1. INTRODUCTION The Board of Directors of the Company wishes to announce that Rhone Ma Malaysia Sdn. Bhd. ( RMM ), a wholly-owned subsidiary of the Company, had on 1 August 2017 entered into a Sale and Purchase Agreement ( Agreement ) with Klanggroup Development Sdn. Bhd. (Company No. 1014494-X) ( Vendor or Klanggroup ) for the acquisition of a semi-detached factory comprising one (1) mezzanine (store) and two (2)-storey office, bearing postal address known as No. 21, Jalan Wawasan 2C/KU7, Sungai Kapar Indah, 42200 Klang, Selangor Darul Ehsan ( Property ) for an aggregate cash consideration of RM5,588,000.00 ( Purchase Consideration ) ( Acquisition ). 2. DETAILS OF THE ACQUISITION 2.1 Information of the Property The Property is located within Excellent Technology Park III, a light industrial development in Daerah Klang, Selangor Darul Ehsan. Further details of the Property are set out below: Description Lot details : A semi-detached factory comprising one (1) mezzanine (store) and two (2)-storey office distinguished as Unit No. 21, Type KB 2, with lift : HS (D) 158399, No. PT 75672, Mukim Kapar, Daerah Klang, Selangor Darul Ehsan Postal address : No. 21, Jalan Wawasan 2C/KU7, Sungai Kapar Indah, 42200 Klang, Selangor Darul Ehsan Tenure Registered owner : Freehold : Klanggroup Approximate age : Not applicable as the construction was completed in 2017 Existing use Proposed use Land area Built up area Net book value Encumbrances : Vacant : Warehouse and office : 1,750.4 square metres : 14,616.0 square feet : Not applicable : Nil Page 1
2.2 Salient terms of the Agreement 2.2.1 Payment of Purchase Consideration The Purchase Consideration shall be paid by RMM in the following manner: (i) (ii) (iii) Upon execution of the Agreement, RMM shall pay to the Vendor, the sum of RM558,800.00, being payment of the deposit ( Deposit Sum ). The Deposit Sum shall in the event of the completion of the sale and purchase form part payment towards the Purchase Consideration. RMM shall also pay to the Vendor a further sum of RM558,800.00, being further payment towards the Purchase Consideration. Within three (3) months from the date of the Agreement ( Completion Date ), RMM shall pay the balance sum of RM4,470,400.00 to the Vendor ( Balance Purchase Consideration ). In the event that RMM fail to pay the Balance Purchase Consideration within the Completion Date, the Vendor shall grant RMM an extension of one (1) month from the expiry date of the Completion Date to pay the Balance Purchase Consideration. Provided always that RMM shall pay to the Vendor interest calculated on the Balance Purchase Consideration or any balance thereof at the rate of eight per centum (8%) per annum calculated on a day to day basis from the date of expiry of the Completion Date until the receipt of full payment by the Vendor. 2.2.2 Delivery of vacant possession (i) (ii) (iii) Vacant possession of the Property shall be delivered by the Vendor to RMM within seven (7) days from the date the Vendor is in receipt of the payment of the Balance Purchase Consideration and all monies due to the Vendor under the Agreement including but not limited to apportionment of outgoings and late interest payment by RMM s solicitors. Upon the expiry of seven (7) days mentioned above, whether or not RMM has actually entered into possession or occupation of the Property, RMM is deemed to have taken vacant possession or occupation of the Property and thereafter any losses or damages to the Property or any part thereof including the fixtures and fittings therein (if any) shall be entirely at the risk of and be solely borne by RMM. If delivery of vacant possession of the Property to RMM is prevented or delayed by any reason of the default on RMM in the payment of any sums due under the Agreement (other than the Purchase Consideration), any loss and / or damage to the Property shall be entirely at the risk of and the sole responsibility of RMM as at the date the full Purchase Consideration is received by the Vendor. Page 2
