Kwung’s Aroma Holdings Announces Discloseable Transactions for Land Acquisition in Thailand

Key Developments for Investors

• Kwung’s Aroma Holdings Limited (“Kwung’s Aroma” or “the Company”) is making significant investments in Thailand, acquiring three parcels of land to establish new overseas production capabilities.
• Total consideration for the acquisition of three land parcels: THB146,861,000 (approximately HKD 32 million at recent exchange rates).
• Complex structuring due to Thai regulatory hurdles: The Company has not yet received the necessary government approvals to directly own the land in Thailand, leading to a structured arrangement involving a local intermediary.
• Discloseable transaction status: The aggregate transaction size triggers notification and announcement requirements under Chapter 14 of the Hong Kong Listing Rules, which may be price-sensitive information for shareholders.
• Potential impact on share price: The expansion into Thailand, if successful, enhances the Company’s international footprint and production capabilities, but carries execution and regulatory risks.

Detailed Transaction Overview

1. Land Sale and Purchase Agreements

On 26 May 2025, Kwung’s Investments (a wholly-owned subsidiary) entered into three Land Sale and Purchase Agreements in Thailand, with the following details:

• Sale Land I: 33,106 m², THB56,214,125, located in Mab Yang Pom Sub District, Pluak Daeng District, Rayong Province.
• Sale Land II: 33,927 m², THB57,750,000, same area as above.
• Sale Land III: 19,140 m², THB32,896,875, same area as above.

The purchase prices were determined through arm’s-length negotiations, referencing prevailing market values for comparable land in the area. The Company has already paid a reservation fee totaling THB44,058,300 to the Sellers.

2. Assignment and Structuring to Overcome Regulatory Hurdles

On 4 March 2026, the rights and obligations under the Land Sale and Purchase Agreements were assigned from Kwung’s Investments to Kwungs Thailand (another wholly-owned subsidiary). However, Kwungs Thailand has not yet obtained the required investment promotion and government approval to own land in Thailand.

To resolve this, Kwungs Thailand entered into a Memorandum with Mr. Arkom Thithinan (50% shareholder of Dragon, the local real estate agency). Key terms include:

• Mr. Thithinan will acquire the Sale Land on behalf of Kwungs Thailand and hold it until the Company obtains approval to own land.
• Kwungs Thailand will provide an interest-free loan of THB113,964,125 to Mr. Thithinan for the final payment. This loan is secured by a mortgage over Sale Land I and II, mitigating credit risk.
• Upon obtaining approvals, Kwungs Thailand has the right to acquire the land from Mr. Thithinan for THB146,861,000, offsetting the purchase price against the outstanding loan and any accrued interest.
• If approvals are not obtained within six months, the land may be sold to a third party at Kwungs Thailand’s discretion (except for Sale Land III), and proceeds will be used to repay the Company’s loan and any additional amounts owed.
• An interest compensation agreement was also entered for Sale Land III, under which Kwungs Thailand will pay Mr. Thithinan an 8.5% annual interest on the full purchase price for the period he holds the land.

3. Financial and Strategic Rationale

The acquisition and subsequent development of production facilities in Thailand are part of the Company’s broader strategy to diversify its manufacturing base outside China, in response to global economic and geopolitical uncertainties. The Company has already launched a new factory in Vietnam and is now expanding further into Southeast Asia.

Funding for the land acquisition and related expenses will be sourced from internal resources. The Company’s directors believe the transaction will not materially impact the Group’s liquidity or financial position.

Importantly, the arrangement with Mr. Thithinan ensures that the Company does not lose its reservation fee or opportunity to acquire the land, even if regulatory approvals are delayed or denied.

Key Issues and Risks for Shareholders

• Regulatory Risk: The Company’s ability to ultimately own the land and complete its planned expansion in Thailand depends on obtaining government approvals. Delays or failures could force a sale to a third party, potentially affecting the Company’s strategic plans.
• Credit Risk: While the loan to Mr. Thithinan is secured by the land, there remains some exposure if land values fluctuate or in the event of unforeseen legal complications in Thailand.
• Potential Impact on Earnings and Valuation: Successful expansion into Thailand could strengthen Kwung’s Aroma’s production capabilities and supply chain resilience, which may positively influence future earnings and investor sentiment. Conversely, any setbacks or financial losses from the transaction could negatively affect share value.
• Disclosure obligations: As the size of the transaction exceeds 5% but is less than 25% of relevant Listing Rule ratios, it constitutes a discloseable transaction, requiring public notification to shareholders and the market.

Conclusion

The disclosed transaction represents a significant strategic step for Kwung’s Aroma Holdings as it seeks to internationalize its manufacturing base. The complex structuring, regulatory dependency, and the size of the transaction are all potentially price-sensitive matters. Investors should closely monitor further announcements regarding regulatory approvals in Thailand and the progress of the Company’s expansion plans.

Disclaimer

The above article is for informational purposes only and does not constitute investment advice. Investors are advised to conduct their own research or seek professional advice before making investment decisions. The Company’s plans are subject to regulatory approval and other risks, and future outcomes may differ from current expectations.

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