Group and
the Company's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the
Group and Company were unable to continue as a going concern.
The Directors expect to raise sufficient funds to finance the
completion of the Group's existing projects and the necessary
working capital via the disposal of its development lands in
Vietnam and East Malaysia, its existing units of condominium
inventories in West Malaysia, and through the disposals of the City
International Hospital, the Four Points Sheraton Sandakan Hotel and
the Harbour Mall Sandakan.
Should the planned disposals of the assets not materialise, or
are delayed, the Directors expect to 'roll-over' the medium term
notes which are due to expire in the next 12 months, given that the
notes are 'AAA' rated and secured by two completed inventories of
the Group with carrying amount of US$79.92 million as at 31
December 2018. Included in the terms of the medium term notes
programme is an option for the Group to refinance the notes, as and
when they expire. This option to refinance is available until
2021.
The Group also has significant borrowings in Vietnam secured by
the City International Hospital and development lands. The
Directors expect to repay the short term portion of the borrowings
via sale of land in Vietnam. The remaining scheduled installments
are due in 2019 and 2020.
The forecasts also incorporate current payables, committed
expenditure and other future expected expenditure, along with sales
of all completed inventories and disposal of all development
lands.
2.1.1 December 2019 Resolution
When the Group was launched in 2007, the Board considered it
desirable that Shareholders should have an opportunity to review
the future of the Group at appropriate intervals.
At a general meeting of the Company held on 23 April 2018,
Shareholders voted in favour of the Board's proposals to continue
with the Group's divestment investment policy to enable a
realisation of the Group'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 Group's investments. Shareholders also
supported the Board's recommendation to vote against the
Discontinuation Resolution proposed at the general meeting, in
order to allow a policy of orderly realisation of the Group's
assets over a period of up to eighteen months in order to maximise
the value of the Group's assets and returns to Shareholders, both
up to and upon the eventual liquidation of the Company.
To the extent that the Group has not disposed of all of its
assets by 31 December 2019, Shareholders will be provided with an
opportunity to review the future of the Group, which would include
the option for shareholders to vote for the continuation of the
Company. The Board shall procure that, at a general meeting of the
Company, an ordinary resolution will be proposed to the effect that
the Company shall cease to continue as presently constituted (the
'December 2019 Resolution'). If, at any such meeting, such
resolution is passed, the Board shall within four months of such
meeting, convene a general meeting of the Company at which a
special resolution shall be proposed requiring the Company to be
wound up voluntarily. In connection with, or at the same time as,
the proposal that the Company be wound up voluntarily the Board
shall be entitled to make proposals for the reconstruction of the
Group.
It is necessary for the Board to determine if the Company and
the Group should be continued as a going concern. The Board has
therefore requested its two largest shareholders (holding
collectively approximately 41% of the Company's shares) to state
how they might vote in relation to the December 2019
Resolution.
While the two shareholders did not disclose how they might vote
in relation to the December 2019 Resolution, the two shareholders
have expressed their view that:
o The Group is already in a divestment mode and is not making
new investments.
o Divestment of the Group's assets is best carried out by the
Board itself in a solvent orderly manner and with the assistance of
appropriately experienced professionals.
o If necessary, and should the Board decide that it does not
have the necessary experience, the Board may bring in new people
(including additional Directors) with the relevant experience.
o The shareholders may not have control over the appointment of
the liquidator and the liquidator will be heavily influenced by the
interest of the Group's creditors instead of its shareholders.
o At this stage, they see no circumstances where it is better to
rely on the liquidator to divest the assets of the Group rather
than the Board doing so itself in an orderly manner.
o Hence, should the December 2019 Resolution be passed, these
shareholders expect the Board to come up with new ideas on the
continuing divestment of the Group's assets.
o Until substantially all the Group's assets have been orderly
disposed of and its proceeds returned to shareholders, they have
expressed that they will not vote in favour of a voluntary winding
up of the Company as doing so will be detrimental to the interests
of the Company and its shareholders.
As a special resolution requires the approval of the Company's
shareholders by a two-third majority, the Board believes that the
possibility of the Company being put in voluntarily winding-up
within the next twelve months to be remote. For this reason, the
Company and the Group continue to adopt the going concern basis in
preparing the financial statements.
In the event the continuation vote is not passed, the directors
do not consider this will have a material impact on the carrying
value and classification of the group's net assets as the
discontinuance provides for an orderly realisation process.
2.1.2 Statement of Compliance
A number of new standards and amendments to standards and
interpretations have been issued by International Accounting
Standards Board but are not yet effective and in some cases have
not yet been adopted by the EU. The Directors do not expect that
the adoption of these standards will have a material impact on the
financial statements of the Group in future periods, except as
mentioned below:
IFRS 16, Leases
IFRS 16 replaces, the guidance in IAS 17, Leases, IFRIC 4,
Determining whether an Arrangement contains a Lease, SIC-15,
Operating Leases Ð Incentives and SIC-27, Evaluating the Substance
of Transactions Involving the Legal Form of Lease. IFRS 16 is
likely to require the recognition of the material operating lease
commitments on the Group's balance sheet as assets and the
recognition of a corresponding liability. At 31 December 2018, the
Group does not have any lease which is material and long term,
Directors do not therefore anticipate the adoption of IFRS 16 will
have any impact on the Group's consolidated financial
statements.
During the year, the Group adopted the following new standards,
amendments and interpretations with a date of initial application
of 1 January 2018. As a result of the changes in the Group's
accounting policies, prior year financial statements had to be
restated. As explained in Note 28, the impact of these adopted
standards is described as follow:
(b) IFRS 9, Financial instruments
IFRS 9 addresses the classification, measurement and recognition
of financial assets and financial liabilities. It simplifies the
existing categories of financial instruments, introduces an
expected credit loss model and redefines the criteria required for
hedge effectiveness. The adoption of IFRS 9, there is no material
impact on the Group's financial information for the year ended 31
December 2018 and its comparative.
(c) IFRS 15, Revenue from contracts with customers
The Group adopted IFRS 15 Revenue from Contracts with Customers
with a date of initial application of 1 January 2018. The Group
applied IFRS 15 retrospectively and has restated comparatives
financial information as disclosed in Note 28. The adjustments to
revenue are made for property development activities of The RuMa
Hotel Suites and Residences, where no revenue was previously
recognised under IFRIC 15 Ð Agreements for Construction of Real
Estate, which prescribes that revenue be recognised only when the
properties are completed and occupancy permits are issued.
Under the new rule of IFRS 15, revenue from the development of
The RuMa Hotel Suites and Residences is recognised as and when the
control of the asset is transferred to the buyer and it is probable
that the Group will collect the consideration to which it will be
entitled in exchange for the asset that will be transferred to the
buyer. In light of the terms of the contract and the laws that
apply to the contract, control of the asset is transferred over
time as the Group's performance does not create an asset with an
alternative use to the Group and the Group has an enforceable right
to payment for performance completed to date.
