SPORTS & EDUCATION CORPORATION LIMITED LISTING PROFILE
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SPORTS & EDUCATION CORPORATION LIMITED
LISTING PROFILESPORTS & EDUCATION CORPORATION LIMITED
LISTING PROFILE
1. WHO ARE WE - Overview of the Group
1.1. Structure
Sports & Education Corporation Limited (SEC) has been established as a group holding
company. It currently owns 100% of the Pegasus Golf Course and Sports Club (Pegasus Golf
Course) through its wholly owned subsidiary Pegasus Golf Limited (Pegasus).
1.2. Operations and Activities
The Pegasus Golf Course has a beautiful parkland style par 72-18 hole championship golf
course located about 25 kilometers north of Christchurch at Mapleham Drive in the town of
Pegasus in North Canterbury.
The course was designed by Kristine Kerr of Kura Design.
The Pegasus Golf Course was ranked No. 14 of New Zealand’s top 40 golf courses, and best of
the Christchurch golf courses by Australian Golf Digest in July 22, 2016.
Opened in 2009, the Pegasus Golf Course has hosted the New Zealand Women’s Open in
2010, 2011 and 2012.
1The Course, occupying an area of just under 80 hectares, boasts a majestic layout with varying
degrees of difficulty aimed at providing an excellent golfing experience for every level of golf.
Set on the North Canterbury Plains with views of North Canterbury’s Craigieburn Range and
in the background the South Island Southern Alps, the course’s fairways and greens are
complimented by lake features.
As well as an 18 hole championship course, the Pegasus Golf and Sports Club features a range
of facilities, including a covered driving range, practice greens, pro shop (with a wide range of
golf brands, clothes, clubs and shoes), Bunker Café and Bar, tennis courts and a gym.
Pegasus Golf and Sports Club also offers a wide range of services, a clubhouse with a locker
room, club, cart and trundler rental, food and beverage on site (including restaurants/bar and
dining at the Bunker Café and Bar), driving range with balls available, caddies on request and
golf coaching with a PGA professional on site.
As at December 2017 the Pegasus Golf and Sports Club had 13 full time employees and 613
annual members.
The 2019 NZPGA Championship will be hosted at the Pegasus Golf Course from 7 to 10 March
2019. The tournament will be part of the ISPS HANDA PGA Tour of Australasia and will carry
prize money of $125,000.
The Pegasus Golf Course, under the Waimakiriri District Council Plan, is subject to two
separate zonings. The area zoned Mapleham Rural 4B Zone covers approximately 44 hectares
and provides for subdivision into a maximum of 35 allotments with a minimum area of 1
hectare. The area zoned Pegasus Rural covers approximately 36 hectares and provides for
subdivision in to allotments with a minimum area of 4 hectares. The current use as a golf club
conforms with the current permissible uses of both zones under the Waimakiriri District
Council Plan. There are three areas within the course that are identified in the Waimakiriri
District Council Plan as archaeological sites and the land owner is required to abide by the
heritage implications identified in the District Plan.
There are no obligations to maintain the site as a Golf Club and Golf Course.
21.3. The Team
1.3.1. Directors of SEC
SEC’s four directors are:
Xiangming Huo (also known as Sam Huo)
Executive Chairman
Sam arrived in New Zealand from China in 1998 and became a New Zealand citizen in the
early 2000s.
Prior to moving to New Zealand, Sam had lived in Japan for seven years, where he obtained
a Bachelor of Economics.
After setting up in New Zealand, Sam married in 2003 and he and his wife have two children.
Since arriving in New Zealand Sam has been active in property development, both as an
investor and builder.
In 2016 Sam arranged the Pegasus acquisitions as described above.
Sam also has extensive connections in China and actively promotes China and New Zealand
Brent Douglas King B.Com, CA, CMA, RFA
Non Executive Independent Director
Brent was the founder and managing director of Dorchester Pacific Limited, and its subsidiary
Dorchester Finance Limited, until he resigned in 2006. During his tenure he built that company
from zero to over $480m in assets and returns of 20% per annum for over 10 years.
