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Aseana Properties Limited Final Results

30/04/2019 1:17pm

UK Regulatory (RNS & others)


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Aseana Properties Limited

30 April 2019

30 April 2019

Aseana Properties Limited

('Aseana' or 'the Company')

Full Year Results for the Year Ended 31 December 2018

Aseana Properties Limited (LSE: ASPL) is a property developer in Malaysia and Vietnam listed on the Main Market of the London Stock Exchange. The Company and its subsidiary undertakings (together with the 'Group') are pleased to announce its audited results for the year ended 31 December 2018.

Operational highlights

 
 --   The Group fully divested Seni Mont' Kiara in 2018. 
 --   Construction of The RuMa Hotel and Residences ('The RuMa') 
       was completed and Certificate of Completion and Compliance 
       ('CCC') was obtained on 28 September 2018. To date, The 
       RuMa Residences recorded approximately 68.3% sales based 
       on sale and purchase agreements signed. The RuMa Hotel commenced 
       business on 30 November 2018 with limited inventory. 
 --   The occupancy rate at Harbour Mall Sandakan improved to 
       78.1% as at 31 December 2018 (2017: 71.4%). Four Points 
       by Sheraton Sandakan Hotel ('FPSS') achieved an occupancy 
       rate of 39.2% in the year ended 31 December 2018. 
 --   The operation of the City International Hospital ('CIH') 
       improved in 2018 with outpatient and inpatient volumes increasing 
       by 21.6% and 22.4% respectively compared to 2017. 
 

Financial highlights

 
 --   The Group recognised revenue of US$33.1 million (2017: US$33.5 
       million (restated)). The revenue was mainly attributable 
       to the sale of completed units at SENI Mont' Kiara and The 
       RuMa Residences. 
 --   Net loss before taxation of US$6.8 million (2017: US$4.3 
       million (restated)), largely due to losses recorded by The 
       RuMa Hotel of US$4.2 million, which was mainly attributable 
       to pre-opening expenses; and finance costs of US$7.0 million 
       which were mainly attributable to CIH, International Healthcare 
       Park ('IHP'), FPSS and HMS; and operating losses at CIH 
       and FPSS. 
 --   Consolidated comprehensive loss of US$7.5 million (2017: 
       US$3.1 million income (restated)), which included loss arising 
       from foreign currency translation differences of US$1.1 
       million (2017: gains of US$8.7 million(restated)) due to 
       a weakening of Ringgit against US Dollars from RM4.0469/US$1.0 
       as at 31 December 2017 to RM4.1356/US$1.0 as at 31 December 
       2018. 
 --   Cash and cash equivalents stood at US$12.6 million (2017: 
       US$26.0 million (restated)). 
 --   Loss per share of US$0.0246 (2017: Loss per share of US$0.0198 
       (restated)) based on voting share capital. 
 --   Net asset value per share US$0.69 (2017: US$0.72 (restated)) 
       based on voting share capital. 
 

* These results have been extracted from the Annual Report and financial statements, and do not constitute the Group's Annual Report and financial statements for the year ended 31 December 2018. The financial statements for 2018 have been prepared under International Financial Reporting Standards. The auditors, Crowe UK LLP, have reported on those financial statements. Their report was unqualified and did not include a reference to any matters to which the auditors draw attention by way of emphasis without qualifying their report.

The Company also announces that its 2018 Annual Report has been submitted to the National Storage Mechanism (http://www.morningstar.co.uk/uk/nsm) and can be obtained on the Company's website (http://www.aseanaproperties.com/annual_reports.htm).

Post Year End Company Announcements

On 20 March 2019, the Company announced that Nicholas Paris had resigned as a non-executive Director, with effect from 19 March 2019. The Board will identify a suitable replacement Director.

On 22 March 2019, the Company announced that Ireka Development Management Sdn Bhd ('IDM'), the current Development Manager for the Company, had on 21 March 2019, submitted a notice to terminate its appointment under the Management Agreement. IDM is a wholly-owned subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's issued share capital. Unless otherwise agreed, IDM's resignation is subject to a three-month notice period which will enable the orderly transition of operations currently carried out by IDM to the Company itself or to third parties. Following the termination, IDM has indicated that it would be prepared to work with the Board to facilitate a smooth and orderly transition of the operations of the Company. At the request of the Board, IDM is agreeable to extend the notice period, should the Board require more time to put in place the effected changes.

Commenting on the Company's results and outlook, Mohammed Azlan Hashim, Chairman of Aseana Properties Limited, said:

'The economic situation in Malaysia remains challenging due to uncertainties in fiscal policies subsequent to the change in government back in 2018. In Vietnam, although the country's economy continues to be robust, it is susceptible to risks posed by the uncertainties from the ongoing USA-China trade war. While no major asset sales were recorded during the year under review, the Group is continuing its efforts in disposing of its remaining assets in an orderly and timely manner to achieve optimum value for its shareholder.'

-Ends-

For further information:

 
 Aseana Properties Limited              Tel: +603 6411 6388 
 Chan Chee Kian                         Email: cheekian.chan@ireka.com.my 
 N+1 Singer                             Tel: 020 7496 3000 
 James Maxwell/ James Moat (Corporate 
  Finance) 
 
 Tavistock                              Tel: 020 7920 3150 
 Jeremy Carey                           Email: jcarey@tavistock.co.uk 
 

Notes to Editors:

London-listed Aseana Properties Limited (LSE: ASPL) is a property developer investing in Malaysia and Vietnam.

Ireka Development Management Sdn Bhd ('IDM') is the exclusive Development Manager for Aseana. It is a wholly-owned subsidiary of Ireka Corporation Berhad, a company listed on the Bursa Malaysia since 1993, which has over 52 years' experience in construction and property development. IDM is responsible for the day-to-day management of Aseana's property portfolio and the implementation of the Divestment Investment Policy.

CHAIRMAN'S STATEMENT

The global economy started 2018 with robust and synchronised growth. However, as the year progressed, growth trends deviated and momentum faltered as a result of the moderating activity and heightened risks due to elevated trade tensions between the world's two largest economies, the United States of America ('USA') and China. Restrictive trade measures such as tariffs and import duties introduced by these economic powerhouses have posed more downside risks and threatened global economic growth. Similarly, some large emerging markets and developing economies have experienced significant financial market stress and struggled with tighter liquidity and capital outflow. The global economic environment is likely to remain challenging in 2019 amid increasing interest rates and rising trade protectionism. The World Bank has estimated global economic growth to soften to 2.9% in 2019 amid rising downside risks.

Against the subdued global growth backdrop, Malaysian Gross Domestic Product ('GDP') growth moderated to 4.7% in 2018, compared to 5.9% in 2017. The Malaysian economy experienced a period of uncertainty subsequent to the electoral transition in 2018 as the nation anticipated the effects of the newly implemented economic policies by the current Government. Nevertheless, measures are being taken by the Malaysian Government to mitigate further economic slowdown such as improving the nation's debt servicing cost by securing the Samurai bonds at a coupon rate of 0.65%, which is expected to avoid a credit rating downgrade. Bank Negara Malaysia ('BNM') has kept the nation's overnight policy rate ('OPR') at 3.25% which indicates sustained economic expansion and resilient domestic demand, with private consumption remaining as the main growth pillar. The Ringgit saw a mixed performance in 2018 as the local currency was dragged down by a sharp change of sentiment in the second quarter due to adverse external factors such as the trade tensions between USA and China as well as the prospect of higher interest rates in the USA. However, the Ringgit improved slightly during the last quarter of 2018 and appreciated marginally to close at RM4.1356/US$1.00.

In contrast, the Vietnamese economy remained buoyant in 2018 with GDP growth of 7.1%, the strongest expansion since 2011, exceeding the target of 6.8%. The strong GDP growth was driven by strong domestic demand and a dynamic export-oriented manufacturing sector. Foreign Direct Investment ('FDI') growth remained as one of the primary factors for Vietnam's strong GDP growth, with a record high of US$19.1 billion of FDI being disbursed in 2018. Low business operating cost and strong macroeconomic growth continued to attract foreign investments into Vietnam. However, given its high trade openness and limited fiscal as well as monetary policy buffer, Vietnam's economic outlook is susceptible to downside risks and external volatilities amidst the ongoing USA-China trade war. The country's GDP is expected to grow at a slower pace of 6.6% in 2019 as a result of the tightened monetary policies introduced by the Vietnamese Government and the slowdown in global demand.

In parallel with the slowdown of the Malaysian economy, the nation's property market remained soft in 2018. Imbalances observed in the property market continued to persist, evidenced by the increase in unsold completed units by 48.4% to 30,115 units based on records from the Valuation and Property Services Department of Malaysia. The recent increase in Real Property Gains Tax ('RPGT') from 5% to 10% for foreigners and 0% to 5% for Malaysians, for property disposals after the fifth year, could dampen the local property market further. In a bid to boost the property sector, the Government has proposed to implement certain measures such as easing home financing requirements for first time home buyers, reducing compliance cost and implementation of industrialised building systems to reduce the cost of housing.

On the back of Vietnam's robust economic growth, the country's property market in 2018 continued to be stable, with supply on the rise and is expected to remain bullish in 2019. The number of foreign investors purchasing luxury properties in Vietnam has been on the rise following the easing of foreign ownership regulation back in 2015. In addition, infrastructure improvements, including the construction of Metro Line No.1 and the opening of the Ho Chi Minh City-Long Thanh-Dau Giay Expressway, have significantly improved the development landscape in the city's eastern area over the last few years. However, Vietnam's property market is still vulnerable to downside risks stemming from the new regulation set by the State Bank of Vietnam ('SBV') which increases the risk weighting for real estate loans from 200.0% to 250.0% from 2020 onwards which will significantly disincentivise banks from lending to the property sector. Since January 2019, SBV has also reduced the proportion of short-term funds available for medium and long-term loans from 45.0 % to 40.0%, a move which will reduce banks' liquidity and therefore hinder property developers' access to funds.

In the financial year ended 31 December 2018, Aseana Properties and its subsidiaries (the 'Group') registered revenue of US$33.1 million (2017: US$33.5 million (restated)), attributable to the sale of completed units at SENI Mont' Kiara and The RuMa Residences. The Group has adopted IFRS 15 Revenue from Contracts with Customers with an initial application date of 1 January 2018.

The Group recorded a consolidated comprehensive loss of US$7.5 million, mainly due to losses of US$4.2 million incurred by The RuMa Hotel which was mostly attributable to pre-opening expenses as well as US$7.0 million of finance costs mainly attributable to City International Hospital ('CIH'), International Healthcare Park ('IHP'), Four Points by Sheraton Sandakan Hotel ('FPSS') and Harbour Mall Sandakan ('HMS'); and operating losses at CIH and FPSS. The comprehensive loss included a loss on foreign currency translation of US$1.1 million (2017: gains of US$8.7 million (restated)), as a result of the weakened Ringgit Malaysia ('RM') against the US Dollar from RM4.0469/US$1.00 at 31 December 2017 to RM4.1356/US$1.00 at 31 December 2018.

Progress of the property portfolio

The sluggish property market in Malaysia has affected the sale of properties at The RuMa Hotel and Residences ('The RuMa') in 2018. Construction of The RuMa was completed and the Certificate of Completion and Compliance ('CCC') was obtained on 28 September 2018. Sales of The RuMa Residences to date stands at 68.3% based on sale and purchase agreements signed. The Group will continue to actively market the available residence units to local and overseas buyers. Meanwhile, The RuMa Hotel commenced business on 30 November 2018 with limited inventory. Since its opening, it has received positive reviews from local and international media including CNN, Bloomberg and The UK's Independent newspaper. Based on the data from Ministry of Tourism Malaysia, tourist arrivals to Malaysia in 2018 experienced a slight decrease of 0.45% as compared to the previous year, with a total of 25.8 million tourist arrivals. However, tourist receipts were 2.4% higher at RM84.1 billion. The Ministry has set a target of 28.1 million tourist arrivals for 2019, while tourist receipts are targeted to increase to RM92.2 billion.

Meanwhile, tourism in Sabah showed a slight improvement with the total number of tourist arrivals reaching 3.9 million in 2018, which generated an estimated RM8.0 billion in tourism receipts. Visitors from China continued to be the largest group with 0.6 million visitors during the year while the Sabah tourism board has targeted approximately 4.0 million tourists in 2019. The Government's decision to proceed with the Pan Borneo Highway is expected to have a positive effect on the tourism sector in Sabah upon its completion. It will allow travelling within Borneo to be more accessible. FPSS recorded an occupancy level of 39.2% for year ended 31 December 2018 and 35.2% for year 2019 to date. David Scully was appointed as the new General Manager of FPSS on 29 February 2019; he has over 27 years' experience in the hotel industry, across central and Southeast Asia. In the meantime, performance of HMS has improved compared to last year with occupancy recorded at 78.1% to date.

In Vietnam, the Group has entered into an agreement to divest a plot of land at IHP for approximately US$6.6 million, completion of which is still pending regulatory approval. Operational performance at CIH for the year ended 2018 has seen a 21.6% increase in outpatient volume and 22.4% increase in inpatient volume compared to 2017. The operation of the angiographic intervention service since the end of April 2018 has contributed to the overall increase inpatient volume of the hospital. Apart from that, a new Stroke Centre for emergency care and interventional therapies, which are jointly managed by CIH and the founder of Vietnam Stroke International Services, came into operation at the end of 2018.

Further information on each of the Group's properties is set out in the Development Manager's report on pages 9 to 11.

Post Year End Company Announcements

On 20 March 2019, the Company announced that Nicholas Paris had resigned as a non-executive Director, with effect from 19 March 2019. The Board will identify a suitable replacement Director.

On 22 March 2019, the Company announced that Ireka Development Management Sdn Bhd ('IDM'), the current Development Manager for the Company, had on 21 March 2019, submitted a notice to terminate its appointment under the Management Agreement. IDM is a wholly-owned subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's issued share capital. Unless otherwise agreed, IDM's resignation is subject to a three-month notice period which will enable the orderly transition of operations currently carried out by IDM to the Company itself or to third parties. Following the termination, IDM has indicated that it would be prepared to work with the Board to facilitate a smooth and orderly transition of the operations of the Company. At the request of the Board, IDM is agreeable to extend the notice period, should the Board require more time to put in place the effected changes.

Outlook

2018 was a challenging year for the Malaysian property market as a result of the post-election sentiment which affected investors' confidence and consumer spending. For 2019, the general outlook for the Malaysian property market seems to be one of cautious optimism, with recovery expected in the mid to longer term. In contrast, the property market in Vietnam has performed well in 2018 and is expected to be sustainable with robust growth in 2019. Disposal of the Group's remaining assets will continue to be the primary focus of the Board.

In closing, I wish to take this opportunity to thank my Board colleagues at Aseana Properties, our advisors, shareholders and business associates for their continued support and guidance throughout the year.

