(COLLECTIVELY REFERRED TO AS THE PROPOSED ACQUISITIONS )

Transcription

1 HIL INDUSTRIES BERHAD ( HIL OR THE COMPANY ) (I) (II) PROPOSED ACQUISITION BY AMJ CONSTRUCTION SDN BHD ( AMJC ), A WHOLLY-OWNED SUBSIDIARY OF HIL THROUGH SATU TUNAS SDN BHD AND HIL PROPERTIES SDN BHD, OF 99% EQUITY INTEREST IN A&M CONCRETE PRODUCTS SDN BHD ( A&M CONCRETE ) FROM STEVEN JUNIOR NG KWEE LENG AND MALCOLM JEREMY NG KWEE SENG FOR A TOTAL PURCHASE CONSIDERATION OF RM22,000,000 ( PROPOSED ACQUISITION OF A&M CONCRETE ); AND PROPOSED ACQUISITION BY AMJC OF THE ENTIRE EQUITY INTEREST IN SHOW PIECE SDN BHD ( SHOW PIECE ), WHICH IN TURN HOLDS 100% EQUITY INTEREST IN INNOCENTRAL SDN BHD ( INNOCENTRAL ), FROM TAN SRI DATO NG BOON NG THIAN HOCK AND DATO MILTON NORMAN NG KWEE LEONG FOR A PURCHASE CONSIDERATION OF RM49,000,000 ( PROPOSED ACQUISITION OF SHOW PIECE ). (COLLECTIVELY REFERRED TO AS THE PROPOSED ACQUISITIONS ) 1. INTRODUCTION On behalf of the Board of Directors of HIL ( Board ), Mercury Securities Sdn Bhd ( Mercury Securities ) wishes to announce that AMJC, a wholly-owned subsidiary of HIL through Satu Tunas Sdn Bhd and Hil Properties Sdn Bhd, had on 16 January 2017 entered into the following agreements: (i) (ii) a conditional share sale agreement between AMJC and Steven Junior Ng Kwee Leng and Malcolm Jeremy Ng Kwee Seng (collectively, A&M Concrete Vendors ) for the Proposed Acquisition of A&M Concrete ( A&M Concrete SSA ); and a conditional share sale agreement between AMJC and Tan Sri Dato Ng Boon Ng Thian Hock and Dato Milton Norman Ng Kwee Leong (collectively, Show Piece Vendors ) for the Proposed Acquisition of Show Piece ( Show Piece SSA ). Further details of the Proposed Acquisitions are set out in the ensuing sections. 2. INFORMATION ON AMJC AMJC is a wholly-owned subsidiary of Satu Tunas Sdn Bhd, which in turn is a wholly-owned subsidiary of HIL through Hil Properties Sdn Bhd. AMJC was incorporated in Malaysia on 11 April 1984 under the Companies Act, 1965 ( Act ) as a private limited company. As at 6 January 2017, being the latest practicable date prior to this announcement ( LPD ), the authorised share capital of AMJC is RM1,000,000 comprising 1,000,000 ordinary shares of RM1.00 each ( AMJC Shares ), of which RM800,000 comprising 800,000 AMJC Shares have been issued and fully paid up. AMJC is principally a property development and investment holding company and it does not have any subsidiary nor associate company as at the LPD. The directors of AMJC are Dato Milton Norman Ng Kwee Leong and Malcolm Jeremy Ng Kwee Seng. 1

2 3. PROPOSED ACQUISITION OF A&M CONCRETE The Proposed Acquisition of A&M Concrete entails the acquisition by AMJC of 99 ordinary shares of RM1.00 each in A&M Concrete ( A&M Concrete Shares ) for a total purchase consideration of RM22,000,000, which will be paid to the respective A&M Concrete Vendors in proportion to the number of A&M Concrete Shares sold by each of them, details as follows: A&M Concrete Vendors No. of A & M Concrete Shares held No. of A&M Concrete Shares to be acquired by AMJC Purchase consideration (RM) Steven Junior Ng Kwee Leng ,888,889 Malcolm Jeremy Ng Kwee Seng ,111, ,000,000 Under the A&M Concrete SSA, both AMJC and the A&M Concrete Vendors agree that the purchase consideration for the Proposed Acquisition of A&M Concrete shall be payable in the following manner: (a) on the date of A&M Concrete SSA, a sum of RM2,200,000 being ten per centum (10%) of the purchase consideration for the Proposed Acquisition of A&M Concrete; (b) on or before twelve (12) months from the date of the last of the conditions precedent stipulated in the A&M Concrete SSA being fulfilled and satisfied, a sum of RM4,400,000; (c) at the election of the A&M Concrete Vendors, the A&M Concrete Vendors may allow AMJC to settle and pay the balance purchase price of RM15,400,000 by the transfer of properties to the A&M Concrete Vendors and/or their nominees in accordance with Clause 6.02 of the A&M Concrete SSA on or before the A&M Concrete Payment Date (as defined herein) or the extended A&M Concrete Payment Date, as the case may be. In the event that AMJC does not receive any notice of election from the A&M Concrete Vendors at the end of the period stated above, AMJC shall settle and pay the balance purchase price to the A&M Concrete Vendors in cash on or before the A&M Concrete Payment Date or the extended A&M Concrete Payment Date, as the case may be. The A&M Concrete Shares will be transferred to AMJC on the date the last condition precedent under the A&M Concrete SSA is fulfilled and satisfied. The balance purchase price of RM15,400,000 is expected to be paid by AMJC to the A&M Concrete Vendors within thirtysix (36) months from the date the last condition precedent under the A&M Concrete SSA is fulfilled and satisfied ( A&M Concrete Payment Date ). Salient terms of the A&M Concrete SSA are set out in Appendix I of this announcement. 3.1 Information on A&M Concrete A&M Concrete was incorporated in Malaysia on 6 June 2002 under the Act as a private limited company under the name of A&M Utilities Sdn Bhd. It assumed its present name on 31 December As at the LPD, the authorised share capital of A&M Concrete is RM100,000 comprising 100,000 A&M Concrete Shares, of which RM100 comprising 100 A&M Concrete Shares have been issued and fully paid up. 2