Dorchester Pacific Limited was a public issuer with a registered prospectus for more than
fifteen years. During that time Dorchester Pacific Limited, companies sponsored by
Dorchester and other companies that Brent was a director of registered in excess of 100
prospectuses and disclosure documents. Brent is a current director of Corporate Holdings
Limited, General Finance Limited, Investment Research Group Limited (IRG), Equity
Investment Advisers Limited, King Capital & Investment Corporation Limited, General Capital
Limited and Snakk Media Limited. IRG is both an NZAX sponsor and an NXT advisor. Brent
has also held directorships with a number of private companies.
Yu (Michael) Xiao
Executive Director
Michael has 8 years of experience in the golf industry in China with in-depth understanding
of local and Chinese golf market and has good relationship with mainstream golf media and
relative golf organizations. He is specialised in brand promotion and organising golf events.
He used to engage in some influential local amateur golf tournaments such as the “Beijing
Golf Open” and the “Beijing Junior Golf Tournament”. Prior to Pegasus, Michael was the CEO
of China Golf TV Network between 2014 and 2016.
3Paul McKay
Non Executive Independent Director
Paul’s career has been entirely within the insurance industry with the first 13 years in
underwriting roles and latterly in designing and developing risk resilience and insurance
solutions in the private, central and local government sectors. He has also had significant
experience in handling earthquake claims during the Christchurch and Kaikoura earthquake
events.
Paul has been with Aon for the last 12 years and prior to that spent 15 years with Willis NZ as
their Chief Broking Officer. Paul has worked in Christchurch, Wellington and Auckland markets
dealing with the Australian, Singapore and London’s Lloyds markets. He is also specialised in
developing and managing large corporate insurance programmes in New Zealand and
internationally.
Directors Fees
The shareholders of the Company have resolved and approved payment of Director’s fees up
to a maximum of $250,000 in aggregate per annum for each financial year of the Company,
which may by agreement between the Company and the relevant Directors be paid in part or
in whole by an issue of shares in the Company provided the issue occurs in compliance with
USX Market Rules.
1.3.2. Management team of the Group:
Yu (Michael) Xiao
Chief Executive Officer
Refer above for Michael’s biography
Chen Zhang – BBus (Hons), MPBS, CPA
Chief Financial Officer
Chen is a member of CPA Australia. One of the top accounting students at Auckland University
of Technology and a recipient of Vice Chancellor Scholarship. Before he joined Pegasus Golf
Limited in September 2017, he was a business advisory accountant at RSM New Zealand.
41.3.3. The Pegasus Golf and Sports Club Business management team:
Aiden Berry
General Manager
Aiden joined Pegasus Golf & Sports Club in 2011, becoming General Manager in 2017. Aiden
is a member of the NZPGA and the GMANZ, holding qualifications with both. Aiden has 14
years’ experience in the golf industry allowing him to build strong relationships with a diverse
range of clients and industry professionals. In addition to his management role he still coaches
from grass roots, through to LPGA Tour Player commitments. Prior to Pegasus Aiden operated
a sole operator golf store at Coringa Golf Club which became one of the most successful in
the Canterbury region.
Aiden is a fast learner, committed to re-education, and staying current with the golfing
industry. Aiden’s well-developed time-management and self-management skills allow him to
work across the entire business operation. Aiden is passionate about the club and driven to
see its continued success.
Paula Campbell
Membership Manager
Paula joined Pegasus Golf & Sports Club pre-opening in August 2009 to assist with the set up
the operational aspect of the business prior to the official opening in December 2009. She has
also gleaned valuable retail experience as the Centre Manager for an exclusive boutique
shopping centre, where she was responsible for the maintenance and marketing of an iconic
$30m investment. She is a versatile team player with a strong customer focus and has worked
in a variety of roles for prestigious hotels and golf resorts throughout New Zealand. Although
Paula’s main focus at Pegasus is membership sales and communications, her responsibilities
also extend to the back-of-house systems including POS, financial aspects, executing
marketing campaigns, brand management, and overall office management. She understands
the wholesale/inbound market and has represented organisations at national and
international trade shows.
