AF Global Limited Provides Extensive Update on Xuzhou Investment Disposals

AF Global Limited (“AF Global” or the “Company”) has released a comprehensive announcement detailing significant developments in its Xuzhou Investment, a joint venture real estate project in China. The update covers the sale of its stakes in Xuzhou Yinjian LumChang Real Estate Development Co., Ltd (“XZYJLC”) and Xuzhou Real Estate Services Co., Ltd (“XZRES”), including the rationale, financial impact, and implications for shareholders.

Key Highlights

• Major Asset Disposal: The Company, through its subsidiaries, is exiting its 55% equity stakes in both XZYJLC and XZRES as part of a compulsory liquidation order by the PRC courts.
• Aggregate Consideration: The total consideration for the disposals is RMB147.0 million (approximately S\$27.17 million), with only RMB49.99 million (about S\$9.24 million) to be received as cash.
• Significant Financial Impact: The disposals are expected to result in a net loss of approximately S\$16.41 million after accounting for fair value losses, taxes, and expenses. If the Company recognizes a further asset write-down, the net loss could rise to S\$19.17 million.
• Shareholder Approval and SGX Waiver: The transaction qualifies as a “major transaction” under SGX rules and typically requires shareholder approval. The Company is seeking a waiver from SGX, but if denied, an EGM will be convened for a shareholder vote.
• Price Sensitive Implications: These developments are likely to impact AF Global’s net asset value (NAV) and net tangible assets (NTA) per share, potentially affecting share price.

Transaction Details

• Resolution Disposal: AF Global’s subsidiary L.C. Logistics Pte Ltd (“LCLPL”) will transfer its 55% equity in XZYJLC to the JV partner for RMB142 million (approx. S\$26.24 million). This consists of RMB44.99 million in cash and RMB97.01 million as assignment of debt owed by XZYJLC to the JV partner.
• XZRES Disposal: Hillgate Investment Pte Ltd (“Hillgate”), another AF Global subsidiary, will transfer its 55% equity in XZRES to the JV partner’s affiliate (Beijing Sancai) for RMB5.0 million (approx. S\$0.92 million) in cash.
• Aggregate Cash Proceeds: The Group expects to receive S\$9.24 million in cash, with the remainder of the consideration being the transfer of property titles (Relevant Assets) in China, valued at S\$17.93 million (subject to liquidity and repatriation risk due to Chinese FX controls).
• Conditions Precedent: The agreements will only become effective after (i) execution of all definitive documents, and (ii) either shareholder approval or a waiver from the SGX. If not completed by 30 June 2026, the XZRES Disposal will not proceed unless all parties agree otherwise.
• Termination Clause: If either party breaches the agreements, the Liquidator may terminate the arrangements and revert to asset liquidation via public auction.

Financial and Strategic Rationale

• Why the Disposals? With XZYJLC under court-ordered liquidation, XZRES (whose main activity was marketing XZYJLC’s real estate) has also become non-operational. The disposals allow AF Global to expedite its exit from these joint ventures, avoid additional uncertainties, and realize value from its Chinese investments.
• Use of Proceeds: The Company cannot, at this stage, specify how the proceeds will be used (other than for general corporate purposes), nor consider dividends or distributions, due to an ongoing scheme of arrangement for a possible acquisition of AF Global itself. This is in compliance with the Singapore Code on Take-overs and Mergers.

Material Financial Effects

• Major Transaction Classification: The aggregate consideration (S\$27.17 million) represents 23.61% of the Company’s market capitalization as of 16 January 2026, and 17.67% of Group NAV, making it a major transaction under SGX rules.
• Estimated Net Loss: After considering all costs, taxes, and the write-down of asset values, the disposals will result in an estimated net loss of S\$16.41 million (or up to S\$19.17 million if asset write-down is recognized).
• Pro Forma Financial Impact:
  • EPS: Loss per share increases from 0.01 to 0.22 Singapore cents post-disposal (FY2024 pro forma).
  • NTA per Share: Drops from 14.76 Singapore cents to 13.21 Singapore cents, or to 12.95 cents if the asset write-down is recognized.
  • NAV per Share: Also drops to 13.21 Singapore cents (or 12.95 cents with write-down).
• Cash Flow and Repatriation Risks: Only S\$9.24 million of the proceeds are in cash. Repatriation of funds from China is subject to foreign exchange controls and regulatory approval. There is no certainty on timing or whether the Group can sell the transferred assets at or above their current book value.

Shareholder and Regulatory Considerations

• Shareholder Approval: If the SGX waiver is not granted, an EGM will be called. Major shareholders (Aspial Corporation Limited and Mr. Koh Wee Meng), holding 72.6% of voting rights, have indicated support.
• No Change to Board: No new directors are being appointed as part of this transaction.
• Inspection Rights: Shareholders may inspect key transaction documents at the Company’s registered office for three months.

Key Risks and Price Sensitive Issues

• Net Asset Value Dilution: The disposals will substantially reduce the Company’s NTA and NAV per share, which may be perceived negatively by the market.
• Uncertain Cash Realization: Proceeds are mostly non-cash and subject to regulatory/practical hurdles in China.
• Significant Net Loss: The large accounting loss may impact investor sentiment and could pressure the share price.
• Pendency of Scheme of Arrangement: The Company’s flexibility to use proceeds is restricted until the outcome of the proposed takeover is determined.
• Potential for EGM and Shareholder Vote: If waiver is not granted, there could be further delays or uncertainties.

Conclusion

The announced Xuzhou Disposals represent a significant strategic and financial move by AF Global Limited to exit its non-performing Chinese real estate joint ventures. The transaction, while allowing the Company to realize some value and potentially streamline its portfolio ahead of a possible takeover, will result in a material reduction in net asset value and a substantial accounting loss. The cash component of the proceeds is modest, and realization of further value depends on the successful disposal of Chinese assets and regulatory approval for fund repatriation.

Investors should monitor further updates regarding the SGX waiver, EGM, and the outcome of the ongoing scheme of arrangement, as these factors are likely to influence the Company’s share price in the near term.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should conduct their own due diligence and consult their professional advisors before making investment decisions. The information is based on company announcements and is subject to change without notice.

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