INDUSTRONICS BERHAD ("INDUSTRONICS" OR "THE COMPANY") PROPOSED DISPOSAL OF PROPERTY INTRODUCTION The Board of Directors of Industronics is pleased to announce that Sukitronics Sdn Bhd ( the Vendor ), a 51% owned subsidiary of the Company had on 20 November 2017 entered into a Sale and Purchase Agreement ( SPA ) with GNG DISTRIBUTORS SDN. BHD. (679213-U) ( the Purchaser ) to dispose a 1½ storey light industrial terrace factory held under Lot No. 62066, GRN 215441 in the District of Petaling, State of Selangor, bearing Unit No. 22, Jalan Pendidik U1/31, Hicom Glenmarie Industrial Park, 40150 Shah Alam, Selangor ( the Property ) to the Purchaser for a total consideration of Ringgit Malaysia Five Million and Two Hundred Thousand (RM5,200,000.00) only ( Proposed Disposal ). INFORMATION ON THE VENDOR The Vendor is a company incorporated under the Companies Act, 1965 on 5 October 1990, with its business address at No. 22 Jalan Pendidik U1/31, Section U1, Hicom Glenmarie Industrial Park, 40150 Shah Alam, Selangor Darul Ehsan. The total issued and paid-up share capital of the Vendor is Ringgit Malaysia Five Million (RM5,000,000.00) comprising of 5,000,000 ordinary shares. Its principal activity is design of fire protection system, installation work and mechanical engineering services. The directors and shareholders of the Vendor are: Directors 1. Lim Hock Guan 2. Christian Kwok-Leun Yau Heilesen 3. Liu Wing Yee Amy 4. Leung Kwok Kuen Jacob Share holders No. of Shares 1. Industronics Berhad 2,550,000 (51%) 2. Lim Hock Guan 2,450,000 (49%) INFORMATION ON THE PURCHASER The Purchaser is a company incorporated under the Companies Act, 1965 on 24 January 2005, with its principal place of business at No. 15, Jalan Pendidik U1/31, Seksyen U1, Hicom Glenmarie Industrial Park, 40150 Shah Alam, Selangor. The total issued and paid-up share capital of the Purchaser is Ringgit Malaysia One Million (RM1,000,000.00) comprising of 1,000,000 ordinary shares. Its principal activity is trading & laying of tiles. The directors and shareholders of the Purchaser are: 1
Directors 1. Poh Soon Chin 2. Poh Soon Terng 3. Tan Thiam Lee Share holders No. of Shares 1. Poh Holdings (M) Sdn Bhd 649,999 2. Koridor Kayangan Sdn Bhd 349,999 3. Poh Soon Terng 1 4. Tan Thiam Lee 1 INFORMATION ON THE PROPERTY The particulars of the Property are as follows:- Postal address Title Particulars Type of property Total land area Total built-up area The existing used Age of the Property Land Tenure of independent registered valuer Date & method of valuation Quantification of the market value Net book value based on audited financial statements for the financial year ended 31 December 2016 Encumbrance No. 22, Jalan Pendidik U1/31, Hicom Glenmarie Industrial Park, 40150 Shah Alam, Selangor Lot No. 62066, GRN 215441 in the District of Petaling, State of Selangor 1½ storey light industrial terrace factory approximately 9,644 square feet 16,799 square feet Vacant 20 years Freehold Stocker Roberts and Gupta Sdn Bhd Comparison method on the basis of open market value Date of valuation: 31 December 2016 Open Market Value Revalued amount: RM 5.2 Million Nil BASIS OF ARRIVING AT THE SALE CONSIDERATION The total sale consideration for the Property of RM5.2 million was arrived at on a willing buyer willing seller basis based on highest offer received from interested buyers recommended by an appointed property agent. No independent valuation was carried out on the Property for the purpose of the Proposed Disposal. 2
SALIENT TERMS OF THE AGREEMENT (i) (ii) (iii) The Company is the registered proprietor of the Property. The Property is free from encumbrances and not charged to any bank or financial institution as security for any loan. The said Property is subject to the following express condition(s):- "Perusahaan / Perindustrian" (iv) (v) The Purchaser had on or before the date hereof seen and inspected the said Property and is satisfied with the state and condition thereof. The sale consideration of RM5.2 million shall be settled in the following manners:- Items Amount Period of Payment Earnest Money RM104,000.00 Paid to the Vendor prior to signing of SPA RPGT Retention Sum RM156,000.00 To be paid to Ketua Pengarah Lembaga Hasil Dalam Negeri Real Estate Commission RM104,000.00 To be paid to the Vendor s agent Balance Deposit RM156,000.00 To be held by Vendor s solicitors as stakeholder Balance Purchase Price RM4,680,000.00 Within three (3) calendar months from the SPA s Date ( Completion Date ) with an extension of one (1) calendar month with an interest rate of eight per centum (8.00%) per annum calculated on