1 INTRODUCTION
The Board of Directors of Focus Point (“Board”) wishes to announce that its wholly-owned subsidiary, Focus Point Vision Care, had on 9 December 2010 entered into two (2) sale of business and assets agreements with the following parties:
(i) Imperial Optics (K.K.) Sdn Bhd (Company No. 798329-U) (“Imperial Optics”) and Vision Twenty Sdn Bhd (Company No. 916721-U) (“Vision Twenty”) (the “Agreement 1”); and
(ii) One Borneo Optics Sdn Bhd (Company No. 819379-H) (“One Borneo”) (the “Agreement 2”),
(Imperial Optics and One Borneo are collectively referred to as the “Vendors” and Agreement 1 and Agreement 2 are collectively referred to as the “Agreements”)
for the acquisition of the business and assets of the Vendors for a purchase consideration of RM1,490,194.70 and RM479,847.22 respectively (the “Purchase Considerations”) (“Proposed Acquisitions”).
2 INFORMATION ON THE VENDORS AND VISION TWENTY
2.1 Background of Imperial Optics
Imperial Optics was incorporated in Malaysia under the Companies Act, 1965 (“Act”) on 5 December 2007 as a private limited company and is principally involved in the business of operating professional eye care centres. It currently owns the following:
(i) a professional eye care centre located at Lot G-107, Ground Floor, 1Borneo Hypermall, Jalan Sulaman, 88300 Kota Kinabalu, Sabah (“1Borneo Outlet”);
(ii) a Focus Point-franchised professional eye care centre located at Lot G.01 (B), Ground Floor, Kompleks Karamunsing, 88300 Kota Kinabalu, Sabah and is operated by Intensive Vision Sdn Bhd (“Kompleks Karamunsing Outlet”); and
(iii) a professional eye care centre located at Lot B-35, Lower Ground Floor, Suria Sabah Shopping Mall, Jalan Tun Fuad Stephens, 88300 Kota Kinabalu, Sabah, which has since closed down on 22 November 2010 (“Suria Sabah Outlet”).
It has an authorised share capital of RM100,000.00 comprising 100,000 ordinary shares of RM1.00 each, of which RM100,000.00 has been issued and fully paid-up.
Based on the latest audited accounts of Imperial Optics for the financial year ended 30 November 2009, it recorded a net profit of RM41,688 on the back of revenue of RM2,205,624. The total assets and net assets of Imperial Optics as at 30 November 2009 amounted to RM1,671,934 and RM151,821 respectively.
The shareholders and directors of Imperial Optics as at the date of this announcement are as follows:
| Name |
No of Shares
|
%
|
| Chong Kui Sin |
99,000
|
99.0
|
| Wee Bee Chu |
1,000
|
1.0
|
| Total |
100,000
|
100.0
|
2.2 Background of One Borneo
One Borneo was incorporated in Malaysia under the Act on 28 May 2008 as a private limited company and is principally involved in the business of operating professional eye care centres with an outlet located at Lot C201c, Concourse (Lower Ground) Floor, 1Borneo Hypermall, Jalan Sulaiman, 88300 Kota Kinabalu, Sabah (“One Borneo Optics Outlet”). It has an authorised share capital of RM100,000.00 comprising 100,000 ordinary shares of RM1.00 each, of which RM100,000.00 has been issued and fully paid-up. Based on the latest audited accounts of One Borneo for the financial year ended 31 May 2010, it recorded a net profit of RM14,964 on the back of revenue of RM810,779. The total assets and net assets of One Borneo as at 31 May 2010 amounted to RM535,107 and RM98,581 respectively. The shareholders and directors of One Borneo as at the date of this announcement are as follows:
| Name |
No of Shares |
%
|
| Chong Kui Sin |
90,000
|
90.0
|
| Wee Bee Chu |
10,000
|
10.0
|
| Total |
100,000
|
100.0
|
2.3 Background of Vision Twenty
