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Sim Leisure Group board doubles down on preference share redemption

CATALIST-LISTED theme park operator Sim Leisure Group has reiterated that it does not expect business to take a hit from its decision on how to spend its initial public offering (IPO) proceeds.

The board said on Monday evening that there will not be any material adverse impact on business operations and plans - even though the proceeds were used to redeem certain preference shares and to pay for listing expenses, with none of the proceeds going to expansion and working capital.

The full redemption of Penang Development Corp's redeemable convertible preference shares with the S$5.81 million in IPO gross proceeds has improved Sim Leisure's financial position, which "is expected to augur well for the group's operations", the board added in a statement signed by group founder and chief executive Sim Choo Kheng.

The statement said that Penang-based Sim Leisure, which made its trading debut in Singapore on March 1, now no longer has any debt on its balance sheet besides hire-purchase borrowings of less than RM100,000 (S$33,200). The group can also save on finance costs, the board asserted.

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The board reiterated that Sim Leisure plans to expand in its home market of Malaysia, the wider Asean region and China through joint ventures and/or strategic alliances, and expects to pay for its business strategies and expansion plans "using internal resources and/or external financing".

Sim Leisure had previously announced a non-binding memorandum of understanding to build and run a theme park in the Chinese city of Linyi, in Shandong province.

"Barring unforeseen circumstances and subject to economic and market conditions as well as available opportunities, the board does not foresee any difficulties with implementing the growth strategies of the group, by leveraging the scalable and proven profitable business model of the group's Escape theme parks," the Sim Leisure board added, while noting that it expects visitor numbers to its existing parks to rise and that it will start operations at a third facility in the first half of 2019.

The board's statement was in reply to an opinion piece by corporate governance hawk Mak Yuek Teen that was published by The Business Times on March 6.

Assoc Prof Mak had pointed to the difference in the actual IPO size and Mr Sim's previous target, shared with the media, of between US$10 million and US$12 million.

Prof Mak also asked "how realistic are its touted plans of expanding to China, Asean and the rest of the world, taking into account the kind of theme parks it was operating".

Sim Leisure added 0.2 Singapore cent, or 1.08 per cent, to 18.8 Singapore cents, before its statement. The counter is down by 14.6 per cent from its IPO price of S$0.22 a share.