This article first appeared in The Edge Malaysia Weekly on March 2, 2020 - March 8, 2020

OVER the past two weeks, Avillion Bhd (formerly known as Reliance Pacific Bhd) has been in the news for a number of reasons.

On Feb 26, the loss-making hotel operator announced that it had received a RM382 million unsolicited offer, subject to due diligence and final agreements, for land parcels that it owns in Port Dickson. The offer was made by China-based Guangxi East Hangyang Investment Group.

Avillion, in its announcement, says, “The board would also like to caution that there is no assurance of the said purchase of the land by the offeror materialising … The board at this juncture is unable to comment on the veracity of the offer and financial capability of the offeror.”

The announcement lacked key details, yet created quite a stir. On the next trading day, Feb 27, Avillion was among the most actively traded counters, closing unchanged at 16 sen, with 129.16 million shares, or 13.86% of the company’s share base, changing hands. At its close of 16 sen last Thursday, Avillion had a market capitalisation of RM151.1 million, which makes the excitement understandable.

It is not clear which parcels Guangxi East Hangyang is after, however, and there is very little information available about the Chinese group. Meanwhile, news reports have it that Guangxi East Hangyang’s offer is for six parcels of land in Port Dickson.

From its last annual report, for its financial year ended March 2019, Avillion had three parcels of land collectively measuring 14.24 acres that were valued at RM155.3 million last May and named Avillion Hotel Port Dickson.

The company also had another parcel under Admiral Cove, Port Dickson, measuring 22.25 acres, pegged at a net book value of RM66.84 million after being valued a year ago. It houses Admiral Cove Integrated Marina Resort.

These four parcels have a net book value of RM222.14 million.

Other than these four, Avillion’s other parcels are undeveloped and include three other parcels in Admiral Cove with net book values of RM9.66 million, RM8.41 million and RM4.47 million — all of which were valued between 2002 and mid-2004. In Mukim Si Rusa in Port Dickson, Avillion has three parcels of land for development purposes collectively valued at RM13.97 million.

Avillion also has five small parcels of land (each more than an acre in size) in Kuala Lumpur valued at RM17.33 million in January 2011, and another tract of almost 11 acres in Langkawi valued at RM17.58 million at end-October 2010.

Avillion’s land bank is valued at a total of RM293.56 million.

Despite its attractive assets, the company suffered losses in financial years 2016 to FY2019, bleeding losses of RM16.9 million (FY2018) to RM35.6 million (FY2019). Put another way, it has bled losses in the past 19 consecutive quarters.

The current financial year is also likely to be a loss: For the first half ended September, the company suffered a net loss of RM8.73 million from RM34.92 million in sales.

Avillion said little about its prospects, but its accumulated losses for the first half of FY2019 was RM100.69 million and its operating expenses amounted to RM33.66 million, or more than 96% of revenue.

As at end-September 2019, Avillion had fixed deposits with licensed banks amounting to RM4.18 million and cash and bank balances of RM4.04 million. Meanwhile, short-term borrowings and long-term debt amounted to RM48.11 million and RM46.49 million respectively. It is noteworthy that Avillion’s finance costs for the period was RM3.71 million.

Nevertheless, Avillion is undertaking a cash call, after its shareholders approved a private placement of up to 20% of its existing share base of 944.4 million shares. The company is looking to raise RM22.67 million by issuing 188.88 million shares at 12 sen per placement share, and 566.64 million warrants as a sweetener to be issued at a later date, on the basis of one warrant for every two shares held.

The cash call looks like a stopgap measure, however, as almost 99% of the sums raised is for asset enhancement and refurbishment (RM10 million), the repayment of bank borrowings (RM6 million), a property development project (RM3 million) and working capital (RM3.32 million).

It is also interesting to note that, on Feb 19,

Avillion announced that Toh Puan Mahani Idris, wife of businessman and former finance minister Tun Daim Zainuddin, ceased to be a substantial shareholder in the company. The cessation took effect on July 9, 2019 with the transfer of 247.3 million shares, equivalent to a 28.8% interest in Avillion.

The shares, whose registered holder is Ibu Kota Developments Sdn Bhd, were transferred to Maybank Trustees Bhd on July 9, 2019. It is not clear who the ultimate owner of the shares is.

Ibu Kota Developments shareholders include Daza Holdings Sdn Bhd, the vehicle of Mahani and Datuk Md Wira Dani Abdul Daim, Mahani and Daim’s son.

Other shareholders of Ibu Kota Development include Mazmur Capital Sdn Bhd, the vehicle of See Ah Sing, managing director of Avillion, and his wife, Hedy Gan See Tong.

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