Announcement Details/Table Section :
Further to our earlier announcements made on 21 May 2012 and 22 May 2012 on the subject-matter, we wish to furnish herewith the following additional information:-
1. Basis of Arriving at the Purchase Consideration and Justification of the Purchase Consideration
The basis of 11% discounted cashflows rate was agreed after taken in the consideration of valuation benchmarking in China's water industry which is in the range of 8% to 12%.
2. Source of Fund
80% of the Purchase Consideration will be funded through bank borrowings while the remaining 20% by internal generated funds.
3. Prospect of Darco Environmental
The Proposed Acquisition would allow Salcon to establish a strategic alliance and work closely with Darco Environmental principally in the industrial wastewater sector which is the latter’s core strength and area of expertise. By tapping into Darco Environmental’s proven expertise in integrated engineering and knowledge-based industrial wastewater treatment solutions, it would allow Salcon to further improve its penetration into the industrial wastewater market in China.
The Deqing Government, under its water integration plan (Yi Thi Hua) intends to consolidate all the water-related assets to ensure an efficient delivery system, and to improve the level of service to its people. The Government has indicated its intention to expand the capacity of Wukang water treatment plant from the current 60 to 120 MLD, and to integrate its wastewater assets. As the sole and existing water operator in Deqing county, there are tremendous opportunities for growth, and Salcon via Darco Environmental looks forward to further expand its presence in this county.
4. Gearing
Based on the latest audited consolidated financial statements of the Company for the financial year ended 31 December 2011 and the assumption that RM37,980,000 representing 80% of the Purchase Consideration is financed through bank borrowings to be procured by the Company for the Proposed Acquisition, the effect on the gearing of Salcon Group is as follows:-
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Audited FYE 31 December 2011
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After Acquisition
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RM’000
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RM’000
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Total borrowings
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303,185
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341,165
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Less: Cash and cash equivalents
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(214,531)
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(214,531)
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Net debt
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88,654
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126,634
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Total equity
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548,430
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548,430
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Gearing (times)
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0.16
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0.23
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This announcement is dated 23 May 2012.
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