MOHAMMED AZLAN HASHIM

Chairman

30 April 2019

DEVELOPMENT MANAGER'S REVIEW

BUSINESS OVERVIEW

2018 was a challenging year for Aseana Properties as uncertainties in the Malaysian and the global economy continued to impact the performance of the Group. In Malaysia, the Group successfully sold the remaining units at SENI and construction of The RuMa was completed in September 2018 with the hotel commencing business on 30 November 2018. The sluggish property market in Malaysia has affected the sale of The RuMa Residences, which has sold 68.3% of units to date. HMS has shown improvement in performance against a tough economic landscape, although FPSS is still impacted by the slow recovery of tourist to Sandakan.

In Vietnam, the economy remained resilient with robust growth throughout 2018 notwithstanding the global economic slowdown. The Group entered into an agreement to divest a plot of land in Vietnam for approximately US$6.6 million during the year, the completion of which is still pending approval from regulatory authorities. CIH has performed well with an increased number of patients and revenue. This was partially due to the introduction of the angiographic intervention services which began operations in April 2018.

Looking forward to 2019, the Malaysian economy is expected to experience modest growth underpinned by stronger domestic demand and increasing public spending. On the property front, the market is expected to remain challenging, in particular with high-end residential properties. The Malaysian Government has introduced further measures to curb property speculation and to encourage long-term buyers by increasing the RPGT for disposal of properties from 5% to 10% for foreigners and 0% to 5% for locals after the fifth year of purchase. On the other hand, Vietnam's growth in 2019 is envisaged to be marginally lower than 2018 due to constricting monetary policies and reduced global demand.

Malaysia Economic Update

Malaysia's economy grew at 4.7% in 2018, marginally above earlier expectations due to better growth in the fourth quarter of 2018. Private sector activity was the main driver of growth, whilst a rebound in exports of goods and services contributed towards net export growth. However, growth was still below the stellar growth of 5.9% in 2017. This was largely due to external economic factors caused by the ongoing trade tensions between USA and China which led to the introduction of various restrictive trade measures such as tariffs and import duties on a multitude of goods. On the back of the subdued economic conditions, the International Monetary Fund ('IMF') has projected Malaysia's 2019 GDP growth to be at 4.5% to 5.0%. Domestic demand is expected to remain the driving force of growth amid moderating global demand. In tandem, BNM has kept the nation's OPR at 3.25% which is intended to reduce capital outflows and maintain the stability of the Ringgit. The Ringgit weathered the emerging currency turmoil in 2018 despite being dragged down by a sharp change of sentiment in the second quarter due to adverse external factors and improved slightly against the US Dollar to close at RM4.1356/US$1.00.

Meanwhile, as Malaysia continues the journey of restoring its fiscal stability through the implementation of several key election promises by the current Government, including the repeal of the Goods and Services Tax and the review of infrastructure projects, Fitch Ratings has affirmed the nation's Long-Term Foreign-Currency Issuer Default Rating at 'A-' with a stable outlook. This reflects higher growth rates supported by solid economic growth and steady current account surpluses. Malaysia's Consumer Price Index ('CPI') recorded a nine-year low growth of 1.0% compared to the previous year. This was achieved as a result of the abolishment of the Goods and Services Tax in September 2018.

Foreign investment remains a vital growth driver for the Malaysian economy as the country aims to achieve developed nation status in the near future. An uncertain political environment coupled with global trade slowdown have affected foreign investments in the region. Malaysia was not spared as it recorded FDI net inflow of RM32.6 billion in 2018, a decrease of approximately 19.3% from the prior year. Renegotiations of a number of mega infrastructure projects such as the East Coast Rail Line and High-Speed Rail have had an adverse effect on the country's relationship with its largest trading partner, China. However, despite these difficulties, Malaysia-China bilateral trade volume recorded a high of RM443.0 billion in 2018. In addition, Malaysia's trade surplus widened to RM120.3 billion in 2018, its largest in recent years.

Vietnam Economic Update

In contrast to the subdued global economy, Vietnam remains as one of the strongest performing nations in the region with impressive growth during the year. The country's economy expanded by 7.1% in 2018, the highest rate since 2011 and exceeding the Government's initial target of 6.7%, driven by robust domestic demand, increased exports, manufacturing and foreign investment. The Vietnamese Government is taking advantage of the USA-China trade tensions to boost the nation's profile as a manufacturing and export powerhouse. In addition, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ('CPTPP'), the eleven-country trade pact, took effect in Vietnam in January 2019. According to Vietnam's Ministry of Industry and Trade, CPTPP is expected to create as many as 26,000 jobs by 2035 and also amplify the country's GDP growth.

Although registered FDI slipped by 1.2% to US$35.46 billion in 2018 compared to the prior year, disbursed FDI jumped to a record high of US$19.1 billion, representing a year-on-year increase of 9.1%. Processing and manufacturing industries accounted for 46.7% of all registered FDI capital in 2018, with US$16.58 billion invested across 1,065 newly granted projects. The Vietnamese Government has astutely negotiated numerous free-trade agreements ('FTA'), integrating its economy more closely with key trading partners across the world. The country is part of the Asean FTA and is close to concluding an FTA with the European Union. These FTAs have improved the country's access to foreign markets and improved competitiveness. Meanwhile, the Vietnamese Government's efforts to strengthen macroeconomic stability have proven to be successful as the country's core inflation rate was contained at a manageable rate of 1.5% in 2018. CPI rose to 3.6%, below the 4.0% target, as a result of the Government's efforts in curbing prices. CPI growth was mainly driven by upward adjustment of prices in healthcare and education services.

The State Bank of Vietnam ('SBV') continued to introduce measures to tighten monetary policies which have resulted in growth of only 14.0% in total outstanding credit in 2018, the lowest rate since 2014. Moody's Investors Service ('Moody's') has recently changed its 12 to 18-month outlook on the Vietnamese banking system from positive to Ba3 on the back of robust economic growth which will support the banks' operating environment and improve asset quality. Moody's expects the Vietnamese credit growth in 2019 to remain at approximately 14.0% due to the slow progress of raising new capital by state-owned banks and also SBV's efforts in maintaining control over credit growth.

PORTFOLIO REVIEW

MALAYSIA

Property Market Review

The Malaysian property market remained lacklustre in 2018, partly due to the 14(th) General Election. Uncertainties and apprehension pre and post-election drove many investors and buyers to the side-lines. Although investors and homebuyers are expected to slowly return to the market in 2019 due to improved confidence in the newly elected government, with a clearer picture of Government policies, the current property market continues to experience challenges such as a property oversupply, a tight lending environment and the affordability of property. The slight upward revision in the rates of the RPGT and stamp duty as announced in Budget 2019 are unlikely to have significant impact on the high-end condominium sector. However, it may impact the acquisition and disposal costs in property transactions.

In the retail property market, the average occupancy rates remained stable at 78.2% in 2018 due to the diminishing amount of new retail spaces coming onto the market as compared to the prior year. However, the retail market is expected to remain challenging for the coming year in tandem with deteriorating consumer sentiment caused by the dull economic environment and rising costs of living. This is evidenced by the drop of 10.7 points to 96.8 points in the Consumer Sentiment Index, in the last quarter of 2018, measured by the Malaysian Institute of Economic Research

Meanwhile, growth in Malaysia's hospitality sector suffered a setback in 2018. Tourist arrivals in 2018 fell short of its target for the eighth consecutive year to a total of 25.8 million, compared to the target of 26.4 million. This was also a 0.4% decline from the 26.0 million recorded in 2017. In Sabah, the tourism sector remained a major contributor to its State economy as tourist receipts in 2018 generated approximately RM8.0 billion (US$1.9 million). Sabah welcomed a total of 3.9 million visitors in 2018, representing an increase of 5.3% compared to 2017. The largest group of tourists came from China, with 0.6 million visitors throughout the year. The decision to proceed with the Pan Borneo Highway is expected to positively impact the tourism sector in Sabah as travelling within the region becomes more accessible.

Aseana Properties currently has four investments in Malaysia. These investments consist of residential properties, hotels and a retail mall:

   á          The RuMa Hotel and Residences 

This project is strategically located in the heart of Kuala Lumpur City Centre ('KLCC') on Jalan Kia Peng, near landmarks such as the world-famous Petronas Twin Towers, KLCC Convention Centre, Suria KLCC shopping mall and KLCC Central Park. The RuMa Hotel and Residences is owned by Aseana Properties 70.0% and Ireka Corporation Berhad 30.0%. The project consists of 199 units of luxury residences (The RuMa Residences) and a 253-room luxury bespoke hotel (The RuMa Hotel), built on 43,559 sq ft of development land. The RuMa Hotel is managed by Urban Resort Concepts, a renowned bespoke hotel management company based in Shanghai, which created and operates the award-winning The Puli Hotel in Shanghai.

   á          Harbour Mall Sandakan 

The occupancy rate at HMS is currently recorded at 78.1%. Notable tenants include Lotus Five Star Cinema, Popular Bookstore, Levi's, The Body Shop, Watsons and McDonalds. The outlook for HMS is promising, as leasing initiatives were undertaken to increase the occupancy rate to above 85% this year.

HMS is funded by medium term notes amounting to approximately US$23.8 million (RM100.0 million) as at 31 December 2018.

   á          Four Points by Sheraton Sandakan Hotel 

FPSS recorded an occupancy rate of 39.2% for 2018, with an Average Daily Room Rate of approximately US$56 (RM232). Sandakan's hotel occupancy has been greatly affected by on-going negative travel advisories issued by some countries in response to previous cases of kidnapping for ransom along the coast of Eastern Sabah. The management of FPSS continues to improve the efficiency of its operations and to work with the relevant authorities to improve tourist arrivals to Sandakan. David Scully was appointed as the new General Manager of FPSS on 29 February 2019 and has over 27 years' experience in the hotel industry, across central and Southeast Asia. In addition, the on-going expansion of the runway at Sandakan Airport is expected to attract more commercial airlines and charter flights, in particular from China, to fly directly to Sandakan in the future.

   á          Kota Kinabalu Seafront resort & residences 

Aseana Properties acquired three adjoining plots of land totalling approximately 80 acres in September 2008 with the intention of developing a resort hotel, resort villas and resort homes at the seaside area in Kota Kinabalu, Sabah. In 2012, the Board decided not to proceed with the development and to dispose of the land instead. Marketing efforts are on-going and the Group is currently working with various consultants/agents for the disposal of the lands to potential buyers.

VIETNAM

Property Market Review

The property market in Vietnam witnessed a stable development during the period under review on the back of continued strong economic growth, rapid urbanisation and increased foreign investments into the property sector as well as the fast-growing number of local middle-class buyers. The real estate sector lured nearly US$6.6 billion in foreign investment, doubling from the same period last year and accounted for 18.5% of the country's total foreign investment. According to the Real Estate Association of Vietnam, inventory sank to a low of US$1.0 billion as of November 2018, down from the peak of US$105.6 billion in the first quarter of 2013.

In tandem with Vietnam's buoyant economic growth, the country's residential property market recorded strong demand throughout 2018. In Ho Chi Minh City ('HCMC'), a total of 31,083 condominium units were sold and 30,792 units were launched during the year.

Meanwhile, office markets in both HCMC and Hanoi continued to favour landlords as supply was scarce while demand remained strong. In 2018, HCMC's overall office market occupancy rate increased to more than 96.0% while occupancy in Hanoi's office market stood at 92.0%. The year was also an exceptional year for the co-working space market in HCMC and Hanoi. Total supply of flexible workspace in HCMC has surged up to 37,780 square metres gross floor area, increasing by 109.0% compared to 2017. Correspondingly, competition in the Vietnamese retail market continued to intensify, underpinned by massive expansion plans from domestic and foreign retailers. Retailers from across Asia are flooding into Vietnam as the country loosens its restrictions on foreign companies, racing to bring convenience stores and supermarkets to an economy dominated by small businesses. The overall shopping centres and departmental stores' occupancy rate remained stable at 90.0% in HCMC and 88.0% in Hanoi.

The hospitality sector emerged as one of Vietnam's most lucrative sectors in its real estate industry in 2018, drawing attention from international and local developers as well as investors. The tourism industry of Vietnam contributed approximately US$26.8 billion in tourism revenue during 2018 with a total of 15.5 million tourist arrivals, an increase of 19.9% compared to the year before. Further to that, Vietnam won a series of international awards, recognising it as a safe and friendly destination and was crowned 'Asia's Leading Destination' for the first time at the 2018 World Travel Awards,

With robust economic development and better living conditions, Vietnam witnessed an increasing demand for higher quality products and services, including medical care. To fulfil demand, modernised hospitals and clinics have been growing in numbers in Hanoi and HCMC to accommodate a majority of the Vietnamese middle-class. In tandem with the overall policy to transform the nation into a market economy, the Vietnamese Government has been encouraging foreign investors to engage in the health-related sector. According to the Business Monitor International ('BMI'), Vietnam's healthcare expenditure in 2017 reached US$16.1 billion, representing 7.5% of the country's GDP. BMI forecasts that healthcare spending will grow to US$22.7 billion in 2021, a compound annual growth rate of approximately 12.5% from 2017 to 2021.

Aseana Properties now has two investments in Vietnam:-

   á          International Healthcare Park 

IHP is a planned mixed development on 37.5 hectares of land comprising private hospitals, mixed commercial, hospitality and residential developments. It is located in the Binh Tan District, close to District 5 (Chinatown) and is approximately 11 km from District 1, the central business and commercial district of HCMC. Aseana Properties has a 72.4% stake in this development and its local partner, Hoa Lam Group holds a significant minority stake together with a consortium of investors from Singapore, Malaysia and Vietnam. A total of 19 plots of land were approved for development and Land Use Right ('LUR') was issued and paid for a 69-year lease. Of the 19 plots, 6 plots are dedicated to hospital and related functions. To date, 8 plots have been developed or divested. Apart from the international-class City International Hospital, IHP also boasts the largest AEON retail mall in Ho Chi Minh City.

US$14.6 million of loan facilities to part finance the land and working capital remained outstanding as at 31 December 2018.

   á          City International Hospital 

CIH is a modern private care tertiary hospital conforming to international standards with 320 beds (Phase 1: 168 beds). In April 2018, the hospital introduced the angiographic intervention service which has improved the overall patient volume of the hospital. Additionally, a new Stroke Centre for emergency care and interventional therapies, which is jointly managed by CIH and the founder of Vietnam Stroke International Services, came into operation at the end of 2018.

The development of City International Hospital is funded by total facilities of US$41.0 million as at 31 December 2018.

OUTLOOK

The Board and the Manager remain focused and committed on divesting the remaining investments in its portfolio and enhancing the value of its operating assets through diligent management. The Malaysian economy in particular, is expected to face another difficult year in 2019 as it is being challenged by the on-going domestic market adjustments and rising external headwinds. Recalibration of fiscal policies and structural reforms by the Malaysian Government will continue to put pressure on the nation's economic performance. In addition, Vietnam's economy is expected to grow at a slower pace as a result of tightened monetary policies as well as the slowdown in global demand despite its broad macroeconomic stability.