In respect of the sale of The RuMa Hotel Suites, the Group
entered into agreements with the buyer for a sale and leaseback of
the hotel suites for hotel operation. Under this arrangement, the
Group considered the buyer did not obtain any control of the hotel
suite as the buyer has limited ability to direct the use of, and
obtain substantially all of the remaining benefits from the asset,
even though the buyer may have physical possession of the
asset.
On that basis, the control of the hotel suites, under sale and
leaseback arrangement, has yet to be transferred to the buyer and
transfer of the asset is not a sale. Accordingly, no revenue from
the sale of The RuMa Hotel Suites was recognised over the contract
period.
3 revenue AND SEGmeNTAL information
The Group's operating revenue for the year was mainly
attributable to the sale of completed units in Malaysia.
Income earned from hotel, mall and hospital operations are
included in other income in line with management's intention to
dispose of the properties.
3.1 Revenue recognised during the year as follows:
2018 2017
US$'000
US$'000 Restated
--------------------------------------------- --- -------- ----------
Sales of land held for property development - 13,132
Sale of development properties 27,650 14,450
Sale of completed units 5,404 5,966
33,054 33,548
------------------------------------------------- -------- ----------
Timing of revenue recognition
Properties transferred
at
a point in time 5,404 19,098
Properties transferred
over time 27,650 14,450
--------------------------------- ------- --------
33,054 33,548
------------------------------- ------- --------
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 Ð investing activities;
(ii) Ireka Land Sdn. Bhd. Ð develops Tiffani ('Tiffani') by i-ZEN;
(iii) ICSD Ventures Sdn. Bhd. Ð owns and operates Harbour Mall
Sandakan ('HMS') and Four Points by Sheraton Sandakan Hotel
('FPSS');
(iv) Amatir Resources Sdn. Bhd. Ð develops SENI Mont' Kiara ('SENI');
(v) Urban DNA Sdn. Bhd.Ð develops The RuMa Hotel and Residences ('The Ruma'); and
(vi) Hoa Lam Shangri-La Healthcare Group Ð master developer of
International Healthcare Park ('IHP'); owns and operates the City
International Hospital ('CIH').
Other non-reportable segments comprise the Group's development
projects. None of these segments meets any of the quantitative
thresholds for determining reportable segments in 2018 and
2017.
Information regarding the operations of each reportable segment
is in Notes 3.3. The Executive Management monitors the operating
results of each segment for the purpose of performance assessments
and making decisions on resource allocation. Performance is based
on segment gross profit/(loss) and profit/(loss) before taxation,
which the Executive Management believes are the most relevant in
evaluating the results relative to other entities in the industry.
Segment assets and liabilities are presented 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 Ð ended 31 December 2018
Investment Ireka ICSD Amatir The RuMa Urban Hoa Lam Total
Holding Land Sdn. Ventures Resources Hotel KL DNA Shangri-La
Companies Bhd. Sdn. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Healthcare
Bhd. Group
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- ----------
Segment
(loss)/profit
before
taxation (2,475) (32) (1,339) 820 (4,199) 6,118 (4,107) (5,214)
--------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- ----------
Included in
the measure
of segment
(loss)/profit
are:
Revenue - - - 5,404 - 27,650 - 33,054
Other income
from hotel
operations - - 3,727 - 109 - - 3,836
Other income
from mall
operations - - 1,767 - - - - 1,767
Other income
from hospital
operations - - - - - - 12,695 12,695
Disposal of
intangible
assets - - - (53) - - - (53)
Marketing
expenses - - - - - (671) - (671)
Expenses from
hotel
operations - - (4,169) - (593) - - (4,762)
Expenses from
mall
operations - - (1,395) - - - - (1,395)
Expenses from
hospital
operations - - - - - - (12,989) (12,989)
Depreciation
of property,
plant and
equipment - - - - (14) - (78) (92)
Finance costs - - (1,494) (135) - (156) (5,249) (7,034)
Finance income - 1 80 158 - 18 985 1,242
--------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- ----------
Segment assets 275 501 82,219 16,987 737 104,498 88,531 293,748
--------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- ----------
Segment
liabilities 450 182 2,400 9,513 659 23,240 64,793 101,237
--------------- ------------ ----------- ---------- ----------- ----------- ----------- ----------- ----------
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
------------------------------------ ---------
Total loss for reportable segments (5,214)
Other non-reportable segments (1,582)
Consolidated loss before taxation (6,796)
------------------------------------ ---------
3.3 Analysis of the group's reportable operating segments are as follows:-
Operating Segments Ð ended 31 December 2017
Investment Ireka ICSD Ventures Amatir Urban Hoa Lam Total
Holding Land Sdn. Sdn. Bhd. Resources DNA Shangri-La
Companies Bhd. Sdn. Bhd. Sdn. Bhd. Healthcare
Group
(Restated) US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- ------------ ------------ --------------- ------------ ------------ ------------ ----------
Segment
profit/(loss)
before
taxation 1,077 (432) (1,554) 193 (728) (2,852) (4,296)
------------------- ------------ ------------ --------------- ------------ ------------ ------------ ----------
Included in the
measure
of segment
profit/(loss)
are:
Revenue - 935 - 5,031 14,450 13,132 33,548
Other income from
hotel
operations - - 3,842 - - - 3,842
Other income from
mall
operations - - 1,440 - - - 1,440
Other income from
hospital
operations - - - - - 8,234 8,234
Disposal of
intangible
assets - - - (53) - (2,827) (2,880)
Marketing expenses - - - (8) (488) - (496)
Expenses from
hotel operations - - (3,939) - - - (3,939)
Expenses from mall
operations - - (1,488) - - - (1,488)
Expenses from
hospital
operations - - - - - (10,491) (10,491)
Depreciation of
property,
plant and
equipment - - - - - (84) (84)
Finance costs - - (1,713) - (6,700) (4,031) (12,444)
Finance income 6 2 236 12 23 113 392
------------------- ------------ ------------ --------------- ------------ ------------ ------------ ----------
Segment assets 735 523 83,525 15,438 84,825 104,829 289,875
------------------- ------------ ------------ --------------- ------------ ------------ ------------ ----------
Segment
liabilities 166 88 2,480 3,374 44,998 77,244 128,350
------------------- ------------ ------------ --------------- ------------ ------------ ------------ ----------
*
Reconciliation of reportable segment revenues, profit or loss,
assets and liabilities and other material items
Profit or loss US$'000
------------------------------------ --------
Total loss for reportable segments (4,296)
Other non-reportable segments (30)
Consolidated loss before taxation (4,326)
------------------------------------ --------
2018 Additions
US$'000 to
Finance Segment Segment non-current
Revenue Depreciation Finance costs income assets liabilities assets
---------------- -------- ------------- -------------- ------------- -------------- ------------- -------------
Total
reportable
segment 33,054 (92) (7,034) 1,242 293,748 101,237 -
Other
non-reportable
segments - - - - 13,780 70,854 121
---------------- -------- ------------- -------------- ------------- -------------- ------------- -------------
Consolidated
total 33,054 (92) (7,034) 1,242 307,528 172,091 121
---------------- -------- ------------- -------------- ------------- -------------- ------------- -------------
2017 Additions
(Restated) to
US$'000 Finance Segment Segment non-current
Revenue Depreciation Finance costs income assets liabilities assets
---------------- -------- ------------- -------------- ------------- -------------- ------------- -------------
Total
reportable
segment 33,548 (84) (12,444) 392 289,875 128,350 -
Other
non-reportable
segments - - - - 14,263 32,926 5
---------------- -------- ------------- -------------- ------------- -------------- ------------- -------------
Consolidated
total 33,548 (84) (12,444) 392 304,138 161,276 5
---------------- -------- ------------- -------------- ------------- -------------- ------------- -------------
Geographical Information Ð ended 31 December 2018
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 33,054 - 33,054
Non-current assets 5,925 4,087 10,012
-------------------- --------- -------- -------------
In the financial year ended 31 December 2018, no single customer
exceeded 10% of the Group's total revenue.
