ASEANA PROPERTIES LIMITED
ANNUAL REPORT
2019
1
CONTENTS
3
Corporate Information
4
Corporate Strategy
6
Chairman’s Statement
9
Property Portfolio
14
Corporate Social Responsibility
16
Board of Directors
18
Directors’ Report
26
Report of Directors’ Remuneration
10
Performance Summary
28
Corporate Governance Statement
11
Financial Review
35
Independent Auditor’s Report
FINANCIAL
STATEMENTS
41
Consolidated Statement of
Comprehensive Income
42
Consolidated Statement of
Financial Position
44
Consolidated Statement of
Changes In Equity
45
Consolidated Statement of
Cash Flows
47
Notes to the Financial Statements
2
CORPORATE INFORMATION
NON-EXECUTIVE CHAIRMAN
Gerald Ong Chong Keng
NON-EXECUTIVE DIRECTORS
Monica Lai Voon Huey
Christopher Lovell
Nicholas Paris
Helen Wong Siu Ming
COMPANY SECRETARY AND REGISTERED OFFICE
APAX Group Limited
12 Castle Street, St. Helier
Jersey JE2 3RT
Channel Islands
WEBSITE
www.aseanaproperties.com
LISTING DETAILS
Main Market of the London Stock Exchange under the ticker symbol ASPL
AUDITOR
Crowe U.K. LLP
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
United Kingdom
CORPORATE BROKER
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London ECY 9LY
United Kingdom
PUBLIC RELATIONS
Tavistock Communications
1 Cornhill
London EC3V 3ND
United Kingdom
REGISTRAR
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street, St. Helier
Jersey JE1 1ES
Channel Islands
Tel: +44(0) 370 707 4040
Fax: +44(0) 370 873 5851
3
CORPORATE STRATEGY
KEY FACTS
Exchange
Symbol
Lookup
:
London Stock
Exchange Main Market
: ASPL
:
Reuters - ASPL.L
Bloomberg - ASPL:LN
Domicile
Shares Issued
Shares Held
in Treasury
Voting Share
Capital
Share
Denomination
Admission
Date
: Jersey
: 212,025,002
: 13,334,000
: 198,691,002
: US Dollars
: 5 April 2007
Aseana Properties Limited (“Aseana Properties” or “the Company”) is a London-listed company
incorporated in Jersey. The Company and its subsidiary undertakings (together with the “Group”) are
focusing on property development opportunities in Malaysia and Vietnam.
Ireka Development Management Sdn. Bhd. (“IDM”) (a wholly-owned subsidiary of Ireka Corporation
Berhad), the Development Manager for Aseana Properties, ceased to act as the Company’s
Development Manager on 30 June 2019 following the submission of notice to terminate its
appointment under the Management Agreement on 21 March 2019.
Following the termination of the Development Manager, the Board decided to internalise the
management of the Company. The Board identified and appointed a Chief Executive Officer to
strengthen the capability and capacity of the Board to oversee and manage the operations of the
Company. Certain IDM employees were also seconded to the Company to assist with the operation of
the assets, and certain services were out-sourced to IDM to carry out the day-to-day administration of
the Company. A Divestment Director was nominated from the existing Board with a specific focus to
sell the Company’s remaining assets, in line with its Divestment Investment Policy. Following the
resignation of the Chief Executive Officer on 17 January 2020, all of his responsibilities were assumed
by the Chairman and the Board.
When the Company was launched in 2007, the Board considered it desirable that Shareholders should
have an opportunity to review the future of the Company at appropriate intervals. At a general meeting
of the Company held on 30 December 2019, Shareholders voted in favour of the Board’s proposals to
reject the 2019 Discontinuation Resolution and enabled the Company to continue to pursue the new
divestment strategy rather than placing the Company into liquidation. This enabled a realisation of the
Company’s assets in a controlled, orderly and timely manner, with the objective of achieving a balance
between periodically returning cash to Shareholders and maximising the realisation value of the
Company’s investments.
Shareholders supported the Board’s recommendation to vote against the 2019 Discontinuation
Resolution proposed at the general meeting, in order to allow a policy of orderly realisation of the
Company’s assets over a period of at least twelve months from the date of the finalisation of 2019
audit report in order to maximise the value of the Company’s assets and returns to Shareholders, both
4
up to and upon the eventual liquidation of the Company. As a result, the Company will hold another
discontinuation vote at a general meeting in May 2021, meanwhile the Company continued to seek for
disposal of its assets in a measured manner.
To the extent that the Company has not disposed of all of its assets by May 2021, Shareholders will
be provided with an opportunity to review the future of the Company, which would include the option
for shareholders to vote for the continuation of the Company.
The Directors have considered the appropriateness of preparing the accounts on a going concern basis
in light of the decision to realise the Group’s investments in an orderly manner. There is no certainty
over the timeframe over which the investments will be realised. The Directors note that other viable
alternative strategies to a wind-down remain available and they will continue to evaluate whether to
propose continuation of the current divestment strategy or a change to an alternative strategy.
5
CHAIRMAN’S STATEMENT
Dear Shareholders
The period under review has been the most turbulent and momentous period for our Company to
date. Our assets have experienced huge challenges arising from the COVID-19 pandemic that have
been exacerbated by the economic and political conditions unique to Malaysia. This has coincided
with upheavals to the Board of Directors and the resignation of our Development Manager on 21
March 2019. While we have managed to successfully obtain the mandate from our shareholders on
30th December 2019 to extend the life of the Company by another 17 months until May 2021, we have
been struck by the adverse economic effects of COVID-19 resulting in a forced hiatus to our asset
divestment efforts which had until then looked promising.
We would also like to take this opportunity to once again apologise for the delay of this Annual Report
and correspondingly our Annual General Meeting. The finalisation of the Annual Report and
completion of the audit have been delayed primarily due to the impact of the Covid-19 pandemic
which led to the imposition of movement restrictions in Malaysia and Vietnam. These restrictions
resulted in an approximately 3-week delay in the completion of the accounts and Annual Report.
OVERVIEW
In 2019, the Malaysian economy expanded at a low rate of 4.3% beset by lower output of commodities
including palm oil crude oil and natural gas. Exports were hampered by US – China trade tensions
while Foreign Direct Investments were constrained by political uncertainty and tensions with China.
The Malaysian economy expanded at its slowest pace in over a decade in Q1 2020 as the country
reeled from the COVID-19 fallout. The pandemic is set to push the economy into recession this year
with rising unemployment and the Malaysian Government Movement Control Orders (MCO)
expected to hamper private consumption. Exports are expected to shrink amid plummeting demand
for oil and a complete cessation of tourist arrivals. This has been exacerbated by the rise in political
risk with elevated in-fighting within the major political parties and uncertainty over leadership of the
country. Economists have estimated a GDP contraction of between 2.6 – 3.6% for 2020. Given that
the vast majority of the assets of our Company are located in Malaysia, the financial impact of COVID-
19 has been and is expected to continue to be severely negative.
Vietnam as a country and economy has performed significantly better with tremendous success in the
fight against the COVID-19 pandemic with a very low number of coronavirus cases and no COVID-
19 deaths. In 2019 Vietnam continued to show fundamental strength and resilience, supported by
robust domestic demand and export orientated manufacturing. The country announced a GDP growth
rate of 7.0%, which is among the fastest in the region. While Q1 2020 saw the inevitable impact of
the COVID-19 lockdown, the Vietnamese government acted early in the fight against the pandemic
and as a consequence they have started lifting restrictions on certain activity. Most non-essential
businesses are operating and domestic flights have resumed. However international travel has yet to
resume as of this date. GDP growth is estimated at 2.8% for 2020
6
PERFORMANCE REVIEW
For FY 2019, our Company recorded a net loss before taxation of US$28.7 million compared to a net
loss before taxation of US$6.8 million for the previous financial year. The loss was largely due to net
realisable value adjustments of 30% or approximately (US$23m) to our two Sandakan properties
arising from more realistic valuations reflecting their trading history and prospects and the operating
and finance expenses of various projects in our portfolio. The Net Loss attributable to equity holders
was US$27.1 million for FY 2019 and the loss per share was US cents 13.64 cents. A more detailed
description of the financial performance of our Company is outlined in the Financial Review section
of this Annual Report.
OUR ASSET DIVESTMENT PROGRAM
The Company has been in divestment mode for some time now. As part of the process of expediting
the divestment of the remaining assets of ASPL, Ms Helen Siu Ming Wong was appointed to the Board
on 17 June 2019 and subsequently appointed Divestment Director with a specific focus on selling the
Company’s remaining assets.
The Company had realized gross proceeds of US$250 Million since it went into realisation mode in
June 2015 but we had achieved little or no progress in divesting the remaining 6 assets except that in
2020 we received a Letter of Intent to purchase The RuMa Hotel and in July we agreed the sale of two
plots of development land in Kota Kinabalu for approximately US$4 million in cash. Our divestment
efforts have unfortunately been impeded by the increasingly difficult real estate market and economic
conditions in Malaysia and from February 2020, the regional lock down and travel restrictions imposed
by both Vietnam and Malaysia in their efforts to combat the COVID-19 pandemic. Until that point in
time, there had been a lot of preliminary sales interest leading to multiple signings of Non-Disclosure
Agreements by prospective buyers and several promising leads and negotiations had commenced on
more than one of our assets.
Although we continue to be in discussions with several potential purchasers of our assets, many of the
promising leads had been halted by the lockdown and travel restrictions imposed as a result of this
pandemic. We are of course re-establishing communications and negotiations with these parties and
will intensify efforts now that the said travel restrictions are lifted.
THE DEMERGER TRANSACTION
On 7 May 2020, our Company announced that the Board is considering proposals to de-merge certain
assets held by the Company in exchange for the buyback and cancellation of a significant percentage
of the issued ordinary shares in the capital of the Company (De-Merger). The De-Merger would
involve buying back shares owned by Ireka Corporation Berhad (Ireka) and its concert party Legacy
Essence Limited (Legacy) along with certain other shareholders who in aggregate own approximately
50% of the outstanding shares of the Company.
The consideration would be an in-specie distribution of certain assets to the participating shareholders
(principally The RuMa Hotel & Residences in Kuala Lumpur) together with a balancing cash payment
from said shareholders to our Company. In addition, adjustments will be made to reflect the settlement
of potential claims that our Company may have against Ireka or its group companies in connection
with various Company projects including the settlement of amounts owing by a subsidiary of Ireka to
the development and construction of The RuMa Hotel and
our Company relating
Residences. Following the De-Merger, there will be a complete and total separation of the interests
of Ireka and Legacy from our Company.
to
7
On 16 July 2020, our Company announced that a Share Buyback Agreement (SBA) and a Global
Settlement Agreement (GSA) have been executed with Ireka and Legacy. A circular will soon be sent
to our shareholders and an EGM convened during August to seek approval for the De-merger from
those shareholders who are not seeking to demerge from our company. It should be noted that the De-
Merger resolutions would require the passing of a special resolution of Shareholder and the approval
of 66.66% of the voting at the EGM. The De-Merger is further conditional upon the approval of
various other parties including the shareholders of Ireka at their own EGM which is yet to be convened
and the bankers/ guarantors and holders of Medium Term Notes to our Company. With the completion
of the De-Merger exercise, our Company would emerge leaner and fitter with better cash flows and a
significantly lower level of liabilities, putting ourselves in a better position to survive these
unprecedented and perilous economic times. Critically it is the strong belief of the Board that the De-
Merger will result in our Company achieving a stronger financial position and hence improved
negotiating power vis-à-vis potential purchasers of our remaining assets.
While your Board remains cautiously optimistic that all conditions precedent of the SBA and GSA
will be met, it is important for shareholders to note that there is no certainty that the proposed De-
Merger will be successfully completed as the approval of several external parties is yet to be obtained.
ACKNOWLEDGEMENTS
After nearly 11 years as a Non-Executive and Independent Director and a year as Chairman, I will be
retiring from the Board shortly. Nicholas John Paris, who re-joined the Board on 7th September 2019
will assume the role of Chairman upon my retirement. It has been my privilege to serve our Company
and its shareholders throughout my tenure. These past months have been extremely frustrating with
our refocussed divestment efforts led by our new Divestment Director, having been effectively forced
into hiatus. It is anticipated that once regional travel restrictions are lifted and the De-Merger
completed, our team will re-engage fully with the various interested purchasers and the Divestment
Program will once again be of top priority.
I would like to take this opportunity to thank my colleagues on the Board and in our Company and our
external advisors and service providers for their tireless efforts on behalf of the Company and its
shareholders. This has been the most challenging period in the corporate life of our Company and the
proposed De-Merger will mark a major watershed point. Assuming that the resolutions are passed and
the conditions-precedent to the SBA and GSA are met, the De-Merger will happen and our Company
will undergo a significant transformation for the better – leaner and with significantly improved cash-
flows. I continue to remain a shareholder of our Company and have the utmost confidence in the Board
to execute the aforementioned divestment plans and to act in the best interests of the shareholders of
our Company.
Thank you.
Gerald Ong Chong Keng
Chairman
24 July 2020
8
PROPERTY PORTFOLIO AS AT 31 DECEMBER 2019
Project
Completed projects
Type
Effective
Ownership
Approximate
Gross
Floor Area
(sq m)
Approximate
Land Area
(sq m)
The RuMa Hotel and
Residences
Kuala Lumpur, Malaysia
Luxury residential
tower and bespoke
hotel
Sandakan Harbour Square
Sandakan, Sabah, Malaysia
Retail lots, hotel and
retail mall
70.0%
40,000
4,000
100.0%
126,000
48,000
Phase 1: City International
Hospital, International
Healthcare Park,
Ho Chi Minh City, Vietnam
Undeveloped projects
Private general
hospital
72.4%*
48,000
25,000
Other developments in
International Healthcare Park,
Ho Chi Minh City, Vietnam
(formerly International Hi-
Tech Healthcare Park)
Kota Kinabalu Seafront resort
& residences
Kota Kinabalu, Sabah,
Malaysia
Commercial
development with
healthcare theme
(i) Boutique resort
hotel and resort
villas
(ii) Resort homes
72.4%*
972,000
351,000
100.0%
80.0%
n/a
327,000
Divested projects
SENI Mont’ Kiara
Kuala Lumpur, Malaysia
Tiffani by i-ZEN
Kuala Lumpur, Malaysia
Luxury
condominiums
Luxury
condominiums
100.0%
225,000
36,000
100.0%
81,000
15,000
1 Mont’ Kiara by i-ZEN
Kuala Lumpur, Malaysia
Office suites, office
tower and retail mall
100.0%
96,000
14,000
Waterside Estates
Ho Chi Minh City, Vietnam
Villa and high-rise
apartments
55.0%
94,000
57,000
Kuala Lumpur Sentral Office
Towers & Hotel
Kuala Lumpur, Malaysia
Aloft Kuala Lumpur Sentral
Hotel
Kuala Lumpur, Malaysia
Listed equity investment in
Nam Long Investment
Corporation,
an established developer in
Ho Chi Minh City, Vietnam
Office towers and a
business hotel
Business-class hotel
(a Starwood Hotel)
Listed equity
investment
* - shareholding as at 31 December 2019
40.0%
107,000
8,000
100.0%
28,000
5,000
6.9%
n/a
n/a
9
Year ended
31 December 2019
Year ended
31 December 2018
PERFORMANCE SUMMARY
Total Returns since listing
Ordinary share price
FTSE All-share index
FTSE 350 Real Estate Index
One Year Returns
Ordinary share price
FTSE All-share index
FTSE 350 Real Estate Index
Capital Values
Total assets less current liabilities (US$ million)
Net asset value per share (US$)
Ordinary share price (US$)
FTSE 350 Real Estate Index
Debt-to-equity ratio
Debt-to-equity ratio 1
Net debt-to-equity ratio 2
(Loss)/ Earnings Per Share
Earnings per ordinary share - basic (US cents)
- diluted (US cents)
-52.77%
35.53%
19.30%
-15.21%
23.92%
38.78%
164.02
0.55
0.46
602.06
122.00%
114.80%
-13.64
-13.64
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%
-45.75%
10.30%
-50.03%
2.36%
-12.95%
-17.49%
186.60
0.69
0.54
468.71
90.82%
81.54%
-2.46
-2.46
10
FINANCIAL REVIEW
INTRODUCTION
The Group recorded a consolidated comprehensive loss of US$29.4, million for the financial year
ended 31 December 2019, largely due to net realisable value adjustments of the Four Points by Sheraton
Sandakan Hotel and Harbour Mall Sandakan, and operating and finance costs of City International
Hospital, The RuMa Hotel & Residences, Four Points by Sheraton Sandakan Hotel and Harbour Mall
Sandakan.
STATEMENT OF COMPREHENSIVE INCOME
The Group recognised revenue of US$9.7 million, compared to US$33.1 million for the previous
financial year. The revenue was mainly attributable to the sale of completed units at SENI Mont’ Kiara
and The RuMa Residences. In respect of the revenue from the sale of The RuMa Hotel Suites, the
Group also has a contractual arrangement with the buyers 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$39.3 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$28.7 million compared to a net loss before
taxation of US$6.8 million for the previous financial year. The loss was largely due to net realisable
value adjustments of the Four Points by Sheraton Sandakan Hotel and Harbour Mall Sandakan, and
operating and finance costs of its four operating assets.
Net loss attributable to equity holders of the parent company was US$27.1 million, compared to a net
loss of US$4.9 million for the previous financial year. Tax expenses for the year at US$1.3 million
(2018: Tax income of US$0.4 million).
The consolidated comprehensive loss was US$29.4 million (2018: US$7.5 million), which included a
gain of US$0.6 million (2018: loss of US$1.1 million) arising from foreign currency translation
differences for foreign operations due to a weakening of the US Dollar against the Ringgit, during the
year.
Basic and diluted loss per share were both US cents 13.64 (2018: US cents 2.46).
STATEMENT OF FINANCIAL POSITION
Total assets were US$270.2 million, compared to US$307.5 million for the previous year, representing
a decrease of US$37.3 million. This was mainly due to a decrease in inventories of US$28.2million,
mainly attributable to Four Points by Sheraton Sandakan Hotel and Harbour Mall Sandakan with net
realisable value adjustments on goodwill and cost of acquisition in relation to both assets totalling
US$22.4million.
Total liabilities were US$164.4 million, compared to US$172.1 million for the previous year,
representing a decrease of US$7.7 million. This was mainly due to a decrease of US$9.3 million in
trade and other payables.
Net Asset Value per share was US$ 0.55 (31 December 2018: US$ 0.69).
11
CASH FLOW AND FUNDING
Cash flow from operations before interest and tax paid was US$2.2 million, compared to cash flow
from operation of US$1.9 million for the previous year.
The Group generated net cash flow of US$5.7 million from investing activities, compared to US$1.1
million in the previous year.
The borrowings of the Group undertakings were used to fund property development projects and for
working capital. As at 31 December 2019, the Group’s gross borrowings stood at US$89.8 million (31
December 2018: US$85 million). Net debt-to-equity ratio was 78% (31 December 2018: 53%).
Finance income was US$5.79 million for financial year ended 31 December 2019 (2018: US$1.24
million) and it included accrued income of US$3.6m (2018: US$0 million). Finance costs were
US$9.5 million (2018: US$7.0 million), which were mostly incurred by its operating assets.
EVENTS AFTER STATEMENT OF FINANCIAL POSITION DATE
On 9 January 2020, the Company announced the resignation of Chan Say Yeong as the Chief
Executive Officer of the Company, with effect from 17 January 2020. Mr. Chan is not a member of
the Board. Following this, his responsibilities were assumed by the Chairman and the Board.
The Covid virus in early 2020 and the resulting movement restrictions in Malaysia led to the closure
of the Company’s two hotels in Kuala Lumpur and Sandakan and the partial closure of the shopping
mall in Sandakan. We are planning to re-open The RuMa hotel in Kuala Lumpur on 28 August 2020
but are not currently planning to re-open The Four Points Sheraton Hotel in Sandakan as Marriott
International, our hotel operator has terminated their management agreement with us. This severely
reduced revenues from these assets whilst the Company continued to incur costs on them. In addition,
revenues at the Hospital in Ho Chi Minh City declined as patients deferred non-urgent medical
procedures fearing that attendance at the hospital could expose them to the virus. The impact of the
movement restrictions and the reduced revenues on the Company’s operating assets will have affected
the valuations of the Company’s property assets which are based on discounted cash flow calculations.
It is not possible to put an accurate figure to the fall in the value. However, the Directors do believe
that the value can be increased in time once the assets are re-opened and revenue can be built up again.
On 31 May 2020 we terminated the Services Agreement and also terminated the staff secondment
arrangements from Ireka to the Company and have engaged a few staff directly to run our finances
and operations.
On 15 July 2020 we signed agreements to de-merge certain of our assets in exchange for the buyback
and cancellation of the shares of those shareholders who wished to de-merge.