2.2.3 As is where is The Property is a completed unit with Certificate of Completion and Compliance duly issued by the relevant authorities. The Property shall be deemed to have been inspected by RMM prior to the execution of the Agreement and RMM shall be deemed to have purchased and accepted the Property in the condition and state in which the same is at the date of the Agreement and RMM shall not be entitled to rescind the Agreement or make any claim for compensation or reduction of the Purchase Consideration or claim for any damages in respect of the condition or state of the Property. 2.2.4 Default by RMM In the event of RMM failing to pay the Balance Purchase Consideration in accordance with the provisions hereof, the Deposit Sum shall be forfeited by the Vendor absolutely as liquidated damages and the Vendor shall forthwith refund free of interest any other sums thence to fore received by the Vendor from RMM and against such refund, RMM shall redeliver to the Vendor vacant possession of the Property (if delivered) together with all security documents with the Vendor s interest intact and relevant documents that may have been forwarded by the Vendor to RMM or RMM s solicitors prior to the termination of the Agreement and provided always that RMM has at its own cost and expense withdraw, remove or cause to be withdrawn or removed all encumbrances, including but not limited to caveat and prohibitory orders attributable to RMM, its financier and or any person(s) claiming through or under them and whereupon the Agreement shall terminate and be of no further effect and neither parties hereto shall have any claim against the other and the Vendor shall be at liberty to re-sell the Property either by public auction / by private contract and at such time and place and subject to such conditions and in such manner as the Vendor shall think fit without the necessity of previously tendering / offering to make any sale to RMM. 2.2.5 Default by Vendor In the event of default by the Vendor to complete the sale after RMM has complied with the terms and conditions, RMM shall be entitled to terminate the Agreement and in which event RMM shall be entitled to claim a sum equivalent to the Deposit Sum as liquidated damages from the Vendor and a refund of all moneys paid towards the account of the Purchase Consideration pursuant to the provisions of the Agreement and against such payment and refund, RMM shall redeliver or cause to be redelivered to the Vendor vacant possession of the Property (if delivered) together with all security documents with the Vendor s interest intact and all other relevant documents that may have been forwarded by the Vendor to RMM or RMM s solicitors prior to the termination of the Agreement and provided always that RMM has at its own cost and expense withdraw, remove or cause to be withdrawn or removed all encumbrances, including but not limited to caveat and prohibitory orders attributable to RMM, its Financier and or any person(s) claiming through or under them and thereafter the Agreement shall deemed null and void and neither party shall have any further claim against the other save and except for any antecedent breach of the Agreement. Page 3
2.3 Basis and justification of arriving at the Purchase Consideration The Purchase Consideration for the Acquisition of RM5,588,000.00 was arrived at on a willing-buyer willing-seller basis based on the developer s price of the Property within Excellent Technology Park III. 3. INFORMATION ON KLANGGROUP Klanggroup was incorporated on 17 August 2012 in Malaysia under the Companies Act, 1965. As at 1 August 2017, the issued share capital of Klanggroup is RM2,500,000 comprising 2,500,000 ordinary shares. Klanggroup is principally engaged in property development. As at 1 August 2017, the Directors and shareholders of Klanggroup are as follows:- Directors: 1. Gan Thiam Kok 2. On Boon Seng 3. Lee Chang Soo 4. Ong Kwee Lee 5. Ng Keng Hoe Shareholders: Shareholders No. of ordinary shares held % Klanggroup Holdings Sdn Bhd 1,800,000 72.00 Stability Resources Sdn Bhd 250,000 10.00 Ng Keng Hoe 450,000 18.00 4. SOURCE OF FUNDING The Acquisition will be financed through a combination of internally generated funds and bank borrowings. The exact mix of the internally generated funds and bank borrowings will be decided by the management at a later stage taking into consideration the gearing level, interest costs as well as internal cash requirements for the business operations of RMH and its subsidiaries ( Group ). 5. ASSUMPTION OF LIABILITIES Save for the obligations and liabilities in and arising from or in connection with the Agreement, there are no other liabilities, including contingent liabilities and guarantees to be assumed by the Group as a result of the Acquisition. Page 4
