ASPEN Glove, a unit of mainboard-listed Aspen Group : 1F3 0%, has entered an agreement to sell its rights title and interest in a piece of leased land in Malaysia and the factory built upon it for RM200 million (S$61.2 million).

 

The buyer, Sustainable Waste Management Holdings, is a unit of Singapore-based Nutara Investment, Aspen disclosed in a Thursday (Dec 15) bourse filing. Aspen previously entered an agreement to sell the land and factory with another buyer, Cambridge Real Estate Partners, in October, but this was terminated on Dec 6 due to non-fulfilment of certain conditions. 

 

Nutara is part of a German-originated group of companies active in construction and environmental technologies. It also indirectly holds 49 per cent of Tialoc Malaysia, a company that in March served notices of claims for over RM100.4 million to two Aspen units.

 

The land, located at the Kulim Hi-Tech Park in Kedah, measures 117,200 square metres (sq m). It has been leased by Aspen Glove for a 60-year term from September 2020. The factory has a built-up area of 426,191 sq m.

 

Aspen will be seeking the approval of its shareholders for the sale at an extraordinary general meeting to be convened. The sale is expected to result in a gain on disposal of RM14.9 million. It will strengthen Aspen&rsquo s financial position and also enable a final settlement of claims and legal proceedings between Aspen Glove and Tialoc, the company said.

==

Willas-Array sees earnings drop 70% in 1HFY2023 due to foreign exchange loss

 

Willas-Array has reported earnings of HK$12.8 million ($2.2 million) for the 1HFY2023 ended September, down 70.5% compared to its earnings of HK$43.5 million for the same period last year.

 

Earnings per share have also dropped 71.1% y-o-y to 14.78 HK cents from 51.09 HK cents in 1HFY2022.

 

Between 1HFY2023 and 1HFY2022, revenue and cost of sales remained stagnant, recording only slight dips of 0.2% and 0.1% to HK$1.8 billion and HK$1.6 billion respectively in the period just ended.

 

Willas-Array is attributing its earnings decrease to a foreign exchange loss of approximately HK$32.8 million, arising mainly from the depreciation of the Renminbi in 1HFY2023, as well as an increase in finance costs mainly due to rising weighted average effective interest rate in 1HFY2023 as compared to 1HFY2022.

 

Excluding the foreign exchange difference, the company says its earnings would have been HK$45.6 million in 1HFY2023, surpassing that of 1HFY2022.

 

The company&rsquo s gross profit came in at HK$169.9 million for the period, a 0.6% y-o-y decrease.

 

As at the end of September, Willas-Array had HK$363.2 million in cash and cash equivalents.

 

Willas-Array, which operates in Hong Kong, mainland China and Taiwan and is also listed on the Hong Kong Stock Exchange, says it incurred foreign currency risk mainly on sales and purchases that were denominated in currencies other than its functional currencies. &ldquo The exposure in foreign exchange rate risks mainly arises from fluctuations in foreign currencies against the functional currencies. Given the pegged foreign exchange rate between HKD and USD, the exposure of entities that use HKD as their respective functional currencies to the fluctuations in USD is minimal.&rdquo

 

However, the company says that foreign exchange rate fluctuations between other currencies could affect its performance and asset value. Willas-Array adds that it has a &ldquo foreign currency hedging policy&rdquo to monitor and maintain its foreign exchange exposure at an &ldquo acceptable level&rdquo .

ASPEN (Group) Holdings on Sunday (Oct 30) responded to several queries posed by the Securities Investors Association (Singapore) (Sias) relating to the company&rsquo s annual report for the financial year ended Jun 30, 2022, which covered an 18-month period. 

 

In a bourse filing, the property developer replied to queries, such as its losses after diversification into the healthcare business, its financial ability to fund its projects, the suitability of members of its board for their roles and reasons for material variances between its unaudited and audited financial statements.

 

Sias asked Aspen to explain its approval process for its diversification into the healthcare business, noting that the group said it was &ldquo caught off-guard&rdquo by issues such as lower average selling prices and significant increase in operating costs.

 

Contrary to its expectations of a positive contribution, it saw demand for gloves experience &ldquo an off-the-cliff plunge worldwide&rdquo in a &ldquo global phenomenon that none could have anticipated&rdquo , Aspen had said.

 

Aspen replied that before deciding to include manufacturing and distribution of rubber gloves and other related activities, it had done its due diligence, conducting &ldquo extensive market research and studies&rdquo , to which the board had given &ldquo due deliberation&rdquo .

 

While risks not limited to pricing and market trends were identified, the average selling price trend softened faster than expected, and the margins compressed below pre-Covid-19 levels, contrary to its research.