On 16 July 2020, we signed the Sale and Purchase Agreements for the sale of two plots of land in Kota
Kinabalu for approximately US$4 million in cash.
DIVIDEND
No dividend was declared or paid in the financial years 2019 and 2018.
12
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 has been managed
by the Board of Directors since the Development Manager resigned as of 30 June 2019 and the Board
are closely 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.
GERALD ONG CHONG KENG
Director
24 July 2020
13
CORPORATE SOCIAL RESPONSIBILITY (“CSR”)
Aseana Properties is committed to making a positive difference in the world, whether it is for the local
community or whether it is building a better working environment. The Company believes that being
socially and environmentally responsible is good for people, the planet and for business. The following
six core principles define the essence of corporate citizenship for the Company.
Managing Corporate Responsibility
The Board of Directors at Aseana Properties has oversight mechanisms, through corporate-level
policies and standards to ensure an effective CSR programme is delivered in the interest of its
employees, shareholders and the community at large. It is determined to ensure that its CSR
programme acts legally and responsibly on all matters and that the highest ethical standards are
maintained. The Board recognises this as a key part of its risk, management strategy to protect the
reputation of Aseana Properties and shareholders values are enhanced.
Employees
In the current changing economic environment, with competing demands and stress, the welfare of
employees is critical in order to ensure they are productive, creative and innovative. This is also in
order to achieve the highest standard in the workplace. The Board works hard to ensure that employees
are treated fairly and with dignity because it is the right thing to do and also to get the best out of them.
Health and Safety
Aseana Properties considers Health and Safety to be important because it protects the well-being of
employees, visitors and clients. Looking after Health and Safety makes good business sense and the
Company works hard to provide a healthy workplace environment for its staff, contractors and visitors.
Some of the organized efforts and procedures for reducing workplace accidents, risks and hazards,
exposure to harmful solutions include:
Paying particular attention to the regular maintenance of equipment, plant and systems to
ensure a safe working environment.
Providing sufficient information, instruction, training and supervision to enable all employees
to avoid hazards and to contribute positively to their own safety and safe performance at work.
Stakeholders
Aseana Properties works collaboratively with its stakeholders to improve services and to ensure client
satisfaction. The Company is committed to meaningful diaIogue and encourages stakeholder
participation through stakeholder events, roadshows, briefings, conference calls and timely release of
informative website,
annual reports. Aseana Properties also maintains an updated and
www.aseanaproperties.com that is accessible to stakeholders and members of the public.
Environmental Management
Aseana Properties believes that any commitment to a more environmentally sustainable world has to
start at home, and to this end, it challenges itself to work in an environmentally responsible manner
and to find new ways to reduce its carbon footprint. It also works with consultants such as architects
to look at how they can be more environmentally friendly by incorporating natural elements such as
water, greenery, light and air into its projects. Maintaining and sustaining local Malaysian heritage is
the essence of the RuMa Hotel so decorative elements like batik prints throughout are recycled from
a local batik factory. The Kelelai (a type of bamboo) ornaments and ceiling panels at the pool area of
Level 6 are cultivated from a dying weaving art by Kelantanese women.
14
The RuMa Hotel and Residences have both been separately awarded the Green Building Index (GBI)
Provisional Gold Rating having successfully met all the GBI Criteria under each category for Energy
Efficiency, Indoor Environment Quality, Sustainable Site Planning & Management, Materials &
Resources, Water Efficiency and Innovation. The GBI is Malaysia’s industry recognised green rating
tool for buildings to promote sustainability in the building industry.
Community
Aseana Properties understands the importance of community engagement both for the communities
themselves but also for giving staff more meaningful experiences by tapping into their professional
skills and capabilities.
15
BOARD OF DIRECTORS
GERALD ONG CHONG KENG
NON-EXECUTIVE CHAIRMAN
Gerald Ong was appointed as Director (Non-Executive) of Aseana Properties in September 2009 and
assumed the role of Chairman with effect from 1 June 2019. Gerald is Deputy Chairman and Executive
Director of PrimePartners Corporate Finance Group, has over 25 years of corporate finance related
experience at various financial institutions providing a wide variety of services from advisory, M&A
activities and fund raising exercises incorporating various structures such as equity, equity-linked and
derivative-enhanced issues. In June 2007, he was appointed a Director of Metro Holdings Limited
which is listed on the Singapore Exchange Securities Trading Limited.
Gerald has been granted The Institute of Banking and Finance (IBF) – Distinguished Fellow status
and is an alumnus of the National University of Singapore, University of British Columbia and
Harvard Business School.
CHRISTOPHER HENRY LOVELL
NON-EXECUTIVE DIRECTOR
Christopher Henry Lovell was appointed as Director (Non-Executive) of Aseana Properties in June
2019. Christopher was first appointed as an independent non-executive director of Aseana Properties
in March 2007. He retired as a director at the 2018 Annual General Meeting as part of the Company’s
strategy to reduce its ongoing costs and bring the size of the Board in line with the objectives of the
realisation process.
Christopher practised as an English Solicitor in Jersey between 1979 and 2008: he was a partner in the
law firm Theodore Goddard from 1983 until 1993 when he set up his own practice. In 2000, he was
one of the founding partners of Channel House Trustees Limited, a Jersey regulated trust company
which was acquired by Capita Group plc in 2005. He was subsequently appointed as a director of
Capita’s regulated trust company.
Christopher has acted as an independent non-executive director for over 20 years and specialises in
property holding groups. He is personally registered with the Jersey Financial Services Commission
to act as a non-executive director.
HELEN WONG SIU MING
NON-EXECUTIVE DIRECTOR
Helen Wong Siu Ming was appointed as Director (Non-Executive) of Aseana Properties in June 2019.
Helen brings to Aseana Properties over 27 years of financial and operational experience in the United
States and Asia. She is Chief Executive Officer and founder of LAPIS Global Limited, a Hong Kong
based investment management and advisory firm. She was formerly the CEO of Cushman &
Wakefield Capital Asia where she established the Asia Investment Management and Investment
Banking platform.
In addition, Helen has held numerous executive positions including Chief Operating Officer of Bravia
Capital Hong Kong Limited, Managing Director of IFIL Asia (renamed EXOR S.p.A), where she was
responsible for the Asian direct investment activities and Chief Financial Officer of the listed
investment vehicle, Pacific Century Regional Developments Limited.
16
Helen also has extensive experience in infrastructure and transport through her prior roles at the
Provisional Airport Authority, Hong Kong and the Port Authority of New York & New Jersey.
MONICA LAI VOON HUEY
NON-EXECUTIVE NON-INDEPENDENT DIRECTOR
Monica Lai was appointed as Director (Non-Executive) of Aseana Properties Limited in September
2019.
Monica Lai is the Group Deputy Managing Director of Ireka Corporation Berhad, listed on the Main
Board of Bursa Malaysia. She graduated from City University, London with a Bachelor of Science
(Hons) Degree in Accountancy and Economics. Monica worked for EY London and KPMG Hong
Kong before joining Ireka in 1993. Her professional qualifications include The Institute of Chartered
Accountants England & Wales, The Malaysian Institute of Accountants and the Malaysian Institute of
Taxation.
NICHOLAS JOHN PARIS
NON-EXECUTIVE NON-INDEPENDENT DIRECTOR
Nicholas (Nick) John Paris was appointed as Director (Non-Executive) of Aseana Properties Limited
in September 2019.
Nick is a director and portfolio manager for LIM Advisors Limited, an Asian-focused investment
management firm, headquartered in Hong Kong. Based in London, he specialises in investing in closed
ended investment funds. He graduated from Newcastle University with a Bachelor of Science (Hons)
Degree in Agricultural Economics. He is a fellow of the Institute of Chartered Accountants England
& Wales and a Chartered Alternative Investment Analyst. He worked with Rothschild Asset
Management from 1986 until 1994, launching specialist investment products before becoming a
corporate adviser and broker in closed ended investment funds with a particular focus on those
investing in emerging markets. In this role, between 1994 and 2001 he worked at Baring Securities,
Peregrine Securities and then Credit Lyonnais Asia Securities. Nick then joined the hedge fund
industry in a series of sales roles before founding Purbeck Advisers in 2006, which is his own advisory
and sales business. He has been advising LIM on investing in Asian closed end funds for ten years and
is a director of their London-based investment management subsidiary.
Nick is currently Managing Director of Myanmar Investments International Limited (a fund investing
in private equity in Myanmar which is traded on the main market of the London Stock Exchange) and
he has previously been a non-executive director of Aseana (22 June 2015 to 20 March 2019), Global
Resources Investment Trust plc (a fund investing in a diverse portfolio of primarily small and mid-
capitalisation natural resources and mining companies which is traded on the main market of the
London Stock Exchange), RDL Realisation PLC (a London listed fund investing in US loan platforms
which is traded on the main market of the London Stock Exchange), The India IT Fund Limited (a
fund investing in Indian software companies which was listed on the Channel Islands Stock Exchange)
and TAU Capital Plc (a fund investing in public and private equity in Kazakhstan which was traded
on AIM).
17
DIRECTORS’ REPORT
The Directors present their report together with the audited financial statements of Aseana Properties
Limited (the “Company”) and its subsidiary undertakings (together with the “Group”) for the year
ended 31 December 2019.
PRINCIPAL ACTIVITIES
The principal activities of the Group are development of upscale residential and hospitality projects,
sale of development land and operation and sale of hotel, mall and hospital assets in Malaysia and
Vietnam.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The consolidated statement of comprehensive income for the year is set out on page 39. A review of
the development and performance of the business has been set out in the Chairman’s Statement, the
Director’s Review and the Financial Review reports.
OBJECTIVES AND STRATEGY
When the Company was launched in 2007, the Board considered it desirable that Shareholders should
have an opportunity to review the future of the Company at appropriate intervals.
At a general meeting of the Company held on 30 December 2019, Shareholders again voted in favour
of the Board’s proposals to continue with the Company’s divestment investment policy to enable a
realisation of the Company’s assets in a controlled, orderly and timely manner, with the objective of
achieving a balance between periodically returning cash to Shareholders and maximising the
realisation value of the Company’s investments. Shareholders also supported the Board’s
recommendation to vote against the Discontinuation Resolution proposed at the general meeting, in
order to allow a policy of orderly realisation of the Company’s assets over the period up to May 2021
in order to maximise the value of the Company’s assets and returns to Shareholders, both up to and
upon the eventual liquidation of the Company.
To the extent that the Company has not disposed of all of its assets by 31 May 2021, Shareholders will
be provided with a further opportunity to review the future of the Company, 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. 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 Company.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s business is property development in Malaysia and Vietnam. Its principal risks are
therefore related to the property market in these countries in general, and also the particular
circumstances of the property development projects it is undertaking. More detailed explanations of
these risks and the way they are managed are contained under the heading of Financial and Capital
Risk Management Objectives and Policies in Note 4 to the financial statements.
18
Other risks faced by the Group in Malaysia and Vietnam include the following:
Economic
Strategic
Regulatory
Law and regulations
Tax regimes
Management and control
Operational
Financial
Going Concern
Inflation, economic recessions and movements in interest
rates could affect property development activities.
Incorrect strategy,
including sector and geographical
allocations and use of gearing, could lead to poor returns for
shareholders.
Breach of regulatory rules could lead to suspension of the
Company’s Stock Exchange listing and financial penalties.
Changes in laws and regulations relating to planning, land use,
development standards and ownership of land could have
adverse effects on
the
shareholders.
Changes in the tax regimes could affect the tax treatment of
the Company and/or its subsidiaries in these jurisdictions.
the business and returns for
Changes that cause the management 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.
The COVID-19 virus led to movement controls in both
Malaysia and Vietnam from March 2020 onwards which
affected our key properties as our two hotels had to be closed,
only food operations were permissible at our shopping mall
and patient bookings at our hospital decreased. There can be
no certainty as to how quickly operations at these properties
can be resumed and what overall effect this will have on our
revenues, costs and valuations. Failure of the Company’s
accounting system and disruption to the business, or to that of
third party service providers, could lead to an inability to
provide accurate reporting and monitoring leading to a loss of
shareholders’ confidence.
Inadequate controls by the Company or third party service
providers could lead to a 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.
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 on pages 32 to 33.
19
RESULTS AND DIVIDENDS
The results for the year ended 31 December 2019 are set out in the attached financial statements.
No dividends were declared nor paid during the financial year under review.
SHARE CAPITAL
No shares were issued in 2019. Further details on share capital are stated in Note 24 to the financial
statements.
DIRECTORS
The following were Directors of Aseana who held office throughout the financial year and up to the
date of this report:
Gerald Ong Chong Keng - Chairman
Monica Lai Voon Huey
Christopher Henry Lovell
Nicholas John Paris
Helen Wong Siu Ming
On 31 May 2019, Mohammed Azlan Hashim resigned as Board Chairman of Aseana and Gerald Ong
assumed the role with effect from 1 June 2019. The Company also appointed Christopher Henry
Lovell and Helen Siu Ming Wong as non-executive Director, with effect from 1 June 2019 and 17
June 2019 respectively. On 17 June 2019, the Company announced the appointment of Richard Boleat
as a non-executive Director with immediate effect. On 9 September 2019, the Company further
announced the resignation of Richard Boleat and Ferheen Mahomed as non-executive Directors with
effect from 5 and 7 September 2019 respectively. On the same day, the Company announced that
Monica Lai and Nicholas Paris have been appointed as non-independent and non-executive Directors
with effect from 7 September 2019.
DIRECTORS’ INTERESTS
The interests of the directors in the Company’s shares as at 31 December 2019 and as at the date of
this report were as follows:
DIRECTOR
ORDINARY SHARES OF US$0.05 EACH
Gerald Ong Chong Keng
Nicholas John Paris
Christopher Henry Lovell
Monica Lai Voon Huey
As at 31 Dec 2019
2,108,467
36,654,192
48,000
82,465,876
As at 30 June 2020
2,108,467
36,654,192
48,000
82,465,876
Notes: Nicholas Paris is associated with the holdings of clients of LIM Advisors Limited. Monica Lai
is associated with the holdings of Ireka Corporation Berhad and Legacy Essence Limited.
None of the other directors in office at the end of the financial year had any interest in shares in the
Company during the financial year.
20
MANAGEMENT
The Board had contractually delegated the development management of the property development
portfolio to Ireka Development Management Sdn. Bhd. (the “Development Manager” or “IDM”). The
Development Manager is a wholly-owned subsidiary of Ireka Corporation Berhad, a company listed
on Bursa Malaysia since 1993 which has 52 years of experience in construction and property
development. Under the management contract, the Development Manager was principally responsible
for, inter alia, implementing the real estate strategy for the Company, engaging, managing and
coordinating third parties in relation to the development and management of properties to be acquired
and lead the negotiation for the acquisition or disposal of assets and the financing of such assets.
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. IDM's resignation was subject to a three
month notice period to enable the orderly transition of operations currently carried out by IDM to the
Company itself or to third parties. IDM eventually ceased to act as the Development Manager on 30
June 2019.
Following the termination of the Development Manager, the Board decided to internalise the
management of the Company. The Board identified and appointed a Chief Executive Officer to
strengthen the capability and capacity of the Board to oversee and manage the operations of the
Company. Certain IDM employees were seconded to the Company to assist with the operation of the
assets, and certain services were out-sourced to IDM to carry out the day-to-day administration of the
Company. Helen Wong was nominated as the Divestment Director with a specific focus to sell the
Company’s remaining assets, in line with its Divestment Investment Policy. Following the resignation
of the Chief Executive Office on 17 January 2020, all of his responsibilities were assumed by the
Chairman and the Board.
21
SUBSTANTIAL SHAREHOLDERS
The Board was aware of the following direct and indirect interests comprising a significant amount of
more than 3% issued share capital of the Company at the latest practicable date before the publication
of this Report at 20 March 2020:
NUMBER OF
ORDINARY
SHARES HELD
PERCENTAGE OF
ISSUED SHARE
CAPITAL
Ireka Corporation Berhad.
45,837,504
Legacy Essence Limited and its related parties
36,628,282
LIM Advisors
SIX SIS
Progressive Capital Partners
Dr. Thong Kok Cheong
Credit Suisse
EMPLOYEES
36,654,192
18,366,118
14,393,372
12,775,532
12,024,891
23.07%
18.43%
18.45%
9.24%
7.24%
6.43%
6.05%
The Company had no executive Directors or employees during the year. The subsidiaries of the Group
had a total of 887 employees as at 31 December 2019, of which 179, 459 and 232 were employed by
Four Points Sheraton Hotel and Harbour Mall in Sandakan, City International Hospital in Ho Chi Minh
and The RuMa Hotel and Residences in Kuala Lumpur respectively and 17 were seconded from Ireka
Corporation Berhad. On 31 May 2020 we terminated the Services Agreement and also terminated the
staff secondment arrangements from Ireka to the Company and have engaged a few staff directly to
run our finances and operations.
GOING CONCERN
To the extent that the Group has not disposed of all of its assets by May 2021, shareholders will be
provided a further 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 to be held in May 2021, an ordinary resolution will be proposed to the effect
that the Company shall cease to continue as presently constituted. If at 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 Company. Until
then, the Company will continue to seek to dispose of its assets in a measured manner.
The outcome of the discontinuation vote would be uncertain and may impact on the going concern
status of the Group. 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
22
financial statements do not include the adjustments that would result if the Group and Company were
unable to continue as a going concern.
As disclosed in note 2.1 to the financial statements, it refers to the assumptions made by the Directors
including the uncertainty regarding the De-Merger transaction and the divestment of certain assets will
be completed as planned and the loans and borrowing can be discharged in a timely manner when
concluding that it remains appropriate to prepare the financial statements on the going concern basis.
CREDITORS PAYMENT POLICY
The Group’s operating companies are responsible for agreeing on the terms and conditions under
which business transactions with their suppliers are conducted. It is the Group’s policy that payments
to suppliers are made in accordance with all relevant terms and conditions. Trade creditors at 31
December 2019 amounted to 199 days (2018: 69 days) of property development cost incurred during
the year.
FINANCIAL INSTRUMENTS
The Group’s principal financial instruments comprise cash balances, balances with related parties,
other payables, receivables and loans and borrowings that arise in the normal course of business. The
Group’s Financial and Capital Risk Management Objectives and Policies are set out in Note 4 to the
financial statements.
DIRECTORS’ LIABILITIES
Subject to the conditions set out in the Companies (Jersey) Law 1991 (as amended), the Company has
arranged appropriate Directors’ and Officers’ liability insurance to indemnify the Directors against
liability in respect of proceedings brought by third parties. Such provisions remain in force at the date
of this report.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the financial statements in
accordance with applicable law and regulations. Companies (Jersey) Law 1991 requires the Directors
to prepare financial statements for each financial year. Under that law the Directors are required to
prepare the financial statements in accordance with International Financial Reporting Standards as
adopted by European Union (“IFRSs”).
Under company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the
Group for that year. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable, relevant and reliable;
ensure that the financial statements comply with IFRSs; and
prepare the financial statements on the going concern basis, unless it is inappropriate to
presume that the Group and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time the financial
23
position of the Group and to enable them to ensure that the financial statements comply with the
Companies (Jersey) Law 1991. The Directors are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are also responsible for the maintenance and integrity of the Company’s website on the
internet. However, information is accessible in many different countries where legislation governing
the preparation and dissemination of financial statements may differ from that applicable in the United
Kingdom and Jersey.
The Directors of the Company confirm that to the best of their knowledge that:
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
the sections of this Report, including the Chairman’s Statement, Director’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.
DISCLOSURE OF INFORMATION TO AUDITOR
So far as each person who was a Director at the date of approving this report is aware, there is no
relevant audit information, being information needed by the auditor in connection with preparing its
report, of which the auditor is unaware. Having made enquiries of fellow Directors, each Director has
taken all the steps that he is obliged to take as a Director in order to have made himself aware of any
relevant audit information and to establish that the auditor is aware of that information.
RE-APPOINTMENT OF AUDITOR
The auditor, Crowe U.K. LLP, has expressed their willingness to continue in office. A resolution
proposing their re-appointment will be tabled at the forthcoming Annual General Meeting.
BOARD COMMITTEES
Information on the Audit Committee and Nomination & Remuneration Committee is included in the
Corporate Governance section of the Annual Report on pages 29 to 31.
ANNUAL GENERAL MEETING
The tabling of the 2019 Annual Report and Financial Statements to shareholders will be at an Annual
General Meeting (“AGM”) to be held on 18 August 2020.
During the AGM, investors will be given the opportunity to question the board and to meet with them
thereafter. They will be encouraged to participate in the meeting.
24
On behalf of the Board
GERALD ONG CHONG KENG
Director
24 July 2020
25
REPORT OF DIRECTORS’ REMUNERATION
DIRECTORS’ EMOLUMENTS
The Company has no executive Directors or employees. The Nomination & Remuneration Committee
(“NRC”) of the Board of Directors is responsible for setting the framework and reviewing
compensation arrangements for all non-executive Directors before recommending the same to the
Board for approval. The NRC assesses the appropriateness of the emoluments on an annual basis by
reference to comparable market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high calibre Board.