Vision Twenty was incorporated in Malaysia under the Act on 1 October 2010 as a private limited company and is principally involved in the business of operating professional eye care centres. It currently operates two (2) Focus Point-franchised professional eye care centres located at Lot 1.17, Ground Floor, Imperial Mall & Court, 98000 Miri, Sarawak (“Imperial Mall Outlet”) and Lot 1.55 & 1.56, 1st Floor, Bintang Megalmall, Jalan Bintang, 98000 Miri, Sarawak (“Bintang Megamall Outlet”). It has an authorised share capital of RM100,000.00 comprising 100,000 ordinary shares of RM1.00 each, of which RM100,000.00 has been issued and fully paid-up. The directors of Vision Twenty are Chong Kui Sin and Hamidiah binti Hanafi and the shareholders of Vision Twenty as at the date of this announcement are as follows:
| Name |
No of Shares
|
%
|
| Chong Kui Sin |
51,000
|
51.0
|
| Hamidiah Binti Hanafi |
49,000
|
49.0
|
| Total |
100,000
|
100.0
|
3 SALIENT TERMS OF THE AGREEMENTS
3.1 Salient terms of Agreement 1
(a) the operation of professional eye care centre at 1Borneo Outlet, trade name of the business (i.e. Imperial Optics), systems data and licences in connection to the business but excluding all liabilities; and
(b) the assets (but excluding the liabilities) of Imperial Optics including but not limited to trading/closing stocks, optical equipment/machines and furniture and fittings of 1Borneo Outlet, Kompleks Karamunsing Outlet and Suria Sabah Outlet. 3.1.1 Focus Point Vision Care shall acquire from Imperial Optics:
3.1.2 Subject to adjustments as provided for in Agreement 1 (but of which shall not under any circumstances be adjusted upwards), the purchase consideration of RM1,490,194.70 is to be paid in the following manner:
(a) a deposit amounting to RM149,019.47 shall be payable to Imperial Optics upon signing of Agreement 1; and
(b) the balance purchase consideration of RM1,341,175.23 shall be paid by way of three (3) equal monthly instalments with the first monthly instalment due on 9 December 2010 or such other date as may be mutually agreed upon between the parties but in any event shall be a date after the last of the conditions precedent is fulfilled or waived (“Completion Date”).
3.1.3 The trading/closing stocks of Suria Sabah Outlet, which presently amounts to RM207,532.70, shall be sold to Vision Twenty on a gradual basis within a period of eight (8) months commencing from the Completion Date.
3.1.4 If the conditions precedent in Agreement 1 is not fulfilled or waived by Focus Point Vision Care on or before seven (7) days from signing of Agreement 1 (or such other date as may be mutually agreed upon by the parties), Focus Point Vision Care shall be entitled to terminate Agreement 1 and Imperial Optics shall return the deposit (as mentioned in paragraph 3.1.2 (a) above) without interest and all such other monies that it may have received from Focus Point Vision Care.
3.2 Salient terms of Agreement 2
3.2.1 Focus Point Vision Care shall acquire the operation of professional eye care centre at One Borneo Optics Outlet, trade name of the business (i.e. One Borneo Optics), systems data and licences, as well as the assets (but excluding the liabilities) of One Borneo including but not limited to trading/closing stocks, optical equipment/machines and furniture and fittings of One Borneo Optics Outlet.
3.2.2 Subject to adjustments as provided for in Agreement 2 (but of which shall not under any circumstances be adjusted upwards), the purchase consideration of RM 479.847.22 is to be paid in the following manner:
(a) a deposit amounting to RM47,984.72 is payable to One Borneo upon signing of Agreement 2;
(b) at the instruction of One Borneo, an amount of RM180,000.00 shall be payable to Toh Beng Teck, an employee of One Borneo, upon signing of Agreement 2 (“Part Balance Purchase Consideration”); and
(c) the balance purchase consideration of RM251,862.50 shall be paid by way of three (3) equal monthly instalments with the first monthly instalment due on the Completion Date.