 

This was due to &ldquo heightened competition, global supply chain challenges, higher shipping and logistics costs, high inflation and higher production costs, which had further worsened due to the ongoing Russia-Ukraine conflict, and geopolitical tensions&rdquo .

 

In its report, Aspen said that it will focus on its flagship development Aspen Vision City at Batu Kawan, and intends to launch three new projects.

 

Sias asked Aspen whether it has the financial resources to fund these projects, noting that the total gross development value is estimated to be RM725 million (S$216.6 million), while as at Jun 30, 2022, the group&rsquo s cash and cash equivalents amounted to RM26.7 million.

 

The group replied that its funds are sufficient and initial construction costs on new projects will be funded through bridging financing. It intends to subsequently rely on internally generated funds, through progress billing on the projects.

 

In its financial report, Aspen said that the carrying value of its completed units have increased to RM132.4 million from RM44.8 million, to which Sias asked for a breakdown of the completed units and whether it would be prudent to sell down the inventory before committing additional capital to new phases or projects.

 

Providing the breakdown, the group said that it has &ldquo a relatively low inventory&rdquo , which necessitates the launch of new projects &ldquo to enhance business continuity and operational resilience and to capitalise on the growing demand for its development in Aspen Vision City at Batu Kawan&rdquo .

 

&ldquo Moreover, it is necessary for the Group to recover the opportunity loss during Covid-19 lockdown,&rdquo it said.

 

Addressing a question about the impact of its divestment of its 30 per cent interest in Bandar Cassia Properties at a loss to Ikano on the companies&rsquo working relationship, Aspen said that it &ldquo will not in any way affect the established good partnership between the group and Ikano, with both parties &ldquo fully committed&rdquo to their collaborations.

 

Sias was also concerned about the suitability of several of Aspen&rsquo s board members. It asked the company&rsquo s nominating committee (NC) to explain the re-election of a member and the continued office of directors who had been reprimanded by the Singapore Exchange Securities Trading Listings Disciplinary Committee (LDC) for causing the company to breach Mainboard rules.

 

Aspen said: &ldquo Similar to the findings of the LDC, the NC is of the opinion that the breaches did not imply any character or integrity issues on the part of the executive directors.&rdquo Rather, the breaches were partly due to inadequacies of the company&rsquo s former standard operating procedures, which have since been updated to &ldquo a more robust compliance procedure&rdquo .

 

It added that removing the executive directors, who play a &ldquo key role&rdquo in the company, may be detrimental to the group and its shareholders. The company&rsquo s appointed internal auditor has also assisted it to further strengthen and implement its internal control policies, Aspen said.

 

On the question of underlying reasons for omissions of impairments and reclassifications that resulted in material variances in its unaudited and audited financial statements, Aspen said: &rdquo The deteriorating market conditions and rapid changes of healthcare segment showed further impairment was needed.

 

&ldquo Hence, on a prudent basis, the Group had further recognised impairment loss on factory building and plant and machine, and further written down on amount owing by subsidiaries.&rdquo

 

Reclassifications were also made due to differences in the interpretation of accounting standards, oversight of the nature of transactions and to better present the accounts to shareholders, which did not have any impact on the bottom line, it said.

 

WITH the pandemic easing and the sale prices of gloves sliding, mainboard-listed Aspen (Group) : 1F3 +2.08%is now proposing to sell its glove-making subsidiary&rsquo s factory building and the leased land on which the facility sits for RM200 million (S$61.1 million).

 

As the deal entails a sale of over 20 per cent of the group&rsquo s total net asset value, it is therefore a major transaction. Aspen would need the approval of its shareholders to go ahead with it.

 

Aspen noted that the proposed disposal could book a gain of about RM14.9 million if the sale goes through, it could bring the net tangible asset value per share of the company to 39.22 sen from 37.84 sen, on a pro forma basis.

 

In a statement filed by Malaysia-based Aspen on Friday (Oct 7), the property developer &ndash which waded into glove-making at the height of the pandemic, when demand for the protective gear was through the roof &ndash said it intends to sell the land in Kulim Hi-Tech Park in the state of Kedah to Singapore real estate fund manager, Cambridge.

 

An Aspen unit had built the Kulim facility on a plot of land leased from Kulim Technology Park Corporation Land, the approval of which was one of the conditions to complete the deal.

 

ASPEN (Group) Holdings : 1F3 -14.29% has responded to several queries posed by the Singapore Exchange Securities Trading (SGX-ST) relating to the company&rsquo s financial results for the fiscal year 2022 ended June.

 

In the lengthy list of responses that were posted in a filing to the bourse late on Friday (Sep 9) were the company&rsquo s replies to queries on the likes of the increase in administrative and other operating expenses, a decline in share of results of equity-accounted investees, an increase in trade and other receivables despite a decline in revenue, and the non-disclosure of related party transactions for the financial period under review. 