During the year, the Directors received the following emoluments in the form of fees from the
Company:
Directors
Gerald Ong Chong Keng
(Chairman of the Board)1, 2
Mohammed Azlan Hashim1
Helen Wong Siu Ming2
(Chairman of the Audit Committee)
Christopher Henry Lovell3
Nicholas John Paris4
Monica Lai Voon Huey5
Richard Michael Boleat6
Ferheen Mahomed7
David Harris
John Lynton Jones
Total
Year ended
31 December 2019
(US$)
Year ended
31 December 2018
(US$)
53,288
21,875
40,197
28,142
15,255
15,255
12,033
-
-
-
36,000
52,500
-
20,624
-
-
-
-
18,000
18,000
186,045
145,124
1 Mohammed Azlan Hashim was Chairman of the Board before his resignation on 31 May 2019.
Gerald Ong Chong Keng was appointed Chairman of the Board w.e.f. 1 June 2019.
2
3
Gerald Ong Chong Keng was Chairman of the Audit Committee. Helen Wong Siu Ming was appointed
Chairman of the Audit Committee w.e.f. 7 September 2019.
Christopher Henry Lovell resigned on 2 July 2018 and was re-appointed on 1 June 2019.
4 Nicholas John Paris resigned on 19 March 2019 and was re-appointed on 7 September 2019.
26
5 Monica Lai Voon Huey was appointed on 7 September 2019.
6 Richard Michael Boleat was appointed on 17 June 2019 and resigned on 5 September 2019.
7
Ferheen Mahomed has waived her entitlement for director’s fee since her appointment in 2015 and
she resigned on 7 September 2019.
SHARE OPTIONS
The Company did not operate any share option schemes during the years ended 31 December 2019
and 2018.
SHARE PRICE INFORMATION
High for the year
Low for the year
Close for the year
-
-
-
US$0.54
US$0.46
US$0.46
PENSION SCHEMES
In view of the non-executive nature of the directorships, no pension schemes exist in the Company.
SERVICE CONTRACTS
In view of the non-executive nature of the directorships, there are no service contracts in existence
between the Company and any of the Directors. Each Director was appointed by a letter of
appointment that states his appointment subject to the Articles of Association of the Company which
set out the main terms of his appointment.
CHRISTOPHER LOVELL
Chairman of the Nomination & Remuneration Committee
24 July 2020
27
CORPORATE GOVERNANCE STATEMENT
The Financial Conduct Authority requires all companies with a Premium Listing to comply with The
UK Corporate Governance Code (the “Code”). Aseana Properties is a Jersey incorporated company
with a Standard Listing on the UK Listing Authority’s Official List and is therefore not subject to the
Code. The following explains how the principles of governance are applied to the Company.
THE BOARD
The Company currently has a Board of five non-executive directors, including the non-executive
Chairman.
The brief biographies of the following Directors appear on pages 16 and 17 of the Annual Report
2019:
Gerald Ong Chong Keng (Non-Executive Chairman)
Monica Lai Voon Huey
Christopher Lovell
Nicholas John Paris
Helen Wong Siu Ming
Nicholas John Paris resigned as a non‐executive Director on 19 March 2019. Mohammad Azlan
Hashim resigned as non-executive Chairman on 31 May 2019. Christopher Lovell was re-appointed
as a non-executive Director on 1 June 2019. Richard Boleat and Helen Wong were appointed as non-
executive Directors on 17 June 2019. Richard Boleat and Ferheen Mahomed resigned as non-executive
Directors and Monica Lai and Nicholas Paris were appointed as non-executive Directors on 7
September 2019.
The Board did not appoint a Chief Executive or a Senior Independent Director from its incorporation
as it did not consider it appropriate given the nature of the Company’s business and that the Company’s
property portfolio was externally managed by Ireka Development Management Sdn. Bhd. (the
“Development Manager”). On 21 March 2019, the Development Manager submitted a notice to
terminate its appointment under the Management Agreement. The termination was subject to a three
(3)-month notice period. Following the notice of termination, the Development Manager indicated
that it would be prepared to work with the Board to facilitate a smooth and orderly transition of the
operations of Aseana Properties, currently carried out by the Development Manager, to Aseana
Properties itself or to third parties. The Board decided to self-manage the operations of Aseana
Properties, and also nominated Helen Wong as the Divestment Director to lead the orderly disposal of
the assets.
ROLE OF THE BOARD OF DIRECTORS
The Board’s role is to provide entrepreneurial leadership to the Company, within a framework of
prudent and effective controls, enabling risks to be assessed and managed. The Board sets the
Company’s strategic objectives, monitors and reviews the Company’s operational and financial
performance, ensures the Company has sufficient funding, and examines and approves disposal of the
Company’s assets in a controlled, orderly and timely manner. The Board also sets the Company’s
values and standards and ensures that its obligations to its shareholders and other stakeholders are met.
The implementation of the Company’s strategy was delegated to the Development Manager and its
performance was regularly assessed by the Board.
28
Appropriate level of directors’ and officers’ liability insurance is maintained by the Company.
MEETINGS OF THE BOARD OF DIRECTORS
The Board meets at least four (4) times a year and at such other times as the Chairman shall require.
During the year ended 31 December 2019, the Board met twelve (12) times and their respective
attendance are as follows:
Name of Directors
Attendance
Gerald Ong Chong Keng
Helen Wong Siu Ming (appointed w.e.f. 17 June 2019)
Christopher Henry Lovell (appointed w.e.f. 1 June 2019)
Nicholas John Paris (reappointed w.e.f. 7 September 2019)
Monica Lai Voon Huey (appointed w.e.f. 7 September 2019)
Mohammed Azlan Hashim (resigned w.e.f. 31 May 2019)
Ferheen Mahomed (resigned w.e.f. 7 September 2019)
Richard Michael Boleat (appointed w.e.f. 17 June 2019 and resigned
w.e.f. 5 September 2019)
12/12
6/6
6/6
3/3
2/2
5/6
8/10
3/3
To enable the Board to discharge its duties effectively, all Directors receive accurate, timely and clear
information, in an appropriate form and quality, including Board papers distributed in advance of
Board meetings. The Board periodically will receive presentations at Board meetings relating to the
Company’s business and operations, significant financial, accounting and risk management issues. All
Directors have access to the advice and services of the Company Secretary and advisers, who are
responsible to the Board on matters of corporate governance, board procedures and regulatory
compliance.
BOARD BALANCE AND INDEPENDENCE
Following the resignation of our Development Manager as of 30 June 2019, ASEANA has been a self-
managed company. The Board consists solely of non-executive directors of which Gerald Ong is the
non-executive Chairman. Notwithstanding that Ferheen Mahomed and following her resignation,
Monica Lai are the representatives of Legacy Essence Limited and Nicholas Paris is the representative
of LIM Advisors Limited, and they were therefore classified as Non-Independent Non-Executive
Directors of the Company, the Board considers the majority of Directors to be independent, being
independent of management and also having no business relationships which could interfere materially
with the exercise of their judgement.
The Chairman is responsible for leadership of the Board, ensuring effectiveness in all aspects of its
role and setting its agenda. Matters referred to the Board are considered by the Board as a whole and
no individual has unrestricted powers of decision. Together, the Directors bring a wide range of
experience and expertise in business, law, finance and accountancy, which are required to successfully
direct and supervise the business activities of the Company.
PERFORMANCE APPRAISAL
The Board undertakes an annual evaluation of its own performance and that of its Committees and
individual Directors. In November 2019, the evaluation concluded that the performance of the Board,
29
its Committees and each individual Director was and remains effective and that all Directors
demonstrate full commitment in their respective roles. The Directors are encouraged to continually
attend training courses at the Company’s expense to enhance their skills and knowledge in matters
that are relevant to their role on the Board. The Directors also receive updates on developments of
corporate governance, the state of economy, management strategies and practices, laws and
regulations, to enable effective functioning of their roles as Directors.
RE-ELECTION OF DIRECTORS
The Company’s Articles of Association states that all Directors shall submit themselves for election
at the first opportunity after their appointment, and shall not remain in office for longer than three
years since their last election or re-election without submitting themselves for re-election. At the
Annual General Meeting held on 8 July 2019, Ferheen Mahomed and Gerald Ong retired by rotation
and offered themselves for re-election and Richard Boleat, Christopher Lovell and Helen Wong having
recently been appointed offered themselves for re-election by the shareholders. All of these Directors
were re-elected at the AGM.
At the forthcoming Annual General Meeting, Monica Lai and Nicholas Paris will be offering
themselves for re-election having recently been appointed and Christopher Lovell will be retiring by
rotation and offering himself for re-election.
BOARD COMMITTEES
The Board has established Audit and Nomination & Remuneration which deal with specific aspects
of the Company’s affairs, each of which has written terms of reference which are reviewed annually.
Necessary recommendations are then made to the Board for its consideration and decision-making.
No one, other than the committee chairman and members of the relevant committee, is entitled to be
present at a meeting of board committees, but others may attend at the invitation of the board
committees for presenting information concerning their areas of responsibility. Copies of the terms of
reference are kept by the Company Secretary and are available on request at the Company’s registered
office at 12 Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands.
AUDIT COMMITTEE
The Audit Committee consists of three members and is currently chaired by Helen Wong, who replaces
Gerald Ong following his elevation to Chairman of the Board during the year. The other members are
Christopher Lovell and Nicholas Paris. The Committee members have no links with the Company’s
external auditor and Helen Wong and Christopher Lovell are independent Directors. The Board
considers that collectively the Audit Committee has sufficient recent and relevant financial experience
with the ability to discharge its duties properly, through extensive service on the Boards and Audit
Committees of other listed companies.
MEETINGS OF THE AUDIT COMMITTEE
The Committee meets at least twice a year and at such other times as the Chairman of the Audit
Committee shall require. Any member of the Audit Committee or the auditor may request a meeting
if they consider that one is necessary. The Committee met four (4) times during the year and their
respective attendance are as follows:
30
Name
Attendance
Helen Wong Siu Ming
Christopher Henry Lovell
Nicholas John Paris
Gerald Ong Chong Keng
Mohammed Azlan Hashim
Richard Michael Boleat
2/2
2/2
2/2
3/3
2/2
1/1
Representatives of the auditor may attend by invitation.
The Committee is responsible for:
monitoring, in discussion with the auditor, the integrity of the financial statements of the
Company, any formal announcements relating to the Company’s financial performance and
reviewing significant financial reporting judgements contained in them;
reviewing the Company’s internal financial controls and risk management systems;
making recommendations to the Board in relation to the appointment, re-appointment and
removal of the external auditor and approving the remuneration and terms of engagement of
the external auditor to be put to the shareholders for their approval in general meetings;
reviewing and monitoring the external auditor’s independence and objectivity and
effectiveness of the audit process, taking into consideration relevant UK professional and
regulatory requirements;
developing and implementing policy on engagement of the external auditor to supply non-audit
services; and
reporting to the Board any matters in respect of which it considers that action or improvement
is needed and making recommendations as to the steps to be taken.
Since the start of the financial year ended 31 December 2019, the Audit Committee performed its
duties as set out in the terms of reference. The main activities carried out by the Audit Committee
encompassed the following:
reviewing the audit plan with the Group’s Auditor;
reviewing and discussing the Audit Committee Report with the Group’s Auditor;
reviewing the draft Audited Financial Statements as contained in the draft Annual Report
together with the Group’s Auditor before tabling to the Board for consideration and approval;
reviewing other published financial information including the half year results and results
announcements before tabling to the Board for consideration and approval;
considering the independence of the auditor; and
31
reviewing the auditor’s performance and made a recommendation for the reappointment of the
Group’s auditor by shareholders.
NOMINATION & REMUNERATION COMMITTEE
The Nomination & Remuneration Committee is chaired by Christopher Lovell. The other committee
members are Monica Lai and Helen Wong. The Committee meets annually and at any such times as
the Chairman of the Nomination & Remuneration Committee shall require. The Committee met once
during the year and the meeting was attended by all committee members and other Board members at
the invitation of the Nomination & Remuneration Committee.
During the year ended 31 December 2019, the Nomination & Remuneration Committee carried out its
functions as set out in its terms of reference which are summarised below:
regularly reviewing the structure, size and composition (including skills, knowledge and
experience) of the Board and making recommendations to the Board with regard to any change;
considering the re-appointment or re-election of any Directors at the conclusion of their
specified term of office or retiring in accordance with the Company’s Articles of Association;
identifying and nominating for the approval of the Board, candidates to fill Board vacancies as
and when they arise;
considering any matter relating to the continuation in office of any Director at any time;
determining and agreeing with the Board the framework for the remuneration of the Directors;
and
setting the remuneration for all Directors.
FINANCIAL REPORTING
The Board aims to present a fair, balanced and understandable assessment of the Company’s position
and prospects in all reports to shareholders, investors and regulatory authorities. This assessment is
primarily provided in the half-yearly report and the Annual Report through the Chairman’s Statement,
Financial Review Statement and Directors’ Report.
The Audit Committee has reviewed the significant reporting issues and judgements made in
connection with the preparation of the Group’s financial statements including significant accounting
policies, significant estimates and judgements. The Audit Committee has also reviewed the clarity,
appropriateness and completeness of disclosures in the financial statements.
INTERNAL AUDIT
The Board has confirmed that the systems and procedures employed, provide sufficient assurance that
a sound system of risk management and internal control is maintained. An internal audit function
specific to the Company is therefore considered not necessary. However, the Directors will continue
to monitor if such need is required.
32
AUDITOR
The Audit Committee’s responsibilities include monitoring and reviewing the performance and
independence of the Company’s Auditor, Crowe U.K. LLP who had been appointed in December
2018.
Pursuant to audit and ethical standards, the auditor is required to assess and confirm to the Board their
independence, integrity and objectivity. The Auditor had carried out this assessment and considered
themselves to be independent, objective and in compliance with the Ethical Standard for Auditors
published by the UK Financial Reporting Council and the Code of Ethics issued by the Institute of
Chartered Accountants in England and Wales.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board is responsible for the effectiveness of the Company’s risk management and internal control
systems and is supplied with information to enable it to discharge its duties. Such systems are designed
to meet the particular needs of the Company and to manage rather than eliminate the risk of failure to
meet business objectives and can only provide reasonable, and not absolute, assurance against material
misstatement or loss.
During the year, the Board discharged its responsibility for risk management and internal control
through the following key procedures:
clearly defined delegation of responsibilities to employees of the Company, including
authorisation levels for all aspects of the business;
regular and comprehensive information provided to the Board covering financial performance
and key business indicators;
a detailed system of budgeting, planning and reporting which is approved by the Board and
monitoring of results against budget with variances being followed up and action taken, where
necessary; and
regular visits to operating units and projects by the Board.
The Board has established frameworks, policies and procedures to comply with the requirement of the
Bribery Act 2010 (the “Bribery Act”) and Market Abuse Regulation (“MAR”). In respect of the
former, the Development Manager had set up a legal and compliance function for the purposes of
implementing the anti-corruption and anti-bribery policy. Training and briefing sessions were
conducted for the senior management and employees. Compliance reviews are carried out as and when
required to ensure the effectiveness of the policy. In respect of dealing by employees and Directors of
the Company, the Company has a Dealing Code which imposes restrictions on dealings in its securities
by Persons Discharging Managerial Responsibilities (“PDMR”) and certain employees who have been
told the clearance procedures apply to them. The Company also has a Group-Wide Dealing Policy and
a Dealing Procedures Manual. These policies have been designed to ensure that the PDMR and other
employees of the Company and its subsidiaries do not misuse or place themselves under suspicion of
misusing information about the Group which they have and which is not public.
33
RELATIONSHIP WITH SHAREHOLDERS
The Board is committed to maintaining good communications with shareholders and has designated
the Chairman and designated members of its senior management as the principal spokespersons with
investors, analysts, fund managers, the press and other interested parties. The Board is informed of
material information provided to shareholders and is advised on their feedback. The Board has also
developed an understanding of the views of major shareholders about the Company through meetings
and teleconferences conducted by the financial adviser. In addition, the Company seeks to regularly
update shareholders through stock exchange announcements, press releases and participation in
roadshows.
To promote effective communication, the Company has a website, www.aseanaproperties.com
through which shareholders and investors can access relevant information.
ANNUAL GENERAL MEETING (“AGM”)
The AGM is the principal forum for dialogue with shareholders. At and after the AGM, investors are
given the opportunity to question the Board and seek clarification on the business and affairs of the
Group. All Directors attended the 2019 AGM, held on 8 July 2019 at the Company’s registered office.
Notices of the AGM and related papers are sent out to shareholders in good time to allow for full
consideration prior to the AGM. Each item of special business included is accompanied by an
explanation of the purpose and effect of a proposed resolution. The Chairman declares the number of
votes received for, against and withheld in respect of each resolution after the shareholders and proxies
present have voted on each resolution. An announcement confirming whether all the resolutions have
been passed at the AGM is made through the London Stock Exchange.
On behalf of the Board
GERALD ONG CHONG KENG
Director
24 July 2020
34
AUDITOR’S REPORT
Opinion
We have audited the financial statements of Aseana Properties Limited and its subsidiaries (the
“Group”) for the year ended 31 December 2019, which comprise:
the Group statement of comprehensive income for the year ended 31 December 2019;
the Group statement of financial position as at 31 December 2019;
the Group statement of changes in equity for the year then ended;
the Group statement of cashflows for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies
and other explanatory information.
The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
give a true and fair view of the state of the Group’s affairs as at 31 December 2019 and of its
loss for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to notes 2.1 and 2.1.1 in the financial statements.
As described in Note 2.1 the Group holds loans and borrowings along with medium term notes which
are due for repayment in the next 12 months. The settlement of these amounts is dependent upon the
sales of the remaining assets, this includes those which would be transferred as part of the proposed
De-Merger transaction. There is no certainty the De-Merger transaction and the divestment of certain
assets will be completed, as planned, and that therefore the loans and borrowings can be discharged in
accordance with the repayment terms and may impact on the going concern status of the Group.
Note 2.1.1 is concerning the general meeting (the ‘Discontinuation Resolution’) of the Company to be
held if the Group has not disposed of all of its assets by May 2021. Shareholders will be provided 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 to be held in May 2021, an ordinary resolution will be proposed to the effect that the
Company shall cease to continue as presently constituted. If at the meeting this resolution is passed
the Board shall, within four months of such meeting, convene a general meeting of the Company at
35
which a special resolution shall be proposed requiring the Company to be wound up voluntarily. The
outcome of the discontinuation vote would be uncertain and may impact on the going concern status
of the Group.
The matters explained in notes 2.1 and 2.1.1 indicate the existence of a material uncertainty which
may cast significant doubt about the Group’s ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the Group were unable to continue as a
going concern. Our opinion is not modified in respect of this matter.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered
material if it could reasonably be expected to change the economic decisions of a user of the financial
statements. We used the concept of materiality to both focus our testing and to evaluate the impact of
misstatements identified.
Based on our professional judgement, we determined overall materiality for the financial statements
as a whole to be US$2,800,000 (2018 US$3,500,000), based on 1.06% (2018 1.15%) of the Group’s
total assets which we have considered to be the appropriate benchmark for a property development
company.
We use a different level of materiality (‘performance materiality’) to determine the extent of our
testing for the audit of the financial statements. Performance materiality is set based on the audit
materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific
risk of each audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for
related party transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of US$85,000 (2018:
US$105,000). Errors below that threshold would also be reported to it if, in our opinion as auditor,
disclosure was required on qualitative grounds.
Overview of the scope of our audit
We carried out a full scope audit. Our audit approach was developed by obtaining an understanding
of the Group’s activities and the overall control environment. Based on this understanding we assessed
those aspects of the Group’s transactions and balances which were most likely to give rise to a material
misstatement.
As part of designing our audit, we determine materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of the valuation of inventories which a high level of
estimation uncertainty is involved in determining its net realisable value.
Whilst the Group’s accounting is centralised in Kuala Lumpur, Malaysia, the main activities of the
Group are accounted for from two operating locations in Malaysia and Vietnam.
In establishing out overall approach to the Group audit, we determined the type of work that needed
to be undertaken at each of the components by us, as the primary audit engagement team. For the full
scope components in Malaysia and Vietnam, where the work was performed by member firms of the
Crowe Global network, we determined the appropriate level of involvement to enable us to determine
that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
We issued instructions to the component auditors which included details of the significant areas to be
36
covered, including the key audit matters detailed below, and the information required to be reported
back. We reviewed the audit work performed by the component auditors, communicated our findings
therefrom and any further work required by us was then performed by the component auditor.
The primary team led by the senior statutory auditor was ultimately responsible for the scope and
direction of the audit process. This, together with the additional procedures performed at Group level,
gave us appropriate evidence for our opinion on the Group financial statements.
We designed out audit procedures to respond to the risk, recognising that the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through
collusion.