On a personal note, I would like to take this opportunity to extend my warmest gratitude to the Board of Directors of Aseana Properties, our advisors, shareholders and business associates for their unrelenting support and guidance throughout the year.

LAI VOON HON

President

Ireka Development Management Sdn. Bhd.

Development Manager

30 April 2019

PERFORMANCE SUMMARY

 
                                                 Year ended          Year ended 
                                           31 December 2018    31 December 2017 
                                                                     (Restated) 
---------------------------------------  ------------------  ------------------ 
 Total Returns since listing 
 Ordinary share price                               -45.75%             -47.00% 
 FTSE All-share index                                10.30%              26.71% 
 FTSE 350 Real Estate Index                         -50.03%             -39.43% 
 
 One Year Returns 
 Ordinary share price                                 2.36%               1.92% 
 FTSE All-share index                               -12.95%               9.00% 
 FTSE 350 Real Estate Index                         -17.49%              10.34% 
 
 Capital Values 
 Total assets less current liabilities 
  (US$ million)                                      186.60              178.29 
 Net asset value per share (US$)                       0.69                0.72 
 Ordinary share price (US$)                            0.54                0.53 
 FTSE 350 Real Estate Index                          468.71              568.05 
 
 Debt-to-equity ratio 
 Debt-to-equity ratio (1)                            90.82%              82.72% 
 Net debt-to-equity ratio (2)                        81.54%              64.53% 
 
 (Loss)/ Earnings Per Share 
 Earnings per ordinary share - basic 
  (US cents)                                          -2.46               -1.98 
    - diluted (US cents)                              -2.46               -1.98 
 
 

Notes:

(1) Debt-to-equity ratio = (Total Borrowings / Total Equity) x 100%

(2) Net debt-to-equity ratio = (Total Borrowings less Cash and Cash Equivalents / Total Equity) x 100%

FINANCIAL REVIEW

INTRODUCTION

The Group recorded a consolidated comprehensive loss of US$7.5 million for the financial year ended 31 December 2018, mainly due to losses incurred by The RuMa Hotel and finance costs attributable to its four operating assets.

STATEMENT OF COMPREHENSIVE INCOME

The Group recognised revenue of US$33.1 million, compared to US$33.5 million (restated) for the previous financial year. The revenue was mainly attributable to the sale of completed units at SENI Mont' Kiara and The RuMa Residences. The Group adopted and applied IFRS 15 Revenue from Contracts with Customers retrospectively. The adjustments to revenue were made for property development activities of The RuMa Hotel Suites and Residences (the 'RuMa Project'), where no revenue was previously recognised under IFRIC 15 Ð Agreements for Construction of Real Estate, which prescribes that revenue to be recognised only when the properties are completed and occupancy permits are issued. With the adoption of IFRS 15, which requires the revenue from the development of the RuMa Project to be recognised over the contract period. In respect of the revenue from the sale of the The RuMa Hotel Suites, the Group also has a contractual arrangement with the buyer for the leaseback of the hotel suites to operate for the hotel operation. Under this sale and leaseback arrangement, which prescribes that control of the hotel suites has yet to be transferred to the buyers of the hotel suites. Hence, revenue of US$38 million is deferred until such time that

control is passed to the buyers of the hotel suites.

The Group recorded a net loss before taxation of US$6.8 million compared to a net loss before taxation of US$4.3 million (restated) for the previous financial year. The losses were largely due to The RuMa Hotel of US$4.2 million which mostly was attributable to pre-opening expenses; and finance costs of US$7.0 million which mainly were attributable to City International Hospital, International Healthcare Park, Four Points by Sheraton Sandakan Hotel and Harbour Mall Sandakan; and operating losses of City International Hospital and Four Points by Sheraton Sandakan Hotel.

Net loss attributable to equity holders of the parent company was US$4.9 million, compared to a net loss of US$3.9 million (restated) for the previous financial year. Tax income for the year at US$0.4 million (2017: Tax expenses of US$1.2 million (restated)).

The consolidated comprehensive loss was US$7.5 million (2017: comprehensive income of US$3.1 million (restated)), which included a loss of US$1.1 million (2017: gains of US$8.7 million(restated)) arising from foreign currency translation differences for foreign operations due to a weakening of the Ringgit against the US Dollar, during the year.

Basic and diluted loss per share were both US cents 2.46 (2017: US cents 1.98 (restated)).

STATEMENT OF FINANCIAL POSITION

Total assets were US$307.5 million, compared to US$304.1 million (restated) for the previous year, representing an increase of US$3.4 million.

Total liabilities were US$172.1 million, compared to US$161.3 million (restated) for the previous year, representing an increase of US$10.8 million. This was mainly due to an increase of US$20.2 million in trade and other payables.

Net Asset Value per share was US$ 0.69 (31 December 2017: US$ 0.72 (restated)).

CASH FLOW AND FUNDING

Cash flow used in operations before interest and tax paid was US$1.9 million, compared to cash flow generated from operation of US$15.7 (restated) million for the previous year.

The Group generated net cash flow of US$1.1 million from investing activities, compared to US$2.1 million in the previous year.

Changes in cash flow in 2018 were positive at US$ 0.1million, compared to the negative cash flow of US$7.1 million in 2017.

The borrowing of the Group undertakings to fund property development projects and for working capital. As at 31 December 2018, the Group's gross borrowings stood at US$85 million (31 December 2017: US$91.8 million). Net debt-to-equity ratio was 53.0% (31 December 2017: 46.0%(restated)).

Finance income was US$1.24 million for financial year ended 31 December 2018 (2017: US$0.39million). Finance costs were US$7.0 million (2017: US$12.4 million (restated)), which were mostly incurred by City International Hospital, International Healthcare Park, Four Points by Sheraton Sandakan Hotel and Harbour Mall Sandakan.

event after statement of financial position date

On 22 March 2019, the Company announced that Ireka Development Management Sdn Bhd ('IDM'), the current Development Manager for the Company, had on 21 March 2019, submitted a notice to terminate its appointment under the Management Agreement. IDM is a whollyowned subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's issued share capital. Unless otherwise agreed, IDM's resignation is subject to a three-month notice period which will enable the orderly transition of operations currently carried out by IDM to the Company itself or to third parties. Following the termination, IDM has indicated that it is be prepared to work with the Board to facilitate a smooth and orderly transition of the operations of the Company. At the request of the Board, IDM is agreeable to extend the notice period, should the Board require more time to put in place the effected changes.

DIVID

No dividend was declared or paid in financial years 2018 and 2017.

PRINCIPAL RISKS AND UNCERTAINTIES

A review of the principal risks and uncertainties facing the Group is set out in the Directors' Report of the Annual Report.

TREASURY AND FINANCIAL RISK MANAGEMENT

The Group undertakes risk assessments and identifies the principal risks that affect its activities. The responsibility for the management of each key risk has been clearly identified and delegated to the senior management of the Development Manager. The Development Manager's senior management team is involved in the day-to-day operation of the Group.

A comprehensive discussion on the Group's financial risk management policies is included in the notes to the financial statements of the Annual Report.

MONICA LAI VOON HUEY

Chief Financial Officer

Ireka Development Management Sdn. Bhd.

Development Manager

30 April 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 DECEMBER 2018

 
                                                        2018         2017 
 Continuing activities                      Notes    US$'000      US$'000 
                                                                Restated* 
-----------------------------------------  ------  ---------  ----------- 
 Revenue                                      3       33,054       33,548 
 Cost of sales                                5     (24,601)     (20,448) 
-----------------------------------------  ------  ---------  ----------- 
 Gross profit                                          8,453       13,100 
 Other income                                 6       19,149       14,176 
 Administrative expenses                             (1,027)        (927) 
 Foreign exchange (loss)/gain                 7      (1,353)        3,419 
 Management fees                              8      (1,460)      (3,129) 
 Marketing expenses                                    (671)        (496) 
 Other operating expenses                           (24,095)     (18,417) 
-----------------------------------------  ------  ---------  ----------- 
 Operating (loss)/profit                             (1,004)        7,726 
                                                   ---------  ----------- 
 Finance income                                        1,242          392 
 Finance costs                                       (7,034)     (12,444) 
                                                   ---------  ----------- 
 Net finance costs                            9      (5,792)     (12,052) 
 Net loss before taxation                    10      (6,796)      (4,326) 
 Taxation                                    11          390      (1,207) 
-----------------------------------------  ------  ---------  ----------- 
 Loss for the year                                   (6,406)      (5,533) 
-----------------------------------------  ------  ---------  ----------- 
 Other comprehensive (loss)/income, net of 
  tax items 
  that are or may be reclassified subsequently 
   to profit 
   or loss 
 Foreign currency translation differences 
  for foreign operations                             (1,082)        8,671 
 Total other comprehensive (loss)/income 
  for the year                               12      (1,082)        8,671 
-----------------------------------------  ------  ---------  ----------- 
 Total comprehensive (loss)/income for the 
  year                                               (7,488)        3,138 
-------------------------------------------------  ---------  ----------- 
 
 

* See Note 28

The notes to the financial statements form an integral part of the financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 DECEMBER 2018 (cont'd)

 
                                                              2018         2017 
 Continuing activities                             Notes   US$'000      US$'000 
                                                                      Restated* 
------------------------------------------------  ------  --------  ----------- 
 Loss attributable to: 
 Equity holders of the parent company               13     (4,885)      (3,937) 
 Non-controlling interests                                 (1,521)      (1,596) 
------------------------------------------------  ------  --------  ----------- 
 Loss for the year                                         (6,406)      (5,533) 
------------------------------------------------  ------  --------  ----------- 
 Total comprehensive (loss)/income attributable 
  to: 
 Equity holders of the parent company                      (6,154)        4,629 
 Non-controlling interests                                 (1,334)      (1,491) 
------------------------------------------------  ------  --------  ----------- 
 Total comprehensive (loss)/income 
  for the year                                             (7,488)        3,138 
------------------------------------------------  ------  --------  ----------- 
 
 
 
 Loss per share 
 
 Basic and diluted (US cents)    13    (2.46)   (1.98) 
------------------------------  ---  --------  ------- 
 

* See Note 28

The notes to the financial statements form an integral part of the financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS at 31 DECEMBER 2018

 
                                          31 December   31 December    1 January 
                                                 2018          2017         2017 
                                              US$'000       US$'000      US$'000 
                                  Notes                   Restated*    Restated* 
-------------------------------  ------  ------------  ------------  ----------- 
 Non-current assets 
 Property, plant and equipment                    678           663          743 
 Intangible assets                 14           4,148         4,201        7,081 
 Deferred tax assets               15           5,186         5,058        1,606 
-------------------------------  ------  ------------  ------------  ----------- 
 Total non-current assets                      10,012         9,922        9,430 
-------------------------------  ------  ------------  ------------  ----------- 
 Current assets 
 Inventories                       16         267,160       250,173      234,920 
 Trade and other receivables                   16,991        17,394       14,136 
 Prepayments                                      635           293        1,093 
 Current tax assets                               157           372          660 
 Cash and cash equivalents                     12,573        25,984       26,650 
 Total current assets                         297,516       294,216      277,459 
-------------------------------  ------  ------------  ------------  ----------- 
 TOTAL ASSETS                                 307,528       304,138      286,889 
-------------------------------  ------  ------------  ------------  ----------- 
 Equity 
 Share capital                     17          10,601        10,601       10,601 
 Share premium                     18         208,925       208,925      218,926 
 Capital redemption reserve        19           1,899         1,899        1,899 
 Translation reserve                         (22,265)      (20,996)     (29,562) 
 Accumulated losses                          (62,786)      (57,898)     (53,422) 
-------------------------------  ------  ------------  ------------  ----------- 
 Shareholders' equity                         136,374       142,531      148,442 
 Non-controlling interests                      (937)           331        1,031 
-------------------------------  ------  ------------  ------------  ----------- 
 Total equity                                 135,437       142,862      149,473 
-------------------------------  ------  ------------  ------------  ----------- 
 

* See Note 28

The notes to the financial statements form an integral part of the financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS at 31 DECEMBER 2018 (cont'd)

 
                                   Notes   31 December   31 December    1 January 
                                                  2018          2017         2017 
                                               US$'000       US$'000      US$'000 
                                                           Restated*    Restated* 
-------------------------------  -------  ------------  ------------  ----------- 
 Non-current liabilities 
 Trade and other payable                        37,976        26,392       19,004 
 Loans and borrowings               21          13,188        54,572       46,405 
 Total non-current liabilities                  51,164        80,964       65,409 
-------------------------------  -------  ------------  ------------  ----------- 
  Current liabilities 
 Trade and other payables                       34,128        25,552       20,143 
 Amount due to non-controlling 
  interests                         20          13,194        13,400       12,573 
 Loans and borrowings               21          48,084        12,882       10,807 
 Medium term notes                  22          23,761        24,324       26,343 
 Current tax liabilities                         1,760         4,154        2,141 
-------------------------------  -------  ------------  ------------  ----------- 
 Total current liabilities                     120,927        80,312       72,007 
-------------------------------  -------  ------------  ------------  ----------- 
 Total liabilities                             172,091       161,276      137,416 
-------------------------------  -------  ------------  ------------  ----------- 
 TOTAL EQUITY AND LIABILITIES                  307,528       304,138      286,889 
-------------------------------  -------  ------------  ------------  ----------- 
 

* See Note 28

The notes to the financial statements form an integral part of the financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 december 2018

 
                                                                                                             Total 
                                                                                                            Equity 
                                                                                                      Attributable 
                                                                                                         to Equity 
                     Redeemable                               Capital                                      Holders           Non- 
                       Ordinary   Management      Share    Redemption    Translation    Accumulated         of the    Controlling                Total 
                         Shares       Shares    Premium       Reserve        Reserve         Losses         Parent      Interests               Equity 
   Consolidated         US$'000      US$'000    US$'000       US$'000        US$'000        US$'000        US$'000        US$'000              US$'000 
-----------------  ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 Balance at 1 
  January 2017           10,601           -*    218,926         1,899       (29,142)       (58,922)        143,362        (1,148)              142,214 
 Impact of change 
  in accounting 
  policy                      -            -          -             -          (420)          5,500          5,080          2,179                7,259 
-----------------  ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 Adjusted balance 
  at 1 January 
  2017                   10,601            -    218,926         1,899       (29,562)       (53,422)        148,442          1,031            149,473 
 Share buy back 
  (Note 18)                   -            -   (10,001)             -              -              -       (10,001)              -            (10,001) 
 Changes in 
  ownership 
  interests 
  in subsidiaries 
  (Note 23)                   -            -          -             -              -          (539)          (539)            539                    - 
 Non-controlling 
  interests 
  contribution                -            -          -             -              -              -              -            252                  252 
                   ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 Restated loss 
  for the year                -            -          -             -              -        (3,937)        (3,937)        (1,596)              (5,533) 
 Restated total 
  other 
  comprehensive 
  income for the 
  year                        -            -          -             -          8,566              -          8,566            105               8,671 
                   ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 Restated total 
  comprehensive 
  income/(loss) 
  for the year                -            -          -             -          8,566        (3,937)          4,629        (1,491)                3,138 
 Restated balance 
  at 31 December 
  2017/ 1 January 
  2018                   10,601            -    208,925         1,899       (20,996)       (57,898)        142,531            331             142,862 
 Changes in 
  ownership 
  interests 
  in subsidiaries 
  (Note 23)                   -            -          -             -              -            (3)            (3)              3                    - 
 Non-controlling 
  interests 
  contribution                -            -          -             -              -              -              -             63                   63 
                   ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 Loss for the 
  year                        -            -          -             -              -        (4,885)        (4,885)        (1,521)              (6,406) 
 Total other 
  comprehensive 
  loss for the 
  year                        -            -          -             -        (1,269)              -        (1,269)            187              (1,082) 
                   ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 Total 
  comprehensive 
  loss 
  for the year                -            -          -             -        (1,269)        (4,885)        (6,154)        (1,334)              (7,488) 
 Shareholders' 
  equity at 
  31 December 
  2018                   10,601           -*    208,925         1,899       (22,265)       (62,786)        136,374          (937)              135,437 
-----------------  ------------  -----------  ---------  ------------  -------------  -------------  -------------  -------------  ------------------- 
 

*represents 2 management shares at US$0.05 each

The notes to the financial statements form an integral part of the financial statements.