 

SGX noted that for the 18-month period ended June, Aspen&rsquo s administrative expenses and other operating expenses were up by about S$32.7 million and $28.6 million respectively on a year-on-year basis. It asked Aspen to provide a breakdown of these expenses, and to explain the reason for any significant expenses and fluctuations. 

 

In its response, the company said the increase in both categories of expenses was due chiefly to 3 factors &ndash   the commencement of the healthcare segment on May 10, 2021 an impairment loss on machineries by the healthcare segment amounting to RM31.8 million (S$9.9 million) due to the &ldquo significant scale down&rdquo of the operation, and a loss on disposal of associate of RM16.9 million. 

 

SGX also asked the group about the S$24.2 million increase in its trade and current and non-current receivables despite the S$26 million decline in revenue for the 18-month period. SGX asked Aspen, among other things, to give a breakdown of its trade and other receivables and the reasons for the increase, as well as the board&rsquo s assessment on the recoverability of its trade and other receivables. 

 

In response, Aspen said the spike in receivables came from an increase in trade receivables from the property development segment due to the release of the stakeholder sum &ndash the amount retained by the stakeholder solicitor pursuant to the Housing Development Act to protect the homebuyer&rsquo s interest and to ensure that developers rectify the defects during the defect liability period. 

 

Aspen added that the recoverability of the receivables is &ldquo probable&rdquo , and the group does not have any significant credit risk from its property development activities as its products are primarily sold to purchasers with end financing facilities from reputable financiers. The credit risk is also limited, said the group. 

 

In response to SGX&rsquo s question on a S$49.8 million in crease in credit costs from ongoing projects from the corresponding year-ago period, Aspen said the increase of contract costs being capitalised is higher than contract cost being amortised. This is based on revenue recognition principles outlined in Singapore Financial Reporting Standards, the group said. 

 

The decrease in amortisation rate was mainly caused by the decrease in the percentage of completion of development projects due to delays in construction progress during the Covid-19 lockdown period, particularly for the ongoing projects in Aspen Vision City. 

 

SGX also asked the company about its acquisitions of property, plant and equipment worth some S$278 million for the 18-month period. 

 

Aspen said for the 18 months, the acquisitions of buildings for its healthcare segment amounted to RM166.5 million, while plant and machinery for the segment totalled some RM99.4 million. The group added that although &ldquo significant&rdquo capital expenditure was put into the acquisitions for the healthcare segment, this particular segment had to &ldquo significantly scale down&rdquo operations after the Covid-19 boom normalised. 

 

SGX also raised some transactions that Aspen had with its directors, key management personnel, as well as the companies in which they have substantial interests. Aspen, however, had said in its financial statements that there were no interested party transactions for the period under review. 

 

Aspen said these interested party transactions were conducted during &ldquo past financial years&rdquo and &ldquo progress billings&rdquo &ndash invoices that allow purchasers pay upon the property unit&rsquo s completion by stages &ndash are issued over a few years period depending on the construction stage. The company also referenced its previous announcements on the bourse in 2018 and 2020. 

 

SGX also asked if Aspen had made any provisions for legal actions commenced by Tialoc Malaysia and Multipurpose Metal Tech. The company said it has made provisions, and these were recorded in its FY2022 financial results. 

 

Aspen (Group) Holdings reported a loss of RM130 million ($40.6 million) for FY2022 ended June, as compared to earnings of RM56.6 million in FY2021. This brings losses per share to 12.02 cents.

 

On Nov 19, 2021, the group announced a change of its financial year end from Dec 31 to June 30, to allow it to better plan its audit schedule and holding of its annual general meetings during the off-peak period, thereby resulting in better cost-savings and operational efficiencies. With the change of financial year end, FY2022 ended June will cover a period of 18 months from January 1, 2021 to June 30.

 

On the earnings, the group attributed its losses to the impairments of machines in the group&rsquo s healthcare segment totalling to RM31.8 million in light of the scaling down of operations and loss on disposal of an associate company, Bandar Cassia Properties (SC) Sdn Bhd amounting to RM16.9 million.

\

Apart from the jump in impairment losses, the group&rsquo s administrative expenses increased by 41% y-o-y to RM112.6 million, while selling and distribution expenses increased by 25% y-o-y to RM16.3 million.

 

During the height of the pandemic, CEO Dato&rsquo Murly Manokharan in an interview with The Edge Singapore mentioned that the group, whose main business is in property development in Penang, Malaysia, had decided to diversify its business into the glove making industry. However, the business did not manage to properly take off, which led to the impairment charges mentioned above.