52. HOW DID WE GET HERE?
2.1. Pegasus Acquisition of Golf Course and Sports Club
On 8th November 2016, Pegasus entered into a sale and purchase agreement for acquiring
the Pegasus Golf Course, Sports Club Land, Golf Businesses and 5 residential lots for a total
amount of $4,825,000 via a deed of nomination.
On 29 September 2017, Pegasus settled the Pegasus Golf Course, Sports Club Land and Golf
Business and partially settled the residential sections for $4,148,613 ($3,929,500 plus trading
stock of $323,164 less other liabilities of $104,051). The amounts were paid in cash from funds
advanced by Xiangming (Sam) Huo.
The remaining balance of $895,500 was settled on 12 April 2018 from funds advanced by
Xiangming (Sam) Huo.
On 29 September 2017, Pegasus purchased 4 Mowers, 2 Tractors and 2 Motor Vehicles and
other miscellaneous green keeping tools from The Plant People 2006 Limited for $434,870
(GST inclusive).
On 1 November 2017 Pegasus also entered into a lease agreement with De Lage Landen Ltd
for an operating lease of 35 golf carts for $3,944 (GST inclusive) per month for 12 months.
On 1 January 2018, Pegasus entered into an agreement with Golf Imports Limited for the
purchase of 11 Golf Carts for $128,685 (GST Inclusive). The amounts were paid in cash from
funds advanced by Xiangming (Sam) Huo.
The funds advanced by Xiangming (Sam) Huo, totaling $4,976,927, were consideration for
shares issued by Pegasus on its formation and on 16 July 2017. After a share consolidation on
12 March 2018 the total number of Pegasus shares on issue was 37,168,000. These shares
were issued at an average price of 13.4 cents per share.
2.2. SEC Acquisition of Pegasus
On 29 March 2018, SEC acquired all the shares in Pegasus for a consideration of $14,800,000,
which SEC satisfied by the issue to Xiangming (Sam) Huo (the Vendor) of 14,800,000 fully paid
ordinary shares in SEC at $1.00 per share.
6The consideration was based on valuation for Pegasus agreed between the Board and Vendor
as follows.
Land and improvements to the Land $5,200,000
Residential lots (5) $1,460,000
Buildings and site improvements at replacement cost $7,292,900
Inventory $357,100
Greenkeeping equipment $378,100
Golf Carts $111,900
___________
Total $14,800,000
These amounts were based on market and replacement cost valuations received by SEC’s
directors from AON Valuation Services a subsidiary of NYSE listed Aon plc.
The replacement cost of the Golf Course was estimated by SEC’s Directors as $1m per hole
and $6m for the buildings, totaling $24m.
2.3. Events after Acquisition & Balance Date
On 14 April 2018, SEC approved the issue of 500,000 ordinary shares to Xiangming (Sam) Huo
at $1.00 per share. The consideration for these shares was the conversion of an advance of
$500,000 received from Xiangming (Sam) Huo on 29 March 2018. These shares were
transferred to Wenting Ziu on 30 April 2018.
During May 2018, 2 of the 5 residential lots owned by Pegasus were assessed as being surplus
to the groups needs and placed on the market. One of these was sold for $310,000 and settled
on 28 September 2018.
On 19 July 2018, SEC entered a loan agreement for $450,000 with General Finance Limited
(at an interest rate of 9.95% per annum) secured over the residential lots and guaranteed by
Xiangming (Sam) Huo. $70,000 was repaid on 2 November 2018 and the balance of the loan
is to be repaid by July 2019.
On 28 September the Company approved the issue of 660,000 ordinary shares to Zhang Nan
at $1.00 per share. The consideration was received in cash.