3.2.3 Upon completion of this Proposed Acquisitions, Focus Point Vision Care is unconditionally permitted to dispose of the operation of professional eye care centre at One Borneo Optics Outlet as well as the systems data and licences in connection to the business excluding the liabilities, to Toh Beng Teck at such terms and conditions as may be agreeable between them. Further, it is also acknowledged that the Part Balance Purchase Consideration is given to Toh Beng Teck as capital to operate One Borneo Optics Outlet.
3.2.4 If the conditions precedent in Agreement 2 is not fulfilled or waived by Focus Point Vision Care within seven (7) days of signing Agreement 2 (or such other date as may be mutually agreed upon by the parties), Focus Point Vision Care shall be entitled to terminate Agreement 2 and One Borneo shall return the deposit (as mentioned in paragraph 3.2.2 (a) above) without interest and all such other monies that it may have received from Focus Point Vision Care.
3.3 Basis of arriving at the Purchase Considerations and liabilities to be assumed
The Purchase Considerations were arrived at on a willing buyer-willing seller basis and after taking into consideration, the book value of the assets based on the latest audited financial statements of the Vendors.
There is no liability to be assumed by Focus Point in connection to the Proposed Acquisitions.
3.4 Source of funds
The Purchase Considerations shall be financed via proceeds raised from the listing of Focus Point on the ACE Market of Bursa Malaysia Securities Berhad (“Bursa Securities”).
4 RATIONALE FOR THE PROPOSED ACQUISITIONS
The Proposed Acquisitions are consistent with Company’s expansion plan to grow its presence in the professional eye care centre into East Malaysia and are expected to contribute positively to the earnings and shareholders’ value in the long term.
5 FUTURE PROSPECTS
The Malaysian economy registered a growth of 5.3% in the third quarter of 2010, driven by domestic demand amid slowing external demand. The expansion in domestic demand was supported by private sector spending. The slowdown in the global economy has led to the moderation in external demand. On the supply side, all major economic sectors, except mining, continued to expand during the quarter, but at a more moderate pace.
Domestic demand expanded by 5% in the third quarter (2Q 10: 9%) led by a sustained expansion in both private consumption and capital spending. Private consumption recorded a growth of 7.1% (2Q 10: 7.9%) supported by favourable labour market conditions and positive consumer confidence. Public consumption declined by 10.2% (2Q 10: 6.9%) as a result of lower government spending on supplies and services. Gross fixed capital formation expanded by 9.8% (2Q 10: 12.9%) driven by capital expenditure from the private sector. Private sector capital spending was supported by the expansion in domestic production amidst high levels of capacity utilisation and positive business sentiments.
Amid the moderation in global recovery, the pace of growth of the Malaysian economy will be influenced by the expected continued slowdown in external demand. Overall growth will continue to be supported by robust domestic economic activity. Private consumption will benefit from the favourable employment situation, firm commodity prices and the accommodative financing environment. Capital spending in domestic-oriented sectors and the economic transformation programmes by the Government will underpin the continued growth of private investment.
(Source: Economic and Financial Developments in Malaysia in the third quarter of 2010, Bank Negara Malaysia)
The Economic Transformation Programme (ETP) unveiled as part of the 10th Malaysia Plan (2011-2015) is anchored on 12 National Key Economic Areas (NKEAs), which are drivers of economic activities that have the potential to materially contribute to the growth of Malaysia. One area of which the NKEAs is focused on is the wholesale and retail sector.
The NKEA has recognised Malaysia’s wholesale and retail sector as a significant contributor to gross national income (GNI). It contributed about RM57 billion to GNI in 2009 and also contributed around 500,000 jobs.
During this 10th Malaysia Plan, distributive trade is expected to register a growth rate of 8.3% per annum, contributing 15.1% of gross domestic product (GDP) in 2015. To achieve this, the wholesale and retail sector will be modernised and transformed to be more efficient with higher quality services to consumers. Initiatives to be undertaken include:
(a) Liberalising the retail and wholesale sector and promoting investment;
(b) Encouraging consolidation among local retailers to encourage efficiencies and achieve economies of scale;
(c) Encouraging modern retail formats such as hypermarkets, supermarkets, convenience stores, specialty stores to stimulate investment and expedite modernisation; and
(d) Promoting franchise, direct sales and e-commerce to achieve their full potential.