We focused on laws and regulations that could give rise to a material misstatement in the financial
statements. Our tests included, but were not limited to:
Agreement of the financial statement disclosures to underlying supporting documentation;
Enquiries of management;
Review of minutes of board meetings throughout the period
Considering the effectiveness of control environment in monitoring compliance with laws and
regulations.
There are inherent limitations in the audit procedures described above and the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely we would become aware of it. As in all of our audits we also addressed the
risk of management override of internal controls, including testing journals and evaluating whether
there was evidence of bias by the directors that represented a risk of material misstatement due to
fraud.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In addition to the matter described in the “Material uncertainty related to going concern”, we have
determined the following key audit matter and this is not a complete list of all risks identified by our
audit.
Key audit matter
How the scope of our audit addressed the key audit
matter
Carrying value of inventory
The Group’s inventories comprise land
held for property development and stock
of completed units. At 31 December
2019, the carrying value of inventories
were US$238.8 million.
The Group uses external valuers to provide a valuation
of their inventories to support the Group’s assessment
of net realisable value (“NRV”).
We focused on this area due to the significance of the
carrying value of the assets, the risk of impairment was
considered likely to be highly sensitive to assumptions
and estimates about the forecast occupancy rate,
rates, average rent rates,
average daily room
37
capitalisation rate and discount rate, as described in
Note 21.
We evaluated management’s NRV assessment for the
Group’s inventories. To assist with this we have
appointed our own expert in assessing and challenge
the assumptions used by management’s valuers. Our
procedures included:
assessing the competence and capabilities of
the valuers and verified their qualifications;
tested average rent rate and daily room rate
assumptions by comparing to the latest market
evidence available and benchmarking the rate
to the risks faced by the Group or risk exposed
to the property developments;
tested forecast cash flows by comparing the
assumptions used within
flow
projection models. We assessed the historical
accuracy of management’s budgets and
forecasts by comparing
to actual
performance; and
the cash
them
Discussions were held with the Group’s valuers
and management to determine whether the
valuation methodologies used are appropriate
and acceptable within real estate sector.
tested
significant
development
We
expenditure and capitalised borrowing costs incurred
during the year to supporting documents.
property
Evaluated the adequacy of the financial statement
disclosures in relation to management’s NRV
assessment.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as
a whole. They were not designed to enable us to express an opinion on these matters individually and
we express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that
38
there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report to you in respect of the following matters where the Companies (Jersey)
Law 1991 requires us to report to you if, in our opinion:
proper accounting records have not been kept by the Group, or proper returns adequate for our
audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 23, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements. A further description of our responsibilities for the audit of
the
the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
financial statements
located on
is
Other matters which we are required to address
We were appointed by the Audit Committee on 8 June 2019 to audit the financial statements for the
period ending 31 December 2019. Our total uninterrupted period of engagement is two years, covering
the periods ending 31 December 2018 to date.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group and
we remain independent of the Group in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
39
Use of our report
This report is made solely to the company's members, as a body, in accordance with Article 113A of
the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in an auditor's report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Stacy Eden (Senior Statutory Auditor)
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
24 July 2020
40
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
7
8
9
Notes
5
6
Continuing activities
Revenue
Cost of sales
Gross (loss)/profit
Other income
Administrative expenses
Foreign exchange gain/(loss)
Management fees
Marketing expenses
Other operating expenses
Operating loss
Finance income
Finance costs
Net finance costs
Net loss before taxation
Taxation
Loss for the year
Other comprehensive income/(loss), net of tax
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences
for foreign operations
11
12
13
14
Total other comprehensive
income/(loss) for the year
Total comprehensive loss
for the year
Loss attributable to:
Equity holders of the parent company
Non-controlling interests
Loss for the year
14
15
16
Total comprehensive loss attributable to:
Equity holders of the parent company
Non-controlling interests
Total comprehensive loss for the year
Loss per share
Basic and diluted (US cents)
2019
US$’000
9,725
(29,799)
(20,074)
26,989
(1,122)
287
(1,157)
(171)
(29,688)
(24,936)
5,793
(9,514)
(3,721)
(28,657)
(1,349)
(30,006)
2018
US$’000
33,054
(24,601)
8,453
19,149
(1,027)
(1,353)
(1,460)
(671)
(24,095)
(1,004)
1,242
(7,034)
(5,792)
(6,796)
390
(6,406)
615
(1,082)
615
(1,082)
(29,391)
(7,488)
(27,106)
(2,900)
(30,006)
(26,485)
(2,906)
(29,391)
(4,885)
(1,521)
(6,406)
(6,154)
(1,334)
(7,488)
15
(13.64)
(2.46)
The notes to the financial statements form an integral part of the financial statements.
41
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
Notes
2019
US$’000
2018
US$’000
Non-current assets
Property, plant and equipment
Intangible assets
Right of use
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Prepayments
Current tax assets
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Equity
Share capital
Share premium
Capital redemption reserve
Translation reserve
Accumulated losses
Shareholders’ equity
Non-controlling interests
Total equity
17
18
19
20
21
22
23
24
25
26
27
16
Non-current liabilities
Trade and other payable
Loans and borrowings
Total non-current liabilities
28
30
Current liabilities
Trade and other payables
Amount due to non-controlling interests
Loans and borrowings
Medium term notes
Current tax liabilities
Total current liabilities
Total liabilities
28
29
30
31
620
4,097
544
5,066
10,327
238,863
12,902
524
3
7,615
259,907
678
4,148
-
5,186
10,012
267,160
16,991
635
157
12,573
297,516
270,234
307,528
10,601
208,925
1,899
(21,644)
(90,135)
109,646
(3,848)
105,798
39,253
18,968
58,221
23,549
10,587
34,713
36,142
1,224
106,215
164,436
10,601
208,925
1,899
(22,265)
(62,786)
136,374
(937)
135,437
37,976
13,188
51,164
34,128
13,194
48,084
23,761
1,760
120,927
172,091
TOTAL EQUITY AND LIABILITIES
270,234
307,528
42
The financial statements were approved on 24 July 2020 and authorised for issue by the Board and
were signed on its behalf by
__________________________________ _________________________________
GERALD ONG CHONG KENG
Director
24 July 2020
NICHOLAS PARIS
Director
`
The notes to the financial statements form an integral part of the financial statement
43
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Consolidated
Balance at 1 January 2018
Changes in ownership interests in subsidiaries (Note 32)
Non-controlling interests contribution
Loss for the year
Total other comprehensive loss for the year
Total comprehensive loss for the year
As at 31 December 2018/ 1 January 2019
Impact of change in accounting policy (Note 36)
Redeemable
Ordinary
Shares
US$’000
10,601
-
-
-
-
-
10,601
-
Adjusted balance at 31 December 2018/ 1 January 2019
10,601
Changes in ownership interests in subsidiaries (Note 32)
Non-controlling interests contribution
Loss for the year
Total other comprehensive loss for the year
Total comprehensive loss for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-#
-
-
-
-
-
Management
Shares
US$’000
Share
Premium
US$’000
Capital
Redemption
Reserve
US$’000
Translation
Reserve
US$’000
Accumulated
Losses
US$’000
Total Equity
Attributable
to Equity
Holders of the
Parent
US$’000
Non-
Controlling
Interests
US$’000
208,925
1,899
(20,996)
(57,898)
142,531
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,269)
(1,269)
(3)
-
(4,885)
-
(4,885)
(3)
-
(4,885)
(1,269)
(6,154)
208,925
1,899
(22,265)
(62,786)
136,374
-
-
-
(219)
(219)
208,925
1,899
(22,265)
(63,005)
136,155
Total Equity
US$’000
142,862
-
63
(6,406)
(1,082)
(7,488)
135,437
(248)
135,189
-
-
331
3
63
(1,521)
187
(1,334)
(937)
(29)
(966)
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
621
621
(24)
-
(24)
-
(27,106)
(27,106)
(2,900)
(30,006)
-
621
(6)
615
(27,106)
(26,485)
(2,906)
(29,391)
Shareholders’ equity at 31 December 2019
10,601
-#
208,925
1,899
(21,644)
(90,135)
109,646
(3,848)
105,798
#represents 2 management shares at US$0.05 each
The notes to the financial statements form an integral part of the financial statements.
44
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash Flows from Operating Activities
Net loss before taxation
Finance income
Finance costs
Unrealised foreign exchange (gain)/loss
Write down/Impairment of goodwill
Depreciation of property, plant and equipment
Net realisation value adjustments of inventory
Operating (loss)/profit before changes in
working capital
Changes in working capital:
Decrease/(Increase) in inventories
Decrease/(Increase) in trade and other receivables
and prepayments
(Decrease)/Increase in trade and other payables
Cash generated from/(used in) operations
Interest paid
Tax paid
2019
US$’000
2018
US$’000
(28,657)
(5,793)
9,514
(292)
51
105
23,287
(1,785)
(6,796)
(1,242)
7,034
1,382
53
92
-
523
6,931
(22,243)
7,949
(10,794)
2,294
(9,514)
(1,568)
(987)
20,768
(1,939)
(7,034)
(1,955)
Net cash used in operating activities
(8,788)
(10,928)
Cash Flows From Investing Activities
Purchase of property, plant and
equipment
Proceeds from disposal property, plant and
equipment
Finance income received
Net cash from investing activities
(54)
(121)
-
1,242
2,173 1,121
6
2,221
45
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT’D)
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash Flows From Financing Activities
Advances from non-controlling interests
Issuance of ordinary shares of subsidiaries to non-
controlling interests (ii)
Finance lease liabilities
Repayment of loans and borrowings
Drawdown of loans and borrowings and Medium
Term Notes
Net (decrease)/increase in pledged deposits for
loans and borrowings and Medium Term Notes
Net cash generated from financing activities
Net changes in cash and cash equivalents
during the year
Effect of changes in exchange rates
Cash and cash equivalents at the beginning of
the year
Cash and cash equivalents at the end of the
year (i)
2019
US$’000
(2,666)
-
(873)
(12,162)
17,448
(1,651)
96
(6,519)
(109)
9,863
3,235
2018
US$’000
82
63
-
(24,197)
20,308
13,623
9,879
72
497
9,294
9,863
(i) Cash and Cash Equivalents
Cash and cash equivalents included in the consolidated statement of cash flows comprise the following
consolidated statement of financial position amounts:
Cash and bank balances
Short term bank deposits
Less: Deposits pledged (iii)
Cash and cash equivalents
2019
US$’000
2,380
5,235
7,615
(4,380)
3,235
2018
US$’000
9,372
3,201
12,573
(2,710)
9,863
The notes to the financial statements form an integral part of the financial statements.
(ii)
In 2018, US$63,000 of ordinary shares of subsidiaries were issued to non-controlling
shareholders which was satisfied via cash consideration.
(iii)
Included in short term bank deposits and cash and bank balance is US$4,380,000 (2018:
US$2,710,000) pledged for loans and borrowings and Medium Term Notes of the Group.
46
NOTES TO THE FINANCIAL STATEMENTS
1
GENERAL INFORMATION
Aseana Properties Limited (the “Company”) was incorporated in Jersey as a limited liability
par value company. The Company’s registered office is 12 Castle Street, St Helier, Jersey JE2
3RT.
The consolidated financial statements comprise the financial information of the Company and
its subsidiary undertakings (together the “Group”). Detail of the entities of the Group are
described in Note 34.
The principal activities of the Group are development of upscale residential and hospitality
projects, sale of development land and operation of hotel, mall and hospital in Malaysia and
Vietnam.
The financial statements are presented in US Dollar (US$), 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 is a going concern.
The Directors expect to raise sufficient funds to finance the operation of the Group’s existing
projects via the disposal of its development lands in Vietnam and East Malaysia, its existing
units of condominium inventories at The RuMa Residences in West Malaysia, and through the
disposals of the City International Hospital, the Four Points Sheraton Sandakan Hotel and the
Harbour Mall Sandakan and The RuMa Hotel and re-focused these disposal efforts by
nominating a Divestment Director at the Board level in June 2019. Significant new interest was
then generated from prospective buyers. However the impact of the COVID-19 meant that
movement restrictions were imposed throughout Malaysia from March 2020 and foreign travel
47
into and out of Vietnam was also prohibited. Operations at our two hotels and our shopping
mall in Malaysia were severely constrained and income fell considerably. Patient admissions
at our hospital in Ho Chi Minh also fell as patients avoided attending the premises fearing that
they might expose themselves to the virus. In addition, detailed due diligence and site visits by
prospective buyers became impossible and sales interest therefore stalled. The Directors intend
to revive that interest as the movement restrictions ease.
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$58 million as at 31 December 2019. 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 December 2021 which is their final
expiry date and if they have not been repaid by then the Directors intend to re-finance the notes
with other bank borrowings.
The Group also has significant borrowings in Vietnam secured by the City International
Hospital and adjacent development lands. The Directors expect to repay the borrowings via the
sale of the hospital and the adjacent land in Vietnam, or to re-structure the repayment dates of
the borrowings; they have successfully restructured a loan repayment that was due on the
hospital in June 2020 with a revised schedule of instalments due between from June 2021 to
2023.
As at 31 December 2019, one of the Group’s subsidiary undertakings had not complied with
the Debt to Equity ratio covenant in respect of a loan of US$23.4 million, in accordance with
the terms set out in the facility agreement. In the event of a breach of this covenant, the loan
shall be immediately due and payable together with accrued interest thereon upon notification
by the lenders. The Group’s subsidiary undertaking requested a non-compliance waiver from
the lenders in respect of this non-compliance with approval of the waiver received on 5 June
2020. Subsequently the loan was restructured and its maturity date is now 12 months from 22
July 2020 or upon completion of the hospital disposal, whichever is the earlier.
The Group has prepared and considered prospective financial information based on
assumptions and events (including COVID-19 effect) 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 30 and 31). The cash flow forecasts also incorporate current
payables, committed expenditure and other future expected expenditure, along with the
potential sale of two plots of development land in East Malaysia to an entity associated with
Legacy Essence Limited. 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.
On 7 May 2020, the Group announced that it is considering proposals to demerge certain assets
held by the Group in exchange for the buyback and cancellation of a significant percentage of
the issued ordinary shares of US$0.05 each in the capital of the Company (“De-Merger”). The
De-Merger transaction should result in approximately 50% in aggregate of the outstanding
shares in the Company being bought back from Ireka Corporation Berhad (“ICB”) and its
concert party Legacy Essence Limited (“Legacy Essence”) along with certain other
shareholders (the “Participating Shareholders”). The consideration would be an in specie
48
distribution of certain assets owned by the Group to the Participating Shareholders together
with a balancing cash payment from Participating Shareholders to the Group to reflect the
relative value of the assets to be distributed and the value of the shareholding of the
Participating Shareholders as at the date of the buyback. The Group will assess the net book
value of the Group's assets for the purposes of the transaction based on the unaudited net asset
value as at 31 December 2019 and has agreed with Ireka that adjustments should be made,
where appropriate, to reflect the settlement of potential claims that the Group may have against
Ireka or its group companies in connection with the Group's projects, including the settlement
of amounts owing by a subsidiary of Ireka to the Group relating to the construction of The
RuMa Hotel and Residences in Kuala Lumpur ("RuMa"). It is presently expected the assets
that will be distributed in specie will comprise RuMa, a portion of the land owned by the Group
in Kota Kinabalu and the residual projects from past developments. Any shares re-acquired by
the Company would be cancelled.
Following the Demerger Transaction the business plan remains unchanged and the Directors
anticipate the sale of the Group’s remaining assets, comprising of the hospital and adjacent
development lands in Ho Chi Minh, the hotel and shopping mall in Sandakan and two plots of
development land in Kota Kinabalu, can be made as COVID-19 related movement restrictions
are lifted in both Malaysia and Vietnam and are already seeking to revive previous interest
from prospective buyers. These asset sales will collectively enable the repayment of the
Group’s bank debts as or before they fall due.
As described in the Chairman’s Statement, this De-Merger transaction would require the
passing of a special resolution of Shareholders (including the Participating Shareholders)
which will require the approval of 66 2/3% of those voting at an Extraordinary General Meeting
("EGM"). The De-Merger is also conditional upon of the approval of various other parties
including the shareholders of Ireka at their own EGM which is yet to be convened and the
bankers/ guarantors and holders of Medium Term Notes to the Group. There is no certainty
that the proposed De-Merger will be successfully completed as the approval of several external
parties is yet to be obtained.
After considering the forecasts and the business risks, there is no certainty the De-Merger
transaction and the divestment of certain assets will be completed as planned and the loans and
borrowing can be discharged at the timely manner. 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 Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. For these reasons, they continue to adopt
the going concern basis of accounting in preparing the annual financial statements.
2.1.1 December 2019 Resolution
At a general meeting of the Company held on 30 December 2019, Shareholders supported the
Board's recommendations to vote against the ordinary resolution that the Company shall cease
to continue as presently constituted and voted in favour of the special resolution to amend the
Company's Articles which extended the life of the Company to May 2021.
To the extent that the Group has not disposed of all of its assets by May 2021, shareholders
will be provided with a further opportunity to review the future of the Group, which is likely
to include the option for shareholders to vote for another continuation of the Company but the
Board shall also procure that, at a general meeting of the Company to be held in May 2021, an
ordinary resolution will be proposed to the effect that the Company shall cease to continue as
presently constituted. If at such meeting, such resolution is passed, the Board shall, within four
49
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 Company. Until then, the
Company will continue to seek to dispose of its assets in a measured manner.
The outcome of the discontinuation vote would be uncertain and may impact on the going
concern status of the Group. 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.
2.2
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.
Initial application of IFRS 16
The Group has adopted IFRS 16 using the modified retrospective approach under which the
cumulative effect of initial application is recognised as an adjustment to the retained profits as
at 1 January 2019 (date of initial application) without restating any comparative information.
The Group has applied IFRS 16 only to contracts that were previously identified as leases under
IAS 17 “leases” and IC Interpretation 4 “Determining Whether an Arrangement Contains a
Lease”. Therefore, IFRS 16 has been applied only to contracts entered into or changed on or
after 1 January 2019.
Lessee Accounting
At 1 January 2019, for leases that were classified as operating leases under IFRS 17, the Group
measured the lease liabilities at the present value of the remaining lease payments, discounted
using the Group’s incremental borrowing rate at that date of ranging from 6.6% to 7.0%. The
right-of-use assets were measured at the amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that lease.
The Group has used the following practical expedients in applying IFRS 16 for the first time:-
Applied a single discount rate to a portfolio of leases with reasonably similar
characteristics;
Applied for the exemption not to recognise operating leases with a remaining lease term
of less than 12 months as at 1 January 2019;
Excluded initial direct costs for the measurement of the right-of-use asset at the date of
initial application; and
Used hindsight in determining the lease term where the lease contract contains options
to extend or terminate the lease.
For leases that were classified as finance leases, the Group has recognised the carrying amount
of the leased asset and lease liability immediately before 1 January 2019 as the carrying amount
of the right-of-use asset and the lease liability as at the date of initial application.
50
There was no difference between the operating lease commitments disclosed in the last
financial year (determined under IFRS 117) and the lease liabilities recognised at 1 January
2019.
Lessor Accounting
The Group did not make any adjustments to the accounting for assets held as lessor under
operating leases as a result of the adoption of IFRS 16.
Leases
The Group assesses whether a contract is or contains a lease, at the inception of the contract.
The Group recognises a right-of-use asset and corresponding lease liability with respect to all
lease arrangements in which it is the lessee, except for low-value assets and short-term leases
with 12 months or less. For these leases, the Group recognises the lease payments as an
operating expense on a straight-line method over the term of the lease unless another systematic
basis is more representative of the time pattern in which economic benefits from the leased
assets are consumed.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use assets and the associated lease liabilities are presented as a separate line item
in the statement of financial position.
The right-of-use asset is initially measured at cost. Cost includes the initial amount of the
corresponding lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred less any incentives received.
The right-of-use asset is subsequently measured at cost less accumulated depreciation and any
impairment losses, and adjustment for any re-measurement of the lease liability. The
depreciation starts from the commencement date of the lease. If the lease transfers ownership
of the underlying asset to the Group or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is depreciated over the
useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset to
the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental borrowing rate.
The lease liability is subsequently measured at amortised cost using the effective interest
method. It is re-measured when there is a change in the future lease payments (other than lease
modification that is not accounted for as a separate lease) with the corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recognised in profit or loss if the
carrying amount has been reduced to zero.
The impacts of adopting IFRS 16 on the Group’s consolidated financial statement are disclosed
in the following tables:
Operating lease commitments disclosed on 31 December 2018
(restated)
Discounted using weighted average of Group’s incremental
borrowing rate
Lease liability recognised as at 1 January 2019
US$'000
(2,729)
1,238
(1,491)
51
Consolidated Statement of
Financial Position as at 31
December 2018/1 January
2019
Right of use (ROU)
Finance lease liabilities
Accumulated losses
Non-controlling interest
Trade and other payables
Audited
Previously
Reported
Amounts
US$'000
-
-
(62,786)
(937)
34,128
Effect of
adoption of
IFRS 16
US$'000
1,272
1,491
Amounts
US$'000
1,272
1,491
(219)
(29)
29
(63,005)
(966)
34,157
The financial impacts arising from the change are summarised as follows:-
The group applied IFRS 16 by recognising the cumulative effect of initially applying IFRS
16 as an adjustment of US$248,000 to the opening balance of equity as at 1 January 2019.
