Hong Lai Huat - a property company with a large development project outside of Phnom Penh - announced on Nov 24 that it will issue to Soochow CSSD Capital Markets (Asia) 80 million non-listed and transferable warrants exercisable within two years from the date of issue of the Warrants.

Each warrant carry the right to subscribe for 1 new share in the company at the following exercise prices: 30 cents per Share for the first 20 million warrants 35 cents per share for the next 20 million warrants 40 cents per share for the next 20 million warrants and 45 cents per share for the last 20 million warrants

Hong Lai Huat last traded at 9.4 cents.

Assuming the warrants are exercised in full, the warrant shares represent approximately 15.45% of the company&rsquo s existing 517,844,114 issued shares as at the date of the announcement, and approximately 13.38% of the aggregate 597,844,114 issued shares taking into account the warrant Shares.

If the warrants are exercised in full at the exercise prices (assuming no adjustments are required to be made to the exercise prices and/or the number of warrants issued pursuant to the conditions), the estimated amount of net proceeds that may be raised (after deducting estimated costs and expenses of $700,000) is approximately 29.3 million.

Hong Lai Huat' s board believes the issuance of the warrants is beneficial in the long run as the exercise prices are at significant premia to the current market trading price of the shares and the funds from the exercise of the warrants will further strengthen the company' s cash balance to be deployed for ongoing developments and activities in Cambodia.

HONG Lai Huat' s Hong Lai Huat: CTO -2.02% wholly-owned subsidiary HLH Development (HLHD) has agreed to co-develop an 11.5-hectare (ha) site in Cambodia' s Sihanoukville province with the site' s land owner Smart Winner, announced the group in a bourse filing on Monday (Nov 1).

 

This marks the group' s fourth mixed-use development project in Cambodia as well as its second foray into Sihanoukville after Project D' Seaview, its first mixed-use development in the same province.

 

About 3 to 5 ha of the site will be developed into a wholesale and distribution centre that includes a seafood market, which Hong Lai Huat intends to either lease or sell to a potential operator.

 

The remaining land will be subdivided into smaller plots for mixed-use development.

 

Under the terms of the joint venture (JV), Smart Winner will contribute the site, which is valued at US$25.2 million and located close to Sihanoukville Autonomous Port. It will hold a 50.4 per cent stake in the JV company.

 

HLHD will pay US$10 million for the remaining 49.6 per cent stake in the JV company, and contribute US$5 million towards its working capital.

 

It also has the right of first refusal to purchase an additional 19.54 per cent stake in the JV for US$6.5 million within the next 12 months. The group said this will allow HLHD to enjoy potential upside from any significant increase in the land value, once Phase 1 of the wholesale and distribution centre project has been marketed.

 

Development of the project is expected to commence in Q2 FY2022. 

 

Ong Jia Jing, group executive director of Hong Lai Huat, said the latest JV investment is expected to drive further upside for the group in the near future.

 

" Not only do we gain a recurring source of rental income from the development, we are also likely to benefit from the development of mixed-use project or potential sale of the remaining strata title plots," said Ong.