3 A&M Concrete is principally a property development company and it commenced operations on 1 October As at the LPD, it does not have any subsidiary nor associate company. The directors and shareholders of A&M Concrete and their respective shareholdings as at LPD are as follows: Name Dato' Ambrose Leonard Ng Kwee Heng Designation / Nationality Director, Malaysian 3 Direct No. of A&M Concrete Shares % Indirect No. of A&M Concrete Shares Steven Junior Ng Kwee Leng Director, Malaysian Malcolm Jeremy Ng Kwee Seng Director, Malaysian A&M Concrete is the registered owner of a parcel of freehold land held under PT No (New Lot 67433) for individual Title No. H.S. (D) 49484, Mukim and District of Klang and State of Selangor Darul Ehsan measuring 175,547 square feet which has been approved for development of 280 units within 3 blocks of apartment units as well as 9 units of stratified 3- storey shops ( Bukit Kemuning Land ). Based on the audited financial statements of A&M Concrete for the financial year ended ( FYE ) 30 September 2015, the net book value of Bukit Kemuning Land is RM5,397,653 as at 30 September The gross development value ( GDV ) and gross development cost ( GDC ) of Bukit Kemuning Land is RM178,635,764 and RM131,740,184 respectively. Development of the Bukit Kemuning Land has commenced in first (1 st ) quarter of 2017 and is expected to be launched in the second (2 nd ) quarter of Further details on A&M Concrete and the Bukit Kemuning Land are set out in Appendix II of this announcement. 3.2 Information on A&M Concrete Vendors Mr. Steven Junior Ng Kwee Leng, aged thirty-six (36), is a major shareholder of HIL by virtue of his parents shareholdings. He is the son of Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman of HIL and brother to Dato Milton Norman Ng Kwee Leong, Managing Director of HIL and Mr Malcolm Jeremy Ng Kwee Seng, Executive Director of HIL. Mr. Steven graduated with Bachelor of Commerce Degree majoring in Finance and Marketing with a minor in Business Law, from University of Western Australia. As at LPD, he is an Executive Director of A&M Realty Berhad. Mr. Malcolm Jeremy Ng Kwee Seng, aged thirty (30), is an Executive Director of HIL. He is also a major shareholder of the Company by virtue of his parents shareholdings. He is the youngest son of Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman of HIL and the youngest brother to Dato Milton Norman Ng Kwee Leong, Managing Director of the Company. Mr. Malcolm graduated with Double Degrees majoring in Accounting and Law from Murdoch University, Western Australia in After graduating, he spent a brief period in MIMB Investment Bank Berhad before joining HIL. As at LPD, he is also a director in A&M Realty Berhad. %

4 3.3 Original Cost and Date of Investment The original cost and date of investment by the A&M Concrete Vendors in A&M Concrete are set out below: Vendors No. of A&M Concrete Share(s) Cost of Investment RM Original Date of Investment Steven Junior Ng Kwee Leng Malcolm Jeremy Ng Kwee Seng January September April September Basis of Determining and Justification for Purchase Consideration of A&M Concrete The purchase consideration for the Proposed Acquisition of A&M Concrete was arrived at on a willing-buyer-willing seller basis after taking into consideration the indicative market value of the Bukit Kemuning Land of RM35,100,000, as appraised by Weise International Property Consultants Sdn Bhd, being the independent valuer appointed for the Proposed Acquisitions ( Independent Valuer ), in its valuation report dated 21 December 2016 ( Valuation Report of Bukit Kemuning Land ). Based on the market value of Bukit Kemuning Land, the net assets ( NA ) of A&M Concrete is adjusted as follows: Amount (RM 000) Latest audited NA of A&M Concrete (1) (39) Add: Net revaluation surplus of Bukit Kemuning Land (2) 22,573 Adjusted NA 22,534 Interest to be acquired by AMJC 99.00% Proportionate share of the adjusted NA 22,309 Purchase Consideration for the Proposed Acquisition of A&M Concrete 22,000 Discount to the proportionate share of adjusted NA 1.39% Notes: (1) Based on the audited financial statements of A&M Concrete for the FYE 30 September (2) Net revaluation surplus is calculated as follows: Amount (RM 000) Market Value of Bukit Kemuning Land 35,100 Less: Audited net book value of Bukit Kemuning Land as at 30 September ,398 Revaluation Surplus 29,702 Less: Deferred Tax of 24% 7,129 Net Revaluation Surplus 22,573 Based on the above, the purchase consideration for the Proposed Acquisition of A&M Concrete represents a discount of approximately 1.39% from the proportionate share of the adjusted NA of A&M Concrete. 4

5 3.5 Source and Breakdown of Funding The purchase consideration for the Proposed Acquisition of A&M Concrete will be entirely satisfied via AMJC s internally generated funds. 3.6 Liabilities to be Assumed Save for obligation and liabilities arising from, pursuant to or in connection with the A&M Concrete SSA, there are no other liabilities, including contingent liabilities and guarantees to be assumed by the Group pursuant to the Proposed Acquisition of A&M Concrete. The A&M Concrete Shares are sold free from all encumbrances and from all other rights exercisable by third parties. 3.7 Additional Financial Commitment Required Save for the future development costs to be incurred on the Bukit Kemuning Land, which are expected to be satisfied via AMJC s internally generated funds, the Board does not foresee any other additional financial commitment required to put in the business of A&M Concrete onstream. The actual development costs to be incurred by AMJC will depend on, among others, time span of the development projects, financing cost as well as cost of raw materials, construction cost and other miscellaneous cost. 4. Proposed Acquisition of Show Piece The Proposed Acquisition of Show Piece entails the acquisition by AMJC of 1,000,000 ordinary shares of RM1.00 each in Show Piece ( Show Piece Shares ) for a total purchase consideration of RM49,000,000, which will be paid to the respective Show Piece Vendors in proportion to the number of Show Piece shares sold by each of them, details as follows: Show Piece Vendors No. of Show Piece Shares held No. of Show Piece Shares to be acquired by AMJC Purchase consideration (RM) Tan Sri Dato Ng Boon Ng Thian Hock Dato Milton Norman Ng Kwee Leong 990, ,000 48,510,000 10,000 10, ,000 1,000,000 1,000,000 49,000,000 Under the Show Piece SSA, both AMJC and the Show Piece Vendors agree that the purchase consideration for the Proposed Acquisition of Show Piece shall be payable in the following manner: (a) on the date of the Show Piece SSA, a sum of RM4,900,000 only being ten per centum (10%) of the purchase consideration for the Proposed Acquisition of Show Piece; (b) on or before twelve (12) months from the date of the last of the conditions precedent stipulated in the Show Piece SSA being fulfilled and satisfied, a sum of RM19,600,000; and 5