2.3
Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any
future periods affected.
Information about critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the consolidated financial statements are
discussed below:
(a) Going concern
The Extraordinary General Meeting that was held in December 2019 extended the
Company’s life until May 2021 and the Directors anticipate holding a similar vote at
that time. It is too early to be able to forecast how the Company’s shareholders will
vote on a continuation resolution which would be a special resolution needing to be
passed by two-third majority of those voting. The Company and the Group continue to
adopt the going concern basis in preparing the financial statements.
As described in Note 2.1 the Directors consider the company to be a going concern
while the Directors continue with the agreed divestment and realisation process in an
orderly manner under their control and they expect to be able to continue to meet all
finance obligations as they fall due.
52
(b) Net realisable value of inventories
The Group assesses the net realisable value of inventories under development, land held
for development and completed properties held for sale according to their recoverable
amounts based on the realisability of these properties, taking into account estimated
costs to completion based on past experience and committed contracts and estimated
net sales based on prevailing market conditions supported by external valuations.
Provision is made when events or changes in circumstances indicate that the carrying
amounts at completion of development may exceed net realisable value. The
assessment requires the use of judgement and estimates in relation to factors such as
sales prices, comparable market transactions, occupancy levels, projected growth rates,
and discount rates.
As described in Note 21, the methods and key assumptions in relation to the calculation
of the net realisable value of inventories. At 31 December 2019, the carrying value of
inventories were approximately US$239million (31 December 2018: US$267million)
During the year, a net realisable value adjustment in relation to both Four Points by
Sheraton Sandakan Hotel and Harbour Mall Sandakan assets totalling US$23.3million
was recognised within cost of sales in the Consolidated Statement of Comprehensive
Income.
(c) Revenue – sale and leaseback arrangements
The Group entered into agreements with the buyers of The RuMa Hotel Suites for a
sale and leaseback arrangement. The sold hotel suites will be leased back to the Group
for the hotel operation over the lease term period of 10 years.
The Group considers that the control of the sold hotel suites, under the sale and
leaseback arrangement, has yet to be transferred to the buyer and the transfer of the
asset is therefore not a sale. No revenue is recognised in the financial statements.
The nature of this leaseback transaction represents, in substance, a temporary financing
arrangement. Any contractual payment made to the buyer was recognised as finance
costs. The proceeds of the revenue received from these buyers were recognised as
amounts owed to contract buyers, amounted to US$39million and was disclosed in Note
28.
(d) Classification of assets as inventory
The Directors apply judgements in determining the classification of the properties held
by the Group. As the Group’s principal activity is property development, the Group
continues to classify its completed developments, namely the hotel, mall and hospital
as inventories, in line with the Group’s intention to dispose of these assets rather than
hold them for rentals or capital appreciation. The Group operates these inventories
temporarily to stabilise its operation while seeking a potential buyer.
As described in the note 3.3(c) and (d), as a result of this classification all income
generating from the operations of these developments is recognised as other income in
note 6.
(e)
Impairment of licence contracts and related relationships
Licence contracts and related relationships represent the rights to develop the
International Healthcare Park venture with the lease period ending on 9 July 2077.
53
The Group assesses the recoverable amount of licence contracts and related
relationships by reference to the realisability of the properties of which the licence
contracts and related relationships is attached (refer to Note 2.3(b) and Note 18). The
assessment requires the use of judgement and estimates in relation to factors such as
sales prices and comparable market transactions.
The Group derecognises licence contracts and related relationships when a component
of the venture is disposed of.
(f)
Coronavirus Disease 2019 (COVID-19)
The current outbreak of COVID-19 has resulted in the occurrence of a multitude of
associated events such as temporary closing of businesses, travel restrictions and
quarantine measures across the globe. These measures and policies affect supply chains
and the production of goods and services and lower economic activity which is likely
to result in reduced demand for the Group’s goods and services. The Group exercises
judgement, in light of all facts and circumstances, to assess what event in this series of
events provides additional evidence about the condition that existed at the reporting
date and therefore affects the recognition and measurement of the Group’s assets and
liabilities at 31 December 2019.
3 SIGNIFICANT ACCOUNTING POLICIES
3.1
Basis of Consolidation
(a)
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial information of
subsidiaries are included in the consolidated financial statements from the date that
control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align
them with the policies adopted by the Group.
The Group controls an entity when it is exposed, or has rights, to variable returns from
its involvement with the entity and has the ability to affect those returns through its
power over the entity. Potential voting rights are considered when assessing control
only when such rights are substantive. The Group also considers it has de facto power
over an investee when, despite not having the majority of voting rights, it has the
current ability to direct the activities of the investee that significantly affect the
investee’s return.
(b)
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising
from intra-group transactions, are eliminated in preparing the consolidated financial
statements. Unrealised gains arising from transactions with equity-accounted investees
are eliminated against the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but to
the extent that there is no evidence of impairment.
54
(c)
Acquisition of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with owners
in their capacity as owners and therefore no goodwill is recognised as a result.
Adjustments to non-controlling interests arising from transactions that do not involve
the loss of control are based on a proportionate amount of the net assets of the
subsidiary.
3.2
Foreign Currencies
(a)
Foreign currency transactions
The consolidated financial statements are presented in United States Dollar (“US$”),
which is the Group’s presentation currency. Each entity in the Group determines its
own functional currency and items included in the financial statements of each entity
are measured using that functional currency. Transactions in foreign currencies are
translated to the respective functional currencies of the Group entities at exchange rates
at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated to the functional currency at the
exchange rate at that date.
Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency at the exchange rate
at the date that the fair value was determined. Non-monetary items in a foreign currency
that are measured in terms of historical cost are translated using the exchange rate at
the date of the transaction. Foreign currency differences arising on retranslation are
recognised in profit or loss, except for differences arising on the retranslation of
available-for-sale equity investments, which are recognised in other comprehensive
income.
(b)
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated to US$ at exchange rates at the
reporting date. The income and expenses of foreign operations are translated to US$ at
exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and
presented in the foreign currency translation reserve (“translation reserve”) in equity.
However, if the foreign operation is a non-wholly owned subsidiary, then the relevant
proportionate share of the translation difference is allocated to the non-controlling
interest. When a foreign operation is disposed of such that control, significant influence
or joint control is lost, the cumulative amount in the translation reserve related to that
foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.
When the Group disposes of only part of its interest in a subsidiary that includes a
foreign operation while retaining control, the relevant proportion of the cumulative
amount is reattributed to non-controlling interest. When the Group disposes of only part
of its investment in an associate that includes a foreign operation while retaining
significant influence or joint control, the relevant proportion of the cumulative amount
is reclassified to profit or loss.
When the settlement of a monetary item receivable from or payable to a foreign
operation is neither planned nor likely in the foreseeable future, foreign exchange
gains and losses arising from such a monetary item are considered to form part of a
55
net investment in a foreign operation and are recognised in other comprehensive
income, and presented in the translation reserve in equity.
3.3
Revenue Recognition and Other Income
Revenue is recognised to the extent that it is probable that the economic benefits will flow to
the Group and the revenue can be reliably measured. The following specific recognition criteria
must also be met before revenue is recognised:
(a)
Sale of completed properties
Revenue from sale of completed properties is recognised when effective control of
ownership of the properties is transferred to the purchasers which is when the
completion certificate or occupancy permit has been issued.
(b) Sale of development properties
Revenue from sale of development properties 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.
Revenue is recognised over the period of the contract by reference to the progress
towards complete satisfaction of that performance obligation. This is determined based
on the actual cost incurred to date to estimated total cost for each contract.
Where the outcome of a contract cannot be reliably estimated, revenue is recognised to
the extent of contract costs incurred that are likely to be recoverable. Contract costs are
recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the
expected loss is recognised as an expense immediately.
(c) Rental income
Rental income is recognised in profit or loss on a straight-line basis over the lease term.
Lease incentives granted are recognised as an integral part of the total rental income,
over the term of the lease. Rental income is recognised as other income.
(d)
Income from hotel, hospital and mall operations
Income from hospital operations which include healthcare support services and
medicine and medical services is recognised in the profit or loss net of service tax and
discounts as and when services are rendered. Income from hospital operations is
recognised as other income.
Income from the hotel operations, which include provision of rooms, food and
beverage, other departments sales and laundry service fees are recognised when
services are rendered. Income from hotel operations is recognised as other income.
Income from mall operations is recognised in profit or loss on a straight-line basis over
the term of the lease. Lease incentives granted are recognised as an integral part of the
56
total rental income, over the term of the lease. Where a rent-free period is included in a
lease, the rental income foregone is allocated evenly over the period from the date the
lease commencement to the earliest termination date. Income from mall operations is
recognised as other income.
(e)
Interest income
Interest income is recognised as it accrues using the effective interest method in profit
or loss except for interest income arising from temporary investment of borrowings
taken specifically for the purpose of obtaining a qualifying asset which is accounted
for in accordance with the accounting policy on borrowing costs.
3.4
Property, Plant and Equipment
All property, plant and equipment are stated at cost less depreciation unless otherwise stated.
Cost includes all relevant external expenditure incurred in acquiring the asset.
The estimates for the residual values, useful lives and related depreciation charges for the
property and equipment are based on commercial factors which could change significantly as
a result of technical innovations and competitors’ actions in response to the market
conditions. The Group anticipates that the residual values of its property and equipment will
be insignificant. As a result, residual values are not being taken into consideration for the
computation of the depreciable amount. Changes in the expected level of usage and
technological development could impact the economic useful lives and the residual values of
these assets, therefore future depreciation charges could be revised. The carrying amount of
property and equipment as at the reporting date is disclosed in Note 17 to the financial
statements.
The cost of property, plant and equipment recognised as a result of a business combination is
based on fair value at acquisition date. The fair value of property is the estimates amount for
which a property could be exchanged between knowledgeable willing parties in an arm’s length
transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion. The fair value of other items of plant and equipment is
based on the quoted market prices for similar items when available and replacement cost when
appropriate.
The gain or loss on disposal of an item of property, plant and equipment is determined by
comparing the proceeds from disposal with the carrying amount of property, plant and
equipment and is recognised net within “other income” and “other operating expenses”
respectively in profit or loss.
3.5
Income Tax
Income tax expense comprises current tax and deferred tax. Current tax and deferred tax is
recognised in profit or loss except to the extent that it relates to a business combination, or
items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted by the end of the reporting period, and any adjustment to tax
payable in respect of previous years.
Deferred tax is recognised using the liability method, providing for temporary differences
between the carrying amounts of assets and liabilities in the statement of financial position and
their tax bases. Deferred tax is not recognised for the following temporary differences: the
57
initial recognition of goodwill, and the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit or loss.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary
differences when they reverse, based on the laws that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will
be available against which the temporary difference can be utilised. Deferred tax assets are
reviewed at the end of each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
3.6
Financial Instruments
(a)
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they
are originated. All other financial assets are recognised initially on the trade date, which
is the date that the Group becomes a party to the contractual provisions of the
instrument.
Financial assets and liabilities are offset and the net amount presented in the statement
of financial position when, and only when, the Group has a legal right to offset the
amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
The Group classifies non-derivative financial assets into the following categories:
loans and receivables.
(i) Loans and receivables
Loans and receivables are held with an objective to collect contractual cash flows
which are solely payments of principal and interest on the principal amount
outstanding. Such assets are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, loans and
receivables are measured at amortised cost using the effective interest method, less
any impairment losses Loans and receivables comprise cash and cash equivalents
and other receivables.
Trade receivables are recognised initially at the transaction price and subsequently
measured at amortised cost, less any impairment losses.
(b)
Non-derivative financial liabilities
All financial liabilities are recognised initially on the trade date, which is the date that
the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when the contractual obligations are
discharged, cancelled or expire.
58
Financial assets and liabilities are offset and the net amount presented in the statement
of financial position when, and only when, the Group has a legal right to offset the
amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
The Group classifies non-derivative financial liabilities into other financial liability
category. Such financial liabilities are recognised initially at fair value plus any directly
attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortised
cost using the effective interest method.
Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade
and other payables.
Accounting for interest income and finance cost are discussed in Note 3.3 (e) and 3.12
respectively.
(c)
De-recognition
A financial asset or part of it is derecognised when, and only when, the contractual
rights to the cash flows from the financial asset expire or the financial asset is
transferred to another party without retaining control or substantially all risks and
rewards of the asset. On de-recognition of a financial asset, the difference between the
carrying amount and the sum of the consideration received (including any new asset
obtained less any new liability assumed) and any cumulative gain or loss that had been
recognised in equity is recognised in profit or loss.
A financial liability or a part of it is derecognised when, and only when, the obligation
specified in the contract is discharged or cancelled or expire. On de-recognition of a
financial liability, the difference between the carrying amount of the financial liability
extinguished or transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
3.7
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and at bank, deposits held at call and short
term highly liquid investments that are subject to an insignificant risk of changes in value and
are used by the Group in the management of their short term commitments. Bank overdrafts
are included within borrowings in the current liabilities section on the statement of financial
position. For the purpose of the statement of cash flows, cash and cash equivalents are
presented net of bank overdrafts and pledged deposits.
3.8
Intangible Assets
Intangible assets comprise licence contracts and related relationships and goodwill.
(a)
Licence Contracts and Related Relationships
On acquisition, value is attributable to non-contractual relationships and other contracts
of long-standing to the extent that future economic benefits are expected to flow from
the relationships. Licence contracts and related relationships represent the rights to
59
develop the International Healthcare Park venture with the lease period ending on 9
July 2077. Acquired licence contracts and related relationships have finite useful lives.
Subsequent measurement
When a component of the project to which the licence contracts and related
relationships is disposed of, the part of the carrying amount of the licence contracts and
related relationships that has been allocated to the component is recognised in profit or
loss. The licence contracts and related relationships are tested for impairment when
there is an indicator of impairment. The Group assesses the recoverable amount of
licence contracts and related relationships by reference to the realisability of the
properties of which the licence contracts and related relationship is attached to (refer
to Notes 2.3(b), 18 and 21).
(b) Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets.
For the measurement of goodwill at initial recognition. Goodwill is tested for
impairment when there is an indicator of impairment. The Group assesses the
recoverable amount of goodwill by reference to the realisability of the properties of
which the goodwill is attached to (refer to Note 2.3(e), 18 and 21).
Where it is not possible to estimate the recoverable amount of an intangible asset, the
impairment test is carried out on the smallest Group of assets to which it belongs for
which there are separately identifiable cash flows; its Cash Generating Units (‘CGUs’).
Goodwill is allocated on initial recognition to each of the Group’s CGUs that are
expected to benefit from a business combination that gives rise to the goodwill.
Impairment charges would be included in profit or loss, except to the extent they reverse
gains previously recognised in other comprehensive income. An impairment loss
recognised for goodwill is not reversed.
The carrying values of assets, other than those to which IAS 36-Impairment of Assets
does not apply, are reviewed at the end of each reporting period for impairment when
an annual impairment assessment is compulsory or there is an indication that the assets
might be impaired. Impairment is measured by comparing the carrying values of the
assets with their recoverable amounts. When the carrying amount of an asset exceeds
its recoverable amount, the asset is written down to its recoverable amount and an
impairment loss shall be recognised. The recoverable amount of an asset is the higher
of the asset’s fair value less costs to sell and its value in use, which is measured by
reference to discounted future cash flows using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the
asset. Where it is not possible to estimate the recoverable amount of an individual asset,
the Group determines the recoverable amount of the cash-generating unit to which the
asset belongs.
An impairment loss is recognised in profit or loss immediately unless the asset is carried
at its revalued amount. Any impairment loss of a revalued asset is treated as a
revaluation decrease to the extent of a previously recognised revaluation surplus for the
same asset. Any impairment loss recognised in respect of a cash-generating unit is
allocated first to reduce the carrying amounts of the other assets in the cash-generating
unit on a pro rata basis.
60
3.9
Inventories
Inventories comprise land held for property development, work-in-progress and stock of
completed units.
Inventories are stated at the lower of cost and net realisable value. Net realisable value
represents the estimated net selling price in the ordinary course of business, less estimated total
costs of completion and the estimated costs necessary to make the sale (refer to Note 2.3(b)).
Land held for property development consists of reclaimed land, freehold land, leasehold land
and land use rights on which development work has not been commenced along with related
costs on activities that are necessary to prepare the land for its intended use. Land held for
property development is transferred to work-in-progress when development activities have
commenced.
Work-in-progress comprises all costs directly attributable to property development activities
or that can be allocated on a reasonable basis to these activities.
Upon completion of development, unsold completed development properties are transferred to
stock of completed units.
3.10
Impairment
(a)
Loans and receivables
The Group considers evidence of impairment for loans and receivables at a specific
asset level. All individually significant receivables are assessed for specific
impairment.
An impairment loss in respect of loans and receivables is recognised in profit or loss
and is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that had not been
incurred) discounted at the asset’s original effective interest rate. The carrying amount
of the asset is reduced and the loss is recognised in the statement of comprehensive
income within administrative expenses.
When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment
loss to decrease, the decrease in impairment loss is reversed through profit or loss. The
impairment loss is reversed, to the extent that the debtor’s carrying amount does not
exceed what the carrying amount would have been had the impairment not been
recognised at the date the impairment is reversed.
(b)
Non-financial assets
The carrying amounts of non-financial assets (except for inventories and deferred tax
asset) are reviewed at the end of each reporting date to determine whether there is any
indication of impairment.
If any such indication exists, then the asset’s recoverable amount is estimated. For the
purpose of impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of
the cash inflows of other assets or groups of assets (the “cash-generating unit”). The
goodwill acquired in a business combination, for the purpose of impairment testing, is
61
allocated to cash-generating units that are expected to benefit from the synergies of the
combination. Goodwill is tested for impairment on an annual basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in
use and its fair value less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to
the asset.
An impairment loss is recognised if the carrying amount of an asset or its cash-
generating unit exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses recognised in
respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to the units and then to reduce the carrying amount of the other assets
in the unit (groups of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, impairment
losses recognised in prior periods are assessed at the end of each reporting period for
any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable
amount since the last impairment loss was recognised. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised. Reversals of impairment losses are credited to profit or loss
in the year in which the reversals are recognised.
(c)
Equity instruments
Instruments classified as equity are measured at cost on initial recognition and are not
re-measured subsequently.
(i)
Ordinary shares
Ordinary shares are redeemable only at the Company’s options and are
classified as equity. Distributions thereon are recognised as distributions within
equity.
(ii) Management shares
Management shares are classified as equity and are non-redeemable.
3.11 Employee Benefits
(a)
Short-term employee benefits
Short-term employee benefit obligations in respect of salaries, annual bonuses, paid
annual leave and sick leave are measured on an undiscounted basis and are expensed
as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash bonus
or profit-sharing plans if the Group has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee and the obligation can
be estimated reliably.
62
(b)
State plans
Certain companies in the Group maintain a defined contribution plan in Malaysia and
Vietnam for providing employee benefits, which is required by laws in Malaysia and
Vietnam respectively. The retirement benefit plan is funded by contributions from both
the employees and the companies to the employees’ provident fund. The Group’s
contributions to employees’ provident fund are charged to profit or loss in the year to
which they relate.
3.12 Finance Costs
Finance costs directly attributable to the acquisition, construction or production of qualifying
assets, are capitalised to the cost of those assets. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
Any unsold unit is not a qualifying asset because the asset is ready for its intended sale in its
current condition. The unsold unit fails to meet the definition of qualifying asset under IAS
23 and accordingly, no capitalisation of borrowing costs.
All sold units are not a qualifying asset to the developer as the control of the asset has been
transferred to customers over time. No capitalisation borrowing costs relating to assets that it
no longer controls and recognises.
All other finance costs are recognised in profit or loss in the period in which they are incurred
using the effective interest method.
3.13 Commitments and Contingencies
Commitments and contingent liabilities are disclosed in the financial statements and described
in Note 35. They are disclosed unless the possibility of an outflow of resources embodying
economic benefits is remote. A contingent asset is not recognised in the financial statements
but disclosed when an inflow of economic benefits is probable.
3.14 Segment Reporting
Segmental information represents the level at which financial information is reported to the
Board of Directors, being the chief operating decision makers as defined in IFRS 8. The
Directors determine the operating segments based on reports prepared by their staff for
strategic decision making and resource allocation. For management purposes, the Group is
organised into project units as operation segments set out in Note 5.2.