72.4. Accounting for the acquisitions
2.4.1. NZ IFRS 3 – Business Combination
Under the NZ accounting standard, NZ IFRS 3 “Business Combination”, a company is required
to subsequently measure and account for the assets acquired. The company has a period of
12 months from the date of purchase to seek information and facts about the acquisition to
determine the measurement (valuation) of the purchased assets. Any change to the
valuations are reflected in the annual accounts for the following year as a prior period
adjustment.
2.4.2. Acquisition of Pegasus Golf & Sports Club.
At the time of the acquisition of the Pegasus Golf Course by Pegasus the acquisition was
recorded provisionally at the cash price paid for the assets ($4,825,000 plus stock less other
liabilities).
Pegasus purchased Pegasus Golf Course on 29 September 2017. The assets purchased were
disclosed in the SEC Group audited financial statements to 31 March 2018 at the purchase
price as the measurement (valuation) was not complete. Once the valuations are completed
any changes in the valuation will be disclosed in the SEC Group audited financial statements
for the year ending 31 March 2019.
The disclosed values in SEC Group audited financial statements for the year ending 31 March
2018 that are included in the Annual Report are consistent with the NZ IFRS Accounting
Standards.
SEC has received a market valuation from AON Valuation Services with the following values
at the date of purchase:
Golf Course Land $5,200,000
Building and site improvements $2,100,000
Residential Sections $1,460,000
__________
Total $8,760,000
SEC is in discussion with its Auditors as to the adoption of these values for the accounting of
the acquisition of the Pegasus Golf Course. The adopted valuations will be reflected in SEC’s
Annual Report to 31 March 2019 as a prior period adjustment.
82.4.3. Acquisition of Pegasus
SEC is the legal purchaser of Pegasus.
Under the accounting standards the acquisition of Pegasus by SEC is treated as a reverse
takeover as Pegasus is the larger company with net assets at time of acquisition higher than
SEC’s and the transaction was settled by issue of shares in SEC.
The transaction is viewed as the Vendor of Pegasus purchasing a majority share in the smaller
SEC.
In accordance with NZ IFRS accounting standards, SEC’s financial statements in the Annual
Report treat Pegasus as being the continuing company and SEC as being acquired at the
purchase date of 29 March 2019.
Accordingly, the financial statements in SEC’s Annual Report record the purchase of Pegasus
Golf Course at the cash price paid of $5,044,113. The net assets of Pegasus at the time it was
acquired by SEC on 29 March was $4,946,927 or an implied 34 cents per share for 14.8m
shares issued to the Vendor.
If the higher valuation prepared by AON Valuation Services of $8.7m is adopted and reflected
the in the 2019 accounts a higher implied issue price per share will be disclosed.
The financial accounts in SEC’s Annual Report for year ended 31 March 2018 report the value
that SEC as the amount that the vendors shares were diluted by the acquisition. Prior to the
acquisition the vendor held 100% of Pegasus. Following the acquisition, the vendor held 96%
of SEC. The dilution of 4% was the value that the vendor paid to acquire SEC i.e. $169,990.
This acquisition value will also change if the values, that are described above, are adopted for
the valuation of the purchase of the Pegasus Golf Course and Sports Club.
2.5. Related Parties
SEC has had related party dealings with the following related parties:
1. Investment Research Group Limited (IRG), whose director is Brent King, has
managed the transaction including SEC’s acquisition of Pegasus and SEC listing
on USX.
2. Barter Investments Limited, whose directors are Brent King and Garth Ward,
is a shareholder in SEC.
3. Brent King has a beneficial ownership of 100 shares in SEC through his interest
in Barter Investments Limited.
4. Garth Ward, who is a director of Draw Nominees Limited, has acted for IRG in
this transaction, and Draw Nominees Limited is a Trustee for shares being
distributed by Penryn Ventures and Barter Investments Limited.
5. Garth Ward, who is a director of Almond Draw Limited has acted for IRG in
this transaction, is a shareholder in SEC.
