HONG SENG CONSOLIDATED BERHAD ("HONG SENG" OR "THE COMPANY") AND ITS SUBSIDIARIES ("HONG SENG GROUP" OR "THE GROUP") - SHARES SALE AGREEMENT

We refer to your Company’s announcement dated 17 July 2024, in respect of the aforesaid matter.

In this connection, kindly furnish Bursa Securities with the following additional information for public release:-

1) The purpose of the Shareholder’s Advance extended to HSF during a year after completion of the acquisition of HSF by Velocity. To tabulate and show the utilisation of the Shareholder's Advance by HSF to-date.  

2) Properties held by HSF

a) The reason for no new valuation was conducted on Property 1 and merely updating the market value derived from the previous valuation dated 10 July 2023.

b) Based on the Lot number, both Property 1 and Property 2 are located next to each other. In this regard, to state rationale for using different method of valuation for Property 1 and Property 2.

c) To provide breakdown on how the estimated premium payable to PKNK of RM3.05 million was arrived at.

d) To clarify the type and nature of agreement that HSVO did not complete with PKNK and the reason thereof.

e) To state the age of Building 1 and Building 2.

f) To specify the date of commencement of rental of Property 1 to HKL Dynamics.

g) The rationale for the Shareholder’s Advance to be included as part of the Purchase Consideration instead of HSF to pay post completion of the Proposed Acquisition.

h) It is noted that HSF had on 5 July 2024 entered into sale and purchase agreements with HSVO to purchase the remaining balance period of Lease 2 on Property 2 for RM8 million. To clarify on the duration of balance lease period i.e. whether the acquisition sum is for sublease unexpired term of about 26 years (expiring on 2050) or it is inclusive of extended sublease period (expiring on 2088).

i) To show how the increment in market value of the Properties upon Extension of Lease at RM16.44 was derived from Property 1 and Property 2 respectively.

j) To also state the rationale for the RM16.44 million to be included as part of the purchase consideration since Hong Seng Group will be the party to submit the application to PKNK to extend the lease of Land 1 and Land 2 for an additional period of 38 years expiring on 12 March 2088.

k) To elaborate on the risk of non-approval of the Extension of Lease since the 'increase in market value of the Properties upon Extension of Lease' was included as part of the purchase consideration.

l) To elaborate on the ‘impairment loss of approximately RM8.63 million provided on the Building 1’ and how the amount was derived at.

3) Glove production by HKL Dynamics

In respect of glove production by HKL Dynamics, please provide the following information:

a) the net usable area of the glove production manufacturing plant.

b) the production capacity of the glove production manufacturing plant.

c) type of glove produced (e.g. latex, nitrile, vinyl etc) and its primary market.

d) annual glove production for the past 3 years.

e) breakdown of revenue and profit/loss contribution from production of gloves for the past 3 financial years.

4) Information on HSVO

Names of director(s) and shareholder(s), along with their respective shareholdings in HSVO (in percentage), being the registered lessee of the Land 2.   

If the shareholder(s) is a company, to also specify the name and shareholdings (in percentage) of the ultimate owner in the company.

5) To clarify the source of funding of the Proposed Acquisition as the Company have cash and bank balances of RM18.46 million only based on quarterly results for the financial period ended 31 March 2024.

6) To confirm that Dato’ Kang Chez Chiang being the common directors of the Company and Velocity has no other interest such as commission or other kinds of benefit received from the Company or any of its subsidiaries or Velocity Group in relation to the said transaction.

7) To make available the valuation reports of Property 1 and Property 2 for shareholders’ inspection.

Please furnish Bursa Securities with your reply within one (1) market day from the date hereof.

Yours faithfully,

Listing

Regulation

Cc : Market Surveillance Dept. , Securities Commission (via fax)