6 (d) at the election of the Show Piece Vendor, the Show Piece Vendor may allow AMJC to settle and pay the balance purchase price RM24,500,000 only by the transfer of properties to the Show Piece Vendor and/or their nominees in accordance with Clause 6.02 of the Show Piece SSA on or before the Show Piece Payment Date (as defined herein) or the extended Show Piece Payment Date, as the case may be. In the event that AMJC does not receive any notice of election from the Show Piece Vendors at the end of the period stated above, AMJC shall settle and pay the balance purchase price to the Show Piece Vendors in cash on or before the Show Piece Payment Date or the extended Show Piece Payment Date, as the case may be. The transfer of the Show Piece Shares will be transferred to AMJC on the date the last condition precedent under the Show Piece SSA is fulfilled and satisfied. The balance purchase price of RM24,500,000 is expected to be paid by AMJC to Show Piece Vendors within twenty-four (24) months from the date the last condition precedent under the Show Piece SSA is fulfilled and satisfied ( Show Piece Payment Date ). Salient terms of Show Piece SSA are set out in Appendix III of this announcement. 4.1 Information on Show Piece Show Piece was incorporated in Malaysia on 14 July 1994 under the Act as a private limited company. As at the LPD, the authorised share capital of Show Piece is RM5,000,000 comprising 4,900,000 Show Piece Shares and 100,000 five per cent (5%) Redeemable Convertible Preference Shares, of which RM1,000,000 comprising 1,000,000 Show Piece Shares have been issued and fully paid up. Show Piece is principally an investment holding company and it has a 100% equity interest in Innocentral, details of which are set out in Section 4.2 of this announcement. As at the LPD, the directors of Show Piece and their shareholdings are as follows: Name Tan Sri Dato Ng Boon Ng Thian Hock Dato Milton Norman Ng Kwee Leong Note: Designation / Nationality Director, Malaysian Director, Malaysian Direct No. of Show Piece Shares % Indirect No. of Show Piece Shares 990, ,000 (1) 1 10, ,000 (2) 99 % (1) Deemed interested by virtue of the shareholding of his son, Dato Milton Norman Ng Kwee Leong. (2) Deemed interested by virtue of the shareholding of his father, Tan Sri Dato Ng Boon Ng Thian Hock. [The rest of this page has been intentionally left blank] 6

7 4.2 Information on Innocentral Innocentral is a wholly-owned subsidiary of Show Piece. It was incorporated in Malaysia on 19 September 1997 under the Act as a private limited company. As at the LPD, the authorised share capital of Innocentral is RM500,000 comprising 500,000 ordinary shares of RM1.00 each in Innocentral ( Innocentral Shares ) of which RM250,000 comprising 250,000 Innocentral Shares have been issued and fully paid up. Innocentral commenced operations on 1 March 2009 and it is principally involved in property development. As at the LPD, it does not have any subsidiary nor associate company. The directors of Innocentral and their respective shareholdings as at the LPD are as follows: Name Dato Milton Norman Ng Kwee Leong Designation / Nationality Director, Malaysian Direct No. of Innocentral Shares % Indirect No. of Show Piece Shares ,000 (1) 100 Datin Laura Lee Tsui Sian Director, Malaysian ,000 (2) 100 Steven Junior Ng Kwee Leng Director, Malaysian ,000 (1) 100 Malcolm Jeremy Ng Kwee Seng Director, Malaysian ,000 (1) 100 Datin Jean Gan Yat Ching Director, Malaysian Notes: (1) Deemed interested by virtue of his parents shareholdings in Show Piece. (2) Deemed interested by virtue of her spouse and father-in-law s shareholdings in Show Piece. Innocentral is the registered owner of the following: % (i) (ii) 184 units of double storey terraced house plots (Type 22' x 70'), 126 units of double storey terraced house plots (Type 24' x 80') and 8 units of double storey semi-detached house plots, identified as PT Nos to PT Nos (inclusive) and PT Nos to PT Nos (inclusive) and PT Nos to PT Nos (inclusive) and PT Nos to PT Nos (inclusive), held under Titles Nos HS(D) to HS(D) (inclusive) and HS(D) to HS(D) (inclusive), HS(D) to HS(D) (inclusive) and HS(D) to HS(D) (inclusive), within Mukim and District of Klang, State of Selangor Darul Ehsan measuring 624,219 square feet which has been approved for the development ( Sungai Jati Land I ); and a parcel of vacant residential land erected on Lot No , held under Title No. Geran within Mukim and District of Klang, State of Selangor Darul Ehsan measuring 233,864 square feet ( Sungai Jati Land II ), (collectively referred to as the Sungai Jati Land ). Based on the audited financial statements of Innocentral for the FYE 29 February 2016, the net book value of Sungai Jati Land is RM18,958,262 as at 29 February