92.6. Annual Report and Company Constitution
The Annual Report for year ended 31 March 2018 and the Company Constitution are available
on the USX website www.usx.co.nz.
The Auditors report on page 50 of the Annual Report under heading, ”Material Uncertainty
Related to Going Concern”, drew attention to Note 1(e) of the financial statements, which
indicates that the Group incurred a net loss after tax of $753,839 during the year ended 31
March 2018 and as at that date the Group’s current liabilities exceeded its current assets by
the amount of $854,712. As stated in Note 1(e), these events or conditions, along with other
matters as set forth in Note 1 (e), indicate that a material uncertainty exists that may cast
significant doubt on the Group’s ability to continue as a going concern.
103. WHAT HAPPENS NOW
3.1. Company Constitution
Prior to the listing SEC adopted a constitution that is appropriate for a listed company. A copy
of the constitution can be obtained from the Companies Office website https://companies-
register.companiesoffice.govt.nz, Companies website www.secgroupglobal.com or from the
Companies office.
3.2. Share Restructuring
Prior to listing SEC had 16,560,000 ordinary shares on issue and these were split on a 2 for 1
basis so shareholders now hold 2 shares for each share held prior to listing. This increases the
number of shares on issue to 33,120,000.
Penryn Ventures Limited declared an in-specie dividend of shares it held in SEC and placed
216,000 shares (512,000 shares after the share split) in trust with Draw Nominees Limited for
817 shareholders. These shares were distributed to the shareholders upon SEC listing.
Barter Investments Limited declared an in-specie dividend of shares it held in SEC and placed
100,000 shares (200,000 shares after the share split) in trust with Draw Nominees Limited for
12 shareholders. These shares were distributed to the shareholders upon SEC listing.
3.3. Shareholders
The top 10 shareholders at listing are:
Number of shares held % of shares
RMB Land Co. Limited (wholly
owned by Xiangming Huo) 12,000,000 36.2%
Xiangming Huo 11,600,000 35.0%
Nuobei Huo 6,000,000 18.1%
Nan Zhang 1,320,000 4.0%
Wenting Niu 1,000,000 3.0%
Barter Investments Limited 400,000 1.2%
Waitiri Capital Limited 86,152 0.3%
Almond Draw Limited 80,000 0.3%
Draw Nominees Limited 48,000 0.1%
St Breward Limited 40,114 0.1%
Top 10 shareholders 32,574,266 98.3%
Other shareholders 545,734 1.7%
Total shareholding 33,120,000 100.0%
There are no shares held in Escrow.
113.4. Risks To The Group’s Business And Plans
No Investment is Risk Free and Holding Shares in the Company is No Exception
Potential investors should seek financial and legal advice before deciding to acquire shares in
the Company.
The principal risks for shareholders are that:
1. While the Company is listed on the USX market, shareholders may not be able to sell
their shares or, if they can sell them, the price they get for them may be less than the
amount paid for them;
2. The market for shares in the Company may become volatile, illiquid or cease to exist;
3. Shareholders may not receive the distributions they anticipate receiving from the
Company;
4. The Group’s operational and financial performance does not reach levels anticipated
by the shareholders and this impacts adversely on the value of the Company’s shares
and/or any distributions made to shareholders;
5. The Group’s lenders may take enforcement action under their securities, the amount
recoverable under their securities may be less than what is owing, and the Company’s
shares may cease to have any value;
6. The Group may become insolvent and the Company’s shares cease to have any value.
Set out below is a description of the circumstances that the Company is aware that exist or
are likely to arise that significantly increase the risk to the Company’s financial position,
financial performance and plan.
3.4.1. Pegasus Golf Course and Sports Club Business
Earthquake, infestation and other adverse conditions
The Pegasus Golf Course and the Pegasus Golf and Sports Club may be adversely affected by
earthquake (there have been several major earthquakes in the Canterbury region in recent
years), rain, fire, hail, lightening, infestation by some weed or other growth and other adverse
conditions, by industrial disputes and by other events which are beyond the control of the
Company.