a daily basis from the day next following the expiry of the Completion Date until the date of full payment LIABILITIES AND GUARANTEE TO BE ASSUMED There is no specific liability, contingent liability or guarantees to be assumed by the Company and the Purchaser arising from the Proposed Disposal. UTILISATION OF PROCEEDS The Proposed Disposal is expected to result in a loss on disposal of approximately RM0.158 million after taking into consideration the audited net carrying amount of the Property, real estate commission, real property gain tax and professional fees. Part of the proceeds from the Proposed Disposal amounting to RM4,000,000.00 will be distributed to the shareholders of the Vendor as return of capital in accordance with the proposed share capital reduction exercise to be carried out by the Vendor and the balance of proceeds to be remitted to the Vendor. The proceeds from the Proposed Disposal will be utilised for the working capital such as payment for trade and other creditors, salaries and other operating expenses of the Industronics and its subsidiaries ( Group ) and the expected timeframe for full utilisation of the said proceeds is within six (6) months from the completion date of the Proposed Disposal. The Company has not determined the proportion of the sale consideration to be used for the working capital at this juncture. 3
ORIGINAL COST OF INVESTMENT The Company acquired the Property on 3 rd October 1995 for RM960,000.00. RATIONALE FOR THE PROPOSED DISPOSAL The Property are previously used by the subsidiary of the Company, namely Sukitronics Sdn. Bhd., which has become dormant since the end of 2016. As such, the Property is no longer required for the Group s usage. Further, the Proposed Disposal will enable the Company to unlock the value of the Property, thus enhancing the financial position of the Company. The Proposed Disposal will also enable the Company to raise proceed for its working capital requirements without incurring interest cost as opposed to bank borrowings. CASH COMPANY OR PRACTICE NOTE ( PN ) 17 COMPANY The Proposed Disposal is not expected to result in Industronics becoming a cash company or PN17 company. ESTIMATED TIMEFRAME FOR COMPLETION Barring unforeseen circumstances, the Proposed Disposal is expected to be completed within three (3) calendar months from the SPA s Date. FINANCIAL EFFECTS AND CONDITION(S) OF THE PROPOSED DISPOSAL (i) Share Capital and Substantial Shareholders' Shareholdings The Proposed Disposal is not expected to have any effect on the share capital and substantial shareholders' shareholdings in Industronics as the Proposed Disposal does not involve any issuance of new shares of the Company. (ii) Earnings per share ("EPS") Upon completion of the Proposed Disposal, a loss on disposal of approximately RM0.158 million will be reflected in the Company s consolidated financial statements for the financial year ending 31 December 2017. The amount is not expected to have any material effect on earnings per share. (iii) Net Assets ("NA") and gearing The Proposed Disposal is not expected to have any material effect on net assets and gearing. RISK FACTORS Save for the approvals required prior to the completion, the Board of Directors of Industronics is not aware of any risk factors arising from the Proposed Disposal. 4
APPROVAL REQUIRED The Proposed Disposal does not require the approval of any government authority or Industronics shareholders. HIGHEST PERCENTAGE RATIO Based on Industronics Group s Audited Financial Statements for the financial year ended 31 December 2016, the highest percentage ratio pursuant to paragraph 10.02(g) of the Bursa Securities Main Market Listing Requirements that is applicable to the said Proposed Disposal is 14.66%. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST To the best knowledge of the directors, none of the directors, major shareholders or persons connected to directors and major shareholders of the Company has any interest, direct or indirect, in the Proposed Disposal. STATEMENT BY THE BOARD OF DIRECTORS The Board, having considered all relevant aspects of the Proposed Disposal including but not limited to the rationale and the effects of the Proposed Disposal, is of the opinion that the Proposed Disposal is in the best interest of Industronics Group and its shareholders. DOCUMENTS AVAILABLE FOR INSPECTION The SPA can be inspected at the principle place of business of Industronics at No. 9, Jalan Taming 3, Taman Tanming Jaya, 43300 Seri Kembangan, Selangor Darul Ehsan during the 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 20 November 2017. 5