8 The GDV and GDC of Sungai Jati Land I is RM196,601,398 and RM98,451,151 respectively. Development of the Sungai Jati Land I is expected to commence in the fourth (4 th ) quarter of 2017 and is expected to be launched in For Sungai Jati Land II, the land is yet to be subdivided and there is no approved development order granted by the authorities. Further details on Show Piece and its subsidiary, Innocentral (collectively, the Show Piece Group ) and the Sungai Jati Land are set out in Appendix IV of this announcement. 4.3 Information on Show Piece Vendors Tan Sri Dato Ng Boon Ng Thian Hock, aged sixty-eight (68), is an Chairman of HIL. He is the major shareholder of the Company and also the father of Dato Milton Norman Ng Kwee Leong, Managing Director of the Company. Tan Sri Dato Ng graduated with an Honours Degree in Civil Engineering from the University of Malaya. He is the founder of the A&M Realty Berhad s group of companies. He began his career in 1970 as an engineer in Perbadanan Urus Air Selangor Berhad before being appointed as a Municipal Councillor for the Selangor Government, State Assemblyman for the Barisan Nasional Party for the Selat Klang and Pandamaran constituencies and a Senator for the Government. As at LPD, Tan Sri Dato Ng is also the Executive Chairman of A&M Realty Berhad. Dato Milton Norman Ng Kwee Leong, aged forty-five (45), is a Managing Director of the Company and member of the Nomination Committee and Remuneration Committee. He is also a major shareholder of the Company by virtue of his parents shareholdings. He is the son of Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman of HIL. As at LPD, Dato Milton is an Executive Director of A&M Realty Berhad. Dato Milton graduated with an Honours Degree in Law from the University of Western Australia in After graduating, he spent nine (9) months doing his pupillage in the legal office of Shearn Delamore and was admitted to the Malaysian Bar as an Advocate and Solicitor in May He spent a further six (6) months in Shearn Delamore before joining HIL in December 1995 as general manager where he was responsible for the day-to-day operations of the Company. 4.4 Original Cost and Date of Investment The original costs and dates of investment by the Show Piece Vendors are set out below: Vendors Tan Sri Dato Ng Boon Ng Thian Hock No. of Show Piece Share(s) Cost of Investment (RM) Original date of investment 990, , July 2001 Dato Milton Ng Kwee Leong 10,000 10, December 2010 [The rest of this page has been intentionally left blank] 8

9 4.5 Basis of Determining and Justification for Purchase Consideration of Show Piece The purchase consideration for the Proposed Acquisition of Show Piece was arrived at on a willing-buyer-willing seller basis after taking into consideration the indicative market value of the Sungai Jati Land of RM90,000,000, as appraised by the Independent Valuer, in its valuation report dated 21 December 2016 ( Valuation Report of Sungai Jati Land ). Based on the market value of Sungai Jati Land, the NA of Show Piece Group is adjusted as follows: Amount (RM 000) Latest audited NA of Show Piece (1) 962 Add: Net revaluation surplus of Sungai Jati Land (2) 53,992 Adjusted NA 54,954 Purchase Consideration for the Proposed Acquisition of Show Piece 49,000 Discount to the adjusted NA 10.83% Notes: (1) Based on the audited consolidated financial statements of Show Piece for the FYE 29 February (2) Net revaluation surplus is calculated as follows: Amount (RM) Market Value of Sungai Jati Land 90,000 Less: Audited net book value of Sungai Jati Land as at 29 February ,958 Revaluation Surplus 71,042 Less: Deferred Tax of 24% 17,050 Net Revaluation Surplus 53,992 Based on the above, the purchase consideration for the Proposed Acquisition of Show Piece represents a discount of approximately 10.83% from the adjusted NA of Show Piece. 4.6 Source and Breakdown of Funding The purchase consideration for the Proposed Acquisition of Show Piece will be entirely satisfied via AMJC s internally generated funds. 4.7 Liabilities to be Assumed Save for obligation and liabilities arising from, pursuant to or in connection with the Show Piece SSA, there are no other liabilities, including contingent liabilities and guarantees to be assumed by the Group pursuant to the Proposed Acquisition II. The Show Piece Shares are sold free from all encumbrances and from all other rights exercisable by third parties. 9

10 4.8 Additional Financial Commitment Save for the future development costs to be incurred on the Sungai Jati Land, which are expected to be satisfied via the AMJC s internally generated funds, the Board does not foresee any other additional financial commitment required to put in the business of Show Piece Group on-stream. The actual development costs to be incurred by AMJC will depend on, among others, time span of the development project, the type of development to be undertaken, financing cost as well as cost of raw materials, construction cost and other miscellaneous cost. 5. RATIONALE FOR THE PROPOSED ACQUISITIONS Presently, HIL and its subsidiaries ( HIL Group or the Group ) has two (2) on-going projects including the development of cluster semi-detached homes and link houses in the Kota Kemuning area, namely Kemuning Greenhills and Kemuning Hijauan 2. As part of its strategic growth, the Group has been scouting for more suitable lands for development. The Proposed Acquisitions will allow the Group to own the Bukit Kemuning Land and the Sungai Jati Land, thereby representing an opportunity for the Group to obtain a firmer foothold in the property market and strengthen the Group s market presence. The Proposed Acquisitions strategically fits into the Group s business strategy to expand its property division and to reduce reliance on the manufacturing segment. Based on the latest audited consolidated financial statements, the Group s manufacturing activities only contributed approximately 70.13% to the total sales for FYE 2015 (FYE 2014: 78.69%), details as set out in the table below: Property Trading, Services Manufacturing Development and Total and Others Management Total Sales (RM 000) % (RM 000) % (RM 000) % (RM 000) % FYE , , , FYE , , , Further, A&M Concrete and Show Piece have obtained the necessary approvals for respective development of the Bukit Kemuning Land and the Sungai Jati Land I. The prospective development projects are expected to contribute positively to the Group s future financial performance thereby enhancing HIL s shareholders value in the future. [The rest of this page has been intentionally left blank] 10