Geographical Information Ð ended 31 December 2017 (Restated)
Malaysia Vietnam Consolidated
US$'000 US$'000 US$'000
-------------------- --------- -------- -------------
Revenue 20,416 13,132 33,548
Non-current assets 5,744 4,178 9,922
-------------------- --------- -------- -------------
Included in the revenue of the Group for the financial year
ended 31 December 2017 is revenue from the sale of two plots of
land (Lot D2 and D3) at the International Healthcare Park
('IHP').
For the year ended 31 December 2017, two customers exceeded 10%
of the Group's total revenue as follows:
US$'000 Segments
--------------------------------- -------- -------------------
Tien Phat Consultancy Investment Hoa Lam Shangri-La
Co. Ltd 5,399 Healthcare Group
Hoa Lam Shangri-La
Tri Hanh Consultancy Co. Ltd 7,733 Healthcare Group
--------------------------------- -------- -------------------
4 SEASONALITY
The Group's business operations are not materially affected by
seasonal factors for the period under review.
5 Cost of Sales
2018 2017
US$'000 US$'000
Restated
Direct costs attributable to:
Completed units (Note 16) 24,548 12,277
Sales of land held for property development
(Note 16) - 5,291
Disposal/Impairment of intangible assets
(Note 14) 53 2,880
24,601 20,448
--------------------------------------------- -------- ----------
Included in the cost of sales of the Group for the last
financial year is sale of two plots of land (Lot D2 and D3).
6 Other Income
2018 2017
US$'000 US$'000
Rental income 236 260
Other income from hotel operations (a) 3,836 3,842
Other income from mall operations (b) 1,767 1,440
Other income from hospital operations (c) 12,695 8,234
Sundry income 615 400
19,149 14,176
------------------------------------------- -------- ---------
(a) Other income from hotel operations
The income in 2018 and 2017 relates to the hotel operations of
FPSS which is owned by a subsidiary of the Company, ICSD Ventures
Sdn. Bhd.. The income earned from hotel operations is included in
other income in line with management's intention to dispose of the
hotel.
(b) Other income from mall operations
The income relates to the operation of HMS which is owned by a
subsidiary of the Company, ICSD Ventures Sdn. Bhd.. The income
earned from mall operations is included in other income in line
with management's intention to dispose of the mall.
(c) Other income from hospital operations
The income relates to the operation of CIH which is owned by a
subsidiary of the Company, City International Hospital Company
Limited. The income earned from hospital operations is included in
other income in line with management's intention to dispose of the
hospital.
7 Foreign exchange (LOSS)/GAIN
2018 2017
US$'000 US$'000
----------------------------------------- -------- --------
Foreign exchange (loss)/gain comprises:
Realised foreign exchange gain 29 446
Unrealised foreign exchange (loss)/gain (1,382) 2,973
----------------------------------------- -------- --------
(1,353) 3,419
----------------------------------------- -------- --------
8 Management Fees
2018 2017
US$'000 US$'000
------------------ -------- --------
Management fees 1,460 3,129
------------------ -------- --------
From January 2017 to April 2018, 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 Development Manager is entitled to a performance fee calculated
at 20% of the out performance 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.
From 1 May 2018, the management fees payable to the Manager
equal to US$75,000 per month, payable in advance, in respect of the
period to 30 April 2019, following which the base fee payable to
the Manager shall reduce to US$50,000 per month, again payable in
advance; The management fees were allocated to the subsidiaries and
the Company based on where the service was provided.
On 22 March 2019, the Company announced that Ireka Development
Management Sdn. Bhd. ('IDM'), the current Development Manager for
the Company, had on 21 March 2019, submitted a notice to terminate
its appointment under the Management Agreement. IDM is a
wholly-owned subsidiary of Ireka Corporation Berhad which holds
23.07% of ASPL's issued share capital. Unless otherwise agreed,
IDM's resignation is subject to a three-month notice period which
will enable the orderly transition of operations currently carried
out by IDM to the Company itself or to third parties. Following the
termination, IDM has indicated that it is be prepared to work with
the Board to facilitate a smooth and orderly transition of the
operations of the Company.
9 Finance (Costs)/ INCOME
2018 2017
US$'000 US$'000
Restated
Interest income from banks 1,242 392
Agency fees (59) (34)
Interest on bank loans (5,540) (10,731)
Interest on medium term notes (1,435) (1,679)
------------------------------- -------- ----------
(5,792) (12,052)
------------------------------- -------- ----------
10 net Loss BEFORE TAXATION
2018 2017
US$'000 US$'000
------------------------------------------------------- -------- ---------
Net loss before taxation is stated after charging/(crediting):
Auditor's remuneration 190 202
Directors' fees/emoluments 145 235
Depreciation of property, plant and equipment 92 84
Expenses of hotel operations 4,763 3,939
Expenses of mall operations 1,395 1,488
Expenses of hospital operations 12,989 10,491
Unrealised foreign exchange loss/(gain) 1,382 (2,973)
Realised foreign exchange gain (29) (446)
Disposal/impairment of intangible assets 53 2,880
Loss on disposal of an indirectly held subsidiary - 1,298
Tax services 11 13
11 TAXATION
2018 2017
US$'000
US$'000 Restated
Current taxÐ Current year 2,275 4,215
Ð Prior year (2,422) 104
Deferred tax creditÐ Current year (243) (3,628)
Ð Prior year - 516
------------------------------------------------ --------------------- ------------------
Total tax (income)/expense for the
year (390) 1,207
------------------------------------------------ --------------------- ------------------
The numerical reconciliation between the income tax
(income)/expense and the product of accounting results multiplied
by the applicable tax rate is computed as follows:
2018 2017
US$'000 US$'000
Restated
--------------------------------------------------- -------- ---------
Net loss before taxation (6,796) (4,326)
Income tax at a rate of 24% (2017:24%) (1,631) (1,038)
Add :
Tax effect of expenses not deductible in
determining taxable profit 4,137 2,794
Current year losses and other tax benefits
for which no deferred tax asset was recognised 1,927 1,140
Tax effect of different tax rates in subsidiaries 948 708
Less :
Tax effect of income not taxable in determining
taxable profit (3,348) (3,017)
(Over)/Under provision in respect of prior
years (2,423) 620
--------------------------------------------------- -------- ---------
Total tax (income)/expense for the year (390) 1,207
--------------------------------------------------- -------- ---------
The applicable corporate tax rate in Malaysia is 24% (2017:
24%).