An operating segment is a component of the Group that engages in business activities from
which it may earn revenues and incur expenses, including revenues and expenses that relate to
transactions with any of the Group’s other components
Segment capital expenditure is the total cost incurred during the year to acquire property, plant
and equipment, and intangible assets other than goodwill.
63
3.15 Lease
During the year, the Group has changed its accounting policy for leases where the group is
the lessee. The new policy is set out below and the impact of the change is described in note
2.2.
Until 31 December 2018, leases of property, plant and equipment where the Group, as lessee,
had substantially all the risks and rewards of ownership were classified as finance leases.
Finance leases were capitalised at the lease’s inception at the fair value of the leased property
or, if lower, the present value of the minimum lease payments. The corresponding rental
obligations, net of finance charges, were included in other short-term and long-term payables.
Leases in which a significant portion of the risks and rewards of ownership were not transferred
to the Group as lessee were classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease.
Under the new policy, on initial application, the Group has performed the following:
• Recognised right of use assets and lease liabilities in the consolidated statement of
financial position, measured at the present value of future lease payments, discounted
using the rate implicit in the lease or the lessee’s incremental borrowing rate if this is
not stated. These are included within right-of-use assets and lease liabilities
respectively;
• Recognised depreciation of right of use assets and interest on lease liabilities in the
consolidated income statement;
• The incremental borrowing rate is calculated on a lease by lease basis.
4
FINANCIAL INSTRUMENTS
The Group’s principal financial instruments comprise cash and cash equivalents, trade and
other receivables, trade and other payable, amount due to non-controlling interest, medium
term notes, loan and borrowings. The Group’s accounting policies and method adopted,
including the criteria for recognition, the basis on which income and expenses are recognised
in respect of each class of financial assets, financial liability and equity instrument are set out
in Note 3.6.
4.1
Financial Risk Management Objectives and Policies
The Group’s international operations and debt financing arrangements expose it to a variety of
financial risks: credit risk, liquidity risk and market risk (including foreign exchange risk,
interest rate risk and price risk). The Group’s financial risk management policies and their
implementation on a group-wide basis are under the direction of the Board of Aseana Properties
Limited.
The Group’s treasury policies are formulated to manage the financial impact of fluctuations in
interest rates and foreign exchange rates to minimise the Group’s financial risks. The Group
has not used derivative financial instruments, principally interest rate swaps and forward
foreign exchange contracts for hedging transactions. The Group does not envisage using these
derivative hedging instruments in the short term as it is the Group’s policy to borrow in the
currency to match the revenue stream to give it a natural hedge against foreign currency
fluctuation. The derivative financial instruments will only be used under the strict direction of
64
the Board. It is also the Group’s policy not to enter into derivative transactions for speculative
purposes.
4.2
Credit Risk
The Group’s credit risk is primarily attributable to deposits with banks and credit exposures to
customers. The Group has credit policies in place and the exposures to these credit risks are
monitored on an ongoing basis. The Group manages its deposits with banks and financial
institutions by monitoring credit ratings and limiting the aggregate risk to any individual
counterparty. At 31 December 2019, 97.60% (2018: 98.07%) of deposits and cash balances
were placed at banks and financial institutions with credit ratings of no less than A (Moody’s/
Rating Agency Malaysia) and 2.40% (2018: 1.93%) with local banks, in the case of Vietnam.
Management does not expect any counterparty to fail to meet its obligations.
The group applies the IFRS 9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped
based on shared credit risk characteristics and the days past due. The contract assets relate to
unbilled work in progress and have substantially the same risk characteristics as the trade
receivables for the same types of contracts. The Group has therefore concluded that the
expected loss rates for trade receivables are a reasonable approximation of the loss rates for the
contract assets.
In respect of credit exposures to customers, the Group receives progress payments from sales
of commercial and residential properties to individual customers prior to the completion of
transactions. In the event of default by customers, the Group companies undertake legal
proceedings to recover the properties. The Group has limited its credit exposure to customers
due to secured bank loans taken by the purchasers. At 31 December 2019, there was no
significant concentration of credit risk within the Group.
The Group’s exposure to credit risk arising from total debtors was set out in Note 22 and totals
US$12.9 million (2018: US$17.0 million). The Group’s exposure to credit risk arising from
deposits and balances with banks is set out in Note 23 and totals US$7.6 million (2018:
US$12.6 million).
Financial guarantees
The Company provides unsecured financial guarantee to banks in respect of banking facilities
granted to certain subsidiaries, as set out in Notes 31.
At the end of the reporting period, the maximum exposure to credit risk as represented by the
outstanding banking and credit facilities of the subsidiaries is as follows:
Company
Financial institutions for bank facilities
granted to its subsidiaries
2019
US$’000
2018
US$’000
76,010
70,809
At the end of the reporting period there was no indication that any subsidiary would default on
repayment.
65
4.3 Liquidity Risk
The Group raises funds as required on the basis of budgeted expenditure and inflows for the
next twelve months with the objective of ensuring adequate funds to meet commitments
associated with its financial liabilities. When funds are sought, the Group balances the costs
and benefits of equity and debt financing against the developments to be undertaken. At 31
December 2019 the Group’s borrowings to fund the developments had terms of less than ten
years.
Cash flows are monitored on an on-going basis. The Group manages its liquidity needs by
monitoring scheduled debt servicing payments for long term and short term financial liabilities
as well as cash out flows due in its day-to-day operations while ensuring sufficient headroom
on its undrawn committed borrowing facilities at all times so that borrowing limits and
covenants are not breached. Capital investments are committed only after confirming the
source of funds, e.g. securing financial liabilities.
Management is of the opinion that most of the bank borrowings can be renewed or re-financed
based on the strength of the Group’s earnings, cash flow and asset base.
It is not expected that the cash flows included in the maturity analysis could occur significantly
earlier, or at a significantly different amount.
66
The maturity profile of the Group’s financial liabilities at the statement of financial position date, based on the contracted undiscounted payments,
were as follows:
Carrying
amount
US$’000
Contractual
interest rate
Contractual
cash flows
US$’000
Under 1
year
US$’000
1 – 2 years
US$’000
2 – 5 years
US$’000
More than
5 years
US$’000
At 31 December 2019
Finance lease liabilities
Interest bearing loans and borrowings
Trade and other payables
Amount due to non-controlling interests
At 31 December 2018
Interest bearing loans and borrowings
Trade and other payables
Amount due to non-controlling interests
611 2.50% - 3.50%
5.55% - 11.3%
-
-
-
89,212
23,549
10,587
123,959
637
99,959
23,549
10,587
134,706
456
44,925
23,549
10,587
79,493
181
35,022
-
-
35,201
-
20,012
-
-
20,012
85,033
31,324
13,194
129,551
5.55% - 11.3%
-
-
-
101,506
31,324
13,194
146,024
50,817
31,324
13,194
95,335
30,087
-
-
30,087
20,602
-
-
20,602
The above table excludes current tax liabilities and contract liabilities
-
-
-
-
-
-
-
-
67
4.4 Market Risk
(a) Foreign Exchange Risk
Entities within the Group are exposed to foreign exchange risk from future commercial
transactions and net monetary assets and liabilities that are denominated in a currency that is
not the entity’s functional currency. The foreign currency exposure is not hedged.
The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the
country in which the property or investment is located or by borrowing in currencies that match
the future revenue stream to be generated from its investments.
Management monitors the foreign currency exposure closely and takes necessary actions in
consultation with the bankers to avoid unfavourable exposure.
The Group is exposed to foreign currency risk on cash and cash equivalents which are
denominated in currencies other than the functional currencies of the relevant Group entities.
The Group’s exposure to foreign currency risk on cash and cash equivalents in currencies other
than the functional currencies of the relevant Group entities at year end are as follows:
US Dollar
Ringgit Malaysia
Others
2019
US$’000
320
74
-
394
2018
US$’000
44
41
4
89
At 31 December 2019, if cash and cash equivalents denominated in a currency other than the
functional currencies of the Group entities strengthened/ (weakened) by 10% and all other
variables were held constant, the effects on the Group’s profit or loss and equity expressed in
US$ would have been US$39,400/ (US$39,400) (2018: US$8,900/ (US$8,900) ).
Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being
denominated in a currency that is not the functional currency. Differences resulting from the
translation of financial statements into the Group’s presentation currency are not taken into
consideration.
Subsequent to year end, there are no significant monetary balances held by group companies
that are denominated in a non-functional currency.
(b) Interest Rate Risk
The Group’s policy is to minimise interest rate risk on bank loans and borrowings using a mix
of fixed and variable rate debts that represent market rates. The Group prefers to maintain
flexibility on the desired mix of fixed and variable interest rates as this will depend on the
economic environment, the type of borrowings available and the funding requirements of the
project when a decision is to be made.
68
The interest rate profile of the Group’s significant interest-bearing financial instrument, based
on carrying amounts at the end of the reporting period was:
Fixed rate instruments:
Financial assets
Financial liabilities
Floating rate instruments:
Financial liabilities
2019
US$’000
2018
US$’000
5,235
36,753
3,201
23,761
53,070
61,272
The Group’s exposure to the risk of changes in market interest rates relates primarily to the
Group’s liabilities with a floating interest rate. The fixed and floating interest rates were not
hedged and would therefore expose the Group to cash flow interest rate risk. Borrowings at
fixed rate represent 41% (2018: 28%) of the Group’s total borrowings at 31 December 2019.
Interest rate risk is reported internally to key management personnel via a sensitivity analysis,
which is prepared based on the exposure to variable interest rates for non-derivative
instruments at the statement of financial position date. For variable rate borrowings, the
analysis is prepared assuming that the amount of liabilities outstanding at the statement of
financial position date will be outstanding for the whole year. A 100 basis point increase or
decrease is used and represents the management’s assessment of the reasonable possible
change in interest rate.
Sensitivity analysis for floating rate instrument
At 31 December 2019, if the interest rate had been 100 basis point lower/ higher and all other
variables were held constant, this would (decrease)/increase the Group loss for the year by
approximately (US$530,700)/US$530,700 ((2018: would (decrease)/increase the Group loss
for the year by approximately (US$613,000)/US$613,000).
4.5
Fair Values
The carrying amount of trade and other receivables, deposits, cash and cash equivalents, trade
and other payables and accruals of the Group approximate their fair values in the current and
prior years due to relatively short term nature of these financial instruments.
69
The table below analyses financial instruments carried at fair value and those not carried at fair value, along with their carrying amounts shown
in the statement of financial position:
2019
US$’000
Financial liabilities
Amount due to non-
controlling interests
Bank loans and borrowings
Finance lease liabilities
Medium term notes
2018
US$’000
Financial liabilities
Amount due to non-controlling
interests
Bank loans and borrowings
Medium term notes
Fair value of financial instruments
carried at fair value
Level 2 Level 3
Total
Level 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fair value of financial instruments
carried at fair value
Level 2 Level 3
Total
Level 1
-
-
-
-
-
-
-
-
-
-
-
-
Fair value of financial instruments
not carried at fair value
Level 1
Level 2
Level 3
Total
Total
fair
value
Carrying
amount
-
-
-
-
-
-
-
-
-
-
(10,587)
(53,070)
(611)
(35,734)
(10,587)
(53,070)
(611)
(35,734)
(10,587)
(53,070)
(611)
(35,734)
(10,587)
(53,070)
(611)
(36,142)
(100,002)
(100,002)
(100,002)
(100,410)
Fair value of financial instruments
not carried at fair value
Level 1
Level 2
Level 3
Total
Total
fair
value
Carrying
amount
-
-
-
-
-
-
-
-
(13,194)
(61,272)
(23,723)
(98,189)
(13,194)
(61,272)
(23,723)
(13,194)
(61,272)
(23,723)
(13,194)
(61,272)
(23,761)
(98,189)
(98,189)
(98,227)
-
-
-
-
-
-
-
-
-
70
Policy on transfer between levels
The fair value on an asset to be transferred between levels is determined as of the date of the
event or change in circumstances that caused the transfer.
Level 1 fair value
Level 1 fair value is derived from quoted price (unadjusted) in an active market for identical
financial assets or liabilities that the entity can access at the measurement date.
Level 2 fair value
Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that
are observable for the financial assets or liabilities, either directly or indirectly.
Level 3 fair value
Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities.
Transfers between Level 1 and Level 2 fair values
There has been no transfer between Level 1 and 2 fair values during the financial year (2018: no
transfer in either direction).
Transfers between Level 2 and Level 3 fair values
There has been no transfer in either direction during the financial year (2018: no transfer in either
direction).
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value
of future principal and interest cash flows, discounted at the market rate of interest at the end of
the reporting period. At 31 December 2019, the interest rate used to discount estimated cash flows
of the medium term notes is 7.90% (2018: 8.30%).
4.6 Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern in order to provide returns to shareholders and benefits to other stakeholders
and to maintain an optimal capital structure to reduce cost of capital.
The capital structure of the Group consisted of cash and cash equivalents, loans and borrowings,
medium term notes and equity attributable to equity holders of the parent, comprising issued share
capital and reserves, were as follows:
71
Cash and cash equivalents
Loans and borrowings and finance lease liabilities
Medium term notes
Equity attributable to equity holders of the parent
Total capital
2019
US$’000
7,615
(53,681)
(36,142)
(109,646)
(191,854)
2018
US$’000
12,573
(61,272)
(23,761)
(136,374)
(208,834)
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.
Consistent with others in the industry, the Group monitors capital on the basis of net debt-to-
equity ratio.
Net debt-to-equity ratio is calculated as a total of interest-bearing borrowings less held-for-trading
financial instrument and cash and cash equivalents to the total equity.
The net debt-to-equity ratios at 31 December 2019 and 31 December 2018 were as follows:
Total borrowings and finance lease liabilities
Less: Cash and cash equivalents (Note 23)
Net debt
Total equity
Net debt-to-equity ratio
5
REVENUE AND SEGMENTAL INFORMATION
2019
US$’000
89,823
(7,615)
82,208
105,798
0.78
2018
US$’000
85,033
(12,573)
72,460
135,437
0.53
The Group’s operating revenue for the year was mainly attributable to the sale of completed units
in Malaysia.
Income earned from hotel, mall and hospital operations are included in other income in line with
management’s intention to dispose of the properties.
72
5.1
Revenue recognised during the year as follows:
Sale of completed units
Segmental Information
5.2
Timing of revenue recognition
Properties transferred at a point in
time
Properties transferred over time
2019
US$’000
2018
US$’000
9,725
9,725
33,054
33,054
9,725
-
9,725
5,404
27,650
33,054
The Group’s assets and business activities were managed by Ireka Development Management Sdn. Bhd.
(“IDM”) as the Development Manager under a Management Agreement dated 27 March 2007 until they
resigned as of 30 June 2019. Following that date, the Company has been managed by its Board of
Directors with the assistance of certain staff seconded to the Company by Ireka and a Chief Executive
Officer who resigned in January 2020, On 31 May 2020 we terminated the Services Agreement and also
the staff secondment arrangements with Ireka and have engaged a few staff directly to run our finances
and operations.
Segmental information represents the level at which financial information is reported to the Board
of Directors, being the chief operating decision makers as defined in IFRS 8. The Directors
determine the operating segments based on reports reviewed and used by their staff for strategic
decision making and resource allocation. For management purposes, the Group is organised into
project units.
The Group’s reportable operating segments are as follows:
(i) Investment Holding Companies – investing activities;
(ii) Ireka Land Sdn. Bhd. – develops Tiffani (“Tiffani”) by i-ZEN;
(iii) ICSD Ventures Sdn. Bhd. – owns and operates Harbour Mall Sandakan (“HMS”) and Four
Points by Sheraton Sandakan Hotel (“FPSS”);
(iv) Amatir Resources Sdn. Bhd. – develops SENI Mont’ Kiara (“SENI”);
(v) Urban DNA Sdn. Bhd.– develops The RuMa Hotel and Residences (“The RuMa”); and
(vi) Hoa Lam Shangri-La Healthcare Group – master developer of International Healthcare Park
(“IHP”); owns and operates the City International Hospital (“CIH”).
Other non-reportable segments comprise the Group’s development projects. None of these segments
meets any of the quantitative thresholds for determining reportable segments in 2019 and 2018.
73
Information regarding the operations of each reportable segment is in Notes 5.3. The Directors
monitor 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.
74
5.3 Analysis of the group’s reportable operating segments is as follows:-
Operating Segments – ended 31 December 2019
Investment
Holding
Companies
Amatir
Resources
Sdn. Bhd.
US$’000 US$’000 US$’000 US$’000
ICSD
Ventures
Sdn. Bhd.
Ireka
Land
Sdn. Bhd.
The RuMa
Hotel KL
Sdn. Bhd.
US$’000
Urban
DNA
Sdn. Bhd.
US$’000
Hoa Lam
Shangri-La
Healthcare
Group
Total
US$’000 US$’000
1,354
94
(23,929)
1,205
(3,962)
491
(3,862)
(28,609)
Segment (loss)/profit before
taxation
Included in the measure of segment
(loss)/profit are:
Revenue
Other income from hotel operations
Other income from mall operations
Other income from hospital
operations
Provision for allowance of
inventory
Disposal of intangible assets
Marketing expenses
Expenses from hotel operations
Expenses from mall operations
Expenses from hospital operations
Depreciation of property, plant and
equipment
Finance costs
Finance income
Segment assets
-
(180)
-
3,973
-
(14)
1
481
Segment liabilities
251
196
2,735
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,909
1,880
6,427
-
-
-
-
(22,355)
-
-
(3,879)
(1,326)
-
-
(1,634)
104
60,217
(932)
(50)
(1)
-
-
-
-
(678)
708
6,318
4,099
-
3,882
-
-
-
-
-
(6,970)
-
-
(35)
(40)
-
1,085
1,626
3,298
-
-
-
-
-
9,725
7,791
1,880
-
15,092
15,092
-
-
(170)
-
-
-
-
-
-
-
-
(13,454)
(23,287)
(50)
(171)
(10,849)
(1,326)
(13,454)
-
(1,009)
45
(70)
(5,960)
969
(105)
(9,515)
1,827
85,571
86,511
244,156
5,379
65,222
79,508
75
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items
Profit or loss
Total loss for reportable segments
Other non-reportable segments
Finance income
Consolidated loss before taxation
US$’000
(28,609)
(441)
393
(28,657)
76
Operating Segments – ended 31 December 2018
Segment (loss)/profit before
taxation
Included in the measure of segment
(loss)/profit are:
Revenue
Other income from hotel operations
Other income from mall operations
Other income from hospital
operations
Disposal of intangible assets
Marketing expenses
Expenses from hotel operations
Expenses from mall operations
Expenses from hospital operations
Depreciation of property, plant and
equipment
Finance costs
Finance income
Segment assets
Segment liabilities
-
-
-
275
450
Investment
Holding
Companies
Amatir
Resources
Sdn. Bhd.
US$’000 US$’000 US$’000 US$’000
ICSD
Ventures
Sdn. Bhd.
Ireka
Land
Sdn. Bhd.
The RuMa
Hotel KL
Sdn. Bhd.
US$’000
Urban
DNA
Sdn. Bhd.
US$’000
Hoa Lam
Shangri-La
Healthcare
Group
Total
US$’000 US$’000
(2,475)
(32)
(1,339)
820
(4,199)
6,118
(4,107)
(5,214)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
3,727
1,767
-
-
-
(4,169)
(1,395)
-
-
(1,494)
80
5,404
-
-
-
(53)
-
-
-
-
-
(135)
158
501
182
82,219
16,987
2,400
9,513
-
109
-
-
-
-
(593)
-
-
(14)
-
-
737
659
27,650
-
-
-
-
(671)
-
-
-
-
(156)
18
-
-
-
33,054
3,836
1,767
12,695
-
-
-
-
(12,989)
12,695
(53)
(671)
(4,762)
(1,395)
(12,989)
(78)
(5,249)
985
(92)
(7,034)
1,242
104,498
88,531
293,748
23,240
64,793
101,237
77
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items
Profit or loss
Total loss for reportable segments
Other non-reportable segments
Consolidated loss before taxation
US$’000
(5,214)
(1,582)
(6,796)
2019
US$’000
Revenue
Depreciation
Finance
costs
Finance
income
Segment
assets
Segment
liabilities
Total reportable segment
Other non-reportable segments
Consolidated total
9,725
-
9,725
(105)
(9,514)
-
-
1,827
394
244,156
26,078
79,508
84,928
(105)
(9,514)
2,221
270,234
164,436
2018
US$’000
Revenue
Depreciation
Finance
costs
Finance
income
Segment
assets
Segment
liabilities
Total reportable segment
Other non-reportable segments
Consolidated total
33,054
-
33,054
(92)
-
(92)
(7,034)
1,242
-
-
293,748
13,780
101,237
70,854
(7,034)
1,242
307,528
172,091
Additions to
non-current
assets
-
54
54
Additions to
non-current
assets
-
121
121
78
Geographical Information – ended 31 December 2019
Revenue
Non-current assets
Malaysia
US$’000
9,725
6,319
19
Vietnam
US$’000
Consolidated
US$’000
-
4,008
9,725
10,327
In the financial year ended 31 December 2019, no single customer exceeded 10% of
the Group’s total revenue.