12Tourist numbers and patronage
The Pegasus Golf and Sports Club Business relies for its revenue on the Pegasus Golf and
Sports Club being able to attract and retain members and other people to use its facilities and
therefore the financial viability of the Pegasus Golf and Sports Club may be adversely affected
by an economic downturn, particularly one that reduces tourist numbers visiting New
Zealand.
Operational risk
The ongoing operational and maintenance costs will be funded through revenue from annual
subscriptions, cart hire, green fees and other casual user revenues. Any short fall in required
revenue may have to be compensated for by reduced maintenance of facilities and services
and/or by increases to some or all of the fees.
Maintenance and management risk
The successful operation of the Pegasus Golf and Sports Club depends upon it being regularly
and properly maintained.
Personnel risk
Each of the Group Businesses relies to a significant extent on retaining certain key staff, and
on its ability to attract and retain skilled employees. Loss of key executives, loss of employees
who possess a depth of experience, or the loss of qualified personnel can each have a material
adverse effect on the Company’s financial performance and position.
Competition risk
All of the Group Businesses are in industries that are highly competitive. Competition is based
on a range of factors including the quality of the product offered, the reputation of the
provider. Any increase in competition or deterioration in the competitive position of any of
the Group Businesses could have a material adverse impact on the Company’s financial
performance and position.
3.5. Share placements
Following the listing SEC will consider placement of shares for cash to fund the further
development of the Group.
133.6. The 2019 NZPGA Championship
The NZPGA Championship will be hosted at Pegasus Golf Course from 7 to 10 March 2019.
The tournament will be an ISPS HANDA PGA Tour of Australasia sanctioned event and will
carry prize money of $125,000 and will take place the week after the NZ Open in
Queenstown and is expected to attract a strong field of professional golfers from Australia,
New Zealand and likely Asia.
The 2019 NZPGA Championship winner will join a long list of famous names on the McDougall
Cup, first played for in 1920 when it was won by Joe Kirkwood. The current holder is very
proud kiwi Ben Campbell who also holds the Sir Bob Charles Trophy as the leading New
Zealander in the field, which was initiated in 2015 and won by Josh Geary.
3.7. 2019 Sino– New Zealand International Sport Education Forum
2019 Sino– New Zealand International Sport Education Forum will be conducted in the second
day of NZPGA Championship (8th March 2019).
The purpose of this forum is to attract high net-worth individuals and their families to visit
and spend in Christchurch, introducing to them local international education resources, good
living environment, etc. Also, several sport related universities, tertiary educational
organization, and other sport talent training organizations from China will be invited to attend
the Forum, sharing SEC’s common goal in developing and promoting the international sport
education.
3.8. SEC Future
After listing SEC will be considering opportunities to raise capital and to grow its business in
the sport & education fields.
The Board has not yet identified any targets however immediately after listing we will
commence a process.
The board does not expect any immediate action however it will certainly be aggressively
focusing on the growth component of the businesses.
Acquisitions may have a golf focus; however, the board also believes there are significant
opportunities in other sectors as well.
As soon as the board identifies an attractive commercial opportunity it is act quickly and notify
the market.
144. DIRECTORY
Issuer
Sports & Education Corporation Limited
Registered Office
Unit 203
29 Apollo Drive,
Rosedale
Auckland, 1010
New Zealand
Website: www.secgroupglobal.com
Directors
Xiangming Huo (also known as Sam Huo)
Brent Douglas King
Paul McKay
Yu Xiao (also known as Michael Xiao)
Auditor
Crowe Horwath
Level 29,
188 Quay Street
Auckland 1010
Investment Bankers
Investment Research Group Limited
Level 7,
12-26 Swanson Street
Auckland 1010
Share Registrar
Computershare Investor Services Limited,
Level 2,
159 Hurstmere Road,
Takapuna,
Auckland 1140
Investor Inquiries: 09 488 8777
Investor Email: enquiry@computershare.co.nz
Website: www.computershare.co.nz
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