CONSOLIDATED Statement OF Cash FlowS

For the year ended 31 december 2018

 
                                                                    2018         2017 
                                                       Notes     US$'000      US$'000 
                                                                            Restated* 
 Cash Flows from Operating Activities 
 Net loss before taxation                                        (6,796)      (4,326) 
 Finance income                                                  (1,242)        (392) 
 Finance costs                                                     7,034       12,444 
 Unrealised foreign exchange loss/(gain)                           1,382      (2,973) 
 Write down/Impairment of goodwill                                    53        2,880 
 Depreciation of property, plant and equipment                        92           84 
 Operating profit before changes in working 
  capital                                                            523        7,717 
 Changes in working capital: 
 Increase in inventories                                        (22,243)      (2,847) 
 (Increase)/Decrease in trade and other receivables 
  and prepayments                                                  (987)       14,295 
 Increase/(Decrease) in trade and other payables                  20,768      (3,509) 
-------------------------------------------------------------  ---------  ----------- 
 Cash (used in)/from operations                                  (1,939)       15,656 
 Interest paid                                                   (7,034)     (12,444) 
 Tax paid                                                        (1,955)      (2,606) 
-------------------------------------------------------------  ---------  ----------- 
 Net cash (used in)/from operating activities                   (10,928)          606 
-------------------------------------------------------------  ---------  ----------- 
 Cash Flows from Investing Activities 
 Proceeds from disposal of available-for-sale 
  investments                                          (iii)           -          893 
 Purchase of property, plant and equipment                         (121)          (5) 
 Proceeds from disposal of an indirectly held 
  subsidiary                                                           -          800 
 Finance income received                                           1,242          392 
 Net cash from investing activities                                1,121        2,080 
-------------------------------------------------------------  ---------  ----------- 
 

* See Note 28

CONSOLIDATED Statement OF Cash FlowS

For the year ended 31 december 2018 (cont'd)

 
                                                              2018         2017 
                                                  Notes    US$'000      US$'000 
                                                                      Restated* 
 Cash Flows from Financing Activities 
 Advances from non-controlling interests                        82          327 
 Issuance of ordinary shares of subsidiaries 
  to non-controlling interests                    (ii)          63          252 
 Purchase of own share                                           -     (10,001) 
 Repayment of loans and borrowings                        (24,197)     (14,773) 
 Repayment of medium term notes                                  -      (4,615) 
 Drawdown of loans and borrowings                           20,308       25,038 
 Net decrease in pledged deposits for loans 
  and borrowings and Medium Term Notes                      13,623        7,923 
 Deposits subject to restriction in use           (iv)           -     (13,867) 
----------------------------------------------  -------  ---------  ----------- 
 Net cash from/(used in) financing activities                9,879      (9,716) 
-------------------------------------------------------  ---------  ----------- 
 Net changes in cash and cash equivalents 
  during the year                                               72      (7,030) 
 Effect of changes in exchange rates                           497        (315) 
 Cash and cash equivalents at the beginning 
  of the year                                                9,294       16,639 
 Cash and cash equivalents at the end of the 
  year                                            (i)        9,863        9,294 
----------------------------------------------  -------  ---------  ----------- 
 

* See Note 28

(i) Cash and Cash Equivalents

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following consolidated statement of financial position amounts:

 
                                                    31 December   31 December 
                                                           2018          2017 
                                                Notes   US$'000       US$'000 
-----------------------------------------  ----------  --------  ------------ 
 Cash and bank balances                                   9,372        10,343 
 Short term bank deposits                                 3,201        15,641 
-----------------------------------------      ----------------  ------------ 
                                                         12,573        25,984 
 Less Deposits subject to restriction in 
  use                                         (iv)            -      (13,867) 
 Less: Deposits pledged                        (v)      (2,710)          (2,823) 
-----------------------------------------  ----------  --------  --------------- 
 Cash and cash equivalents                                9,863         9,294 
-----------------------------------------  --------------------  ------------ 
 
 

(ii) During the financial year, US$63,000 (2017: US$252,000) of ordinary shares of subsidiaries were issued to non-controlling shareholders which was satisfied via cash consideration.

(iii) In the 2016, the Group disposed the entire balance representing 9,784,653 shares in Nam Long for a consideration of US$9,848,000 of which US$8,955,000 was received in 2016. The balance consideration of US$893,000 was received in previous financial year.

(iv) Included in short term bank deposits in 2017 is US$13,867,000 obtained from the term loan granted to City International Hospital Company Ltd ('CIH') by Vietbank during the year where the utilisation of this balance is restricted solely for the purpose of refinancing the existing syndicated term loan under CIH.

(v) Included in short term bank deposits and cash and bank balance is US$2,710,000 (2017: US$2,823,000) pledged for loans and borrowings and Medium Term Notes of the Group.

The notes to the financial statements form an integral part of the financial statements.

Notes to the Financial Statements

   1          General Information 

Aseana Properties Limited (the 'Company') was incorporated in Jersey as a limited liability par value company. The Company's registered office is 12 Castle Street, St Helier, Jersey JE2 3RT.

The consolidated financial statements comprise the financial information of the Company and its subsidiary undertakings (together the 'Group').

The principal activities of the Group are development of upscale residential and hospitality projects, sale of development land and operation of hotel, mall and hospital in Malaysia and Vietnam.

The financial statements are presented in US Dollar (US$), which is the Group's presentation currency. All financial information is presented in US$ and has been rounded to the nearest thousand (US$'000), unless otherwise stated.

   2          BASIS OF PREPARATION 

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by European Union ('EU'), and IFRIC interpretations issued, and effective, or issued and early adopted, at the date of these financial statements.

As permitted by Companies (Jersey) Law 1991 only the consolidated financial statements are presented.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group's business activities.

   2.1       Going concern 

The financial statements have been prepared on the historical cost basis and on the assumption that the Group are going concerns.

The Group has prepared and considered prospective financial information based on assumptions and events that may occur for at least 12 months from the date of approval of the financial statements and the possible actions to be taken by the Group. Prospective financial information includes the Group's profit and cash flow forecasts for the ongoing projects. In preparing the cash flow forecasts, the Directors have considered the availability of cash, adequacy of bank loans and medium term notes and also the refinancing of the medium term notes (as described in Notes 21 and 22) and the Directors believe that the business will be able to realise its assets and discharge its liabilities in the normal course of business for at least 12 months from the date of the approval of these financial statements.

At 31 December 2018, one of the Group's subsidiary undertakings had not complied with the Debt to Equity ratio covenant in respect of a loan of US$27.8million. In accordance with the term set out in the Facility Agreement, in the event of non-compliance of the financial covenant, the loan shall be immediately due and payable together with accrued interest thereon upon notification by the lenders. The group's subsidiary undertaking has requested a waiver from the lenders in respect of this non-compliance. At the date of approving these financial statements, one of the lenders has approved the waiver and approval from the other lender has not been received. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group and the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

The Directors expect to raise sufficient funds to finance the completion of the Group's existing projects and the necessary working capital via the disposal of its development lands in Vietnam and East Malaysia, its existing units of condominium inventories in West Malaysia, and through the disposals of the City International Hospital, the Four Points Sheraton Sandakan Hotel and the Harbour Mall Sandakan.

Should the planned disposals of the assets not materialise, or are delayed, the Directors expect to 'roll-over' the medium term notes which are due to expire in the next 12 months, given that the notes are 'AAA' rated and secured by two completed inventories of the Group with carrying amount of US$79.92 million as at 31 December 2018. Included in the terms of the medium term notes programme is an option for the Group to refinance the notes, as and when they expire. This option to refinance is available until 2021.

The Group also has significant borrowings in Vietnam secured by the City International Hospital and development lands. The Directors expect to repay the short term portion of the borrowings via sale of land in Vietnam. The remaining scheduled installments are due in 2019 and 2020.

The forecasts also incorporate current payables, committed expenditure and other future expected expenditure, along with sales of all completed inventories and disposal of all development lands.

   2.1.1    December 2019 Resolution 

When the Group was launched in 2007, the Board considered it desirable that Shareholders should have an opportunity to review the future of the Group at appropriate intervals.

At a general meeting of the Company held on 23 April 2018, Shareholders voted in favour of the Board's proposals to continue with the Group's divestment investment policy to enable a realisation of the Group's assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Group's investments. Shareholders also supported the Board's recommendation to vote against the Discontinuation Resolution proposed at the general meeting, in order to allow a policy of orderly realisation of the Group's assets over a period of up to eighteen months in order to maximise the value of the Group's assets and returns to Shareholders, both up to and upon the eventual liquidation of the Company.

To the extent that the Group has not disposed of all of its assets by 31 December 2019, Shareholders will be provided with an opportunity to review the future of the Group, which would include the option for shareholders to vote for the continuation of the Company. The Board shall procure that, at a general meeting of the Company, an ordinary resolution will be proposed to the effect that the Company shall cease to continue as presently constituted (the 'December 2019 Resolution'). If, at any such meeting, such resolution is passed, the Board shall within four months of such meeting, convene a general meeting of the Company at which a special resolution shall be proposed requiring the Company to be wound up voluntarily. In connection with, or at the same time as, the proposal that the Company be wound up voluntarily the Board shall be entitled to make proposals for the reconstruction of the Group.

It is necessary for the Board to determine if the Company and the Group should be continued as a going concern. The Board has therefore requested its two largest shareholders (holding collectively approximately 41% of the Company's shares) to state how they might vote in relation to the December 2019 Resolution.

While the two shareholders did not disclose how they might vote in relation to the December 2019 Resolution, the two shareholders have expressed their view that:

o The Group is already in a divestment mode and is not making new investments.

o Divestment of the Group's assets is best carried out by the Board itself in a solvent orderly manner and with the assistance of appropriately experienced professionals.

o If necessary, and should the Board decide that it does not have the necessary experience, the Board may bring in new people (including additional Directors) with the relevant experience.

o The shareholders may not have control over the appointment of the liquidator and the liquidator will be heavily influenced by the interest of the Group's creditors instead of its shareholders.

o At this stage, they see no circumstances where it is better to rely on the liquidator to divest the assets of the Group rather than the Board doing so itself in an orderly manner.

o Hence, should the December 2019 Resolution be passed, these shareholders expect the Board to come up with new ideas on the continuing divestment of the Group's assets.

o Until substantially all the Group's assets have been orderly disposed of and its proceeds returned to shareholders, they have expressed that they will not vote in favour of a voluntary winding up of the Company as doing so will be detrimental to the interests of the Company and its shareholders.

As a special resolution requires the approval of the Company's shareholders by a two-third majority, the Board believes that the possibility of the Company being put in voluntarily winding-up within the next twelve months to be remote. For this reason, the Company and the Group continue to adopt the going concern basis in preparing the financial statements.

In the event the continuation vote is not passed, the directors do not consider this will have a material impact on the carrying value and classification of the group's net assets as the discontinuance provides for an orderly realisation process.

   2.1.2    Statement of Compliance 

A number of new standards and amendments to standards and interpretations have been issued by International Accounting Standards Board but are not yet effective and in some cases have not yet been adopted by the EU. The Directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Group in future periods, except as mentioned below:

IFRS 16, Leases

IFRS 16 replaces, the guidance in IAS 17, Leases, IFRIC 4, Determining whether an Arrangement contains a Lease, SIC-15, Operating Leases Ð Incentives and SIC-27, Evaluating the Substance of Transactions Involving the Legal Form of Lease. IFRS 16 is likely to require the recognition of the material operating lease commitments on the Group's balance sheet as assets and the recognition of a corresponding liability. At 31 December 2018, the Group does not have any lease which is material and long term, Directors do not therefore anticipate the adoption of IFRS 16 will have any impact on the Group's consolidated financial statements.

During the year, the Group adopted the following new standards, amendments and interpretations with a date of initial application of 1 January 2018. As a result of the changes in the Group's accounting policies, prior year financial statements had to be restated. As explained in Note 28, the impact of these adopted standards is described as follow:

   (b)     IFRS 9, Financial instruments 

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. It simplifies the existing categories of financial instruments, introduces an expected credit loss model and redefines the criteria required for hedge effectiveness. The adoption of IFRS 9, there is no material impact on the Group's financial information for the year ended 31 December 2018 and its comparative.

   (c)     IFRS 15, Revenue from contracts with customers 

The Group adopted IFRS 15 Revenue from Contracts with Customers with a date of initial application of 1 January 2018. The Group applied IFRS 15 retrospectively and has restated comparatives financial information as disclosed in Note 28. The adjustments to revenue are made for property development activities of The RuMa Hotel Suites and Residences, where no revenue was previously recognised under IFRIC 15 Ð Agreements for Construction of Real Estate, which prescribes that revenue be recognised only when the properties are completed and occupancy permits are issued.

Under the new rule of IFRS 15, revenue from the development of The RuMa Hotel Suites and Residences is recognised as and when the control of the asset is transferred to the buyer and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the buyer. In light of the terms of the contract and the laws that apply to the contract, control of the asset is transferred over time as the Group's performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

In respect of the sale of The RuMa Hotel Suites, the Group entered into agreements with the buyer for a sale and leaseback of the hotel suites for hotel operation. Under this arrangement, the Group considered the buyer did not obtain any control of the hotel suite as the buyer has limited ability to direct the use of, and obtain substantially all of the remaining benefits from the asset, even though the buyer may have physical possession of the asset.