11 6. OUTLOOK AND PROSPECTS 6.1 Outlook of the Malaysia Economy The Malaysian economy expanded by 4.3% in the third quarter of 2016 (2Q 2016: 4.0%), underpinned mainly by continued expansion in private sector spending and additional support from net exports. On the supply side, growth continued to be driven by the major economic sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy recorded a growth of 1.5% (2Q 2016: 0.7%). Overall, domestic demand grew at a more moderate pace, as the sustained growth in private sector activity was more than offset by the slower growth in public spending. Private consumption grew by 6.4% (2Q 2016: 6.3%), supported by continued wage and employment growth as well as the increase in minimum wage affective 1 July Private investment registered a growth of 4.7% in the third quarter (2Q 2016: 5.6%), supported primarily by continued capital spending in the services and manufacturing sectors. Growth of public consumption moderated to 3.1% during the quarter (2Q 2016: 6.5%) due to lower spending on supplies and services, which partially offset the higher spending on emoluments. Public investment growth contracted by 3.8% (2Q 2016: 7.5%), attributable mainly to lower spending on fixed assets by the Federal Government. On the supply side, growth in the third quarter was supported mainly by the services and manufacturing sectors, while the agriculture sector remained weak. The expansion in the services sector was underpinned primarily by private consumption activity, while growth in the manufacturing sector was supported by export-oriented industries. In the construction sector, growth continued to be driven by civil engineering activity, while the mining sector expanded at a faster pace on account of higher crude oil production. Growth in the agriculture sector, however, remained in contraction, attributable largely to the lagged impact on El Nino on crude palm oil (CPO) yields. (Source: Bank Negara Malaysia, Quarterly Bulletin - Third Quarter 2016 Economic and Financial Developments in Malaysia in the Third Quarter of 2016 ) The Malaysian economy is expected to expand between 4% and 5% in 2017 (2016: 4% - 4.5%) with nominal gross national income per capita increasing 5% to RM39,699 (2016: 4.8%; RM37,812). Economic growth will be underpinned by strong domestic demand, especially private sector expenditure. Private sector activity will be supported by pro-growth fiscal and accommodative monetary policies in an environment of stable inflation, which is projected to range between 2% and 3% (2016: 2% - 2.5%). Meanwhile, public sector expenditure will be driven mainly by higher capital investment by public corporations. (Source: Ministry of Finance Malaysia, Economic Report 2016 / 2017) 6.2 Overview and Prospects of the Property Development Industry in Malaysia Market activity recorded 163,527 transactions worth RM64.60 billion in the first half year, down by 12.3% and 15.7% in volume and value against similar half of Residential subsector continued to dominate the market, with 62.4% contribution in volume and 50.5% in value. All sub-sectors recorded softening market volume ranging from -34.5% to -5.3% with the exception of agriculture sub-sector up by 7.3%. Correspondingly, value of transactions also recorded similar downward pattern. (Source: National Property Information Centre, Overview of the Property Market Report First Half 2016) 11

12 Malaysian House Price Index (MHPI) continues to moderate reflecting implementation of various measures to contain spiralling prices. The MHPI stood at points (at base year 2000) during the second quarter of 2016, increasing 5.3%, the lowest since the fourth quarter of 2009 (Q2 2015: points; 7.5%). All states recorded a positive growth except Kelantan (-0.2%) and Sabah (-0.6%). Johor registered the highest increase of 7%, followed by Kuala Lumpur (6.9%), Selangor (6.6%), Kedah (6.5%) and Negeri Sembilan (6.2%). The average allhouse price increased to RM326,241 in the second quarter of 2016 relative to RM309,705 for the corresponding period in 2015, with detached houses recording the highest increase at 6.5%, followed by high rise units (6%) and terrace houses (5.7%). Construction activity in the non-residential subsector grew at a moderate pace of 3% (January June 2015: 19.8%). This was mainly due to a further decline in construction starts, particularly in the industrial (-77.1%), shopping complexes (-43.6%) and shops (-36.5%) segments (January June 2015; -21.5%; 618.7%; 156.7%). The Purpose-Built Office (PBO) segment improved with the incoming supply rebounding 28.4% to 2 million square metres (sm), while planned supply increased sharply by 56% to 1 million sm (January June 2015; -15.9%; 1.6 million sm; 36.6%; 0.7 million sm). Shop segment recorded 6,513 transactions worth RM4.7 billion during the first half of 2016, constituting 56% of total commercial property transactions (January June 2015: 10,045 transactions; RM7.9 billion). Johor contributed the highest market volume of 17.5% followed by Selangor (16.1%). The shop overhang increased 22.6% to 5,204 units valued at RM2.5 billion during the period following a more cautious sentiment among businesses (January June 2015; -14.8%; 4,097 units; RM1.7 billion). However, demand for commercial buildings remained favourable with the average occupancy rate of retail space at 82.2% and office (83.5%), reflecting sustained demand for commercial space in prime areas. As at end- June 2016, the existing stock of shopping complexes and industrial segment stood at 14.2 million sm and 106,453 units, respectively (end- June 2015: 13.4 million sm; 103,103 units). The Purpose Built Office Rent Index Wilayah Persekutuan Kuala Lumpur increased 4% to points in the second quarter of 2016 (Q2 2015: 3.5%; points). Kuala Lumpur City Center recorded the highest rental increase of 4.2% to RM4.73 per square feet (psf), surpassing the average rate of RM4.62 psf in Wilayah Persekutuan Kuala Lumpur. (Source: Ministry of Finance Malaysia, Economic Report 2016 / 2017) The property market outlook for year 2016 is that the volume and value are expected to be sustained amidst accommodative financial environment with the lowering of Overnight Policy Rate (OPR) by 25 basis point to 3.0% in the mid 2016 and implementation of several infrastructure projects which are expected to support the property market. The property market outlook for Selangor is expected to be sustained and promising, backed by various on-going and proposed State Government projects. Under the Selangor Budget 2016, several initiatives have been formulated to ensure that Selangor property market performance sustains. The following developments are expected to create positive impact on the State economy as well as property market growth in the state. Amongst the proposed infrastructure projects that are expected to improve accessibility and connectivity are as follows: i) Damansara-Shah Alam Elevated Expressway (DASH); ii) iii) Interchange of Seri Kembangan Highway Maju Expressway (MEX), will connects Kuala Lumpur and KLIA; East Klang Valley Expressway (EKVE); 12