 

Revenue was at RM379.6 million for FY2022, down 6% from RM405.5 million, with cost of sales at RM350.3 million for FY2021, up by 17% from RM300.7 million. The lower revenue for FY2022 was attributable to lower gross profit due to the sales mix from the property development segment and the margin compression from the healthcare segment.

 

For the 2HYF2022 period, the group&rsquo s revenue came in 58% higher y-o-y at RM194.5 million, thanks to higher contribution from its property development segment, as take-up rate improved as economic sectors reopened following better control of the Covid-19 pandemic. During the second half period, the healthcare segment faced margin compression from the impact of the drop in demand and average selling price (ASP) normalisation together with higher production costs due to global supply chain challenges and inflation. Hence, the healthcare segment only managed to achieve revenue of RM12.3 million, representing 6% of the group&rsquo s revenue for 2HFY2022.

 

Gross profit for FY2022 was at RM29.2 million, down 72% from RM104.9 million in FY2021.

 

Cash and cash equivalents for FY2022 were at RM31.8 million, down from RM68 million in FY2021.

 

To recap, Aspen has been under the limelight lately. On Aug 26, SGX criticised the group for releasing an announcement on SGXNET, disclosing that one of the group&rsquo s subsidiaries had entered into an MSA with Honeywell International, that was &ldquo non-factual, false and misleading&rdquo . The group had also failed to &ldquo promptly disclose&rdquo the non-consummation of the MSA by Honeywell, as well as the termination of negotiations with Honeywell.

 

SGX then issued a public reprimand against Dato&rsquo Murly, as well as the group&rsquo s executive directors Dato&rsquo Seri Nazir Ariff Bin Mushir Ariff and Ir. Anilarasu Amaranazan for causing the company to flout the rules mentioned.

 

Amid the challenging climate and all the headwinds that the group faced in the healthcare sector, Aspen had significantly scaled down its glove manufacturing operation. The group had been evaluating various options on the future direction of Aspen Glove Sdn Bhd (AGSB), including disposal of AGSB&rsquo s assets and adopting an asset-light business model.

 

To this end, AGSB is in the midst of negotiations to dispose of its assets which would potentially raise sufficient funds to settle the outstanding due to the payables and bank loan that could immediately reverse the net current liabilities position of the group.

 

Meanwhile, the take-up rate of the group&rsquo s development projects had significantly improved as the economic activity continued to normalise with the easing of the Covid-19 containment measures in Malaysia.

 

To capitalise on the growing demand, Aspen will focus on its flagship development Aspen Vision City (AVC) at Batu Kawan. The group intends to launch three new projects with a total gross development value (GDV) of RM772.7 million, namely Versa Executive Apartments, Viio Business Hubb and Viluxe Phase two and Phase three.

 

As at June 30, the total amount of unbilled sales of the group stood at RM538.7 million.

Singapore Exchange (SGX) has publicly reprimanded Aspen (Group) Holdings for its breach of the listing rules, Mainboard Rules 703 and 719(1) in relation to its disclosure of its master supply agreement (MSA) with Honeywell International.

 

On Aug 26, SGX rebuked the group for releasing an announcement on SGXNET, disclosing that one of the group&rsquo s subsidiaries had entered into an MSA with Honeywell International, which was &ldquo non-factual, false and misleading&rdquo .

 

Aspen had, at the time, also failed to &ldquo promptly disclose&rdquo the non-consummation of the MSA by Honeywell. In addition, the group did not promptly reveal that negotiations with Honeywell on the MSA had been officially terminated.

 

These were considered material information known to the company which was necessary to avoid the establishment of a false market in the company&rsquo s securities.

 

Aspen was also reprimanded for its failure to have in place adequate and effective systems of internal controls and risk

 

On April 13, 2021, Aspen announced that it entered into the MSA with Honeywell International for a consideration of US$210 million ($281.64 million). The group then retracted its statement on April 25. It subsequently confirmed that the US$210 million glove deal was off in June 2021.

 

In the same statement, SGX issued a public reprimand against Aspen&rsquo s group CEO Dato&rsquo Murly Manokharan, as well as the group&rsquo s executive directors Dato&rsquo Seri Nazir Ariff Bin Mushir Ariff and Ir. Anilarasu Amaranazan for causing the company to flout the rules mentioned.

 

On Aug 12, Aspen guided that it is expected to report a consolidated net loss for the FY2022 ended June 30.

 

The expected loss is mainly attributable to the group&rsquo s healthcare sector, where its subsidiary, Aspen Glove has &ldquo since significantly scaled down its operations&rdquo , which the group announced on June 8.

 

Aspen&rsquo s results will be released on or before Aug 29.