The Company is treated as a tax resident of Jersey for the
purpose of Jersey tax laws and is subject to a tax rate of 0%.
The applicable corporate tax rates in Singapore and Vietnam are
17% and 20% (2017: 17% and 20%) respectively.
A subsidiary of the Group, CIH is granted preferential corporate
tax rate of 10% for the results of the hospital operations. The
preferential income tax is given by the government of Vietnam due
to the subsidiary's involvement in the healthcare industry.
A Goods and Services Tax was introduced in Jersey in May 2008.
The Company has been registered as an International Services Entity
so it does not have to charge or pay local GST. The cost for this
registration is GBP200 per annum.
12 OTHER COMPRENHENSIVE (LOSS)/income
Items that are or may be reclassified 2018 2017
subsequently to profit or loss, net of US$'000 US$'000
tax
------------------------------------------------- --------- ---------
Foreign currency translation differences
for foreign operations
(Losses)/Gains arising during the year (1,082) 9,752
Reclassification to profit or loss on
disposal of land held for property development - 61
Reclassification to profit or loss on
disposal of an indirectly held subsidiary - (1,142)
(1,082) 8,671
------------------------------------------------- --------- ---------
13 LOSS Per Share
Basic and diluted loss per ordinary share
The calculation of basic and diluted loss per ordinary share for
the year ended 31 December 2018 was based on the loss attributable
to equity holders of the parent and a weighted average number of
ordinary shares outstanding, calculated as below:
2018 2017
Restated
----------------------------------------- ------------- -------------
Loss attributable to equity holders of
the parent (US$000) (4,885) (3,937)
Weighted average number of shares 198,691,000 199,019,784
Loss per share
Basic and diluted (US cents) (2.46) (1.98)
----------------------------------------- ------------- -------------
Weighted average number of ordinary shares
2018 2017
-------------------------------------------- ------------- -------------
Issued ordinary shares at 1 January 198,691,002 212,025,002
Effect of share buy back (Note 18) - (13,005,218)
------------- -------------
Weighted average number of ordinary shares
at
31 December 198,691,002 199,019,784
------------- -------------
The diluted loss per share was not applicable as there were no
dilutive potential ordinary shares outstanding at the end of the
reporting period.
14 Intangible Assets
Licence Contracts
and Related
Relationships Goodwill Total
US$'000 US$'000 US$'000
--------------------------------- ------------------ --------- --------
Cost
At 1 January 2017/ 31 December
2017 / 31 December 2018 10,695 6,479 17,174
--------------------------------- ------------------ --------- --------
Accumulated impairment
At 1 January 2017 4,349 5,744 10,093
Disposals 2,827 53 2,880
--------------------------------- ------------------ --------- --------
At 31 December 2017 / 1 January
2018 7,176 5,797 12,973
Disposals - 53 53
--------------------------------- ------------------ --------- --------
At 31 December 2018 7,176 5,850 13,026
--------------------------------- ------------------ --------- --------
Carrying amounts
At 31 December 2017 3,519 682 4,201
--------------------------------- ------------------ --------- --------
At 31 December 2018 3,519 629 4,148
--------------------------------- ------------------ --------- --------
The licence contracts and related relationships represent the
Land Use Rights ('LUR') for the Group's lands in Vietnam. LUR
represents the rights to develop the IHP within a lease period
ending on 9 July 2077. In 2017, the Group disposed of its
undeveloped land in the IHP Lot D2 and D3 to third party
purchasers.
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:
31 December 31 December
2018 2017
US$'000 US$'000
---------------------------------------------- ------- ------------ ------------
Licence contracts and related relationships
International Healthcare Park 3,519 3,519
---------------------------------------------- ------- ------------ ------------
Goodwill
SENI Mont' Kiara 79 132
Sandakan Harbour Square 550 550
--------------------------------------------------- ---------------- --------------
629 682
---- ---------------- --------------
The recoverable amount of licence contracts and related
relationships has been tested based on the net realisable value of
the LUR owned by the subsidiaries. The key assumption used is the
expected market value of the LUR. The Group believes that any
reasonably possible changes in the above key assumptions applied is
not likely to materially cause the recoverable amount to be lower
than its carrying amounts.
The recoverable amount of goodwill has been tested by reference
to underlying profitability of the ongoing operations of the
developments using discounted cash flow projections (refer to Note
16).
Intangible assets of US$53,000 (31 December 2017: US$53,000) and
US$Nil (31 December 2017: US$2,827,000) in relation to SENI and IHP
projects respectively were written down as certain components from
the developments were sold during the year.
15 Deferred Tax Assets
31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Restated Restated
------------------------------- ------------ ------------ ----------
At 1 January 5,058 1,606 1,337
Exchange adjustments (114) 352 (84)
Deferred tax credit relating
to origination of
temporary differences during
the year 242 3,100 353
At 31 December 5,186 5,058 1,606
------------------------------- ------------ ------------ ----------
The deferred tax assets comprise:
31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Restated Restated
--------------------------------- ------------ ------------ ----------
Taxable temporary differences
between accounting profit
and taxable profit of property
development units sold 5,186 5,058 1,606
At 31 December 5,186 5,058 1,606
--------------------------------- ------------ ------------ ----------
Deferred tax assets have not been recognised in respect of
unused tax losses of US$79,450,000 (31 December 2017:
US$71,935,000; 1 January 2017: US$65,440,000) and other tax
benefits which includes temporary differences between net carrying
amount and tax written down value of property, plant and equipment,
accrual of construction costs and other deductible temporary
differences of US$5,410,000 (31 December 2017: US$4,834,000; 1
January 2017: US$4,460,000) which are available for offset against
future taxable profits. Deferred tax assets have not been
recognised due to the uncertainty of the recovery of the
losses.