(Source: 10th Malaysia Plan 2011-2015, Economic Planning Unit, Ministry of Finance)
The Malaysian Retailer Chains Association (MRCA) expects 5-8% growth in the retail industry in 2010. MRCA is optimistic with the recent introduction of the NKEA by the Malaysian government, and it hopes that the government would come forward to help small and medium-sized enterprises (SME). In order to promote growth, the retail industry needs sufficient cashflow to open new outlets and one of the ways the government could help to achieve this is through corporate tax reductions.
(Source: Retail Business to growth 5-8% this year, www.bernama.com..my)
6 RISK FACTORS
Shareholders should consider the following risk factors arising from the Proposed Acquisitions (which may not be exhaustive):
6.1 Failure / Delay in completion of the Proposed Acquisitions
The Proposed Acquisitions are conditional upon the approvals of, amongst others, the relevant government authorities and/or licensors for the transfer of the licences and/or trade names mentioned in the Agreements. There is no assurance that the Proposed Acquisitions can be completed within the time period stipulated under the Agreements. In any event the approvals are not obtained within the stipulated time period, Focus Point Vision Care and the Vendors may either mutually extend the said period, failing which, the Agreements shall be terminated and the benefits anticipated to arise from the Proposed Acquisitions may not materialise.
6.2 Contractual risks
In the event the termination of either Agreements is due to the default of Focus Point Vision Care, the Vendors shall be entitled to forfeit the relevant deposits paid by Focus Point Vision Care as mentioned in Section 3.1.2(a) and 3.2.2(a) above under the respective Agreements.
6.3 Market risks
The Purchase Considerations in the respective Agreements were arrived at on a willing buyer willing seller basis, taking into consideration the book value of the business and assets as reported in the latest audited financial statements of the Vendors. The book value of the business and assets neither assures that these assets can be resold in future at a higher price than the Purchase Considerations nor confirms the value of benefits to be derived by Focus Point Vision Care in future.
6.4 Economic risks
Whilst the growth in domestic private consumption in Malaysia has been robust in the third quarter of 2010 (as mentioned in Section 5 above), this does not necessarily translate into positive outlook for the Malaysian economy and specifically the economies of Sabah and Sarawak in which the outlets are located. Furthermore, the uncertainty of the global economy may have an impact on the local economy leading to lower private consumption in the Malaysian economy, thereby hurting the sales of the outlets.
7 DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
None of the Directors, major shareholders of the Company and/or persons connected with them has any interest, direct and/or indirect in the Proposed Acquisitions.
8 FINANCIAL EFFECTS
The Proposed Acquisitions are not expected to have any material effect to the share capital, earnings per share, net assets per share, gearing or substantial shareholders’ shareholding of the Company for the financial year ending 31 December 2010.
9 PERCENTAGE RATIO AND APPROVALS REQUIRED
The highest percentage ratio applicable to the Proposed Acquisitions under Paragraph 10.02(g) of the ACE Market Listing Requirements of Bursa Securities is 5.05% based on the aggregate value of the consideration from the Proposed Acquisitions of approximately RM1.97 million and as such, the Proposed Acquisitions are not subject to the approval of the shareholders of Focus Point.
The Proposed Acquisitions are also not conditional upon any other corporate proposals of Focus Point.
10 DIRECTORS’ STATEMENT
The Board is of the opinion that the Proposed Acquisitions are in the best interest of the Company.
11 ESTIMATED TIMEFRAME FOR COMPLETION
Barring unforeseen circumstances and subject to the fulfilment of all conditions precedent as set out in the Agreements, the Proposed Acquisitions are expected to be completed by end of December 2010.
12 DOCUMENTS FOR INSPECTION
Copies of the Agreements are available for inspection at the registered office of Focus Point at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur during normal office hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement.
This announcement is dated 9 December 2010.
