Firm opts for Impression Melaka as centrepiece for its development
LITTLE-KNOWN property developer Yong Tai Bhd is poised to embark on a significant project in Malacca that would transform the earnings profile of the former garment manufacturer.
In a nutshell, it is to raise some RM280mil from the entry of a Hong Kong-listed company which is taking up a significant placement of shares and irredemable convertible preference shares (ICPS) in the company. Furthermore, Yong Tai will also raise another RM56mil from a placement to different parties. The total RM336mil that will be raised will be used to finance the construction of Impression Melaka, to fund the balance purchase of land for the development of Impression City and to be used as working capital, among others.
On Sept 1, 2016, Yong Tai’s shareholders approved the issuance of shares and ICPS to Sino Haijing, the Hong Kong-listed company. The issuance of shares to Sino Haijing and the 70 million new shares placement should all be carried out within the next few weeks, explains Yong Tai’s CEO Boo Kuang Loon.
It should be noted that post the share issuance and ICPS conversion, Sino Haijing’s stake in Yong Tai will rise to 53.75%. The company is seeking an approval for a waiver from making a general offer for the rest of the shares in Yong Tai. Notably, the proposed exercise is dependent on securing the waiver approval.
Yong Tai’s plans for its Impression City are impressive.
Speaking to StarBizWeek, Boo is clearly optimistic that this tourism and cultural development will hit the right note and bear financial returns for the upcoming property developer.
Boo, a property developer, first made his entrance into Yong Tai as a shareholder in June 2015 with a 7.16% stake. Yong Tai undertook its first development project through a joint venture with Boo’s private company, PTS Properties Sdn Bhd, which also saw Yong Tai turning around for its financial year ended June 30, 2015 after seven years of making losses.
While most developers depend on a hypermarket or a major shopping centre as the anchor to create a bustling development, Yong Tai is choosing an outdoor folk musical show – or more precisely Impression Melaka, which is part of the renowned Impression Series in mainland China, as the centrepiece for its development.
Impression Melaka, is an indoor theatre that will be a key attraction for tourist centric Malacca. The theatre will feature a live show highlighting the local culture. It is a franchise of the Impression Series in China, which is a hit among tourists.
Impression Melaka is part of Impression City, a planned mixed-development project spanning over an area of about 100 acres in Malacca with a gross development value of RM5.4bil. The project will include the development of residential and commercial units, apart from the Impression Melaka.
For the uninitiated, there are nine such Impression series in China, all directed by Zhang Yimou, the renowned director who directed the opening show for the Beijing Olympics in 2008. There are some nine outdoor themed Impression shows in China that have been ongoing over the last 30 years.
The oldest of them all, Impression Sanjie Liu in Guilin, raked in some 87 million yuan (RM53.92mil) in net profit and over 150 million yuan (RM92.96mil) in revenue in 2014.
Significantly, Impression Melaka will be the first to be based outside of China and the exclusive rights for the Impression was secured amidst strong competition of over 150 cities, globally.
“Malacca has some 15 million tourists coming every year. Malaysia is a great tourism spot but we have one missing link. We have no shows. We have food. sceneries and great shopping, but we have no shows to keep our tourists occupied. We are hoping that Impression Melaka will fill in that gap in the Malaysian tourism market,” says Boo.
The development of Impression Melaka alone is expected to be about a whopping RM300mil and is projected to attract an additional 1.2 million tourists.
Boo projects that Yong Tai will be able to rake in a net profit of about RM60mil per year just from Impression Melaka once it is fully commercialised after 2018. This would be a leap from Yong Tai’s status quo. To note, for its financial year ended June 30, 2016, it recorded net profit of RM3.7mil on the back of RM36.68mil in revenue. Currently, the theatre to house the show is being constructed, and will have a capacity of 2,000 seats. For starters, Yong Tai intends to have two shows of 75 minutes each per day, which a ticket price of around RM120.
To successfully complete the project development which has just seen the inception of the first phase in August 2016, Yong Tai needs large scale capital and monetary injection - some RM300mil to be precise. This is where its partner, Sino Haijing Holdings Ltd enters the picture.
Sino Haijing, is also the major shareholder of Impression Sanjie Liu, hence having the expertise and knowhow to execute large scale theatre projects,
Sino Haijing will soon be injecting about RM280mil into Yong Tai. This will be accomplished through two means whereby Sino Haijing will subscribe to 150 million newly issued shares of Yong Tai at a price of 80 sen, which will amount to RM120mil.
There is a moratorium period of three years, during which Sino Haijing will not be able to sell its shares,
Through this, Sino Haijing will be the largest stakeholder, by amassing a 34.5% stake in Yong Tai. The current largest stakeholder, who is Boo himself, will see his holding diluted after the exercise. Sino Haijing will also be subscribing another 200 million new ICPS at an issue price of RM0.80 each. The subscription will see Sino Haijing paying another RM160mil to Yong Tai.
Additionally, Impression Melaka has also been chosen as one of the Entry Point Projects under the Tourism National Key Result Areas and the development of the Impression City is 100% tax-exempted by the government. The spectacular show is expected to “integrate Melaka’s glorious history and modern day culture with characteristic music, presenting a feast of light, shadows, dance, fine arts and melodies along with strong visual and acoustic impact”.
Boo believes that the introduction of the Impression concept on the Malaysian shore will work out just fine and is clearly necessary, since Malaysia and in particular, Melaka lacks spectacular and colourful shows to illuminate the nights as a magnet to attract the tourists. He, who still sees himself as a “Malacca” feels that Malacca is blessed with myriad uniqueness and Impression Melaka is the right catalyst to showcase Malacca’s cultural richness.
When asked by StarBizWeek whether he is concerned about the dilution of his controlling stake in the firm and with Sino Haijing possibly being the decision maker for the entity, Boo confirmed that this has been taken into consideration and he is not worried about the change in shareholding. As per the agreement between Yong Tai and Sino Haijing, the latter will only be given one seat for its representative on the board of directors. Thus, the question of Sino Haijing dominating Yong Tai does not arise.
Apart from the corporate execise associated with Sino Haijing, Yong Tai will also issue up to up to 20.05 million bonus ICPS on the basis of one ICPS for every 10 Yong Tai shares held by shareholders. On top of that, the company will also undertake a private placement of up to 70 million new shares to independent third party investors. Boo has indicated that the placement has received great response and will be fully taken up by institutional investors.
To recap, investors have been bullish about Yong Tai’s shares and the share price has been going on an uptrend since August 2015. Particularly, the price has seen steeper upward spike since July 2016. As of Thursday, the share price stood at RM1.08 and has increased by 140% since its lowest trading price on August 26, 2015.
Boo envisages more benefits for Malaysia, arising from the development of Impression City and the involvement of Sino Haijing in the project.
“Rather than investing our money overseas and cause outflow of currency, I want to bring more money to our shores from abroad. On top of that, I want to encourage more tourists to visit Malaysia and spend their hard cash here,” he says.
Did you find this article insightful?