1) Valuation of Development Rights
a) Can the revaluation surplus arising from the valuation of development rights over land, where development has yet to commence, be allowed to be included in arriving at the purchase consideration of an acquiree company by a listed company or by the applicant company seeking listing as part of the listing proposal?
Yes, however the valuation of such development rights is subject to the following conditions:-

(i) Approval of the relevant authority on the layout plan for the proposed development must be in place prior to the implementation of the corporate proposal;
(ii) The development/joint venture agreement between the acquiree company and the registered/beneficial owner of the subject land which gives rise to the development rights must be irrevocable and must not be to the disadvantage of the acquiree company.
(iii) Salient features of the development/joint venture agreement must be fully disclosed in the related prospectus/circular to shareholders;
(iv) The company (holding the development rights) will be required to submit the following:

  • A written confirmation that to date all terms and conditions of the development/joint venture agreement are fully complied with; and
  • A written undertaking that the company will fully comply and adhere to the terms and conditions of the development/joint venture agreement so as to avoid any circumstances that may result in the termination of the said agreement;
(v) Declaration from both joint venture parties on their intention and commitment in respect of the joint venture development must be given; and
(vi) In the event of any breach of the development/joint venture agreement by any of the parties concerned, timely announcement of such breaches and the remedies to be undertaken must be made to KLSE.
b) What is the basis of valuation acceptable to the SC in valuing such development rights?
The basis of valuation shall be market value which should duly reflect the following items/factors:

(i) The contractual obligations of the parties involved in the development/joint venture agreement; and
(ii) The risk and uncertainties associated or attached to such development rights.