6. RATIONALE FOR THE ACQUISITION AND PROSPECTS OF THE PROPERTY The Acquisition is in line with the Group s future plans which include the expansion of the existing range of food ingredients as it allows the Group to cater to the increasing storage needs of food ingredients. In addition, the Group may house the manufacturing facility for food ingredients in the Property, should the Group decides to venture into the manufacturing of food ingredients in the future. Excellent Technology Park III is a light industrial development well-equipped with infrastructures and strategically located within Klang-Meru-Kapar in Klang Valley. It is easily accessible through NKVE highway and it also provides easy access to the city, port and airport. Premised on the above, the Board of Directors is of the opinion that the Acquisition will contribute positively to the business operations and future earnings of the Group. 7. RISK FACTORS 7.1 Non-completion of the Acquisition The completion of the Acquisition is subject to the fulfillment of all terms and conditions under the Agreement. In the event that RMM breach such terms and conditions, the Vendor may terminate the Agreement and the Acquisition will not be completed. Notwithstanding the above, RMM will take all reasonable steps to ensure all terms and conditions under the Agreement are fulfilled to complete the Acquisition. 7.2 Financing risk The Group intends to finance the Acquisition through a combination of internally generated funds and bank borrowings. Utilisation of internally generated funds may result in a reduction of funds available for working capital purposes whereas obtaining additional bank borrowings may increase the borrowings and gearing level of the Group. As such, the Acquisition may have an adverse effect on the cash flow position of the Group. Further, the Group may incur interest expense on the bank borrowings to be obtained. In view that the interest charged on bank borrowings is depending on prevailing interest rates, future fluctuation in interest rates could materially affect the Group s cash flows and profitability. Nevertheless, the Group shall use its best endeavours to manage its cash flow position and funding requirements. Page 5
8. EFFECTS OF THE ACQUISITION 8.1 Share capital and substantial shareholders shareholdings The Acquisition will not have any effect on the total issued shares and substantial shareholders shareholdings of the Company as it does not involve any issuance of new ordinary shares in the Company. 8.2 Net assets ( NA ) per share and gearing The Acquisition will not have any material effect on the NA and NA per share of the Group as at 31 December 2017. As set out in Section 4, the Acquisition will be funded through a combination of internally generated funds and bank borrowings of which the final composition of the funding will be determined by the management at a later stage. For illustrative purposes, assuming that 90% of the Purchase Consideration amounting to approximately RM5.03 million is funded by bank borrowings and that the Acquisition had been completed as at 31 December 2016, the pro forma effects of the Acquisition on the consolidated NA and gearing of RMH based on the audited financial statements of RMH as at 31 December 2016 are as follows: As at 31 December 2016 After the Acquisition Share capital 83,000,000 83,000,000 Reserves 12,163,053 12,163,053 Total equity 95,163,053 95,163,053 Borrowings 5,243,625 10,272,825 (a) Gearing (times) 0.06 0.11 Note: RM RM (a) Assuming 90% of the Purchase Consideration amounting to RM5,029,200 is funded by bank borrowings. 8.3 Earnings per share The Acquisition is not expected to have any material effects on the earnings and earnings per share of the Group for the financial year ending 31 December 2017. Page 6
9. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS OR PERSON CONNECTED WITH THEM None of the directors and/or major shareholders of the Company and/or any persons connected with them have any interest, direct or indirect, in the Acquisition. 10. STATEMENT BY BOARD OF DIRECTORS The Board of Directors of the Company, having considered and all aspects of the Acquisition, including but not limited to the rationale, terms and conditions of the Agreement, financial effects and risks associated with the Acquisition, is of the opinion that the Acquisition is in the best interest of the Group. 11. HIGHEST PERCENTAGE RATIO APPLICABLE The highest percentage ratio applicable to the Acquisition pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 5.87% based on the latest audited consolidated financial statements of the Company for the financial year ended 31 December 2016. 12. APPROVALS REQUIRED The Acquisition is not subject to the approval of RMH s shareholders and any other relevant authorities. 13. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Acquisition is expected to be completed within three (3) months from the date of the Agreement. 14. DOCUMENTS FOR INSPECTION The Agreement is available for inspection at the registered office of RMH at Lot 6.05, Level 6, KPMG Tower, 8, First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan during normal business hours on Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 1 August 2017. Page 7