16 INVENTORIES
31 December 31 December 1 January
2018 2017 2017
Notes US$'000 US$'000 US$'000
Restated Restated
--------------------------- ------- ------------ ------------ ----------
Land held for property
development (a) 18,674 19,021 22,514
Work-in-progress (b) - 66,744 52,669
Stock of completed units,
at cost (c) 247,937 163,880 159,334
Consumables 549 528 403
At 31 December 267,160 250,173 234,920
------------------------------------ ------------ ------------ ----------
Carrying amount of inventories
pledged as
security for Loans and borrowings
and
Medium Term Notes 154,168 156,857 148,427
-------- --------- --------
(a) Land held for property development
31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Restated Restated
At 1 January 19,021 22,514 23,223
Add :
Exchange adjustments (418) 925 (604)
Additions 71 873 86
At 31 December 18,674 24,312 22,705
------------------------------------ ------------ ------------ ----------
Less: Costs recognised
as expenses in the consolidated
statement of comprehensive
income during the year
(Note 5) - (5,291) (191)
------------------------------------ ------------ ------------ ----------
At 31 December 18,674 19,021 22,514
------------------------------------ ------------ ------------ ----------
(b) Work-in-progress
31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Restated Restated
-------------------------------- ------------ ------------ ----------
At 1 January 66,744 52,669 53,812
Transfer to stock of completed
units (71,683) - -
Add :
Exchange adjustments (1,432) 6,809 (3,967)
Work-in-progress incurred
during the year 6,371 7,266 2,824
At 31 December 71,683 66,744 52,669
-------------------------------- ------------ ------------ ----------
Included in previous financial year are the borrowing costs
capitalised at interest rate ranging from 5.50% to 10.00% per annum
of US$0.2 million.
(c) Stock of completed units, at cost
31 December 31 December 1 January
2018 2017 2017
US$'000 US$'000 US$'000
Restated Restated
-------------------------------- ------------ ------------ ----------
At 1 January 163,880 159,334 230,436
Transfer from work-in-progress 71,683 - -
Less :
Exchange adjustments 36,922 16,823 6,102
Costs recognised as expenses
in the consolidated statement
of comprehensive income
during the year (Note
5) (24,548) (12,277) (74,796)
Impairment of inventory - - (2,408)
At 31 December 247,937 163,880 159,334
-------------------------------- ------------ ------------ ----------
The net realisable value of completed units have been tested by
reference to underlying profitability of the ongoing operations of
the developments using discounted cash flow projections and/or
comparison method with the similar properties within the local
market which provides an approximation of the estimated selling
price that is expected to be achieved in the ordinary course of
business.
Included in the stock of completed units are SENI units 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 recoverable amount
US$41,243,000 of FPSS was determined to approximate with its
carrying amount.
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 2018 and the 10 years projection of FPSS;
(2) The occupancy rate of FPSS will improve to 73% in 2027 which
is when the hotel's operations are expected to stabilise;
(3) Average daily rates of the hotel will improve to US$102 in
2027 which is when the hotel's operations are expected to
stabilise;
(4) Projected gross margin reflects the average historical gross
margin, adjusted for projected market and economic conditions and
internal resources efficiency; and
(5) Pre-tax discount rate of 9% was applied in discounting the
cash flows. The discount rates 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$5,077,000)/US$6,286,000;
(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$967,000/(US$1,209,000);
and
(c) an increase/(decrease) of 5% in average daily rates
throughout the entire projection term used would have
increased/(decreased) the recoverable amount by approximately
US$3,385,000/(US$3,627,000).
Harbour Mall Sandakan ('HMS')
The recoverable amount of HMS was determined based on a
valuation by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$42,795,000 of HMS was determined to approximate with its
carrying value.
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) Outgoing rate projected at 43.8% against gross annual
income;
(3) Capitalisation rate assumed at 4%; and
(4) Capitalisation period of 83 years covering the period of HMS
achieving optimum operations to expiration of the title term.
Sensitivity analysis
The above estimates are sensitive in the following key
areas:
(a) an increase/(decrease) of 0.25% in capitalisation rate used
would have (decreased)/increased the recoverable amount by
approximately (US$2,176,000)/US$2,418,000;
(b) an increase/(decrease) of 1% in optimum occupancy rate
throughout the entire projection term used would have
increased/(decreased) the recoverable amount by approximately
US$484,000/(US$484,000); and
(c) an increase/(decrease) of 5% in average rental rate
throughout the entire projection term used would have
increased/(decreased) the recoverable amount by approximately
US$1,693,000/(US$1,934,000).
City International Hospital ('CIH')
The recoverable amount US$75,000,000 (2017: US$75,200,000) of
CIH was determined based on a valuation by an external, independent
valuer with appropriate recognised professional qualification. The
recoverable amount of CIH was determined to be higher than its
carrying amount.
The valuation of CIH was adopted from the results of discounted
cash flow approach as calculated by discounting the future cash
flows expected to be generated from the continuing operations of
CIH. The followings are the key assumptions:
(1) Cash flows were projected based on past actual operating
results from 2015 to 2018 and references to the 5 years budget of
CIH, as adjusted by the valuer;
(2) Projected revenue growth reflects the increase in average
historical growth figures, adjusted for projected market and
economic conditions and internal resources efficiency. Revenue is
projected to grow at a compound annual growth rate of 8% from 2019
to 2023;
(3) Pre-tax discount rate of 12% was applied in discounting the
cash flows. The discount rates take into the prevailing market
condition of the hospital industry in Vietnam, development time
frame and scale of the property; and
(4) Terminal yield rate of 10% was applied to reflect the
uncertainty and risk associated with remaining lease term of the
asset.
The RuMa Hotel and Residences ('The RuMa')
The recoverable amount of The RuMa was determined based on a
valuation by an external, independent valuer with appropriate
recognised professional qualification. The recoverable amount
US$127,430,000 of The RuMa was determined to be higher than its
carrying amount and no impairment losses in relation to the
inventory amount was recognised.
The valuation of The RuMa Hotel was determined by discounting
the future cash flows expected to be generated from the continuing
operations of The RuMa and was based on the following key
assumptions:
(1) Cash flows were projected based on the 10 years projection
of The RuMa Hotel;
(2) The occupancy rate of The RuMa Hotel will improve to 78% in
2025 which is when the hotel's operations are expected to
stabilise;
(3) Average daily rates of the hotel will improve to US$227 in
2025 which is when the hotel's operations are expected to
stabilise;
(4) Projected gross margin reflects the industry average
historical gross margin, adjusted for projected market and economic
conditions and internal resources efficiency; and
(5) Pre-tax discount rate of 9% was applied in discounting the
cash flows. The discount rate takes into the prevailing trend of
the hotel industry in Malaysia.
The valuation of The RuMa Residences was determined based on the
Comparison Approach as the sole method of valuation.
17 Share Capital
Number Number
of shares Amount of shares Amount
2018 2018 2017 2017
'000 US$'000 '000 US$'000
------------------------------ ----------- --------- ----------- ---------
Authorised Share Capital
Ordinary shares of US$0.05
each 2,000,000 100,000 2,000,000 100,000
Management shares of US$0.05 - * - *
each - * - *
------------------------------ ----------- --------- ----------- ---------
2,000,000 100,000 2,000,000 100,000
------------------------------ ----------- --------- ----------- ---------
Issued Share Capital
Ordinary shares of US$0.05
each 212,025 10,601 212,025 10,601
Management shares of US$0.05 - # - #
each - # - #
------------------------------ -------- ------- -------- -------
212,025 10,601 212,025 10,601
------------------------------ -------- ------- -------- -------
*represents 10 management shares at US$0.05 each
# represents 2 management shares at US$0.05 each
In 2015, the shareholders of the Company approved the creation
and issuance of management shares by the Company as well as a
compulsory redemption mechanism that was proposed by the Board.