On that basis, the control of the hotel suites, under sale and leaseback arrangement, has yet to be transferred to the buyer and transfer of the asset is not a sale. Accordingly, no revenue from the sale of The RuMa Hotel Suites was recognised over the contract period.

   3          revenue AND SEGmeNTAL information 

The Group's operating revenue for the year was mainly attributable to the sale of completed units in Malaysia.

Income earned from hotel, mall and hospital operations are included in other income in line with management's intention to dispose of the properties.

   3.1       Revenue recognised during the year as follows: 
 
 
                                                         2018        2017 
                                                                  US$'000 
                                                      US$'000    Restated 
---------------------------------------------   ---  --------  ---------- 
 Sales of land held for property development                -      13,132 
 Sale of development properties                        27,650      14,450 
 Sale of completed units                                5,404       5,966 
                                                       33,054      33,548 
  -------------------------------------------------  --------  ---------- 
 
 
 Timing of revenue recognition 
 Properties transferred 
  at 
  a point in time                    5,404    19,098 
 Properties transferred 
  over time                         27,650    14,450 
---------------------------------  -------  -------- 
                                    33,054    33,548 
  -------------------------------  -------  -------- 
 
   3.2       Segmental Information 

The Group's assets and business activities are managed by Ireka Development Management Sdn. Bhd. ('IDM') as the Development Manager under a Management Agreement dated 27 March 2007.

Segmental information represents the level at which financial information is reported to the Executive Management of IDM, being the chief operating decision maker as defined in IFRS 8. The Executive Management consists of the Chief Executive Officer, the Chief Financial Officer, Chief Operating Officer and Chief Investment Officer of IDM. The management determines the operating segments based on reports reviewed and used by the Executive Management for strategic decision making and resource allocation. For management purposes, the Group is organised into project units.

The Group's reportable operating segments are as follows:

   (i)    Investment Holding Companies Ð investing activities; 
   (ii)    Ireka Land Sdn. Bhd. Ð develops Tiffani ('Tiffani') by i-ZEN; 

(iii) ICSD Ventures Sdn. Bhd. Ð owns and operates Harbour Mall Sandakan ('HMS') and Four Points by Sheraton Sandakan Hotel ('FPSS');

   (iv)   Amatir Resources Sdn. Bhd. Ð develops SENI Mont' Kiara ('SENI'); 
   (v)   Urban DNA Sdn. Bhd.Ð develops The RuMa Hotel and Residences ('The Ruma'); and 

(vi) Hoa Lam Shangri-La Healthcare Group Ð master developer of International Healthcare Park ('IHP'); owns and operates the City International Hospital ('CIH').

Other non-reportable segments comprise the Group's development projects. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2018 and 2017.

Information regarding the operations of each reportable segment is in Notes 3.3. The Executive Management monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on segment gross profit/(loss) and profit/(loss) before taxation, which the Executive Management believes are the most relevant in evaluating the results relative to other entities in the industry. Segment assets and liabilities are presented inclusive of inter-segment balances and inter-segment pricing is determined on an arm's length basis.

The Group's revenue generating development projects are in Malaysia and Vietnam.

   3.3         Analysis of the group's reportable operating segments are as follows:- 

Operating Segments Ð ended 31 December 2018

 
                   Investment        Ireka        ICSD       Amatir     The RuMa        Urban      Hoa Lam       Total 
                      Holding    Land Sdn.    Ventures    Resources     Hotel KL          DNA   Shangri-La 
                    Companies         Bhd.        Sdn.    Sdn. Bhd.    Sdn. Bhd.    Sdn. Bhd.   Healthcare 
                                                  Bhd.                                               Group 
                      US$'000      US$'000     US$'000      US$'000      US$'000      US$'000      US$'000     US$'000 
---------------  ------------  -----------  ----------  -----------  -----------  -----------  -----------  ---------- 
 Segment 
  (loss)/profit 
  before 
  taxation            (2,475)         (32)     (1,339)          820      (4,199)        6,118      (4,107)     (5,214) 
---------------  ------------  -----------  ----------  -----------  -----------  -----------  -----------  ---------- 
 Included in 
 the measure 
 of segment 
 (loss)/profit 
 are: 
 Revenue                    -            -           -        5,404            -       27,650            -      33,054 
 Other income 
  from hotel 
  operations                -            -       3,727            -          109            -            -       3,836 
 Other income 
  from mall 
  operations                -            -       1,767            -            -            -            -       1,767 
 Other income 
  from hospital 
  operations                -            -           -            -            -            -       12,695      12,695 
 Disposal of 
  intangible 
  assets                    -            -           -         (53)            -            -            -        (53) 
 Marketing 
  expenses                  -            -           -            -            -        (671)            -       (671) 
 Expenses from 
  hotel 
  operations                -            -     (4,169)            -        (593)            -            -     (4,762) 
 Expenses from 
  mall 
  operations                -            -     (1,395)            -            -            -            -     (1,395) 
 Expenses from 
  hospital 
  operations                -            -           -            -            -            -     (12,989)    (12,989) 
 Depreciation 
  of property, 
  plant and 
  equipment                 -            -           -            -         (14)            -         (78)        (92) 
 Finance costs              -            -     (1,494)        (135)            -        (156)      (5,249)     (7,034) 
 Finance income             -            1          80          158            -           18          985       1,242 
---------------  ------------  -----------  ----------  -----------  -----------  -----------  -----------  ---------- 
 Segment assets           275          501      82,219       16,987          737      104,498       88,531     293,748 
---------------  ------------  -----------  ----------  -----------  -----------  -----------  -----------  ---------- 
 Segment 
  liabilities             450          182       2,400        9,513          659       23,240       64,793     101,237 
---------------  ------------  -----------  ----------  -----------  -----------  -----------  -----------  ---------- 
 
 

Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items

 
 Profit or loss                         US$'000 
------------------------------------  --------- 
 Total loss for reportable segments     (5,214) 
 Other non-reportable segments          (1,582) 
 
 Consolidated loss before taxation      (6,796) 
------------------------------------  --------- 
 
   3.3         Analysis of the group's reportable operating segments are as follows:- 

Operating Segments Ð ended 31 December 2017

 
                       Investment         Ireka    ICSD Ventures        Amatir         Urban       Hoa Lam       Total 
                          Holding     Land Sdn.        Sdn. Bhd.     Resources           DNA    Shangri-La 
                        Companies          Bhd.                      Sdn. Bhd.     Sdn. Bhd.    Healthcare 
                                                                                                     Group 
 (Restated)               US$'000       US$'000          US$'000       US$'000       US$'000       US$'000     US$'000 
-------------------  ------------  ------------  ---------------  ------------  ------------  ------------  ---------- 
 Segment 
  profit/(loss) 
  before 
  taxation                  1,077         (432)          (1,554)           193         (728)       (2,852)     (4,296) 
-------------------  ------------  ------------  ---------------  ------------  ------------  ------------  ---------- 
 Included in the 
 measure 
 of segment 
 profit/(loss) 
 are: 
 Revenue                        -           935                -         5,031        14,450        13,132      33,548 
 Other income from 
  hotel 
  operations                    -             -            3,842             -             -             -       3,842 
 Other income from 
  mall 
  operations                    -             -            1,440             -             -             -       1,440 
 Other income from 
  hospital 
  operations                    -             -                -             -             -         8,234       8,234 
 Disposal of 
  intangible 
  assets                        -             -                -          (53)             -       (2,827)     (2,880) 
 Marketing expenses             -             -                -           (8)         (488)             -       (496) 
 Expenses from 
  hotel operations              -             -          (3,939)             -             -             -     (3,939) 
 Expenses from mall 
  operations                    -             -          (1,488)             -             -             -     (1,488) 
 Expenses from 
  hospital 
  operations                    -             -                -             -             -      (10,491)    (10,491) 
 Depreciation of 
  property, 
  plant and 
  equipment                     -             -                -             -             -          (84)        (84) 
 Finance costs                  -             -          (1,713)             -       (6,700)       (4,031)    (12,444) 
 Finance income                 6             2              236            12            23           113         392 
-------------------  ------------  ------------  ---------------  ------------  ------------  ------------  ---------- 
 Segment assets               735           523           83,525        15,438        84,825       104,829     289,875 
-------------------  ------------  ------------  ---------------  ------------  ------------  ------------  ---------- 
 Segment 
  liabilities                 166            88            2,480         3,374        44,998        77,244     128,350 
-------------------  ------------  ------------  ---------------  ------------  ------------  ------------  ---------- 
 
 

*

 
 
 

Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items

 
 Profit or loss                        US$'000 
------------------------------------  -------- 
 Total loss for reportable segments    (4,296) 
 Other non-reportable segments            (30) 
 
 Consolidated loss before taxation     (4,326) 
------------------------------------  -------- 
 
 
  2018                                                                                                     Additions 
   US$'000                                                                                                     to 
                                                              Finance         Segment        Segment      non-current 
                   Revenue   Depreciation   Finance costs      income         assets       liabilities       assets 
----------------  --------  -------------  --------------  -------------  --------------  -------------  ------------- 
 Total 
  reportable 
  segment           33,054           (92)         (7,034)          1,242         293,748        101,237              - 
 Other 
  non-reportable 
  segments               -              -               -              -          13,780         70,854            121 
----------------  --------  -------------  --------------  -------------  --------------  -------------  ------------- 
 Consolidated 
  total             33,054           (92)         (7,034)          1,242         307,528        172,091            121 
----------------  --------  -------------  --------------  -------------  --------------  -------------  ------------- 
  2017                                                                                                     Additions 
  (Restated)                                                                                                   to 
  US$'000                                                     Finance         Segment        Segment      non-current 
                   Revenue   Depreciation   Finance costs      income         assets       liabilities       assets 
----------------  --------  -------------  --------------  -------------  --------------  -------------  ------------- 
 Total 
  reportable 
  segment           33,548           (84)        (12,444)            392         289,875        128,350              - 
 Other 
  non-reportable 
  segments               -              -               -              -          14,263         32,926              5 
----------------  --------  -------------  --------------  -------------  --------------  -------------  ------------- 
 Consolidated 
  total             33,548           (84)        (12,444)            392         304,138        161,276              5 
----------------  --------  -------------  --------------  -------------  --------------  -------------  ------------- 
 

Geographical Information Ð ended 31 December 2018

 
                       Malaysia   Vietnam   Consolidated 
                        US$'000   US$'000        US$'000 
--------------------  ---------  --------  ------------- 
 Revenue                 33,054         -         33,054 
 Non-current assets       5,925     4,087         10,012 
--------------------  ---------  --------  ------------- 
 

In the financial year ended 31 December 2018, no single customer exceeded 10% of the Group's total revenue.

Geographical Information Ð ended 31 December 2017 (Restated)

 
                       Malaysia   Vietnam   Consolidated 
                        US$'000   US$'000        US$'000 
--------------------  ---------  --------  ------------- 
 Revenue                 20,416    13,132         33,548 
 Non-current assets       5,744     4,178          9,922 
--------------------  ---------  --------  ------------- 
 

Included in the revenue of the Group for the financial year ended 31 December 2017 is revenue from the sale of two plots of land (Lot D2 and D3) at the International Healthcare Park ('IHP').

For the year ended 31 December 2017, two customers exceeded 10% of the Group's total revenue as follows:

 
                                    US$'000             Segments 
---------------------------------  --------  ------------------- 
 Tien Phat Consultancy Investment             Hoa Lam Shangri-La 
  Co. Ltd                             5,399     Healthcare Group 
                                              Hoa Lam Shangri-La 
 Tri Hanh Consultancy Co. Ltd         7,733     Healthcare Group 
---------------------------------  --------  ------------------- 
 
   4          SEASONALITY 

The Group's business operations are not materially affected by seasonal factors for the period under review.

   5          Cost of Sales 
 
                                                   2018        2017 
                                                US$'000     US$'000 
                                                           Restated 
 Direct costs attributable to: 
 Completed units (Note 16)                       24,548      12,277 
 Sales of land held for property development 
  (Note 16)                                           -       5,291 
 Disposal/Impairment of intangible assets 
  (Note 14)                                          53       2,880 
                                                 24,601      20,448 
---------------------------------------------  --------  ---------- 
 

Included in the cost of sales of the Group for the last financial year is sale of two plots of land (Lot D2 and D3).

   6         Other Income 
 
                                                 2018       2017 
                                              US$'000    US$'000 
 
 Rental income                                    236        260 
 Other income from hotel operations (a)         3,836      3,842 
 Other income from mall operations (b)          1,767      1,440 
 Other income from hospital operations (c)     12,695      8,234 
 Sundry income                                    615        400 
                                               19,149     14,176 
-------------------------------------------  --------  --------- 
 
    (a)       Other income from hotel operations 

The income in 2018 and 2017 relates to the hotel operations of FPSS which is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd.. The income earned from hotel operations is included in other income in line with management's intention to dispose of the hotel.

   (b)        Other income from mall operations 

The income relates to the operation of HMS which is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd.. The income earned from mall operations is included in other income in line with management's intention to dispose of the mall.

   (c)        Other income from hospital operations 

The income relates to the operation of CIH which is owned by a subsidiary of the Company, City International Hospital Company Limited. The income earned from hospital operations is included in other income in line with management's intention to dispose of the hospital.

   7          Foreign exchange (LOSS)/GAIN 
 
                                               2018      2017 
                                            US$'000   US$'000 
-----------------------------------------  --------  -------- 
 Foreign exchange (loss)/gain comprises: 
 Realised foreign exchange gain                  29       446 
 Unrealised foreign exchange (loss)/gain    (1,382)     2,973 
-----------------------------------------  --------  -------- 
                                            (1,353)     3,419 
-----------------------------------------  --------  -------- 
 
 
   8          Management Fees 
 
                        2018      2017 
                     US$'000   US$'000 
------------------  --------  -------- 
  Management fees      1,460     3,129 
------------------  --------  -------- 
 

From January 2017 to April 2018, the management fees payable to the Development Manager are based on 2% per annum of the Group's net asset value calculated on the last business day of June and December of each calendar year and payable quarterly in advance. The Development Manager is entitled to a performance fee calculated at 20% of the out performance net asset value over a total compounded return hurdle rate of 10% per annum. No performance fee has been paid or accrued during the year.

From 1 May 2018, the management fees payable to the Manager equal to US$75,000 per month, payable in advance, in respect of the period to 30 April 2019, following which the base fee payable to the Manager shall reduce to US$50,000 per month, again payable in advance; The management fees were allocated to the subsidiaries and the Company based on where the service was provided.

On 22 March 2019, the Company announced that Ireka Development Management Sdn. Bhd. ('IDM'), the current Development Manager for the Company, had on 21 March 2019, submitted a notice to terminate its appointment under the Management Agreement. IDM is a wholly-owned subsidiary of Ireka Corporation Berhad which holds 23.07% of ASPL's issued share capital. Unless otherwise agreed, IDM's resignation is subject to a three-month notice period which will enable the orderly transition of operations currently carried out by IDM to the Company itself or to third parties. Following the termination, IDM has indicated that it is be prepared to work with the Board to facilitate a smooth and orderly transition of the operations of the Company.