13 iv) Sungei Besi- Hulu Klang Expressway (SUKE); v) West Cost Expressway from Banting to Taiping; vi) Road upgrading works and Klang third bridge (Phase 1 & 2); vii) viii) Serdang Kinrara- Putrajaya Expressway (SKIP); and The proposed development of MRT Phase 2 from Sungai Buloh to Putrajaya. (Source: Valuation Report of Bukit Kemuning Land and Valuation Report of Sungai Jati Land both dated 21 December 2016) 6.3 Prospects of A&M Concrete and Show Piece HIL Group is expected to benefit from the Proposed Acquisitions as both Bukit Kemuning Land and Sungai Jati Land were ideally situated within the mature and well-develop neighbourhood of Bukit Kemuning. Bukit Kemuning Land is located within established housing schemes namely Bukit Kemuning and located nearby Alam Impian, Kota Kemuning, Bandar Bukit Tinggi, Bandar Botanic and Bandar Puteri. The locality has been fast growing due to available of existing good network of highways such as Shah Alam Expressway (KESAS), Damansara Puchong Expressway (LDP), New Klang Valley Expressway (NKVE), North-South Expressway Central Link (ELITE), Federal Highway and Kemuning Shah Alam Highway (LKSA) as well as established commercial areas. The locality also surrounded by well-established townships and industrial parks which offer various job opportunities to residents of the locality. The interest in the locality has grown stronger with growing demand. Sungai Jati Land is located nearby established housing schemes such as Bukit Kemuning, Alam Impian, Kota Kemuning, Bandar Bukit Tinggi, Bandar Botanic and Bandar Puteri. Sungai Jati Land is accessible from Kuala Lumpur city centre via Lebuhraya Shah Alam (KESAS Highway). The locality has been fast growing due to availability of existing good network of highways as well as established commercial areas. The locality also surrounded by wellestablished townships and industrial parks which offer various job opportunities to residents of the locality. The interest in the locality has grown stronger with growing demand. (Source: Valuation Report of Bukit Kemuning Land and Valuation Report of Sungai Jati Land both dated 21 December 2016) Given the strategic location of the both the Bukit Kemuning Land and the Sungai Jati Land, and taking into consideration the existing state of property market conditions amidst the sustained Malaysia economy, the Board is of the view that both the Bukit Kemuning Land and the Sungai Jati Land has good development potential and prospects. Hence, the Proposed Acquisitions is expected to enhance the Group s future earnings and shareholders value. 7. RISKS FACTORS Prior to the Proposed Acquisitions, the Group has successfully diversified its core business into the property sector. Accordingly, the Group is already subject to risks inherent in the property development industry and the Board does not foresee any material change to the risk profile of the Group s business as a consequence of the Proposed Acquisitions. The Board will continue to mitigate such risks through, inter alia, careful planning and close monitoring of the progress of its development projects. 13

14 The non-exhaustive risk factors in relation to the Proposed Acquisitions are set out below. 7.1 Completion Risk The completion of the Proposed Acquisitions is conditional upon the conditions precedent of the A&M Concrete SSA and Show Piece SSA being fulfilled or waived, details of which are as set out in Appendix I and Appendix III of this announcement respectively. There can be no assurance that such conditions will be fulfilled or waived within the timeframe stipulated in the A&M Concrete SSA and Show Piece SSA. In the event that the condition precedents are not met / waived, the relevant SSA will be terminated and the Proposed Acquisitions will not be completed. Nevertheless, our Board will take reasonable steps to ensure that the conditions precedents are met in a timely manner and that every effort is made to obtain all necessary approvals for the Proposed Acquisitions within the stipulated timeframe. 7.2 Investment Risk The Proposed Acquisitions are expected to contribute positively to the earnings of the Group as a result of future development on the Bukit Kemuning Land and Sungai Jati Land. However, there can be no assurance that the future development projects will generate the expected return on investment as the success and profitability of the prospective developments depend on various factors. To mitigate such risk, the Board has exercised due care in the evaluation of the Proposed Acquisitions. Moving forward, the Board will continuously review and evaluate market conditions, conduct feasibility studies and closely monitor the progress if future development projects. 7.3 Political, Regulatory and Economic Considerations Typically, property industry is cyclical in nature and is more prone to impact from the general economic conditions of Malaysia. Any changes in the economic conditions might affect the supply and demand of properties in Malaysia and hence there can be no assurance that there will be favourable take-up rates for the properties to be developed on the Bukit Kemuning Land and Sungai Jati Land. The property industry is also affected by the uncertainties in political and regulatory conditions such as changes in labour laws, interest rates, fiscal and monetary policies as well as any direct regulation on the property industry. Any adverse developments in political, regulatory and economic conditions in Malaysia could materially affect the property industry in the country. In mitigating such risks, the Board will continue to monitor for any changes in the political, regulatory and economic conditions of Malaysia and take effective measures if necessary, such as prudent financial management and operating procedures in order to adapt to the new changes. Nonetheless, no assurance can be given that any changes to these factors will not have any material adverse effects to the Group s financial performance in the future. 14

15 8. EFFECTS OF THE PROPOSED ACQUISITIONS 8.1 Issued and Paid-Up Share Capital and Substantial Shareholders Shareholdings The Proposed Acquisitions will not have any effect on the share capital and the substantial shareholders shareholding of HIL as the Proposed Acquisitions do not involve any issuance of the new securities by the Company. 8.2 Net assets ( NA ) and Gearing For illustrative purposes only, based on the latest audited consolidated statement of financial position of the Company as at 31 December 2015 and on the assumption that the Proposed Acquisitions had been effected on that date, the pro forma effect of the Proposed Acquisitions on the NA per share and gearing of HIL Group is as follows: Audited as at 31 December 2015 RM After the Proposed Acquisitions RM Share capital 139,357, ,357,072 Share premium 1,280,872 1,280,872 Treasury shares (947,224) (947,224) Capital reserve 308, ,161 Currency translation reserve 5,993,201 5,993,201 Retained profits 162,991, ,654,334 (1) Total equity attributable to the owner of the Company 308,983, ,646,416 Number of shares ( 000) 278,714, ,714,144 NA per share (RM) Borrowings (RM) 1,580,571 1,580,571 Gearing (times) Note: (1) After adjustment for the gain on a bargain purchase of RM 6,263,307 related to Proposed Acquisitions into the retained profits in accordance with Malaysia Financial Reporting Standards ( MFRS ) 3- Business Combinations and after deducting the estimated expenses of RM600,000 to be incurred pursuant to the Proposed Acquisitions. 8.3 Earnings and EPS Based on the expected launching dates of the Bukit Kemuning Land and Sungai Jati Land I, the Proposed Acquisitions are expected to contribute positively to the future earnings of the Group upon development of the prospective development projects. 15

