Investment Advice

PROPOSED ACQUISITION OF ENTIRE EQUITY INTEREST IN SERATA EHSAN SDN BHD AND 45% EQUITY INTEREST IN SERI DELIMA ANGGUN SDN BHD

GAGASAN NADI CERGAS BERHAD (“GNCB”) HAS ENTERED INTO CONDITIONAL SHARE SALE AGREEMENTS TO ACQUIRE 100% OF SERATA EHSAN SDN BHD (“SESB”) FOR A CASH CONSIDERATION OF RM80.0 MILLION AND 45% OF SERI DELIMA ANGGUN SDN BHD (“SDASB”) FOR A CASH CONSIDERATION OF RM47.25 MILLION. THE VENDORS ARE CHONG NGU CHONG AND LIM ENG KEONG (SESB), AND HJ ZULKIFLI BIN ABDUL (SDASB). BOTH ACQUISITIONS WILL BE SETTLED FULLY IN CASH, THROUGH A COMBINATION OF INTERNAL FUNDS AND NEW FUNDRAISING VIA SUKUK/DEBT.

THE FAIR VALUE OF THE TARGET INTERESTS, INDEPENDENTLY APPRAISED BY ASIA EQUITY RESEARCH SDN BHD (“AER”) USING THE FREE CASH FLOW TO EQUITY (FCFE) METHODOLOGY, WAS DETERMINED WITHIN A RANGE OF APPROXIMATELY RM127.0 MILLION TO RM130.47 MILLION FOR 100% OF SESB AND 45% OF SDASB. THE VALUATION UTILIZED AN EQUITY DISCOUNT RATE OF 9.16% TO 9.66% BASED ON MALAYSIAN CONCESSION SECTOR BENCHMARKS, WITHOUT ASSUMING A TERMINAL VALUE, AND INVOLVED A SUM-OF-PARTS AGGREGATION OF FCFE FOR SEVEN CONCESSION-ASSET HOLDING POLYTECHNIC SUBSIDIARIES. THE VALUATION ALSO INCLUDED RELATIVE MARKET MULTIPLES CROSS-CHECKS WITH BURSA MALAYSIA-LISTED ASSET MANAGEMENT AND CONCESSION COMPANIES.

UPON COMPLETION, GNCB WILL SECURE AN EFFECTIVE 69.44% INTEREST IN THE KPSSB GROUP, THE ULTIMATE HOLDING ENTITY OF THE SEVEN POLYTECHNIC HOSTEL CONCESSIONS.

PROPOSED ACQUISITION OF A 24% EQUITY INTEREST IN SOLID POINT PRECISION MANUFACTURING SDN BHD

EDELTEQ HOLDINGS BERHAD HAS ENTERED INTO A CONDITIONAL SHARE SALE AND SUBSCRIPTION AGREEMENT TO ACQUIRE AND SUBSCRIBE FOR AN AGGREGATE OF 24% OF SOLID POINT PRECISION MANUFACTURING SDN. BHD. FOR A TOTAL CASH CONSIDERATION OF RM20.736 MILLION. THE VENDOR IS LIPO PRECISION INDUSTRY PTE LTD, A SINGAPORE-BASED MANUFACTURER OF PRECISION ENGINEERED PARTS. THE INVESTMENT WILL BE SETTLED FULLY IN CASH, FUNDED THROUGH A MIX OF INTERNAL FUNDS AND BANK BORROWINGS.

THE FAIR VALUE OF THE 24% EQUITY INTEREST, INDEPENDENTLY APPRAISED BY ASIA EQUITY RESEARCH SDN. BHD. USING THE FREE CASH FLOW TO FIRM (FCFF) APPROACH, WAS ASCRIBED WITHIN A FAIR VALUE RANGE OF RM19.56 MILLION TO RM21.06 MILLION. THE VALUATION APPLIED A WEIGHTED AVERAGE COST OF CAPITAL OF 10.49%, DISCOUNT FOR LACK OF MARKETABILITY (DLOM) OF 30%, AND DISCOUNT FOR LACK OF CONTROL (DLOC) OF 30–35%, SUPPORTED BY RELATIVE VALUATION CROSS-CHECKS ON COMPARABLE BURSA-LISTED PRECISION ENGINEERING COMPANIES.

APPRAISING THE FAIR VALUE OF THE ENTIRE EQUITY INTEREST IN JENTAYU SOLAR AND ISSUED AN INDEPENDENT VALUATION CERTIFICATE.