   9          Finance (Costs)/ INCOME 
 
                                     2018        2017 
                                  US$'000     US$'000 
                                             Restated 
 Interest income from banks         1,242         392 
 Agency fees                         (59)        (34) 
 Interest on bank loans           (5,540)    (10,731) 
 Interest on medium term notes    (1,435)     (1,679) 
-------------------------------  --------  ---------- 
                                  (5,792)    (12,052) 
-------------------------------  --------  ---------- 
 
   10        net Loss BEFORE TAXATION 
 
                                                              2018       2017 
                                                           US$'000    US$'000 
 -------------------------------------------------------  --------  --------- 
  Net loss before taxation is stated after charging/(crediting): 
 
    Auditor's remuneration                                     190        202 
      Directors' fees/emoluments                               145        235 
     Depreciation of property, plant and equipment              92         84 
      Expenses of hotel operations                           4,763      3,939 
      Expenses of mall operations                            1,395      1,488 
      Expenses of hospital operations                       12,989     10,491 
      Unrealised foreign exchange loss/(gain)                1,382    (2,973) 
      Realised foreign exchange gain                          (29)      (446) 
      Disposal/impairment of intangible assets                  53      2,880 
      Loss on disposal of an indirectly held subsidiary          -      1,298 
      Tax services                                              11         13 
 
 
 
   11        TAXATION 
 
                                                                   2018                2017 
                                                                                    US$'000 
                                                                US$'000            Restated 
 Current taxÐ Current year                                   2,275               4,215 
                  Ð Prior year                             (2,422)                 104 
 
 Deferred tax creditÐ Current year                           (243)             (3,628) 
                              Ð Prior year                       -                 516 
------------------------------------------------  ---------------------  ------------------ 
 Total tax (income)/expense for the 
  year                                                            (390)               1,207 
------------------------------------------------  ---------------------  ------------------ 
 

The numerical reconciliation between the income tax (income)/expense and the product of accounting results multiplied by the applicable tax rate is computed as follows:

 
                                                         2018       2017 
                                                      US$'000    US$'000 
                                                                Restated 
---------------------------------------------------  --------  --------- 
 Net loss before taxation                             (6,796)    (4,326) 
 Income tax at a rate of 24% (2017:24%)               (1,631)    (1,038) 
 Add : 
 Tax effect of expenses not deductible in 
  determining taxable profit                            4,137      2,794 
 Current year losses and other tax benefits 
  for which no deferred tax asset was recognised        1,927      1,140 
 Tax effect of different tax rates in subsidiaries        948        708 
 Less : 
 Tax effect of income not taxable in determining 
  taxable profit                                      (3,348)    (3,017) 
 (Over)/Under provision in respect of prior 
  years                                               (2,423)        620 
---------------------------------------------------  --------  --------- 
 Total tax (income)/expense for the year                (390)      1,207 
---------------------------------------------------  --------  --------- 
 

The applicable corporate tax rate in Malaysia is 24% (2017: 24%).

The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0%.

The applicable corporate tax rates in Singapore and Vietnam are 17% and 20% (2017: 17% and 20%) respectively.

A subsidiary of the Group, CIH is granted preferential corporate tax rate of 10% for the results of the hospital operations. The preferential income tax is given by the government of Vietnam due to the subsidiary's involvement in the healthcare industry.

A Goods and Services Tax was introduced in Jersey in May 2008. The Company has been registered as an International Services Entity so it does not have to charge or pay local GST. The cost for this registration is GBP200 per annum.

   12        OTHER COMPRENHENSIVE (LOSS)/income 
 
 Items that are or may be reclassified                  2018       2017 
  subsequently to profit or loss, net of             US$'000    US$'000 
  tax 
-------------------------------------------------  ---------  --------- 
 Foreign currency translation differences 
  for foreign operations 
 (Losses)/Gains arising during the year              (1,082)      9,752 
 Reclassification to profit or loss on 
  disposal of land held for property development           -         61 
 Reclassification to profit or loss on 
  disposal of an indirectly held subsidiary                -    (1,142) 
                                                     (1,082)      8,671 
-------------------------------------------------  ---------  --------- 
 
   13        LOSS Per Share 

Basic and diluted loss per ordinary share

The calculation of basic and diluted loss per ordinary share for the year ended 31 December 2018 was based on the loss attributable to equity holders of the parent and a weighted average number of ordinary shares outstanding, calculated as below:

 
                                                    2018           2017 
                                                               Restated 
-----------------------------------------  -------------  ------------- 
  Loss attributable to equity holders of 
   the parent (US$000)                           (4,885)        (3,937) 
 Weighted average number of shares           198,691,000    199,019,784 
 Loss per share 
  Basic and diluted (US cents)                    (2.46)         (1.98) 
-----------------------------------------  -------------  ------------- 
 

Weighted average number of ordinary shares

 
                                                       2018           2017 
--------------------------------------------  -------------  ------------- 
 Issued ordinary shares at 1 January            198,691,002    212,025,002 
 Effect of share buy back (Note 18)                       -   (13,005,218) 
                                              -------------  ------------- 
 Weighted average number of ordinary shares 
  at 
  31 December                                   198,691,002    199,019,784 
                                              -------------  ------------- 
 

The diluted loss per share was not applicable as there were no dilutive potential ordinary shares outstanding at the end of the reporting period.

   14        Intangible Assets 
 
                                    Licence Contracts 
                                          and Related 
                                        Relationships   Goodwill     Total 
                                              US$'000    US$'000   US$'000 
---------------------------------  ------------------  ---------  -------- 
 Cost 
 At 1 January 2017/ 31 December 
  2017 / 31 December 2018                      10,695      6,479    17,174 
---------------------------------  ------------------  ---------  -------- 
 
 Accumulated impairment 
 At 1 January 2017                              4,349      5,744    10,093 
 Disposals                                      2,827         53     2,880 
---------------------------------  ------------------  ---------  -------- 
 At 31 December 2017 / 1 January 
  2018                                          7,176      5,797    12,973 
 Disposals                                          -         53        53 
---------------------------------  ------------------  ---------  -------- 
 At 31 December 2018                            7,176      5,850    13,026 
---------------------------------  ------------------  ---------  -------- 
 Carrying amounts 
 At 31 December 2017                            3,519        682     4,201 
---------------------------------  ------------------  ---------  -------- 
 At 31 December 2018                            3,519        629     4,148 
---------------------------------  ------------------  ---------  -------- 
 

The licence contracts and related relationships represent the Land Use Rights ('LUR') for the Group's lands in Vietnam. LUR represents the rights to develop the IHP within a lease period ending on 9 July 2077. In 2017, the Group disposed of its undeveloped land in the IHP Lot D2 and D3 to third party purchasers.

For the purpose of impairment testing, goodwill and licence contracts and related relationships are allocated to the Group's operating divisions which represent the lowest level within the Group at which the goodwill and licence contracts and related relationships are monitored for internal management purposes.

The aggregate carrying amounts of intangible assets allocated to each unit are as follows:

 
                                                          31 December   31 December 
                                                                 2018          2017 
                                                              US$'000       US$'000 
----------------------------------------------  -------  ------------  ------------ 
 Licence contracts and related relationships 
 International Healthcare Park                                  3,519         3,519 
----------------------------------------------  -------  ------------  ------------ 
 
 Goodwill 
 SENI Mont' Kiara                                                  79             132 
 Sandakan Harbour Square                                          550             550 
---------------------------------------------------  ----------------  -------------- 
                                                                  629             682 
 ----                                                ----------------  -------------- 
 
 

The recoverable amount of licence contracts and related relationships has been tested based on the net realisable value of the LUR owned by the subsidiaries. The key assumption used is the expected market value of the LUR. The Group believes that any reasonably possible changes in the above key assumptions applied is not likely to materially cause the recoverable amount to be lower than its carrying amounts.

The recoverable amount of goodwill has been tested by reference to underlying profitability of the ongoing operations of the developments using discounted cash flow projections (refer to Note 16).

Intangible assets of US$53,000 (31 December 2017: US$53,000) and US$Nil (31 December 2017: US$2,827,000) in relation to SENI and IHP projects respectively were written down as certain components from the developments were sold during the year.

   15        Deferred Tax Assets 
 
                                  31 December   31 December   1 January 
                                         2018          2017        2017 
                                      US$'000       US$'000     US$'000 
                                                   Restated    Restated 
-------------------------------  ------------  ------------  ---------- 
 At 1 January                           5,058         1,606       1,337 
 Exchange adjustments                   (114)           352        (84) 
 Deferred tax credit relating 
  to origination of 
  temporary differences during 
  the year                                242         3,100         353 
 At 31 December                         5,186         5,058       1,606 
-------------------------------  ------------  ------------  ---------- 
 

The deferred tax assets comprise:

 
                                    31 December   31 December   1 January 
                                           2018          2017        2017 
                                        US$'000       US$'000     US$'000 
                                                     Restated    Restated 
---------------------------------  ------------  ------------  ---------- 
 Taxable temporary differences 
  between accounting profit 
  and taxable profit of property 
  development units sold                  5,186         5,058       1,606 
 At 31 December                           5,186         5,058       1,606 
---------------------------------  ------------  ------------  ---------- 
 

Deferred tax assets have not been recognised in respect of unused tax losses of US$79,450,000 (31 December 2017: US$71,935,000; 1 January 2017: US$65,440,000) and other tax benefits which includes temporary differences between net carrying amount and tax written down value of property, plant and equipment, accrual of construction costs and other deductible temporary differences of US$5,410,000 (31 December 2017: US$4,834,000; 1 January 2017: US$4,460,000) which are available for offset against future taxable profits. Deferred tax assets have not been recognised due to the uncertainty of the recovery of the losses.

   16        INVENTORIES 
 
                                       31 December   31 December   1 January 
                                              2018          2017        2017 
                              Notes        US$'000       US$'000     US$'000 
                                                        Restated    Restated 
---------------------------  -------  ------------  ------------  ---------- 
 Land held for property 
  development                  (a)          18,674        19,021      22,514 
 Work-in-progress              (b)               -        66,744      52,669 
 Stock of completed units, 
  at cost                      (c)         247,937       163,880     159,334 
 Consumables                                   549           528         403 
 At 31 December                            267,160       250,173     234,920 
------------------------------------  ------------  ------------  ---------- 
 
 
 Carrying amount of inventories 
  pledged as 
  security for Loans and borrowings 
  and 
  Medium Term Notes                    154,168    156,857   148,427 
                                      --------  ---------  -------- 
 

(a) Land held for property development

 
                                        31 December   31 December   1 January 
                                               2018          2017        2017 
                                            US$'000       US$'000     US$'000 
                                                         Restated    Restated 
   At 1 January                              19,021        22,514      23,223 
  Add : 
   Exchange adjustments                       (418)           925       (604) 
   Additions                                     71           873          86 
   At 31 December                            18,674        24,312      22,705 
 ------------------------------------  ------------  ------------  ---------- 
   Less: Costs recognised 
    as expenses in the consolidated 
    statement of comprehensive 
    income during the year 
    (Note 5)                                      -       (5,291)       (191) 
 ------------------------------------  ------------  ------------  ---------- 
   At 31 December                            18,674        19,021      22,514 
 ------------------------------------  ------------  ------------  ---------- 
 
 
 

(b) Work-in-progress

 
                                   31 December   31 December   1 January 
                                          2018          2017        2017 
                                       US$'000       US$'000     US$'000 
                                                    Restated    Restated 
--------------------------------  ------------  ------------  ---------- 
 At 1 January                           66,744        52,669      53,812 
 Transfer to stock of completed 
  units                               (71,683)             -           - 
 Add : 
  Exchange adjustments                 (1,432)         6,809     (3,967) 
  Work-in-progress incurred 
   during the year                       6,371         7,266       2,824 
 At 31 December                         71,683        66,744      52,669 
--------------------------------  ------------  ------------  ---------- 
 

Included in previous financial year are the borrowing costs capitalised at interest rate ranging from 5.50% to 10.00% per annum of US$0.2 million.

(c) Stock of completed units, at cost

 
                                   31 December   31 December   1 January 
                                          2018          2017        2017 
                                       US$'000       US$'000     US$'000 
                                                    Restated    Restated 
--------------------------------  ------------  ------------  ---------- 
 At 1 January                          163,880       159,334     230,436 
 Transfer from work-in-progress         71,683             -             - 
 Less : 
 Exchange adjustments                   36,922        16,823       6,102 
 Costs recognised as expenses 
  in the consolidated statement 
  of comprehensive income 
  during the year (Note 
  5)                                  (24,548)      (12,277)    (74,796) 
 Impairment of inventory                     -             -     (2,408) 
 At 31 December                        247,937       163,880     159,334 
--------------------------------  ------------  ------------  ---------- 
 
 

The net realisable value of completed units have been tested by reference to underlying profitability of the ongoing operations of the developments using discounted cash flow projections and/or comparison method with the similar properties within the local market which provides an approximation of the estimated selling price that is expected to be achieved in the ordinary course of business.

Included in the stock of completed units are SENI units as well as the following completed units:

Four Points by Sheraton Sandakan Hotel ('FPSS')

The recoverable amount of FPSS was determined based on a valuation by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount US$41,243,000 of FPSS was determined to approximate with its carrying amount.

The valuation of FPSS was determined by discounting the future cash flows expected to be generated from the continuing operations of FPSS and was based on the following key assumptions:

(1) Cash flows were projected based on past experience, actual operating results in 2018 and the 10 years projection of FPSS;

(2) The occupancy rate of FPSS will improve to 73% in 2027 which is when the hotel's operations are expected to stabilise;

(3) Average daily rates of the hotel will improve to US$102 in 2027 which is when the hotel's operations are expected to stabilise;

(4) Projected gross margin reflects the average historical gross margin, adjusted for projected market and economic conditions and internal resources efficiency; and

(5) Pre-tax discount rate of 9% was applied in discounting the cash flows. The discount rates takes into the prevailing trend of the hotel industry in Malaysia.

Sensitivity analysis

The above estimates are sensitive in the following key areas:

(a) an increase/(decrease) of 1% in discount rate used would have (decreased)/increased the recoverable amount by approximately (US$5,077,000)/US$6,286,000;

(b) an increase/(decrease) of 1% in occupancy rate throughout the entire projection term used would have increased/(decreased) the recoverable amount by approximately US$967,000/(US$1,209,000); and

(c) an increase/(decrease) of 5% in average daily rates throughout the entire projection term used would have increased/(decreased) the recoverable amount by approximately US$3,385,000/(US$3,627,000).