16 9. APPROVALS AND CONSENTS REQUIRED The Proposed Acquisitions are subject to approvals being obtained from the following: (i) (ii) the Company s shareholders at the EGM to be convened; and any other relevant authorities, if required. Details of the conditions precedent for the A&M Concrete SSA and the Show Piece SSA are set out in Appendix I and Appendix III respectively. The Proposed Acquisitions are not conditional upon any other corporate proposals of the Company. 10. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM The interest of directors and major shareholders of HIL as at the date of this announcement are set out in the table below: Name Direct Indirect Director and Major Shareholder of HIL Tan Sri Dato Ng Boon Ng Thian Hock No. of HIL Shares % No. of HIL Shares 25,113, ,708,974 (1) Dato Milton Norman Ng Kwee Leong 6,668, ,483,740 (2) Malcolm Jeremy Ng Kwee Seng 3,575, ,483,740 (2) Major Shareholder of HIL Dalta Industries Sdn Bhd 149,089, ,220 (3) 0.03 Puan Sri Datin Catherine Yeoh Eng Neo Dato Ambrose Leonard Ng Kwee Heng 7,184, ,638,140 (4) ,553, ,483,740 (2) Steven Junior Ng Kwee Leng 3,541, ,483,740 (2) Notes: (1) Deemed interested by virtue of his interest of more than 15% of the total voting shares in Dalta Industries Sdn Bhd and the shareholding of his spouse, Puan Sri Datin Catherine Yeoh Eng Neo, and his sons, Dato Ambrose Leonard Ng Kwee Heng, Dato Milton Norman Ng Kwee Leong, Steven Junior Ng Kwee Leng, and Malcolm Jeremy Ng Kwee Seng. (2) Deemed interested by virtue of his interest of more than 15% of the total voting shares in Dalta Industries Sdn Bhd and the shareholding of his parents, Tan Sri Dato Ng Boon Ng Thian Hock and Puan Sri Datin Catherine Yeoh Eng Neo. (3) Deemed interested by virtue of its substantial shareholdings in A&M Realty Berhad pursuant to Section 6A of the Act. (4) Deemed interested by virtue of her interest of more than 15% of the total voting shares in Dalta Industries Sdn Bhd and the shareholding of her spouse, Tan Sri Dato Ng Boon Ng Thian Hock, and her sons, Dato Ambrose Leonard Ng Kwee Heng, Dato Milton Norman Ng Kwee Leong, Steven Junior Ng Kwee Leng, and Malcolm Jeremy Ng Kwee Seng. % 16

17 Save as disclosed below, none of the directors and/or major shareholders of HIL and/or persons connected with them have any interest, direct or indirect, in the Proposed Acquisitions Interest of Interested Directors and Persons Connected to Them (a) Proposed Acquisition of A&M Concrete Malcolm Jeremy Ng Kwee Seng, the Executive Director and a major shareholder of HIL, is interested in the Proposed Acquisition of A&M Concrete by virtue of him being one of the A&M Concrete Vendors, a director and major shareholder of A&M Concrete. Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman and major shareholder of HIL, is deemed interested in the Proposed Acquisition of A&M Concrete by virtue of him being a person connected with the A&M Concrete Vendors. Dato Milton Norman Ng Kwee Leong, the Managing Director and major shareholder of HIL, is deemed interested in the Proposed Acquisition of A&M Concrete, by virtue of him being a person connected with the A&M Concrete Vendors. (b) Proposed Acquisition of Show Piece Tan Sri Dato Ng Boon Ng Thian Hock, the Chairman and major shareholder of HIL, is interested in the Proposed Acquisition of Show Piece by virtue of him being one of the Show Piece Vendors and a major shareholder of Show Piece. Dato Milton Norman Ng Kwee Leong, the Managing Director and major shareholder of HIL, is interested in the Proposed Acquisition of Show Piece by virtue of him being one of the Show Piece Vendors, a director and shareholder of Show Piece. Malcolm Jeremy Ng Kwee Seng, the Executive Director and a major shareholder of HIL, is interested in the Proposed Acquisition of Show Piece by virtue of him being a director of Innocentral (subsidiary of Show Piece) and a person connected with the Show Piece Vendors; (collectively referred to as the Interested Directors ). The Interested Directors have abstained and will continue to abstain from all deliberations and voting at the relevant Board meetings of the Company on the relevant resolutions pertaining to the Proposed Acquisitions. Further, the Interested Directors will abstain and have also undertaken to ensure that persons connected with them will abstain from voting in respect of their direct and/or indirect shareholdings on the relevant resolutions pertaining to the Proposed Acquisitions at the forthcoming EGM Interests of the Interested Major Shareholders and Persons Connected to Them (a) Proposed Acquisition of A&M Concrete Steven Junior Ng Kwee Leng, a major shareholder of HIL, is interested in the Proposed Acquisition of A&M Concrete by virtue of him being one of the A&M Concrete Vendors, a director and major shareholder of A&M Concrete. 17