Geographical Information – ended 31 December 2018
Revenue
Non-current assets
Malaysia
US$’000
33,054
5,925
Vietnam
US$’000
Consolidated
US$’000
-
4,087
33,054
10,012
In the financial year ended 31 December 2018, no single customer exceeded 10% of
the Group’s total revenue.
6
COST OF SALES
Direct costs attributable to:
Completed units (Note 21)
Disposal/impairment of
intangible assets
(Note 18)
Net realisable value
adjustment of inventories
(Note 21)
7
OTHER INCOME
Rental income
Other income from hotel operations (a)
Other income from mall operations (b)
Other income from hospital operations (c)
Sundry income
79
2019
US$’000
2018
US$’000
6,461
24,548
51
23,287
53
-
29.799
24,601
2019
US$’000
2018
US$’000
525
7,791
1,880
15,092
1,701
26,989
236
3,836
1,767
12,695
615
19,149
(a) Other income from hotel operations
The income in 2019 and 2018 relates to the hotel operations of FPSS which
is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd. The
income earned from hotel operations is included in other income in line with
management’s intention to dispose of the hotel.
(b) Other income from mall operations
The income relates to the operation of HMS which is owned by a subsidiary
of the Company, ICSD Ventures Sdn. Bhd. The income earned from mall
operations is included in other income in line with management’s intention
to dispose of the mall.
(c)
Other income from hospital operations
The income relates to the operation of CIH which is owned by a subsidiary
of the Company, City International Hospital Company Limited. The income
earned from hospital operations is included in other income in line with
management’s intention to dispose of the hospital.
8
FOREIGN EXCHANGE GAIN/(LOSS)
Foreign exchange gain/(loss) comprises:
Realised foreign exchange
(loss)/gain
Unrealised foreign exchange
gain/(loss)
9
MANAGEMENT FEES
Management fees
2019
US$’000
2018
US$’000
(6)
29
293
287
(1,382)
(1,353)
2019
US$’000
2018
US$’000
1,157
1,460
From 1 January 2019 to 30 April 2019, the management fees paid to the
Development Manager were US$75,000 per month, payable in advance, following
which the base fee payable to the Manager reduced to US$50,000 per month, again
payable in advance. The Manager resigned with effect from 30 June 2019. The
management fees have been allocated to the subsidiaries and the Company based
on where the relevant service was provided.
80
10
STAFF COSTS
Wages, salaries and others (including key management
personnel)
2019
US$’000
8,683
2018
US$’000
8,387
Employees’ provident fund, social security and other
382
337
pension costs
9,065
8,724
The Company has no executive Directors or employees under its employment. As
of year ended 2019, the subsidiaries of the Group have a total of 887 (2018: 816)
employees.
11
FINANCE (COSTS)/ INCOME
Interest income from banks
Accrued interest
Agency fees
Interest on bank loans
Lease interest
Interest on medium term notes
2019
US$’000
2,221
3,572
(695)
(7,038)
(59)
(1,722)
2018
US$’000
1,242
-
(59)
(5,540)
-
(1,435)
(3,721)
(5,792)
Accrued interest represents interest on equity contributions due from Ireka
Corporation Berhad. relating to the development and construction of The RuMa
Hotel and Residences. For more detailed information see note 33.
12
NET LOSS BEFORE TAXATION
Net loss before taxation is stated after charging/(crediting):
Auditor’s remuneration
Directors’ fees/emoluments
Depreciation of property, plant and
equipment
Expenses of hotel operations
Expenses of mall operations
Expenses of hospital operations
Unrealised foreign exchange
(gain)/loss
Realised foreign exchange
loss/(gain)
81
2019
US$’000
2018
US$’000
202
186
105
10,849
1,326
13,454
190
145
92
4,763
1,395
12,989
(293)
1,382
6
(29)
Disposal/impairment of intangible
assets
13
TAXATION
Current tax expense – Current year
– Prior year
Deferred tax credit – Current year
– Prior year
Total tax expense/(income) for the year
51
53
2019
US$’000
172
-
1,177
-
1,349
2018
US$’000
2,275
(2,422)
(243)
-
(390)
The numerical reconciliation between the income tax (income)/expense and the
product of accounting results multiplied by the applicable tax rate is computed as
follows:
Net loss before taxation
Income tax at a rate of 24% (2018: 24%)
Add :
Tax effect of expenses not deductible in determining
taxable profit
Current year losses and other tax benefits for which
no deferred tax asset was recognised
Tax effect of different tax rates in subsidiaries
Less :
Tax effect of income not taxable in determining
taxable profit
Under provision in respect of prior period/year
Total tax expense/(income) for the year
2019
US$’000
(28,657)
(6,878)
1,327
4,911
713
(2,997)
4,273
1,349
2018
US$’000
(6,796)
(1,631)
4,137
1,927
948
(3,348)
(2,423)
(390)
The applicable corporate tax rate in Malaysia is 24% (2018: 24%).
The Company is treated as a tax resident of Jersey for the purpose of Jersey tax
laws and is subject to a tax rate of 0%.
The applicable corporate tax rates in Singapore and Vietnam are 17% and 20%
(2018: 17% and 20%) respectively.
A subsidiary of the Group, CIH is granted preferential corporate tax rate of 10% for
the results of the hospital operations. The preferential income tax is given by the
82
government of Vietnam due to the subsidiary’s involvement in the healthcare
industry.
A Goods and Services Tax was introduced in Jersey in May 2008. The Company
has been registered as an International Services Entity so it does not have to charge
or pay local GST. The cost for this registration is £200 per annum.
14
OTHER COMPREHENSIVE (LOSS)/INCOME
Items that are or may be reclassified subsequently to
profit or loss, net of tax
Foreign currency translation differences for foreign
2019
US$’000
2018
US$’000
operations
Gain/(losses)/arising during the year
615
615
(1,082)
(1,082)
15
LOSS PER SHARE
Basic and diluted loss per ordinary share
The calculation of basic and diluted loss per ordinary share for the year ended 31
December 2019 was based on the loss attributable to equity holders of the parent
and a weighted average number of ordinary shares outstanding, calculated as
below:
Loss attributable to equity holders of the parent
Weighted average number of shares
Loss per share
Basic and diluted (US cents)
2019
US$’000
(27,106)
198,691
2018
US$’000
(4,885)
198,691
(13.64)
(2.46)
The diluted loss per share was not applicable as there were no dilutive potential
ordinary shares outstanding at the end of the reporting period.
83
16
NON-CONTROLLING INTERESTS
Non-controlling interests in subsidiaries
The Group’s subsidiaries that have material non-controlling interests (“NCI”) are
as follows:
Hoa Lam
Services
Co Ltd
US$’000
Shangri-La
Urban
Healthcare
DNA
Investment
Pte Ltd
RuMa
Sdn. Bhd.
US$’000 US$’000 US$’000
Other
individually
immaterial
subsidiaries
Total
US$’000 US$’000
49%
18.34%
30%
30%
(5,475)
(908)
1,409
(794)
2,611
(2)
(2,588)
(1,188)
195
(8)
(3,848)
(2,900)
2019
NCI percentage of
ownership interest
and voting interest
Carrying amount of
NCI
Loss allocated to NCI
Summarised financial information before intra-group elimination
As at 31 December 2019
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Year ended 31 December 2019
Revenue
Loss for the year
Total comprehensive loss
Cash flows used in operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Net increase /(decrease) in cash
and cash equivalents
Hoa Lam
Services
Co Ltd
US$’000
Shangri-La
Healthcare
The
Investment
Pte Ltd
RuMa
US$’000 US$’000 US$’000
Urban
DNA
Sdn.
Bhd.
33,764
38,409
(5,677)
(53,562)
12,934
76,375
87,152
(13,246)
(86,062)
64,219
5,066
80,503
(39,253)
(37,613)
8,703
577
508
(134)
(9,577)
(8,626)
-
(1,854)
(1,862)
-
(4,331)
(4,350)
-
(4)
85
(3,962)
(3,962)
(1,584)
(3,270)
(4,299)
934
3,910
-
4,250
9,953
3,399
3,600
84
10,593
(900)
Shangri-La
Healthcare
Investment
Pte Ltd
Urban
DNA
Sdn. Bhd.
Other
individually
immaterial
subsidiaries
Total
US$’000 US$’000
US$’000
US$’000
Hoa Lam
Services
Co Ltd
US$’000
49%
18.42%
30%
(4,555)
2,185
2,585
(1,152)
(937)
(1,280)
(1,048)
2,074
(1,267)
(1,521)
2018
NCI percentage of
ownership
interest and
voting interest
Carrying amount of
NCI
Loss allocated to
NCI
Summarised financial information before intra-group elimination
As at 31 December 2018
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Year ended 31 December 2018
Revenue
(Loss)/profit for the year
Total comprehensive
(loss)/profit
Cash flows used in operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Net increase /(decrease) in cash
and cash equivalents
Hoa Lam
Services
Co Ltd
US$’000
Shangri-La
Urban
Healthcare
DNA
Investment
Pte Ltd
Sdn. Bhd.
US$’000 US$’000
33,567
37,865
(3,956)
(50,090)
17,386
75,919
86,153
(9,231)
(79,261)
73,580
4,745
99,751
(37,975)
(57,904)
8,617
-
(2,611)
-
(5,691)
-
6,912
(2,317)
(5,277)
6,915
(1,582)
(3,265)
(4,255)
933
3,905
-
4,244
9,940
3,364
3,595
10,580
(891)
85
17 PROPERTY, PLANT AND EQUIPMENT
Furniture,
Fittings &
Equipment
US$’000
Motor
Vehicles
Leasehold
Building
Total
US$’000 US$’000
US$’000
Cost
At 1 January 2019
Exchange adjustments
Addition
Disposal
At 31 December 2019
Accumulated
Depreciation
At 1 January 2019
Exchange adjustments
Charge for the year
Disposal
At 31 December 2019
Net carrying amount at
31 December 2019
Cost
At 1 January 2018
Exchange adjustments
Addition
At 31 December 2018
Accumulated
Depreciation
At 1 January 2018
Exchange adjustments
Charge for the year
At 31 December 2018
Net carrying amount at
31 December 2018
203
10
-
(7)
206
143
(3)
10
-
150
56
207
(4)
-
203
126
(3)
20
143
60
788
(16)
-
(21)
751
320
(6)
32
(21)
325
426
797
(9)
-
788
285
3
32
320
468
1,453
(15)
54
(100)
1,392
775
(15)
105
(93)
772
620
1,354
(21)
120
1,453
691
(8)
92
775
678
462
(9)
54
(72)
435
312
(6)
63
(72)
297
138
350
(8)
120
462
280
(8)
40
312
150
86
18
INTANGIBLE ASSETS
Licence
Contracts and
Related
Relationships
US$’000
Goodwill
Total
US$’000 US$’000
10,695
6,479
17,174
7,176
-
7,176
-
7,176
3,519
3,519
5,797
53
5,850
51
5,901
12,973
53
13,026
51
13,077
629
578
4,148
4,097
Cost
At 1 January 2018/ 31 December 2018 /
31 December 2019
Accumulated impairment
At 1 January 2018
Disposals
At 31 December 2018 / 1 January 2019
Disposals
At 31 December 2019
Carrying amounts
At 31 December 2018
At 31 December 2019
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 2018, 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:
Licence contracts and related relationships
International Healthcare Park
Goodwill
SENI Mont’ Kiara
Sandakan Harbour Square
2019
US$’000
2018
US$’000
3,519
3,519
28
550
578
79
550
629
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
87
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 21).
19
RIGHT OF USE
Cost
Right-of-use assets recognised at 1 January 2019
Initial Application of IFRS 16
At 1 January 2019
Exchange adjustments
At 31 December 2019
Depreciation charges
Charge for the year
At 31 December 2019
NET BOOK VALUE
At 31 December 2019
2019
US$’000
4,498
-
4,498
(62)
4,436
(3,892)
(3,892)
544
Lease liabilities include in the consolidated statement of financial position
Current
Non-Current
Total
Amount recognised in the consolidated income statement
Depreciation charges on right-of-use
Interest on lease liabilities
Total
88
As at 31.12.2019
US$’000
432
179
611
As at 31.12.2019
US$’000
3,892
59
3,951
An increase in depreciation charges of right-of-use assets and interest charges of
Lease liabilities by US$0.6million and US$0.59million respectively, for the
financial year ended 31 December 2019.
20
DEFERRED TAX ASSETS
At 1 January
Exchange adjustments
Deferred tax credit relating to origination of
temporary differences during the year
At 31 December
The deferred tax assets comprise:
Taxable temporary differences between
accounting profit and taxable profit of
property development units sold
At 31 December
2019
US$’000
5,186
52
(172)
5,066
2018
US$’000
5,058
(114)
242
5,186
2019
2018
US$’000
US$’000
5,066
5,066
5,186
5,186
Deferred tax assets have not been recognised in respect of unused tax losses of
US$82m (31 December 2018: US$63m) 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$5,980,000 (31 December 2018: US$5,410,000) which
are available for offset against future taxable profits. The unrecognised deferred tax
asset at effective tax rates of the group would be approximately US$10.6m (31
December 2018: US$8.2m)
21
INVENTORIES
Land held for property
development
Stock of completed units, at cost
Consumables
At 31 December
Notes
(a)
(b)
Carrying amount of inventories pledged
as security for Loans and borrowings and
Medium Term Notes
89
2019
US$’000
2018
US$’000
18,950
219,334
579
238,863
18,674
247,937
549
267,160
132,599
154,168
(a) Land held for property development
At 1 January
Add :
Exchange adjustments
Additions
At 31 December
Less: Costs recognised as expenses
in the consolidated statement of
comprehensive income during the
year (Note 6)
At 31 December
(b) Stock of completed units, at cost
At 1 January
Work in progress
Less :
Exchange adjustments
Costs recognised as expenses in the
consolidated statement of comprehensive
income during the year (Note 6)
Net realisable value adjustments of
inventories (Note 6)
At 31 December
2019
US$’000
2018
US$’000
18,674
19,021
123
153
18,950
(418)
71
18,674
-
-
18,950
18,674
2019
US$’000
2018
US$’000
247,937
(2,501)
163,880
71,683
3,646
36,922
(6,461)
(24,548)
(23,287)
219,334
-
247,937
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. A net realisable value adjustment of US$23,287,000 was recognised
predominantly against the carrying amount of FPSS and HMS.
Included in the stock of completed units are SENI units as well as the following
completed units:
90
Four Points by Sheraton Sandakan Hotel (“FPSS”)
The recoverable amount of FPSS was determined based on a valuation by an
external,
recognised professional
qualification. The recoverable amount US$27,606,000 (RM113,000,000) of FPSS
was determined to approximate with its carrying amount.
independent valuer with appropriate
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 2019 and the 10 years budget of FPSS;
(2) The occupancy rate of FPSS will improve to 78% in 2029 which is when the
hotel’s operations are expected to stabilise;
(3) Average daily rates of the hotel will improve to US$102.61 (RM420) in 2029
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 8% 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 increased/
(decreased) the recoverable amount by approximately
US$2,443,000/(US$2,199,000);
b) an increase/(decrease) of 1% in occupancy rate throughout the entire projection
term used would have increased/ (decreased)the recoverable amount by
approximately US$489,000/ (US$489,000); 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$977,000/ (US$977,000).
Harbour Mall Sandakan (“HMS”)
The recoverable amount of HMS was determined based on a valuation by an
recognised professional
external,
qualification. The recoverable amount US$30,537,000 (RM125,000,000) of HMS
was determined to approximate with its carrying amount. .
independent valuer with appropriate
91
The valuation of HMS was determined by the capitalisation of net income expected
to be generated from the continuing operations of HMS (“income approach by
discounted cash flow method”) when the mall operates at an optimum occupancy
rate and was based on the following key assumptions:
(1) Occupancy rate will improve to an optimum level of 95%;
(2) Capitalisation rate assumed at 6%; and
(3) Capitalisation period of 82 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$977,000)/
US$733,000;
b) an increase/(decrease) of 1% in optimum occupancy rate throughout the entire
projection term would have increased/(decreased) the recoverable amount by
approximately US$Nil/ (US$244,000); and
c) an increase/(decrease) of 5% in average rental rate used would have increased
/(decreased) the recoverable amount by approximately US$2,443,000/
(US$2,687,000).
City International Hospital (“CIH”)
The recoverable amount US$75,000,000 (2018: US$75,000,000) 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
2019 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 14.8% from 2025 to 2029;
(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
92
(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,
recognised professional
qualification. The recoverable amount US$103,095,000 (RM422,000,000) of The
RuMa was determined to be higher than its carrying amount.
independent valuer with appropriate
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 2029 which is
when the hotel’s operations are expected to stabilise;
(3) Average daily rates of the hotel will improve to US$252.36 (RM1,033) in 2029
which is when the hotel’s operations are expected to stabilise;
(4) Projected gross margin reflects the industry average historical gross margin,
adjusted for projected market and economic conditions and internal resources
efficiency; and
(5) Pre-tax discount rate of 9% was applied in discounting the cash flows. The
discount rate takes into the prevailing trend of the hotel industry in Malaysia.
The valuation of The RuMa Residences was determined based on the Comparison
Approach as the sole method of valuation.
22
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Contract assets
Sundry deposits
2019
US$’000
2018
US$’000
3,867
8,475
-
560
8,418
7,754
397
422
12,902
16,991
Trade receivables represent progress billings receivable from the sale of completed
units and land held for property development. Progress billings receivable from the
sale of completed units are generally due for settlement within 30 days from the
date of invoice and are recognised and carried at the original invoice amount less
allowance for any uncollectible amounts. They are recognised at their original
93
invoice amounts on initial recognition less provision for impairment where it is
required.
The loss allowance as at 31 December 2019 and 31 December 2018 (on adoption
of IFRS 9) was determined as follows for both trade receivables and contract assets:
31 December 2019
Current
Past due
0 – 60 days
61 –120 days
More than 120 days
31 December 2018
Current
Past due
0 – 60 days
61 –120 days
More than 120 days
Trade
receivable
US$’000
3,045
Contract
asset
US$’000
-
Loss
allowance
US$’000
-
-
-
822
3,867
-
-
-
-
-
-
-
-
Trade
receivable
US$’000
3,064
Contract
asset
US$’000
-
Loss
allowance
US$’000
-
3,428
880
1,183
8,555
-
-
397
397
(3)
(3)
(131)
(137)
Total
US$’000
3,045
-
-
822
3,867
Total
US$’000
3,064
3,425
877
1,449
8,815
The group uses the simplified approach to estimate credit loss allowance for all
trade receivables and contract assets, which will be based on the past payment
trends, existing market conditions and adjusts for qualitative and quantitative
reasonable and supportable forward-looking information. The loss allowances are
also based on assumptions about risk of default. The quantum of any probability of
an expected credit loss will occur to be low or not material. No provision is
recognised in these financial statements.
Included in trade receivables is US$1,760,000 representing 25% of the Group’s
trade receivables which are due from a subsidiary of Ireka Corporation Berhad. for
the acquisition of SENI units (31 December 2018: US$1,910,000, representing 25%
of the Group’s trade receivables, for the acquisition of SENI units and expenses
paid on behalf). Other than the abovementioned customers, the Group has a large
number of customers whose property purchases are mainly secured by personal
bank financing.
Included in other receivables are sums of US$1,582,000 (31 December 2018:
US$2,427,000) due from a subsidiary of Ireka Corporation Berhad. for advance
payments made to its contractors and US$235,000 (31 December 2018:
US$126,000) due from Ireka Corporation Berhad for rental expenses paid on its
94
behalf. Furthermore, there was an amount due from Ireka Corporation Berhad in
relation to the interest on equity contributions to the construction of The RuMa
Hotel and Residences, as described in note 11.
Contracts assets primarily relate to the Group’s rights to consideration for work
completed on construction contracts but not yet billed at the reporting date.
The maximum exposure to credit risk is represented by the carrying amount in the
statement of financial position. The Group monitors the repayment of the customers
regularly and are confident of the ability of the customers to repay the balance
outstanding.
23
CASH AND CASH EQUIVALENTS
Cash and bank balances
Short term bank deposits
Less: Deposits pledged
Cash and cash equivalents
2019
US$’000
2018
US$’000
2,380
5,235
7,615
(4,380)
3,235
9,372
3,201
12,573
(2,710)
9,863
Included in short term bank deposits and cash and bank balance is US4,380,000 (31
December 2018: US$2,710,000) pledged for loans and borrowings and Medium
Term Notes of the Group.
The interest rate on cash and cash equivalents, excluding deposit pledged with
licensed bank of US$4,380,000 (31 December 2018: US$2,710,000) pledged for
loans and borrowings and Medium Term Notes of the Group, ranges from 1.20%
to 2.80% per annum (31 December 2018: 1.20% to 2.80% per annum).