Harbour Mall Sandakan ('HMS')

The recoverable amount of HMS was determined based on a valuation by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount US$42,795,000 of HMS was determined to approximate with its carrying value.

The valuation of HMS was determined by the capitalisation of net income expected to be generated from the continuing operations of HMS ('investment approach') when the mall operates at an optimum occupancy rate and was based on the following key assumptions:

(1) Occupancy rate will improve to an optimum level of 95% ;

(2) Outgoing rate projected at 43.8% against gross annual income;

(3) Capitalisation rate assumed at 4%; and

(4) Capitalisation period of 83 years covering the period of HMS achieving optimum operations to expiration of the title term.

Sensitivity analysis

The above estimates are sensitive in the following key areas:

(a) an increase/(decrease) of 0.25% in capitalisation rate used would have (decreased)/increased the recoverable amount by approximately (US$2,176,000)/US$2,418,000;

(b) an increase/(decrease) of 1% in optimum occupancy rate throughout the entire projection term used would have increased/(decreased) the recoverable amount by approximately US$484,000/(US$484,000); and

(c) an increase/(decrease) of 5% in average rental rate throughout the entire projection term used would have increased/(decreased) the recoverable amount by approximately US$1,693,000/(US$1,934,000).

City International Hospital ('CIH')

The recoverable amount US$75,000,000 (2017: US$75,200,000) of CIH was determined based on a valuation by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount of CIH was determined to be higher than its carrying amount.

The valuation of CIH was adopted from the results of discounted cash flow approach as calculated by discounting the future cash flows expected to be generated from the continuing operations of CIH. The followings are the key assumptions:

(1) Cash flows were projected based on past actual operating results from 2015 to 2018 and references to the 5 years budget of CIH, as adjusted by the valuer;

(2) Projected revenue growth reflects the increase in average historical growth figures, adjusted for projected market and economic conditions and internal resources efficiency. Revenue is projected to grow at a compound annual growth rate of 8% from 2019 to 2023;

(3) Pre-tax discount rate of 12% was applied in discounting the cash flows. The discount rates take into the prevailing market condition of the hospital industry in Vietnam, development time frame and scale of the property; and

(4) Terminal yield rate of 10% was applied to reflect the uncertainty and risk associated with remaining lease term of the asset.

The RuMa Hotel and Residences ('The RuMa')

The recoverable amount of The RuMa was determined based on a valuation by an external, independent valuer with appropriate recognised professional qualification. The recoverable amount US$127,430,000 of The RuMa was determined to be higher than its carrying amount and no impairment losses in relation to the inventory amount was recognised.

The valuation of The RuMa Hotel was determined by discounting the future cash flows expected to be generated from the continuing operations of The RuMa and was based on the following key assumptions:

(1) Cash flows were projected based on the 10 years projection of The RuMa Hotel;

(2) The occupancy rate of The RuMa Hotel will improve to 78% in 2025 which is when the hotel's operations are expected to stabilise;

(3) Average daily rates of the hotel will improve to US$227 in 2025 which is when the hotel's operations are expected to stabilise;

(4) Projected gross margin reflects the industry average historical gross margin, adjusted for projected market and economic conditions and internal resources efficiency; and

(5) Pre-tax discount rate of 9% was applied in discounting the cash flows. The discount rate takes into the prevailing trend of the hotel industry in Malaysia.

The valuation of The RuMa Residences was determined based on the Comparison Approach as the sole method of valuation.

   17        Share Capital 
 
                                   Number                  Number 
                                  of shares    Amount     of shares    Amount 
                                    2018        2018        2017        2017 
                                    '000       US$'000      '000       US$'000 
------------------------------  -----------  ---------  -----------  --------- 
 Authorised Share Capital 
 Ordinary shares of US$0.05 
  each                            2,000,000    100,000    2,000,000    100,000 
 Management shares of US$0.05           - *                     - * 
  each                                             - *                     - * 
------------------------------  -----------  ---------  -----------  --------- 
                                  2,000,000    100,000    2,000,000    100,000 
------------------------------  -----------  ---------  -----------  --------- 
 
 
 
 Issued Share Capital 
 Ordinary shares of US$0.05 
  each                           212,025   10,601   212,025   10,601 
 Management shares of US$0.05        - #                - # 
  each                                        - #                - # 
------------------------------  --------  -------  --------  ------- 
                                 212,025   10,601   212,025   10,601 
------------------------------  --------  -------  --------  ------- 
 

*represents 10 management shares at US$0.05 each

# represents 2 management shares at US$0.05 each

In 2015, the shareholders of the Company approved the creation and issuance of management shares by the Company as well as a compulsory redemption mechanism that was proposed by the Board.

The Company increased its authorised share capital from US$100,000,000 to US$100,000,000.50 by the creation of 10 management shares of US$0.05 each for cash.

The Company also increased its issued and paid-up share capital from US$10,601,250 to US$10,601,250.10 by way of an allotment of 2 new management shares of US$0.05 each at par via cash consideration.

In accordance with the compulsory redemption scheme, the Company's ordinary shares were converted into redeemable ordinary shares.

The ordinary shares and the management shares shall have attached thereto the rights and privileges, and shall be subjected to the limitations and restrictions, as are set out below:

(a) Distribution of dividend:

(i) The ordinary shares carry the right to receive all the profits of the Company available for distribution by way of interim or final dividend at such times as the Directors may determine from time to time; and

(ii) The management shares carry no right to receive dividends out of any profits of the Company.

(b) Winding-up or return of capital:

(i) The holders of the management shares shall be paid an amount equal to the paid-up capital on such management shares; and

(ii) Subsequent to the payment to holders of the management shares, the holders of the ordinary shares shall be repaid the surplus assets of the Company available for distribution.

(c) Voting rights:

(i) The holders of the ordinary shares and management shares shall have the right to receive notice of and to attend and vote at general meetings of the Company; and

(ii) Each holder of ordinary shares and management shares being present in person or by a duly authorised representative (if a corporation) at a meeting shall upon a show of hands have one vote and upon a poll each such holder present in person or by proxy or by a duly authorised representative (if a corporation) shall have one vote in respect of every full paid share held by him.

   18        Share Premium 

Share premium represents the excess of proceeds raised on the issuance of shares over the nominal value of those shares. The costs incurred in issuing shares were deducted from the share premium.

 
                       31 December   31 December 
                              2018          2017 
                           US$'000       US$'000 
-------------------   ------------  ------------ 
 At 1 January              208,926       218,926 
 Treasury shares                 -      (10,001) 
 As at 31 December         208,926       208,926 
--------------------  ------------  ------------ 
 

In previous financial year, the Shareholders of the Company at an Extraordinary General Meeting approved a proposal to return US$10,000,500 or US$0.75 per share for 13,334,000 shares representing 6.29 per cent of the Company's share capital to Shareholders. The capital distribution was completed on 10 January 2017 and the repurchased shares of 13,334,000 are currently held as Treasury Shares. The issued and paid up share capital of the Company remains unchanged at 212,025,002.

   19        CAPITAL REDEMPTION RESERVE 

The capital redemption reserve was incurred after the Company cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per share in 2009 and 2013 respectively.

   20        AMOUNT DUE TO NON-CONTROLLING INTERESTS 
 
                                                              31 December   31 December 
                                                                     2018          2017 
                                                                  US$'000       US$'000 
-----------------------------------------------------------  ------------  ------------ 
 
 Minority Shareholder of Bumiraya Impian 
  Sdn. Bhd.: 
 
   *    Global Evergroup Sdn. Bhd.                                  1,199         1,225 
 
 Minority Shareholders of Hoa Lam Services 
  Co Ltd: 
 
   *    Tran Thi Lam                                                1,718         1,756 
 
   *    Tri Hanh Consultancy Co Ltd                                 3,869         3,954 
 
   *    Hoa Lam Development Investment Joint Stock Company          2,586         2,560 
 
   *    Duong Ngoc Hoa                                                222           227 
 
 Minority Shareholder of The RuMa Hotel 
  KL Sdn. Bhd.: 
 
   *    Ireka Corporation Berhad                                        2             2 
 
 Minority Shareholder of Urban DNA Sdn. 
  Bhd.: 
 
   *    Ireka Corporation Berhad                                    3,598         3,676 
                                                                   13,194        13,400 
-----------------------------------------------------------  ------------  ------------ 
 

The current amount due to non-controlling interests amounting to US$13,194,000 (31 December 2017: US$13,400,000) is unsecured, interest free and repayable on demand.

   21        Loans AND BORROWINGS 
 
                 31 December   31 December 
                        2018          2017 
                     US$'000       US$'000 
-------------   ------------  ------------ 
 
 Non-current 
 Bank loans           13,188        54,572 
                      13,188        54,572 
 -------------  ------------  ------------ 
 
  Current 
 Bank loans           48,084        12,882 
                      48,084        12,882 
 -------------  ------------  ------------ 
                      61,272        67,454 
 -------------  ------------  ------------ 
 

The effective interest rates on the bank loans for the year ranged from 5.55% to 11.30% (31 December 2017: 5.35% to 10.50%) per annum.

Borrowings are denominated in Ringgit Malaysia, United State Dollars and Vietnam Dong.

Bank loans are repayable by monthly, quarterly or semi-annually instalments.

Bank loans are secured by land held for property development, work-in-progress, operating assets of the Group, pledged deposits and some by the corporate guarantee of the Company.

At 31 December 2018, one of the Group's subsidiary undertakings had not complied with the Debt to Equity ratio covenant in respect of a loan of US$27.8million. In accordance with the term set out in the Facility Agreement, in the event of non-compliance of the financial covenant, the loan shall be immediately due and payable together with accrued interest thereon upon notification by the lenders. The group's subsidiary undertaking has requested a waiver from the lenders in respect of this non-compliance. At the date of approving these financial statements, one of the lenders has approved the waiver and approval from the other lender has not been received. Consequently, the non-current portion of US23.5m of Bank loan has been reclassified to current liabilities as at 31 December 2018

Reconciliation of movement of loan and borrowings to cash flows arising from financing activities:

 
                    As at                             Foreign    As at 31 
                1 January   Drawdown   Repayment     exchange    December 
                     2018    of loan     of loan    movements        2018 
                  US$'000    US$'000     US$'000      US$'000     US$'000 
 Bank loans        67,454     20,308    (24,197)      (2,293)      61,272 
 Total             67,454     20,308    (24,197)      (2,293)      61,272 
              -----------  ---------  ----------  -----------  ---------- 
 
 
                                   As at                             Foreign    As at 31 
                               1 January   Drawdown   Repayment     exchange    December 
                                    2017    of loan     of loan    movements        2017 
                                 US$'000    US$'000     US$'000      US$'000     US$'000 
 Bank loans                       57,209     25,038    (14,770)         (23)      67,454 
 Finance lease liabilities             3          -         (3)            -           - 
                             -----------  ---------  ----------  -----------  ---------- 
 Total                            57,212     25,038    (14,773)         (23)      67,454 
                             -----------  ---------  ----------  -----------  ---------- 
 
   22        MEDIUM TERM NOTES 
 
                                         31 December   31 December 
                                                2018          2017 
                                             US$'000       US$'000 
--------------------------------------  ------------  ------------ 
 Outstanding medium term notes                24,180        24,710 
 Net transaction costs                         (419)         (386) 
 Less: 
 Repayment due within twelve months *       (23,761)      (24,324) 
 Repayment due after twelve months                 -             - 
--------------------------------------  ------------  ------------ 
 

Reconciliation of movement of medium term notes to cash flows arising from financing activities:

 
                            As at                             Foreign    As at 31 
                        1 January   Drawdown   Repayment     exchange    December 
                             2018    of loan     of loan    movements        2017 
                          US$'000    US$'000     US$'000      US$'000     US$'000 
--------------------  -----------  ---------  ----------  -----------  ---------- 
  Medium Term Notes        24,324          -           -        (563)      23,761 
                      -----------  ---------  ----------  -----------  ---------- 
 
 
                            As at                             Foreign    As at 31 
                        1 January   Drawdown   Repayment     exchange    December 
                             2017    of loan     of loan    movements        2017 
                          US$'000    US$'000     US$'000      US$'000     US$'000 
--------------------  -----------  ---------  ----------  -----------  ---------- 
  Medium Term Notes        26,343          -     (4,615)        2,596      24,324 
                      -----------  ---------  ----------  -----------  ---------- 
 

* Includes net transaction costs in relation to medium term notes due within twelve months of US$0.42 million (31 December 2017: US$0.39 million).

The medium term notes ('MTNs') were issued pursuant to a programme with a tenure of ten (10) years from the first issue date of the notes. The MTNs were issued by a subsidiary, to fund two development projects known as Sandakan Harbour Square and Aloft Kuala Lumpur Sentral ('AKLS') in Malaysia.

In 2016, the Group completed the sale of the AKLS. The net adjusted price value for the sale of AKLS, which included the sale of the entire issued share capital of ASPL M3B Limited and Iringan Flora Sdn. Bhd. (the 'Aloft Companies') were used to redeem the MTN Series 2 and Series 3. Following the completion of the disposal of AKLS, US$95.27 million (RM394.0 million) of MTN associated with the AKLS (Series 3) and the Four Points Sheraton Sandakan (Series 2) were repaid on 19 August 2016. The charges in relation to AKLS was also discharged following the completion of the disposal.

In 2017, Silver Sparrow Berhad ('SSB') obtained consent from the lenders to utilise proceeds of US$4.84 million in the Sales Proceeds Account and Debt Service Reserve Account to partially redeem the MTNs in November 2017. SSB also secured a 'roll-over' for the remaining MTNs of US$23.7mil which is due on 10 December 2018 (now repayable on 10 December 2019). The MTNs are rated AAA.

The weighted average interest rate of the MTN was 6.00% per annum at the statement of financial position date. The effective interest rates of the MTN and their outstanding amounts are as follows:

 
                           Maturity Dates    Interest rate      US$'000 
                                              % per annum 
----------------------  ------------------  --------------  ----------- 
 Series 1 Tranche FGI    10 December 2019        6.15            10,397 
 Series 1 Tranche BG     10 December 2019        6.15            13,783 
                                                                 24,180 
 -----------------------------------------  --------------  ----------- 
 

The medium term notes are secured by way of:

   (i)         bank guarantee from two financial institutions in respect of the BG Tranches; 

(ii) financial guarantee insurance policy from Danajamin Nasional Berhad ('Danajamin') in respect to the FG Tranches;

(iii) a first fixed and floating charge over the present and future assets and properties of Silver Sparrow Berhad and ICSD Ventures Sdn. Bhd. by way of a debenture;

   (iv)       a third party first legal fixed charge over ICSD Ventures Sdn. Bhd.'s assets and land; 
   (v)        a corporate guarantee by the Company; 

(vi) letter of undertaking from the Company to provide financial and other forms of support to ICSD Ventures Sdn. Bhd. to finance any cost overruns associated with the development of the Sandakan Harbour Square;

(vii) assignment of all its present and future rights, interest and benefits under the ICSD Ventures Sdn. Bhd.'s Put Option Agreements in favor of Danajamin, Malayan Banking Berhad and OCBC Bank (Malaysia) Berhad (collectively as 'the guarantors') where once exercised, the sale and purchase of HMS and FPSS shall take place in accordance with the provision of the Put Option Agreement; and the proceeds from HMS and FPSS will be utilised to repay the MTNs;

(viii) assignment over the disbursement account, revenue account, operating account, sale proceed account, debt service reserve account and sinking fund account of Silver Sparrow Berhad, revenue account of ICSD Ventures Sdn. Bhd. and escrow account of Ireka Land Sdn. Bhd.;

(ix) assignment of all ICSD Ventures Sdn. Bhd.'s present and future rights, title, interest and benefits in and under the insurance policies; and

(x) a first legal charge over all the shares of Silver Sparrow Berhad, ICSD Ventures Sdn. Bhd. and any dividends, distributions and entitlements.