18 Dalta Industries Sdn Bhd, a major shareholder of HIL, is deemed interested in the Proposed Acquisition of A&M Concrete by virtue of it being controlled by the A&M Concrete Vendors and persons connected to them. Dato Ambrose Leonard Ng Kwee Heng, a major shareholder of HIL, is interested in the Proposed Acquisition of A&M Concrete by virtue of him being one of the director of A&M Concrete, and a person connected with A&M Concrete Vendors. Puan Sri Datin Catherine Yeoh Eng Neo, a major shareholder of HIL, is deemed interested in the Proposed Acquisition of A&M Concrete by virtue of her being a person connected with the A&M Concrete Vendors. (b) Proposed Acquisition of Show Piece Steven Junior Ng Kwee Leng, a major shareholder of HIL, is interested in the Proposed Acquisition of Show Piece by virtue of him being a director of Innocentral (subsidiary of Show Piece), and a person connected with the Show Piece Vendors. Dalta Industries Sdn Bhd, a major shareholder of HIL, is deemed interested in the Proposed Acquisition of Show Piece by virtue of it being controlled by the Show Piece Vendors and persons connected to them. Dato Ambrose Leonard Ng Kwee Heng, a major shareholder of HIL, is deemed interested in the Proposed Acquisition of Show Piece by virtue of him being a person connected with the Show Piece Vendors. Puan Sri Datin Catherine Yeoh Eng Neo, a major shareholder of HIL, is deemed interested in the Proposed Acquisition of A&M Concrete by virtue of her being a person connected to the vendors of Show Piece Vendors. (collectively referred to as the Interested Shareholders ). The Interested Shareholders will abstain and have also undertaken to ensure that persons connected with them will abstain from voting in respect of their direct and/or indirect shareholdings on the relevant resolutions pertaining to the Proposed Acquisitions at the forthcoming EGM. 11. TRANSACTION WITH THE SAME RELATED PARTY FOR PRECEDING 12 MONTHS There were no transactions entered into by HIL with the Interested Directors and Interested Shareholders including persons connected with them for the preceding twelve (12) months from the date of this announcement. 12. PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Acquisition of A&M Concrete pursuant to paragraph 10.02(g) of the Main Market Listing Requirements ( Listing Requirements ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) is 7.12%, based on the latest audited consolidated financial statements of the Group as at 31 December

19 The highest percentage ratio applicable to the Proposed Acquisition of Show Piece pursuant to paragraph 10.02(g) of the Listing Requirements of Bursa Securities is 15.86%, based on the latest audited consolidated financial statements of the Group as at 31 December Pursuant to Paragraph of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the aggregated percentage ratio applicable to the Proposed Acquisitions is 22.98% based on the latest audited consolidated financial statements of the Group as at 31 December In this regard, HIL is required to issue a circular to its shareholders and seek for shareholders approval for the Proposed Acquisitions at the forthcoming EGM. 13. ADVISERS AND INDEPENDENT ADVISER Mercury Securities has been appointed by HIL to act as its Principal Adviser for the Proposed Acquisitions. In view of the interests of the Interested Directors as set out in the preceding Section 10 of this announcement, the Proposed Acquisitions are deemed as related party transactions pursuant to Chapter 10 of the Listing Requirements. As such, in accordance to Paragraph 10.08(2) of the Listing Requirements, Affin Hwang Investment Bank Berhad has been appointed by the Company as the Independent Adviser ( IA ) to advise the non-interested Directors and the non-interested shareholders of the Company on whether the terms of the Proposed Acquisitions are fair and reasonable so far as the non-interested shareholders are concerned and whether the Proposed Acquisitions are to the detriment of the non-interested shareholders of the Company. 14. STATEMENTS BY THE AUDIT COMMITTEE The Audit Committee is of the opinion that the Proposed Acquisitions are: (i) (ii) (iii) in the best interest of the Company; fair, reasonable and on the normal commercial terms; and not detrimental to the interest of the non-interested shareholders of the Company. In forming its views, the Audit Committee had taken into consideration, amongst others, the following: (i) (ii) (iii) (iv) (v) the rationale of the Proposed Acquisitions as set out in Section 5 of this announcement; the basis of and justification for arriving at the Purchase Consideration of A&M Concrete and Purchase Consideration of Show Piece as set out in Sections 3.4 and 4.5 of this announcement; the prospects of A&M Concrete, Show Piece, Innocentral and the property industry as set out in Sections 6.2 and 6.3 of this announcement; salient terms of A&M Concrete SSA and Show Piece SSA; and the preliminary opinion of the IA. 19

20 15. DIRECTORS RECOMMENDATION The Board (save for the Interested Directors), having considered all aspects of the Proposed Acquisitions, including but not limited to the rationale and effects of the Proposed Acquisitions, the terms and conditions of A&M Concrete SSA and Show Piece SSA, prospects of the property industry, as well as the fairness evaluation of the IA, is of the opinion that the Proposed Acquisitions are in the best interest of the Company. 16. ESTIMATED TIMEFRAME FOR COMPLETION 16.1 Proposed Acquisition of A&M Concrete The A&M Concrete Shares will be transferred to AMJC on the date the last condition precedent under the A&M Concrete SSA is fulfilled and satisfied. The balance purchase price of RM15,400,000 is expected to be paid by AMJC to the A&M Concrete Vendors within thirtysix (36) months from the date the last condition precedent under the A&M Concrete SSA is fulfilled and satisfied Proposed Acquisition of Show Piece The transfer of the Show Piece Shares will be transferred to AMJC on the date the last condition precedent under the Show Piece SSA is fulfilled and satisfied. The balance purchase price of RM24,500,000 is expected to be paid by AMJC to Show Piece Vendors within twenty-four (24) months from the date the last condition precedent under the Show Piece SSA is fulfilled and satisfied. 17. APPLICATIONS TO THE RELEVANT AUTHORITIES Applications to the relevant authorities in relation to the Proposed Acquisitions are expected to be submitted within two (2) months from the date of this announcement. 18. DOCUMENTS AVAILABLE FOR INSPECTION The A&M Concrete SSA, Show Piece SSA, Valuation Report of Bukit Kemuning Land and Valuation Report of Sungai Jati Land are available for inspection at the registered office of the Company at Lot 3, Jalan Lada Sulah 16/11, Section 16, Shah Alam, Selangor Darul Ehsan during normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 16 January