Regal International Group Cancels Key Development Rights Agreement: What Investors Need to Know

Key Points from the Report

• Termination of Development Rights Agreement (DA): Regal International Group Ltd. has announced the mutual rescission of a major Development Rights Agreement involving five land parcels in Bintulu, Sarawak, Malaysia.
• Subsidiary Involved: The agreement was made through Harbour Venture Sdn Bhd, a wholly-owned subsidiary.
• Reason for Termination: The rescission was prompted by the lack of necessary regulatory approvals required for the intended development on the lands.
• Immediate Effect: The DA is now void, and an associated Irrevocable Power of Attorney granted by the landowner to Harbour Venture Sdn Bhd has also been revoked effective immediately.
• No Material Financial Impact: The company states the rescission will not have a material impact on net tangible assets or earnings per share for the financial year ended 31 December 2019.
• No Director or Major Shareholder Interests: No directors, substantial shareholders, or their connected persons have any direct or indirect interest in the rescission, apart from their shareholdings.
• Transparency Measures: The rescission deed is available for inspection at the company’s registered office for three months.

Details Investors Should Note

The now-void DA originally covered five contiguous parcels of land (Lots 17399, 17400, 17401, 17402 & 17403, Block 32, Kemena Land District), with a total area of approximately 2.1 hectares within the Kemena Industrial Estate Park I (KIE I) in Bintulu, Sarawak, Malaysia. This project was expected to be a significant development initiative for Regal International Group through its subsidiary, Harbour Venture Sdn Bhd.

The company had granted itself, via the DA and a Power of Attorney, broad development rights over the site, positioning itself for growth and potential value creation in the Malaysian real estate market. However, due to the failure to secure approval from relevant Malaysian authorities, both parties have now agreed to a clean and immediate rescission of the agreement and all related legal instruments.

Potential Share Price Impact and Price-Sensitive Information

• Loss of Potential Future Revenue: While the company has stated that the rescission will not materially affect earnings or net tangible assets for FY2019, the cancellation does eliminate a pipeline project that may have contributed to future revenues and growth.
• Regulatory Risk Highlighted: The rescission brings to light the regulatory risks of property development in Malaysia, which may prompt investors to reassess the company’s project pipeline and risk profile.
• Transparency: The company’s prompt announcement and willingness to make the rescission deed available for inspection underscores good corporate governance, which may help maintain investor confidence.

Conclusion

The announcement is noteworthy as it marks the cancellation of a material development project in Malaysia due to regulatory hurdles. Investors should factor in the loss of this potential growth avenue and the possible implications for future project approvals in similar jurisdictions. While the immediate financial impact is declared minimal, the news could influence investor sentiment regarding the company’s ability to execute its business strategy in Malaysia.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult their financial advisors before making any investment decisions. The author and publisher are not responsible for any losses incurred from reliance on the information provided above.

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