The Company increased its authorised share capital from
US$100,000,000 to US$100,000,000.50 by the creation of 10
management shares of US$0.05 each for cash.
The Company also increased its issued and paid-up share capital
from US$10,601,250 to US$10,601,250.10 by way of an allotment of 2
new management shares of US$0.05 each at par via cash
consideration.
In accordance with the compulsory redemption scheme, the
Company's ordinary shares were converted into redeemable ordinary
shares.
The ordinary shares and the management shares shall have
attached thereto the rights and privileges, and shall be subjected
to the limitations and restrictions, as are set out below:
(a) Distribution of dividend:
(i) The ordinary shares carry the right to receive all the
profits of the Company available for distribution by way of interim
or final dividend at such times as the Directors may determine from
time to time; and
(ii) The management shares carry no right to receive dividends
out of any profits of the Company.
(b) Winding-up or return of capital:
(i) The holders of the management shares shall be paid an amount
equal to the paid-up capital on such management shares; and
(ii) Subsequent to the payment to holders of the management
shares, the holders of the ordinary shares shall be repaid the
surplus assets of the Company available for distribution.
(c) Voting rights:
(i) The holders of the ordinary shares and management shares
shall have the right to receive notice of and to attend and vote at
general meetings of the Company; and
(ii) Each holder of ordinary shares and management shares being
present in person or by a duly authorised representative (if a
corporation) at a meeting shall upon a show of hands have one vote
and upon a poll each such holder present in person or by proxy or
by a duly authorised representative (if a corporation) shall have
one vote in respect of every full paid share held by him.
18 Share Premium
Share premium represents the excess of proceeds raised on the
issuance of shares over the nominal value of those shares. The
costs incurred in issuing shares were deducted from the share
premium.
31 December 31 December
2018 2017
US$'000 US$'000
------------------- ------------ ------------
At 1 January 208,926 218,926
Treasury shares - (10,001)
As at 31 December 208,926 208,926
-------------------- ------------ ------------
In previous financial year, the Shareholders of the Company at
an Extraordinary General Meeting approved a proposal to return
US$10,000,500 or US$0.75 per share for 13,334,000 shares
representing 6.29 per cent of the Company's share capital to
Shareholders. The capital distribution was completed on 10 January
2017 and the repurchased shares of 13,334,000 are currently held as
Treasury Shares. The issued and paid up share capital of the
Company remains unchanged at 212,025,002.
19 CAPITAL REDEMPTION RESERVE
The capital redemption reserve was incurred after the Company
cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per
share in 2009 and 2013 respectively.
20 AMOUNT DUE TO NON-CONTROLLING INTERESTS
31 December 31 December
2018 2017
US$'000 US$'000
----------------------------------------------------------- ------------ ------------
Minority Shareholder of Bumiraya Impian
Sdn. Bhd.:
* Global Evergroup Sdn. Bhd. 1,199 1,225
Minority Shareholders of Hoa Lam Services
Co Ltd:
* Tran Thi Lam 1,718 1,756
* Tri Hanh Consultancy Co Ltd 3,869 3,954
* Hoa Lam Development Investment Joint Stock Company 2,586 2,560
* Duong Ngoc Hoa 222 227
Minority Shareholder of The RuMa Hotel
KL Sdn. Bhd.:
* Ireka Corporation Berhad 2 2
Minority Shareholder of Urban DNA Sdn.
Bhd.:
* Ireka Corporation Berhad 3,598 3,676
13,194 13,400
----------------------------------------------------------- ------------ ------------
The current amount due to non-controlling interests amounting to
US$13,194,000 (31 December 2017: US$13,400,000) is unsecured,
interest free and repayable on demand.
21 Loans AND BORROWINGS
31 December 31 December
2018 2017
US$'000 US$'000
------------- ------------ ------------
Non-current
Bank loans 13,188 54,572
13,188 54,572
------------- ------------ ------------
Current
Bank loans 48,084 12,882
48,084 12,882
------------- ------------ ------------
61,272 67,454
------------- ------------ ------------
The effective interest rates on the bank loans for the year
ranged from 5.55% to 11.30% (31 December 2017: 5.35% to 10.50%) per
annum.
Borrowings are denominated in Ringgit Malaysia, United State
Dollars and Vietnam Dong.
Bank loans are repayable by monthly, quarterly or semi-annually
instalments.
Bank loans are secured by land held for property development,
work-in-progress, operating assets of the Group, pledged deposits
and some by the corporate guarantee of the Company.
At 31 December 2018, one of the Group's subsidiary undertakings
had not complied with the Debt to Equity ratio covenant in respect
of a loan of US$27.8million. In accordance with the term set out in
the Facility Agreement, in the event of non-compliance of the
financial covenant, the loan shall be immediately due and payable
together with accrued interest thereon upon notification by the
lenders. The group's subsidiary undertaking has requested a waiver
from the lenders in respect of this non-compliance. At the date of
approving these financial statements, one of the lenders has
approved the waiver and approval from the other lender has not been
received. Consequently, the non-current portion of US23.5m of Bank
loan has been reclassified to current liabilities as at 31 December
2018
Reconciliation of movement of loan and borrowings to cash flows
arising from financing activities:
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2018 of loan of loan movements 2018
US$'000 US$'000 US$'000 US$'000 US$'000
Bank loans 67,454 20,308 (24,197) (2,293) 61,272
Total 67,454 20,308 (24,197) (2,293) 61,272
----------- --------- ---------- ----------- ----------
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2017 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
Bank loans 57,209 25,038 (14,770) (23) 67,454
Finance lease liabilities 3 - (3) - -
----------- --------- ---------- ----------- ----------
Total 57,212 25,038 (14,773) (23) 67,454
----------- --------- ---------- ----------- ----------
22 MEDIUM TERM NOTES
31 December 31 December
2018 2017
US$'000 US$'000
-------------------------------------- ------------ ------------
Outstanding medium term notes 24,180 24,710
Net transaction costs (419) (386)
Less:
Repayment due within twelve months * (23,761) (24,324)
Repayment due after twelve months - -
-------------------------------------- ------------ ------------
Reconciliation of movement of medium term notes to cash flows
arising from financing activities:
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2018 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------- ----------- --------- ---------- ----------- ----------
Medium Term Notes 24,324 - - (563) 23,761
----------- --------- ---------- ----------- ----------
As at Foreign As at 31
1 January Drawdown Repayment exchange December
2017 of loan of loan movements 2017
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------- ----------- --------- ---------- ----------- ----------
Medium Term Notes 26,343 - (4,615) 2,596 24,324
----------- --------- ---------- ----------- ----------
* Includes net transaction costs in relation to medium term
notes due within twelve months of US$0.42 million (31 December
2017: US$0.39 million).