The interest rate on short term bank deposits and cash and bank balance pledged
for loans and borrowings and Medium Term Notes of the Group, ranges from 2.50%
to 4.50% per annum (31 December 2018: 2.50% to 4.50% per annum).
95
24
SHARE CAPITAL
Number
of shares
2019
’000
Amount
2019
US$’000
Number
of shares
2018
’000
Amount
2018
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 subject 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.
96
(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.
25
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.
In 2017, the Shareholders of the Company at an Extraordinary General Meeting
approved a proposal to return US$10,000,500 or US$0.75 per share for 13,334,000
shares representing 6.29 per cent of the Company’s share capital to Shareholders.
The capital distribution was completed on 10 January 2017 and the repurchased
shares of 13,334,000 are currently held as Treasury Shares. The issued and paid up
share capital of the Company remains unchanged at 212,025,002.
26
CAPITAL REDEMPTION RESERVE
The capital redemption reserve was incurred after the Company cancelled its
37,475,000 and 500,000 ordinary shares of US$0.05 per share in 2009 and 2013
respectively.
27
TRANSLATION RESERVE
The translation reserve comprises foreign currency differences arising from the
translation of the financial statements of foreign operations.
97
28
TRADE AND OTHER PAYABLES
Non-current
Amount owed to contract buyers
Current
Trade payables
Other payables
Contract liabilities
Deposits refundable
Accruals
2019
US$’000
2018
US$’000
39,253
39,253
1,283
11,980
-
8,750
1,536
23,549
62,802
37,976
37,976
6,544
19,394
2,804
3,091
2,295
34,128
72,104
Trade payables represent trade purchases and services rendered by suppliers as part
of the normal business transactions of the Group. The credit terms granted by trade
suppliers range from 30 to 90 days.
Included in the other payable comprise of the accrued costs to the development of
the RuMa project amounted to US$ 4.4 million (31 December 2018: US$14.6
million).
Contract liabilities represent proceeds received from purchasers of development
properties i.e. SENI and The RuMa Residences which are pending transfer of
vacant possession.
Revenue recognised in the period from:
Amounts included in contract liability at
the beginning of the period
Performance obligations satisfied in
previous period
2019
US$’000
2018
US$’000
9,725
28,270
-
4,784
Amount owed to contract buyer is of funding received, by way of non-refundable
deposits, in advance of completion of the hotel suites which are at 31 December
2019 still controlled by the Group.
Deposits and accruals are from normal business transactions of the Group.
98
29
AMOUNT DUE TO NON-CONTROLLING INTERESTS
Minority Shareholder of Bumiraya Impian Sdn. Bhd.:
- Global Evergroup Sdn. Bhd.
Minority Shareholders of Hoa Lam Services Co Ltd:
- Tran Thi Lam
- Tri Hanh Consultancy Co Ltd
- Hoa Lam Development Investment Joint Stock Company
- Duong Ngoc Hoa
2019
US$’000
2018
US$’000
1,211
1,199
1,720
4,018
2,755
222
1,718
3,869
2,586
222
Minority Shareholder of The RuMa Hotel KL Sdn. Bhd.:
- Ireka Corporation Berhad
2
2
Minority Shareholder of Urban DNA Sdn. Bhd.:
- Ireka Corporation Berhad
659
10,587
3,598
13,194
The current amount due to non-controlling interests amounting to US$10,587,000
(31 December 2018: US$13,194,000) is unsecured, interest free and repayable on
demand.
30
LOANS AND BORROWINGS
2019
US$’000
2018
US$’000
18,789
179
18,968
13,188
-
13,188
34,281
432
34,713
53,681
48,084
-
48,084
61,272
Non-current
Bank loans
Lease liabilities
Current
Bank loans
Lease liabilities
99
2019
Within one year
Between one and five years
LEASE LIABILITIES
Future
minimum lease
payment
2019
US$’000
432
179
611
The effective interest rates on the bank loans for the year ranged from 5.55% to
11.30% (31 December 2018: 5.55% to 11.30%) per annum.
Borrowings are denominated in Ringgit Malaysia, United States Dollars and
Vietnam Dong.
Bank loans are repayable by monthly, quarterly or semi-annual instalments.
Bank loans are secured by land held for property development, work-in-progress,
operating assets of the Group, pledged deposits and some are secured by the
corporate guarantee of the Company.
At 31 December 2019, one of the Group’s subsidiary undertakings had not
complied with the Debt to Equity ratio covenant in respect of a loan of US$23.5
million. In accordance with the terms set out in the Facility Agreement, in the event
of the breach of this financial covenant, the loan shall be immediately due and
payable together with accrued interest thereon upon notification by the lenders. In
June 2020, the group’s subsidiary received a non-compliance waiver from the
lenders in respect of this non-compliance. Subsequently, the loan was restructured
and extended a further 12 months from 22 July 2020, the initial maturity date.
100
Reconciliation of movement of loan and borrowings to cash flows arising from
financing activities:
As at 1
January
2019
US$’000
61,272
61,272
As at 1
January
2018
US$’000
67,454
67,454
Drawdown
of loan
US$’000
5,343
5,343
Repayment
of loan
US$’000
(12,162)
(12,162)
Drawdown
of loan
US$’000
20,308
20,308
Repayment
of loan
US$’000
(24,197)
(24,197)
Foreign
exchange
movements
US$’000
(1,383)
(1,383)
As at 31
December
2019
US$’000
53,070
53,070
Foreign
exchange
movements
US$’000
(2,293)
(2,293)
As at 31
December
2018
US$’000
61,272
61,272
Bank loans
Total
Bank loans
Total
As at 1
January
2019
US$’000
Initial
Application
US$’000
Repayment
Interest
of lease
payment
expenses
US$’000 US$’000
Foreign
exchange
movements
As at 31
December
2019
US$’000 US$’000
Lease
Liabilities
Total
-
-
1,491
1,491
(873)
(873)
59
59
(66)
(66)
611
611
31
MEDIUM TERM NOTES
Outstanding medium term notes
Net transaction costs
Less:
Repayment due within twelve months *
Repayment due after twelve months
2019
US$’000
36,535
(393)
(36,142)
-
2018
US$’000
24,180
(419)
(23,761)
-
101
Reconciliation of movement of medium term notes to cash flows arising from
financing activities:
As at 1
January
2019
US$’000
Drawdown
of loan
US$’000
Repayment
of loan
US$’000
Foreign
exchange
movements
As at 31
December
2019
US$’000 US$’000
Medium
Term Notes
23,761
12,105
-
276
36,142
As at 1
January
2018
US$’000
Drawdown
of loan
US$’000
Repayment
of loan
US$’000
Foreign
exchange
movements
As at 31
December
2018
US$’000 US$’000
Medium
Term Notes
24,324
-
-
(563)
23,761
* Includes net transaction costs in relation to medium term notes due within twelve
months of US$0.39 million (31 December 2018: US$0.42 million).
The medium term notes (“MTNs”) were issued pursuant to a programme with a
tenor 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$96.25 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$4.64 million in the Sales Proceeds Account and Debt Service
Reserve Account to partially redeem the MTNs in November 2017. SSB also
secured a “roll-over” for the remaining MTNs of US$24.43mil which is due on 10
December 2019 (now repayable on 10 December 2020). The MTNs are rated AAA.
The weighted average interest rate of the MTN was 5.85% per annum at the
statement of financial position date. The effective interest rates of the MTN and
their outstanding amounts are as follows:
102
Series 1 Tranche FG
Series 1 Tranche BG
Maturity Dates
10 Jun 2020
10 Jun 2020
Interest rate %
per annum
5.85
5.85
US$’000
10,505
13,925
24,430
The medium term notes are secured by way of:
(i)
(ii)
(iii)
bank guarantee from two financial institutions in respect of the BG
Tranches;
financial guarantee insurance policy from Danajamin Nasional Berhad
(“Danajamin”) in respect to the FG Tranches;
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;
a third party first legal fixed charge over ICSD Ventures Sdn. Bhd.’s assets
(iv)
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 favour 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)
(x)
assignment of all ICSD Ventures Sdn. Bhd.’s present and future rights, title,
interest and benefits in and under the insurance policies; and
a first legal charge over all the shares of Silver Sparrow Berhad, ICSD
Ventures Sdn. Bhd. and any dividends, distributions and entitlements.
Potensi Angkasa Sdn Bhd (“PASB”), a subsidiary incorporated on 25 February
2019, has secured a commercial paper and/or medium term notes programme of not
103
exceeding US$21.99 mil (RM90.0 million) (“CP/MTN Programme”) to fund a
project known as The RuMa Hotel and Residences. PASB may, from time to time,
issue commercial paper and/or medium term notes (“Notes”) whereby the nominal
value of outstanding Notes shall not exceed US$21.99 mil (RM90.0 million) at any
one time. As at 31 December 2019, a total of US$12.12mil (RM49.6 million) was
issued. Subsequently an additional of US$3.75mil (RM15.35 million) was issued on
25 February 2020.
As at 10 June 2020, the initial tranches of US5.59mil (RM22.9 million) matured and
two tranches amounting to US$0.46mil (RM1.90 million) were redeemed. The
remaining tranches of US$5.13 (RM21.0 million) are subsequently rolled-over for
another one year.
The weighted average interest rate of the loan was 6.0% per annum at the statement
of financial position date. The effective interest rates of the medium term notes and
their outstanding amounts were as follows:
Tranche 1 – 23
Tranche 24 -31
Tranche 32-49
Maturity Dates
9 June 2020
29 September 2020
6 October 2020
Interest rate %
per annum
6.0
6.0
6.0
US$’000
5,594
2,153
4,358
12,105
Security for CP/MTN Programme
(a) A legal charge over the Designated Accounts by the PASB and/or the Security
Party (as defined below) (as the case may be) and assignment of the rights, titles,
benefits and interests of the PASB and/or the Security Party (as the case may be)
thereto and the credit balances therein on a pari passu basis among all Notes, subject
to the following:
(b)
(i)
(ii)
(iii)
(iv)
In respect of the 75% of the sale proceeds of a Secured Asset (“Net Sale
Proceeds”) arising from the disposal of a Secured Asset, the Noteholders of
the relevant Tranche secured by such Secured Asset shall have the first
ranking security over such Net Sale Proceeds;
In respect of the insurance proceeds from the Secured Assets (“Insurance
Proceeds”), the Noteholders of the relevant Tranche secured by such
Secured Asset shall have the first ranking security over such Insurance
Proceeds;
In respect of the sale deposits from the Secured Assets (“Sale Deposits”),
the Noteholders of the relevant Tranche secured by such Secured Asset shall
have the first ranking security over such Sale Deposits;
In respect of the amount at least equivalent to an amount payable in respect
of any coupon payment of that particular Tranche for the next six (6) months
to be maintained by the Issuer (“Issuer’s DSRA Minimum Required
104
Balance”), the Noteholders of the relevant Tranche shall have the first
ranking security over such Issuer’s DSRA Minimum Required Balance;
(v)
(vi)
In respect of the proceeds from the Collection Account (“CA Proceeds”),
the Noteholders of the relevant Tranche shall have the first ranking security
over such CA Proceeds; and
In respect of any amount deposited by the Guarantor which are earmarked
for the purposes of an early redemption of a particular Tranche of the Notes
and/or principal payment of a particular Tranche of the Notes (“Deposited
Amount”), the Noteholders of the relevant Tranche shall have the first
ranking security over such Deposited Amount;
(c) An irrevocable and unconditional guarantee provided by the Urban DNA Sdn Bhd
for all payments due and payable under the CP/MTN Programme (“Guarantee”);
and
(d) Any other security deemed appropriate and mutually agreed between the PASB and
the Principal Adviser/Lead Arranger (“PA/LA”), the latter being Kenanga
Investment Bank Berhad.
Security for each medium term note:
Each Tranche shall be secured by assets ("Secured Assets") to be identified prior to
the issue date of the respective Tranche.
Such Secured Assets may be provided by third party(ies), (which, together with the
Guarantor, shall collectively be referred to as “Security Parties” and each a
“Security Party”) and/or by the PASB. Subject always to final identification of the
Secured Asset prior to the issue date of the respective Tranche, the security for any
particular Tranche may include but not limited to the following:
Legal assignment and/or charge by the PASB and/or the Security Party (as the case
may be) of the Secured Assets;
An assignment over all the rights, titles, benefits and interests of the PASB and/or
the Security Party (as the case may be) under all the sale and purchase agreements
executed by end-purchasers and any subsequent sale and purchase agreement to be
executed in the future by end-purchaser (if any), in relation to the Secured Assets;
A letter of undertaking from Aseana Properties Limited to, amongst others,
purchase the Secured Assets (“Letter of Undertaking”); and/or
Any other security deemed appropriate and mutually agreed between the Issuer and
the PA/LA and/or Lead Manager prior to the issuance of the relevant Tranche.
The security for each Tranche is referred to as “Tranche Security”.
(a)
(b)
(c)
(d)
105
32 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 81.59% to 81.66% (2018: 81.58%
to 81.59%) arising from an issue of new shares in the subsidiary for cash
consideration of US$1.034 million (2018: US$0.525 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 72.46% (2018: 72.413%). The Group recognised an increase in non-controlling
interests of US$24,000 (2018: US$3,000) and an increase in accumulated losses of
US$24,000 (2018: US$3,000) resulting from the increase in equity interest in the
above subsidiaries.
33
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 also
mentioned on page 17 of the Directors’ Report under the headings of
‘Management’.
In 2009, the Group entered into a Joint Venture Agreement (JVA) with Ireka
Corporation Berhad (ICB) for the construction of The RuMa Hotel and Residences
(“RuMa”). Under the term of that JVA, the joint venture partners are required to
make equity contribution in the proportion to their participating interest for the
purpose of the development and construction of the RuMa. In the opinion of the
directors, they have considered the JVA allows for the equity contribution to be
deferred and paid upon the conclusion of construction. At 31 December 2019, the
total amount of equity contribution owed by ICB was US$13.1million. The
recognition of these amount owed by ICB would be offset by the corresponding
entry of the amount owed to ICB, which therefore has no net impact to the
consolidated financial statements.
The equity contributions are non-trade in nature and are unsecured and interest
bearing.
Furthermore, the Group was entitled to interest receivable from ICB. The interest
receivable was calculated based on an annual interest rate of 2% above the Malaysia
lending rate and applied to the deferred equity contributions.
As described in note 11, the total interest receivable at 31 December 2019 was
US$3.5million of which US$0.9million and US$1.6million were attributed to the
prior year periods ended 31 December 2018 and 2017 respectively. The Directors
considered the quantum of the accumulated interest receivables at 31 December
2018 was immaterial to merit a prior year adjustment. Accordingly, no restatement
to the comparative financial information.
106
Related parties also include key management personnel defined as those persons
having authority and responsibility for planning, directing and controlling the
activities of the Group either directly or indirectly. The key management personnel
include all the Directors of the Group, and certain members of senior management
of the Group.
ICB Group of Companies
Accounting and financial reporting services fee charged by an
ICB subsidiary
Accrued interest on shareholders advance payable by ICB
Hosting and IT support services charged by an ICB subsidiary
Construction progress claims charged by an ICB subsidiary
Reversal of liquidated ascertained damages (“LAD”) claims
Provisions for construction delay claims by ICB subsidiary
Management fees charged by an ICB subsidiary
Marketing commission charged by an ICB subsidiary
Project staff cost reimbursed to an ICB subsidiary
Rental expenses charged by an ICB subsidiary
Rental expenses paid on behalf of ICB
Secretarial and administrative services fee charged by an ICB
subsidiary
Key management personnel
Remuneration of key management personnel - Directors’ fees
Remuneration of key management personnel - Salaries
2019
US$’000
2018
US$’000
96
3,572
66
4,733
(1,209)
(2,052)
1,157
139
280
16
489
85
186
95
50
-
76
27,812
-
-
1,460
106
288
3
529
50
145
94
Transactions between the Group with other significant related parties are as
follows:
Non-controlling interests
Advances – non-interest bearing (Note 29)
2019
US$’000
2018
US$’000
(2,666)
82
The above transactions have been entered into in the normal course of business and
have been established under negotiated terms.
107
The outstanding amounts due from/(to) ICB and its group of companies as at 31
December 2019 and 31 December 2018 are as follows:
Net amount due from an ICB subsidiary
Net amount due from ICB
2019
US$’000
5,159
3,768
2018
US$’000
2,516
106
The outstanding amounts due to the other significant related parties as at 31
December 2019 and 31 December 2018 are as follows:
Non-controlling interests
Advances – non-interest bearing (Note 29)
2019
US$’000
2018
US$’000
(10,587)
(13,194)
Transactions between the parent company and its subsidiaries are eliminated in
these consolidated financial statements. A list of subsidiaries is provided in Note
34.
108
34
INVESTMENT IN SUBSIDIARIES
Name
Country of
incorporation
Principal activities
Effective
ownership
interest
2019
2018
Subsidiaries
Ireka Land Sdn. Bhd.
Bumijaya Mawar Sdn. Bhd.
Bumijaya Mahligai Sdn. Bhd.
Amatir Resources Sdn. Bhd.
ICSD Ventures Sdn. Bhd.
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Property development 100%
Property development 100%
Property development 100%
Property development 100%
Hotel and mall
100%
100%
100%
100%
100%
100%
ownership and
operation
Priority Elite Sdn. Bhd.
Malaysia
Project management
100%
100%
services
Participating
in
the
Potensi Angkasa Sdn. Bhd
Malaysia
transactions
contemplated under
the
Guaranteed
MTNs Programme
the
in
Participating
Silver Sparrow Berhad
Malaysia
Bumiraya Impian Sdn. Bhd.
The RuMa Hotel KL Sdn. Bhd.
Malaysia
Malaysia
transactions
contemplated under
the
Guaranteed
MTNs Programme
Property development
Investment holding
Urban DNA Sdn. Bhd.
Aseana-BDC Co Ltd
Hoa Lam Services Co Ltd
Shangri-La Healthcare Investment
Malaysia
Vietnam
Vietnam
Singapore
Property development
Investment holding
Investment holding
Investment holding
100%
-
100%
100%
80%
70%
70%
65%
51%
82%
80%
70%
70%
65%
51%
82%
Pte Ltd and its subsidiaries
Hoa Lam-Shangri-La Healthcare
Ltd Liability Co
Vietnam
Property development
72%
72%
City International Hospital Co Ltd Vietnam
Hospital
ownership
72%
72%
and operation
109
35
COMMITMENTS AND CONTINGENCIES
Debt service reserve account
In 2017, Silver Sparrow Berhad obtained consent from the lenders to utilise
proceeds of US$4.89million in the Sales Proceeds Account and Debt Service
Reserve Account (“DSRA”) to partially redeem the MTNs. Thereafter, amount
equivalent
“Minimum
Deposit”) is maintained in the DSRA at all times and the amount is disclosed as
deposit pledged (refer to Note 23).
to RM10.0 million
(US$2.41 million)
(the
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.
36
EVENT AFTER STATEMENT OF FINANCIAL POSITION DATE
On 9 January 2020, the Company announced that the resignation of Chan Say
Yeong as the Chief Executive Officer of the Company, with effect from 17 January
2020. Mr. Chan is not a member of the Board. Following this, his responsibilities
were assumed by the Chairman and the Board.
On 23 March 2020, the Company announced an update on the impact of the
COVID-19 virus on the Company. The Board of Directors of Aseana has been
closely following events related to the COVID-19 virus and has been actively
planning how to mitigate the impact of it as much as possible. The impact of the
COVID-19 was material as it led to successive Movement Control Orders being
issued by the government in Malaysia from March 2020 onwards which prevented
domestic and foreign tourism and the use of hotels, restaurants and non-food shops.
The demand for travel by both leisure and corporate segments were impacted
subsequent to the year ended 31 December 2019. This has affected the financial
performance of the ASPL after the reporting period. The impact of the movement
restrictions and the reduced revenues on the Company’s operating assets will have
affected the valuations of the Company’s property assets which are based on
discounted cash flow calculations. It is not possible to put an accurate figure to the
fall in the value. However the Directors do believe that the value can be increased
in time once the assets are re-opened and revenue can be built up again. The impact
of the Movement Control Orders has delayed divestment discussions and
negotiations on our assets but these are being re-kindled by the Directors now that
the restrictions are starting to be relaxed.
On 31 May 2020 we terminated the Services Agreement and also terminated staff
secondment arrangements from Ireka to the Company and have engaged a few staff
directly to run our finances and operations.
110
On 15 July 2020 we signed agreements to de-merge certain of our assets in
exchange for the buyback and cancellation of the shares of those shareholders who
wished to de-merge.
On 16 July 2020, we signed the Sale and Purchase Agreements for the sale of two
plots of land in Kota Kinabalu for approximately US$4 million in cash.
Copies of the Annual Report
Copies of the annual report will be available on the Company's website at and from the
Company's registered office, 12 Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands.
111