AER USED THE INCOME APPROACH (FREE CASH FLOW TO FIRM METHOD, FCFF) TO VALUE JENTAYU SOLAR, RESULTING IN A FAIR VALUE RANGE OF RM11.31 MILLION TO RM11.55 MILLION FOR THE ENTIRE COMPANY. THE CONSIDERATION PAID FOR 51% (RM5.87 MILLION) AND THE CALL OPTION PRICE FOR THE REMAINING 49% (RM5.64 MILLION) WERE BENCHMARKED AGAINST THIS VALUATION. THE KEY BASIS BEING THAT WACC (5.90%) AND EQUITY DISCOUNT RATE (13.36%), BASED ON MANAGEMENT’S PROJECTED CASH FLOWS AND SECTOR BENCHMARKS, TO REACH ITS VALUATION ASSESSMENT.

JENTAYU SUSTAINABLES BERHAD ("JSB") IS THE ACQUIROR, ACQUIRING A 51% EQUITY INTEREST IN JENTAYU SOLAR SDN BHD FOR RM5.87 MILLION VIA A SET-OFF ARRANGEMENT, WITH AER ACTING AS THE INDEPENDENT VALUER TO DETERMINE THE FAIR VALUE OF THE ASSET.

SUMMARY OF TRANSACTION PARTIES

ACQUIROR: JSB

ACQUIREE ASSET: JENTAYU SOLAR SDN BHD (A COMPANY PRINCIPALLY INVOLVED IN SOLAR POWER GENERATION WITH AN OPERATING SOLAR PHOTOVOLTAIC FACILITY IN KEDAH, MALAYSIA)

PERCENTAGE ACQUIRED: 51% EQUITY INTEREST (1,530,000 ORDINARY SHARES OUT OF 3,000,000 TOTAL SHARES)

CONSIDERATION AND PAYMENT METHOD

CONSIDERATION: RM5.87 MILLION FOR THE 51% EQUITY STAKE

METHOD OF PAYMENT: THE PAYMENT IS MADE ENTIRELY VIA A SET-OFF ARRANGEMENT. THIS MEANS THE SUM IS SET OFF AGAINST REFUNDABLE CASH DEPOSITS PREVIOUSLY PAID BY JSB TO JENTAYU CAPITAL (THE VENDOR) RELATING TO ANOTHER DEAL (THE TERMINATED ACQUISITION OF HYDRO ASSETS). NO ADDITIONAL CASH OUTFLOW IS REQUIRED FOR THIS PORTION.

APPRAISING THE FAIR VALUE OF 60% EQUITY INTEREST IN SHAPADU ENERGY SDN BHD.

ACQUIROR: GFM SERVICES BERHAD (“GFM”)

VENDOR: SHAPADU CORPORATION SDN BHD (“SPC”)

TARGET ASSET: 60,000 ORDINARY SHARES IN SHAPADU ENERGY SDN BHD ("SHAPADU ENERGY") REPRESENTING 60% EQUITY INTEREST. SHAPADU ENERGY OWNS 60% EQUITY INTEREST IN SHAPADU CORPORATION SDN BHD ("SCRA") AND 40% BENEFICIAL OWNERSHIP OF EQUITY INTEREST IN SCRA.

PURCHASE CONSIDERATION: RM30.00 MILLION, TO BE SATISFIED ENTIRELY VIA CASH

ADDITIONAL TERMS: GFM GRANTS SPC A CONDITIONAL CALL OPTION TO REPURCHASE 15% EQUITY INTEREST IN SHAPADU ENERGY FOR RM10.00 MILLION, EXERCISABLE WITHIN 24 MONTHS FROM COMPLETION.

INDEPENDENT ADVISER TO NON-INTERESTED SHAREHOLDERS OF SEDANIA INNOVATOR BERHAD REGARDING A PROPOSED PRIVATE PLACEMENT OF UP TO 20% OF ISSUED SHARES AT A PRICE TO BE DETERMINED, AND AN INTENDED ACQUISITION OF AN ADDITIONAL 29% EQUITY IN OFFSPRING INC SDN BHD FOR RM17.4 MILLION IN CASH.

INDEPENDENT ADVICE LETTER TO THE NON-INTERESTED SHAREHOLDERS IN RELATION TO A PROPOSED ACQUISITION THAT INVOLVES NESTCON (PURCHASER) ACQUIRING THREE UNITS OF OFFICE SPACE WITHIN A MIXED DEVELOPMENT KNOWN AS "NEST 2 RESIDENCES" (SUBJECT PROPERTIES) FROM NESTCITY CERMERLANG (VENDOR)