The medium term notes ('MTNs') were issued pursuant to a
programme with a tenure of ten (10) years from the first issue date
of the notes. The MTNs were issued by a subsidiary, to fund two
development projects known as Sandakan Harbour Square and Aloft
Kuala Lumpur Sentral ('AKLS') in Malaysia.
In 2016, the Group completed the sale of the AKLS. The net
adjusted price value for the sale of AKLS, which included the sale
of the entire issued share capital of ASPL M3B Limited and Iringan
Flora Sdn. Bhd. (the 'Aloft Companies') were used to redeem the MTN
Series 2 and Series 3. Following the completion of the disposal of
AKLS, US$95.27 million (RM394.0 million) of MTN associated with the
AKLS (Series 3) and the Four Points Sheraton Sandakan (Series 2)
were repaid on 19 August 2016. The charges in relation to AKLS was
also discharged following the completion of the disposal.
In 2017, Silver Sparrow Berhad ('SSB') obtained consent from the
lenders to utilise proceeds of US$4.84 million in the Sales
Proceeds Account and Debt Service Reserve Account to partially
redeem the MTNs in November 2017. SSB also secured a 'roll-over'
for the remaining MTNs of US$23.7mil which is due on 10 December
2018 (now repayable on 10 December 2019). The MTNs are rated
AAA.
The weighted average interest rate of the MTN was 6.00% per
annum at the statement of financial position date. The effective
interest rates of the MTN and their outstanding amounts are as
follows:
Maturity Dates Interest rate US$'000
% per annum
---------------------- ------------------ -------------- -----------
Series 1 Tranche FGI 10 December 2019 6.15 10,397
Series 1 Tranche BG 10 December 2019 6.15 13,783
24,180
----------------------------------------- -------------- -----------
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 the Company;
(vi) letter of undertaking from the Company to provide financial
and other forms of support to ICSD Ventures Sdn. Bhd. to finance
any cost overruns associated with the development of the Sandakan
Harbour Square;
(vii) assignment of all its present and future rights, interest
and benefits under the ICSD Ventures Sdn. Bhd.'s Put Option
Agreements in favor of Danajamin, Malayan Banking Berhad and OCBC
Bank (Malaysia) Berhad (collectively as 'the guarantors') where
once exercised, the sale and purchase of HMS and FPSS shall take
place in accordance with the provision of the Put Option Agreement;
and the proceeds from HMS and FPSS will be utilised to repay the
MTNs;
(viii) assignment over the disbursement account, revenue
account, operating account, sale proceed account, debt service
reserve account and sinking fund account of Silver Sparrow Berhad,
revenue account of ICSD Ventures Sdn. Bhd. and escrow account of
Ireka Land Sdn. Bhd.;
(ix) assignment of all ICSD Ventures Sdn. Bhd.'s present and
future rights, title, interest and benefits in and under the
insurance policies; and
(x) a first legal charge over all the shares of Silver Sparrow
Berhad, ICSD Ventures Sdn. Bhd. and any dividends, distributions
and entitlements.
23 change in equity interest in subsidiaries
During the financial year, the Group increased its equity
interest in Shangri-La Healthcare Investment Pte Ltd ('SHIPL') from
81.58% to 81.59% (2017: 81.50% to 81.58%) arising from an issue of
new shares in the subsidiary for cash consideration of US$0.525
million (2017: US$1.5 million). Consequently, the Company's
effective equity interest in Hoa Lam Shangri-La Healthcare Ltd
Liability Co., City International Hospital Co. Ltd, subsidiaries of
SHIPL, increased to 72.413% (2017: 72.410%). The Group recognised
an increase in non-controlling interests of US$3,000 (2017:
US$539,000) and an increase in accumulated losses of US$3,000
(2017: US$539,000) resulting from the increase in equity interest
in the above subsidiaries. The transaction was accounted for using
the acquisition method of accounting.
24 Related Party Transactions
Transactions between the Group with Ireka Corporation Berhad
('ICB') and its group of companies are classified as related party
transactions based on ICB's 23.07% shareholding in the Company.
ICB's relationship with the Group is mentioned in the Annual
Report.
Related parties also include key management personnel defined as
those persons having authority and responsibility for planning,
directing and controlling the activities of the Group either
directly or indirectly. The key management personnel include all
the Directors of the Group, and certain members of senior
management of the Group.
2018 2017
US$'000 US$'000
---------------------------------------------------- --------- ---------
ICB Group of Companies
Accounting and financial reporting services
fee charged by an ICB subsidiary 50 50
Advance payment to the contractors of an
ICB subsidiary - 732
Construction progress claims charged by an
ICB subsidiary 27,812 21,099
Management fees charged by an ICB subsidiary 1,460 3,129
Marketing commission charged by an ICB subsidiary 106 114
Project staff cost reimbursed to an ICB subsidiary 288 311
Rental expenses charged by an ICB subsidiary 3 4
Rental expenses paid on behalf of ICB 529 516
Secretarial and administrative services fee
charged by an ICB subsidiary 50 50
Key management personnel
Remuneration of key management personnel
- Directors' fees 145 235
Remuneration of key management personnel
- Salaries 123 143
---------------------------------------------------- --------- ---------
Liquidated and Ascertained Damages ('LADs')
Ireka Engineering & Construction Sdn. Bhd. ('IECSB'), a
subsidiary of ICB, is the project contractor of The RuMa Hotel and
Residences ('The RuMa'). The expected completion date of the RuMa
development has been deferred to 15 June 2018, with vacant
possession expected to be issued from 15 June 2018. Based on the
Sale and Purchase Agreements ('SPAs') signed, the contractual date
of issuance of vacant possession to purchasers starts from June
2017 (48 months from date of signed SPAs). For hotel suites, Urban
DNA Sdn. Bhd ('the Developer') is given three months from the date
of delivery of vacant possession letter for installation of the
furniture and fittings as stipulated in the respective buyers' SPA
for hotel suites. The delay will potentially result in Liquidated
Ascertained Damages ('LADs') being imposed to the Developer.
However, the Developer is entitled to recover these LADs from the
project contractor, IECSB. Construction of The RuMa Hotel and
Residences ('The RuMa') was completed and Certificate of Completion
and Compliance ('CCC') was obtained on 28 September 2018.
Transactions between the Group with other significant related
parties are as follows:
2018 2017
US$'000 US$'000
------------------------------ -------- --------
Non-controlling interests
Advances Ð non-interest
bearing (Note 20) 82 327
------------------------------- -------- --------
The above transactions have been entered into in the normal
course of business and have been established under negotiated
terms.
