Tuan Sing Holdings 5IC , through its wholly-owned subsidiary, Sing-Hu International Pte Ltd, has divested a majority of its indirect investment in a parcel of vacant greenfield land in Shoushan Countryside, Jin’an District in Fuzhou City, Fujian Province. The land measures some 163,740 sq m or 1.762 million sq ft.
The divestment was made through the dilution of its shares in Shanghai Shenyu Interior Decoration Limited Liability Company to Seyen Machinery (Shanghai). Shanghai Shenyu was held by Fujian Ji’Xing Real Estate Development Co., Ltd (FJX), an indirect wholly-owned subsidiary of Tuan Sing Holdings T24 . FJX is also a wholly-owned subsidiary of Shanghai Shenyu
On July 19, Sing-Hu International, Shanghai Shenyu and Seyen Machinery, entered into a subscription agreement where Seyen Machinery will subscribe for 96.93% of the shares in Shanghai Shenyu for RMB96.9 million ($17.9 million). The consideration will be paid in cash.
Sing-Hu International, Shanghai Shenyu and another company, Stonegate Group Investments, entered into a framework agreement on the same day where Sing-Hu International will waive its pre-emption rights in relation to the 96.93% shares and consent to the subscription.
Upon the completion of the proposed subscription, Shanghai Shenyu and FJX will apply part of the RMB96.9 million to repay existing outstanding inter-company loans of RMB69.4 million to Habitat Properties (Shanghai), another indirect wholly-owned subsidiary of Tuan Sing.
Tuan Sing, with a remaining stake of 3.07%, will no longer have a controlling interest in Shanghai Shenyu and FJX. Shanghai Shenyu will also cease to be Tuan Sing’s indirect wholly-owned subsidiary. Tuan Sing’s authorised representatives will no longer hold any board seats in Shanghai Shenyu and FJX.
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According to Tuan Sing in its July 19 statement, the land has an approved planning plot ratio of 0.32 for residential and ancillary uses. However, such uses now require a plot ratio of a minimum of 1.0 following changes in the Chinese govenrment’s planning policy in 2010. As such, FJX’s original plans to build a low-density residential development is no longer viable.
“FJX has since 2010 submitted in excess of 10 applications to relevant government departments in an attempt to reach a resolution without success. Additionally, FJX managed to defend the government’s attempt to compulsorily acquire the land on the basis of it being idle land in 2020,” reads the statement.
Tuan Sing, through its statement, adds that the proposed transaction is in line with its strategy to improve capital allocation and optimise returns. It will also manage the risks related to its investment in the Fuzhou land development.
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The land is said to be valued at RMB125 million in its existing state based on the original permitted planning plot ratio of 0.32 as at May 31, according to independent valuer Knight Frank Petty Limited. It is valued at RMB116 million as green land by referencing benchmark land prices.
Shanghai Shenyu’s shares were also valued at RMB55.6 million based on the assessed market value of RMB125 million for the Fuzhou land in its existing state. Based on the land’s valuation of RMB116 million, Shanghai Shenyu’s shares would be valued at RMB46.6 million.
Tuan Sing is expected to net $23.4 million from the transaction. It will gain $17.1 million, which is the excess of the net proceeds over the book value of the disposal stake of Shanghai Shenyu. The net proceeds will be used for general working capital.
Interested person transaction
The transaction is deemed as an interested person transaction under listing rules as Tuan Sing owns 100% of the shares in Sing-Hu International and Sing-Hu International, in turn, owns 100% of the shares in Shanghai Shenyu.
Michelle Liem Mei Fung, William Nursalim alias William Liem and Dr Tan Enk Ee are each a controlling shareholder of Tuan Sing.
Nursalim and Tan, collectively, are the ultimate beneficial owners of Seyen Machinery and Stonegate respectively. Accordingly, Seyen Machinery and Stonegate are associates of Liem, Nursalim and Tan and are considered as interesting persons of Tuan Sing.
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On a pro forma basis, if the transaction had taken place on Dec 31, 2023, Tuan Sing’s net tangible assets (NTA) per share would have been 100.1 cents instead of 98.7 cents. If the transaction was completed on Jan 1, 2023, Tuan Sing’s earnings per share (EPS) would have been 1.90 cents from 0.39 cents originally.
Based on Tuan Sing’s audited financial statements for the FY2023 ended Dec 31, 2023, the net loss attributable to the disposal stake in Shanghai Shenyu amounts to some RMB0.6 million. The gain on disposal to be recognised by Tuan Sing upon completion of the proposed transaction is estimated to be $18.5 million.
Profit guidance
In a separate statement, Tuan Sing is guiding for a loss for the 1HFY2024 due mainly to lower profit contribution from Link@896, which began asset enhancement works. Link@896 is located at 896 Dunearn Road. Tuan Sing bought the property, previously known as Sime Darby Centre, in April 2017. The loss is also attributed to operating costs from the development of Opus Bay in Batam, the initial phases of which are slated to be opened progressively from 2025 onwards. The company made a profit in 1HFY2023.
It does not take into consideration the proposed divestment of its investment in the land in Fuzhou.
Tuan Sing will release its 1HFY2024 results after the close of trading on Aug 8.
Shares in Tuan Sing closed 0.5 cents lower or 2.27% down at 21.5 cents on July 19.
