19 April 2014

Keong Hong - JV to develop hotel land (April 2014)

The Board of Directors of Keong Hong Holdings Limited (“Keong Hong” or the “Company” and together with its subsidiaries, the “Group”) is pleased to announce that Keong Hong Construction Pte Ltd (“KHC”), a wholly-owned subsidiary of the Company had entered into a joint venture agreement (“JV Agreement”) dated 11 April 2014 with Master Contract Services Pte. Ltd (“MCSPL”) and Asia Development Pte. Ltd. (“ADPL”) for the joint development of a hotel (the “Project”) located at ML/TS No.26 Lot No.: 10171P PL/PT/Parcel no: 883 East Coast Road (the “Land Parcel”).

MCSPL commenced its business in the facilities maintenance sector in 1993 and subsequently moved into the building and construction sector. It was awarded the highest grade of A1 in General Building (CW01) in 2009 which has allowed it to undertake larger and more complex projects. In 2011, MCSPL ventured into property development sector as a property developer of several projects. Some of its recent property development projects include Skies Miltonia (a joint venture with TG Development Pte Ltd), semi-detached houses at Wak Hassan Drive and a freehold industrial property at Upper Thomson.

ADPL commenced its business in the construction sector since 2006. They are involved in a wide range of projects, including purchase and developing of lands, construction of single and multi-family residences and renovation works. They are currently building and developing landed houses at Sophia Road, Springleaf Lane, Woo Mon Chew Road, Lorong Marzuki, Meng Suan Road, Berwick Drive, Moonstone Lane, Mayflower Avenue, Puay Hee Avenue and Carnation Drive.

Joint Venture Company

Pursuant to the JV Agreement, a joint venture company known as Katong Holdings Pte. Ltd. (the “JVC”) has been set up by the Joint Venture Partners (as defined below) with an issued and paid-up share capital of S$10 comprising 10 ordinary shares to undertake the development of the Project. The issued and paid-up share capital of the JVC will be increased to S$1,000,000 comprising 1,000,000 ordinary shares to be held by MCSPL, KHC and ADPL (collectively, “Joint Venture Partners”) in the following proportion:

- MSCPL 70%
- KHC      20%
- ADPL    10%

The Land Parcel was awarded by the Urban Redevelopment Authority (“URA”) to KHC and MCSPL
on 24 January 2014 for a tender price of S$352.8 million (“Tender Price”). Pursuant to the terms of
the JV Agreement, the Land Parcel will be assigned to the JVC. 75% of the Tender Price amounting
to S$264.6 million will be funded by bank loan(s) while the remaining 25% of the Tender Price has
been funded by shareholders' loans from the Joint Venture Partners in proportion to their equity.
Under the JV Agreement, MCSPL and KHC shall jointly appoint the project manager, main contractor,
and hotel manager, as well as establish a project group for the Project. The Project is planned to be
developed into a 500 to 600-room hotel with commercial space housing medical suites, offices as well
as retail and F&B space.

Funding and Financial Effects
The provision of the shareholders' loan by KHC was, and the setting-up of the JVC and the
subscription of shares in the JVC by KHC will be, funded through the Group’s internal resources
and/or bank financing, and are not expected to have any material impact on the consolidated net
tangible assets per share and consolidated earnings per share of the Group for the financial year
ending 30 September 2014.

Interests of Directors and Controlling Shareholders
None of the Directors or controlling shareholders of the Company has any interest, direct or indirect,
in the JV Agreement, other than through their respective shareholding interests in the Company.
None of the Directors or substantial shareholders of the Company and their respective associates are
related to MCSPL and ADPL.

My Notes
As Keong Hong is holding 20% of the JV, it needs to fund about S$18m in JV, and may provide loan to JV later on as and when the development kicks off. I believe that the gross development value would exceed S$1.0B as the land value is already at S$352.8M. This is the first JV Keong Hong involve in hospitality development and I think it is a good move for Keong Hong to tap on the strength of the JV partners to grow together in property development.

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