The outstanding amounts due from/(to) ICB and its group of
companies as at 31 December 2018 and 31 December 2017 are as
follows:
31 December 31 December
2018 2017
Notes US$'000 US$'000
Net amount due from an ICB subsidiary
for advance payment to its contractors (ii) 2,427 3,993
Net amount due to an ICB subsidiary
for construction progress claims
charged (i) (1,508) (2,046)
Net amount due from an ICB subsidiary
for acquisition of SENI Mont' Kiara
units (i) 1,910 1,952
Net amount due to an ICB subsidiary
for management fees (ii) (239) -
Net amount due to an ICB subsidiary
for marketing commissions (ii) (17) (15)
Net amount due to an ICB subsidiary
for reimbursement of project staff
costs (ii) (40) (55)
Net amount due to an ICB subsidiary
for rental expenses (ii) (2) (5)
Net amount due from ICB for rental
expenses paid on behalf (ii) 126 137
Net amount due to an ICB subsidiary
for staff cost paid on behalf (ii) - (4)
----------------------------------------- ------- ------------ ------------
(i) These amounts are trade in nature and subject to normal trade terms.
(ii) These amounts are non-trade in nature and are unsecured,
interest-free and repayable on demand.
The outstanding amounts due to the other significant related
parties as at 31 December 2018 and 31 December 2017 are as
follows:
31 December 31 December
2018 2017
US$'000 US$'000
-------------------------------------- ------------ ------------
Non-controlling interests
Advances Ð non-interest bearing
(Note 20) (13,194) (13,400)
--------------------------------------- ------------ ------------
Transactions between the parent company and its subsidiaries are
eliminated in these consolidated financial statements.
25 DIVID
The Company has not paid or declared any dividends during the
financial year ended 31 December 2018.
26 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
In 2017, Silver Sparrow Berhad obtained consent from the lenders
to utilise proceeds of US$4.84million in the Sales Proceeds Account
and Debt Service Reserve Account ('DSRA') to partially redeem the
MTNs. Thereafter, amount equivalent to RM10.0 million (US$2.41
million) (the 'Minimum Deposit') is maintained in the DSRA at all
times and the amount is disclosed as deposit pledged.
In the event the funds in the DSRA falls below the Minimum
Deposit, SSB shall within five (5) Business Days from the date of
receipt of written notice from the facility agent or upon SSB
becoming aware of the shortfall, whichever is earlier, deposit such
sums of money into the DSRA to ensure the Minimum Deposit is
maintained.
27 event after statement of financial position date
On 22 March 2019, the Company announced that IDM had, on 21
March 2019, submitted a notice to terminate its appointment under
the Management Agreement. Unless otherwise agreed, IDM's
resignation is subject to a three-month notice period which will
enable the orderly transition of operations currently carried out
by IDM to the Company itself or to third parties. Following the
termination, IDM has indicated that it would be prepared to work
with the Board to facilitate a smooth and orderly transition of the
operations of the Company. At the request of the Board, IDM is
agreeable to extend the notice period, should the Board require
more time to put in place the effected changes.
28 CHANGES IN ACCOUNTING POLICY
Arising from the adoption of International Accounting Standard
IFRS 15 Revenue from Contracts with Customers released in April
2016 and effective for periods beginning on or after 1 January
2018, the Group has changed its revenue recognition accounting
policy with a date of initial application of 1 January 2018.
Adjustment to revenue are made for property development activities
of serviced residences under The RuMa where no revenue was
recognised as per IFRIC 15 Ð Agreements for Construction of Real
Estate, which prescribes that revenue be recognised only when the
properties are completed and occupancy permits are issued.
The impacts of adopting IFRS 15 on the Group's consolidated
financial statement are disclosed in the following tables:
Consolidated Statement of Financial Effect
Position as at 31 December 2016 Previously of adoption Audited As
Reported of IFRS Restated
Amounts 15 Amounts
US$'000 US$'000 US$'000
------------------------------------- ------------- ------------- ---------------
Deferred tax assets 1,623 (17) 1,606
Inventories 244,959 (10,039) 234,920
Trade and other receivables 11,571 2,565 14,136
Translation reserve (29,142) (420) (29,562)
Accumulated losses (58,922) 5,500 (53,422)
Non-controlling interest (1,148) 2,179 1,031
Current tax liabilities 2,158 (17) 2,141
Trade and other payables 53,880 (14,733) 39,147
Shareholders' equity 143,362 5,080 148,442
Consolidated Statement of Comprehensive Effect
Income for the year ended 31 December Previously of adoption Audited As
2017 Reported of IFRS Restated
Amounts 15 Amounts
US$'000 US$'000 US$'000
----------------------------------------- ------------ ------------- ---------------
Revenue 19,098 14,450 33,548
Cost of sales (13,383) (7,065) (20,448)
Finance cost* (5,744) (6,700) (12,444)
Taxation (863) (344) (1,207)
Loss for the year (5,874) 341 (5,533)
Exchange differences on translating
foreign operations 7,863 808 8,671
Total comprehensive income for
the year, net of tax 1,989 1,149 3,138
Loss for the period attributable
to the equity holders of the company (4,176) 239 (3,937)
Loss for the period attributable
to non-controlling interest (1,698) 102 (1,596)
Loss per share (2.10) (1.98)
* The Group has made prior year adjustment of $6.7 million to
finance costs. These finance costs are not eligible for
capitalisation as the development of the RuMa Hotel Suites is not
qualifying assets. Accordingly, the restatement of the 2017
financial information for the correction of this error.
Consolidated Statement of Financial Effect
Position as at 31 December 2017 Previously of adoption Audited As
Reported of IFRS Restated
Amounts 15 Amounts
US$'000 US$'000 US$'000
------------------------------------- ------------ ------------- -----------
Deferred tax assets 4,268 790 5,058
Inventories 278,879 (28,706) 250,173
Trade and other receivables 11,012 6,382 17,394
Translation reserve (21,141) 145 (20,996)
Accumulated losses (62,614) 4,716 (57,898)
Non-controlling interest (3,216) 3,547 331
Trade and other payables 83,040 (31,096) 51,944
Current tax liabilities 3,000 1,154 4,154
Shareholders' equity 137,670 4,861 142,531
Consolidated Statement of cash flows Effect
for the year ended 31 December 2017 Previously of adoption Audited
Reported of IFRS As Restated
Amounts 15 Amounts
US$'000 US$'000 US$'000
Operating profit before changes in
working capital 332 7,385 7,717
Cash generated from operations (before
interest and tax paid) 8,911 6,745 15,656
Net cash used in operating activities 561 45 606
Effect of changes in exchange rates (270) (45) (315)
29 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 8 July 2019.
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 are described 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 regulations Changes in laws and regulations relating 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 financial statements have been prepared in accordance
with International Financial Reporting Standards, including
International Accounting Standards and Interpretations adopted by
the International Accounting Standards Board, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Group; 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 Gerald Ong Chong Keng
Director Director
30 April 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR WGUBACUPBGGU
(END) Dow Jones Newswires
April 30, 2019 08:17 ET (12:17 GMT)
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