   23        change in equity interest in subsidiaries 

During the financial year, the Group increased its equity interest in Shangri-La Healthcare Investment Pte Ltd ('SHIPL') from 81.58% to 81.59% (2017: 81.50% to 81.58%) arising from an issue of new shares in the subsidiary for cash consideration of US$0.525 million (2017: US$1.5 million). Consequently, the Company's effective equity interest in Hoa Lam Shangri-La Healthcare Ltd Liability Co., City International Hospital Co. Ltd, subsidiaries of SHIPL, increased to 72.413% (2017: 72.410%). The Group recognised an increase in non-controlling interests of US$3,000 (2017: US$539,000) and an increase in accumulated losses of US$3,000 (2017: US$539,000) resulting from the increase in equity interest in the above subsidiaries. The transaction was accounted for using the acquisition method of accounting.

   24        Related Party Transactions 

Transactions between the Group with Ireka Corporation Berhad ('ICB') and its group of companies are classified as related party transactions based on ICB's 23.07% shareholding in the Company. ICB's relationship with the Group is mentioned in the Annual Report.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain members of senior management of the Group.

 
                                                           2018       2017 
                                                        US$'000    US$'000 
----------------------------------------------------  ---------  --------- 
 ICB Group of Companies 
  Accounting and financial reporting services 
  fee charged by an ICB subsidiary                           50         50 
 Advance payment to the contractors of an 
  ICB subsidiary                                              -        732 
 Construction progress claims charged by an 
  ICB subsidiary                                         27,812     21,099 
 Management fees charged by an ICB subsidiary             1,460      3,129 
 Marketing commission charged by an ICB subsidiary          106        114 
 Project staff cost reimbursed to an ICB subsidiary         288        311 
 Rental expenses charged by an ICB subsidiary                 3          4 
 Rental expenses paid on behalf of ICB                      529        516 
 Secretarial and administrative services fee 
  charged by an ICB subsidiary                               50         50 
 Key management personnel 
 Remuneration of key management personnel 
  - Directors' fees                                         145        235 
 Remuneration of key management personnel 
  - Salaries                                                123        143 
----------------------------------------------------  ---------  --------- 
 

Liquidated and Ascertained Damages ('LADs')

Ireka Engineering & Construction Sdn. Bhd. ('IECSB'), a subsidiary of ICB, is the project contractor of The RuMa Hotel and Residences ('The RuMa'). The expected completion date of the RuMa development has been deferred to 15 June 2018, with vacant possession expected to be issued from 15 June 2018. Based on the Sale and Purchase Agreements ('SPAs') signed, the contractual date of issuance of vacant possession to purchasers starts from June 2017 (48 months from date of signed SPAs). For hotel suites, Urban DNA Sdn. Bhd ('the Developer') is given three months from the date of delivery of vacant possession letter for installation of the furniture and fittings as stipulated in the respective buyers' SPA for hotel suites. The delay will potentially result in Liquidated Ascertained Damages ('LADs') being imposed to the Developer. However, the Developer is entitled to recover these LADs from the project contractor, IECSB. Construction of The RuMa Hotel and Residences ('The RuMa') was completed and Certificate of Completion and Compliance ('CCC') was obtained on 28 September 2018.

Transactions between the Group with other significant related parties are as follows:

 
                                     2018      2017 
                                  US$'000   US$'000 
------------------------------   --------  -------- 
 Non-controlling interests 
 Advances Ð non-interest 
  bearing (Note 20)                    82       327 
-------------------------------  --------  -------- 
 

The above transactions have been entered into in the normal course of business and have been established under negotiated terms.

The outstanding amounts due from/(to) ICB and its group of companies as at 31 December 2018 and 31 December 2017 are as follows:

 
                                                     31 December   31 December 
                                                            2018          2017 
                                             Notes       US$'000       US$'000 
 Net amount due from an ICB subsidiary 
  for advance payment to its contractors      (ii)         2,427         3,993 
 Net amount due to an ICB subsidiary 
  for construction progress claims 
  charged                                      (i)       (1,508)       (2,046) 
 Net amount due from an ICB subsidiary 
  for acquisition of SENI Mont' Kiara 
  units                                        (i)         1,910         1,952 
 Net amount due to an ICB subsidiary 
  for management fees                         (ii)         (239)             - 
 Net amount due to an ICB subsidiary 
  for marketing commissions                   (ii)          (17)          (15) 
 Net amount due to an ICB subsidiary 
  for reimbursement of project staff 
  costs                                       (ii)          (40)          (55) 
 Net amount due to an ICB subsidiary 
  for rental expenses                         (ii)           (2)           (5) 
 Net amount due from ICB for rental 
  expenses paid on behalf                     (ii)           126           137 
 Net amount due to an ICB subsidiary 
  for staff cost paid on behalf               (ii)             -           (4) 
-----------------------------------------  -------  ------------  ------------ 
 
   (i)    These amounts are trade in nature and subject to normal trade terms. 

(ii) These amounts are non-trade in nature and are unsecured, interest-free and repayable on demand.

The outstanding amounts due to the other significant related parties as at 31 December 2018 and 31 December 2017 are as follows:

 
                                          31 December   31 December 
                                                 2018          2017 
                                              US$'000       US$'000 
--------------------------------------   ------------  ------------ 
 Non-controlling interests 
 Advances Ð non-interest bearing 
  (Note 20)                                  (13,194)      (13,400) 
---------------------------------------  ------------  ------------ 
 

Transactions between the parent company and its subsidiaries are eliminated in these consolidated financial statements.

   25        DIVID 

The Company has not paid or declared any dividends during the financial year ended 31 December 2018.

   26        cOMMITMENTS AND Contingencies 

The Group and Company do not have any contingencies at the statement of financial position date except as follows:

Debt service reserve account

In 2017, Silver Sparrow Berhad obtained consent from the lenders to utilise proceeds of US$4.84million in the Sales Proceeds Account and Debt Service Reserve Account ('DSRA') to partially redeem the MTNs. Thereafter, amount equivalent to RM10.0 million (US$2.41 million) (the 'Minimum Deposit') is maintained in the DSRA at all times and the amount is disclosed as deposit pledged.

In the event the funds in the DSRA falls below the Minimum Deposit, SSB shall within five (5) Business Days from the date of receipt of written notice from the facility agent or upon SSB becoming aware of the shortfall, whichever is earlier, deposit such sums of money into the DSRA to ensure the Minimum Deposit is maintained.

   27        event after statement of financial position date 

On 22 March 2019, the Company announced that IDM had, on 21 March 2019, submitted a notice to terminate its appointment under the Management Agreement. Unless otherwise agreed, IDM's resignation is subject to a three-month notice period which will enable the orderly transition of operations currently carried out by IDM to the Company itself or to third parties. Following the termination, IDM has indicated that it would be prepared to work with the Board to facilitate a smooth and orderly transition of the operations of the Company. At the request of the Board, IDM is agreeable to extend the notice period, should the Board require more time to put in place the effected changes.

   28        CHANGES IN ACCOUNTING POLICY 

Arising from the adoption of International Accounting Standard IFRS 15 Revenue from Contracts with Customers released in April 2016 and effective for periods beginning on or after 1 January 2018, the Group has changed its revenue recognition accounting policy with a date of initial application of 1 January 2018. Adjustment to revenue are made for property development activities of serviced residences under The RuMa where no revenue was recognised as per IFRIC 15 Ð Agreements for Construction of Real Estate, which prescribes that revenue be recognised only when the properties are completed and occupancy permits are issued.

The impacts of adopting IFRS 15 on the Group's consolidated financial statement are disclosed in the following tables:

 
 Consolidated Statement of Financial                         Effect 
  Position as at 31 December 2016         Previously    of adoption       Audited As 
                                            Reported        of IFRS         Restated 
                                             Amounts             15          Amounts 
                                             US$'000        US$'000          US$'000 
-------------------------------------  -------------  -------------  --------------- 
 Deferred tax assets                           1,623           (17)            1,606 
 Inventories                                 244,959       (10,039)          234,920 
 Trade and other receivables                  11,571          2,565           14,136 
 
 Translation reserve                        (29,142)          (420)         (29,562) 
 Accumulated losses                         (58,922)          5,500         (53,422) 
 Non-controlling interest                    (1,148)          2,179            1,031 
 Current tax liabilities                       2,158           (17)            2,141 
 Trade and other payables                     53,880       (14,733)           39,147 
 
 Shareholders' equity                        143,362          5,080          148,442 
 
 
 Consolidated Statement of Comprehensive                        Effect 
  Income for the year ended 31 December      Previously    of adoption       Audited As 
  2017                                         Reported        of IFRS         Restated 
                                                Amounts             15          Amounts 
                                                US$'000        US$'000          US$'000 
-----------------------------------------  ------------  -------------  --------------- 
 Revenue                                         19,098         14,450           33,548 
 Cost of sales                                 (13,383)        (7,065)         (20,448) 
 Finance cost*                                  (5,744)        (6,700)         (12,444) 
 Taxation                                         (863)          (344)          (1,207) 
 Loss for the year                              (5,874)            341          (5,533) 
 Exchange differences on translating 
  foreign operations                              7,863            808            8,671 
 Total comprehensive income for 
  the year, net of tax                            1,989          1,149            3,138 
 Loss for the period attributable 
  to the equity holders of the company          (4,176)            239          (3,937) 
 Loss for the period attributable 
  to non-controlling interest                   (1,698)            102          (1,596) 
 
 Loss per share                                  (2.10)                          (1.98) 
 

* The Group has made prior year adjustment of $6.7 million to finance costs. These finance costs are not eligible for capitalisation as the development of the RuMa Hotel Suites is not qualifying assets. Accordingly, the restatement of the 2017 financial information for the correction of this error.

 
 Consolidated Statement of Financial                        Effect 
  Position as at 31 December 2017        Previously    of adoption   Audited As 
                                           Reported        of IFRS     Restated 
                                            Amounts             15      Amounts 
                                            US$'000        US$'000      US$'000 
-------------------------------------  ------------  -------------  ----------- 
 Deferred tax assets                          4,268            790        5,058 
Inventories                                 278,879       (28,706)      250,173 
Trade and other receivables                  11,012          6,382       17,394 
 
Translation reserve                        (21,141)            145     (20,996) 
Accumulated losses                         (62,614)          4,716     (57,898) 
Non-controlling interest                    (3,216)          3,547          331 
 
Trade and other payables                     83,040       (31,096)       51,944 
Current tax liabilities                       3,000          1,154        4,154 
 
Shareholders' equity                        137,670          4,861      142,531 
 
 
Consolidated Statement of cash flows                        Effect 
 for the year ended 31 December 2017      Previously   of adoption       Audited 
                                            Reported       of IFRS   As Restated 
                                             Amounts            15       Amounts 
                                             US$'000       US$'000       US$'000 
Operating profit before changes in 
 working capital                                 332         7,385         7,717 
Cash generated from operations (before 
 interest and tax paid)                        8,911         6,745        15,656 
Net cash used in operating activities            561            45           606 
Effect of changes in exchange rates            (270)          (45)         (315) 
 
   29        REPORT CIRCULATION 

Copies of the Annual Report and Financial Statements will be sent to shareholders for approval at the Annual General Meeting ('AGM') to be held on 8 July 2019.

Principal Risks and Uncertainties

The Group's business is property development in Malaysia and Vietnam. Its principal risks are therefore related to the property market in these countries in general, and also the particular circumstances of the property development projects it is undertaking. More detailed explanations of these risks and the way they are managed are contained under the heading of Financial and Capital Risk Management Objectives and Policies are described in the Annual Report.

Other risks faced by the Group in Malaysia and Vietnam include the following:

 
Economic             Inflation, economic recessions and movements in 
                      interest rates could affect property development 
                      activities. 
Strategic            Incorrect strategy, including sector and geographical 
                      allocations and use of gearing, could lead to 
                      poor returns for shareholders. 
Regulatory           Breach of regulatory rules could lead to suspension 
                      of the Company's Stock Exchange listing and financial 
                      penalties. 
Law and regulations  Changes in laws and regulations relating to planning, 
                      land use, development standards and ownership 
                      of land could have adverse effects on the business 
                      and returns for the shareholders. 
Tax regimes          Changes in the tax regimes could affect the tax 
                      treatment of the Company and/or its subsidiaries 
                      in these jurisdictions. 
Management           Changes that cause the management and control 
 and control          of the Company to be exercised in the United Kingdom 
                      could lead to the Company becoming liable to United 
                      Kingdom taxation on income and capital gains. 
Operational          Failure of the Development Manager's accounting 
                      system and disruption to the Development Manager's 
                      business, or that of a third party service providers, 
                      could lead to an inability to provide accurate 
                      reporting and monitoring leading to a loss of 
                      shareholders' confidence. 
Financial            Inadequate controls by the Development Manager 
                      or third party service providers could lead to 
                      misappropriation of assets. Inappropriate accounting 
                      policies or failure to comply with accounting 
                      standards could lead to misreporting or breaches 
                      of regulations or a qualified audit report. 
Going Concern        Failure of property development projects due to 
                      poor sales and collection, construction delay, 
                      inability to secure financing from banks may result 
                      in inadequate financial resources to continue 
                      operational existence and to meet financial liabilities 
                      and commitments. 
 

The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual rights and obligations. It also regularly monitors the economic and investment environment in countries that it operates in and the management of the Group's property development portfolio. Details of the Group's internal controls are described in the Annual Report.

RESPONSIBILITY STATEMENT

The Directors of the Group and the Company confirm that to the best of their knowledge that:

(a) the financial statements have been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

(b) the sections of this Report, including the Chairman's Statement, Development Manager's Review, Financial Review and Principal Risks and Uncertainties, which constitute the management report include a fair review of all information required to be disclosed by the Disclosure and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Services Authority of the United Kingdom.

On behalf of the Board

   Mohammed Azlan Hashim                                            Gerald Ong Chong Keng 
   Director                                                                        Director 

30 April 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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