THIS THISTHIS CIRCULAR CIRCULARCIRCULAR ISISIS IMPORTANTIMPORTANTIMPORTANT ANDANDAND REQUIRESREQUIRESREQUIRES YOURYOURYOUR IMMEDIATEIMMEDIATEIMMEDIATE ATTENTION.ATTENTION.ATTENTION. THISTHIS CIRCULAR CIRCULAR ISIS IMPORTANTIMPORTANT ANDAND REQUIRESREQUIRES YOURYOUR IMMEDIATEIMMEDIATE ATTENTION.ATTENTION. If you are in any doubt as to the course of action to be taken,taken, youyou shouldshould consultconsult youryour stockbroker,stockbroker, bankbank manager,manager, solicitor,If you are accountant in any doubt or otheras to theprofessional course of advisers action to immediately. be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. IfIf THIS youyou havehaveCIRCULAR soldsold oror IStransferredtransferred IMPORTANT allall youryour AND ordinaryordinary REQUIRES sharesshares YOURinin MeMenang IMMEDIATE Corporation ATTENTION. (M) Berhadrhad (“MCB” (“MCB” oror “the“the Company”),Company”), youyou shouldshould atIf onceyou have hand sold this orcircular transferred to shareholders all your ordinary (“Circular”) shares and in theMe nangaccompanying Corporation Proxy (M) FoBermrhad to (“MCB”the agent or through“the Company”), whom you you effected should atIf onceyou arehand in this any circular doubt to as shareholders to the course (“Circular”) of action and to the be accompanying taken, you should Proxy Foconsultrm to the your agent stockbroker, through whom bank you manager, effected theat oncesale orhand transfer this circular for onward to shareholders transmission (“Circular”) to the purchaser and the or accompanying transferee. Proxy Form to the agent through whom you effected thesolicitor, sale or accountanttransfer for onward or other transmission professional to the advisers purchaser immediately. or transferee. the sale or transfer for onward transmission to the purchaser or transferee. the sale or transfer for onward transmission to the purchaser or transferee. Bursa Malaysia Securities Berhad (“Bursa Securities") takes no responsibility for its contents, makes no representation as to its BursaIf you Malaysiahave sold Securities or transferred Berhad all (“Bursayour ordinary Securities") shares takes in Me nonang responsibility Corporation for (M) its Be contents,rhad (“MCB” makes or “theno representationCompany”), you as should to its accuracyBursa Malaysia or completeness Securities andBerhad expressly (“Bursa disclaims Securities") any liabilitytakes no whatsoever responsibility for anyfor lossits contents, howsoever makes arising no from representation or in reliance as upto onits accuracyat once hand or completeness this circular toand shareholders expressly disclaims (“Circular”) any andliability the whatsoeveraccompanying for Proxyany loss Form howsoever to the agent arising through from orwhom in reliance you effected upon theaccuracy whole oror completenessany part of the and contents expressly of this disclaims Circular. any liability whatsoever for any loss howsoever arising from or in reliance upon thethe wholesale or or transfer any part for of onward the contents transmission of this Circular.to the purchaser or transferee. the whole or any part of the contents of this Circular. the whole or any part of the contents of this Circular.
Bursa Malaysia Securities Berhad (“Bursa Securities") takes no responsibility for its contents, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular.
MENANG CORPORATION (M) BERHAD MENANG CORPORATION(Company(Company No.No. 5383-K)5383-K) (M) BERHAD (Company No. 5383-K) (Incorporated(Incorporated inin MalaysiaMalaysia(Company underunder No. the the5383-K) CompaniesCompanies Act,Act, 1965)1965) (Incorporated in Malaysia under the Companies Act, 1965) (Incorporated in Malaysia under the Companies Act, 1965) MENANG CORPORATION (M) BERHAD
CIRCULAR(Company TO SHAREHOLDERS No. 5383-K) (IncorporatedCIRCULAR in Malaysia TO under SHAREHOLDERS the Companies Act, 1965)
IN RELATION TO THE IN RELATION TO THE CIRCULAR TO SHAREHOLDERS
PROPOSED BONUS ISSUE OF 133,553,500IN RELATION WARRANTS TO THE IN MCB (“WARRANTS”) ON PROPOSED BONUS ISSUE OF 133,553,500 WARRANTS IN MCB (“WARRANTS”) ON THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) EXISTING ORDINARY THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) EXISTING ORDINARY SHARES OF RM0.50 EACH IN MCB HELD ONON ANAN ENTITLEMENTENTITLEMENT DATEDATE TOTO BEBE SHARES OF RM0.50 EACH IN MCB HELD ON AN ENTITLEMENT DATE TO BE DETERMINEDPROPOSED BONUS LATER ISSUE OF 133,553,500 WARRANTS IN MCB (“WARRANTS”) ON DETERMINED LATER THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) EXISTING ORDINARY
SHARES OF RM0.50 EACH IN MCB ANDHELD ON AN ENTITLEMENT DATE TO BE AND DETERMINED LATER
NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICE OF EXTRAORDINARYAND GENERAL MEETING
NOTICE OF EXTRAORDINARYAdviser GENERAL MEETING Adviser
Adviser
M&A SECURITIES SDN BHD (15017-H) M&A(A(A Wholly-OwnedWholly-OwnedSECURITIES SubsidiarySubsidiary SDN BHDofof InsasInsas (15017-H) Berhad)Berhad) (A(A ParticipatingParticipating(A Wholly-Owned OrganisationOrganisation Subsidiary ofof Bursa Malaysia of Insas Securities Berhad) Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad)
The Notice convening the ExtraordinaryM&A General SECURITIES Meeting (“EGM”) SDN of MCB BHD in respect(15017-H) of the proposal to be held at Canada Place, TheThe NoticeNotice conveningconvening thethe ExtraordinaryExtraordinary GeneralGeneral(A Wholly-Owned MeetingMeeting (“EGM”)(“EGM”) Subsidiary ofof MCBMCB of Insasinin respectrespect Berhad) ofof the the proposalproposal toto bebe heldheld atat CanadaCanada Place,Place, LevelThe Notice2, North convening Block, Wisma the Extraordinary Selangor Dredging, General 142D Meeting Jalan (“EGM”) Ampang, of 50450MCB in Kuala respect Lumpur of the on proposal Friday, 20to beJune held 2014 at Canadaat 10.00 Place, a.m. togetherLevelLevel 2,2, NorthNorthwith the Block,Block, Proxy WismaWisma Form SelangorSelangor are (Aenclosed Participating Dredging,Dredging, in this 142D142DOrganisation Circular. JalanJalan Ampang,Ampang, of Bursa 5045050450 Malaysia KualaKuala Securities LumpurLumpur Berhad) onon Friday,Friday, 2020 JuneJune 20142014 atat 10.0010.00 a.m.a.m. togethertogethertogetherLevel 2, withNorthwithwith thethethe Block, ProxyProxyProxy Wisma FormFormForm Selangor areareare enclosedenclosedenclosed Dredging, ininin thisthisthis 142D Circular.Circular.Circular. Jalan Ampang, 50450 Kuala Lumpur on Friday, 20 June 2014 at 10.00 a.m. A together shareholder with theentitled Proxy to Form attend are and enclosed vote at in thethis EGMCircular. is entitled to appoint a proxy to attend and vote on his behalf. The Proxy ATheA shareholdershareholder Notice convening entitledentitled totheto attend attendExtraordinary andand votevote General atat thethe EGMMeetingEGM isis entitled entitled(“EGM”) thtototo of appointappointappoint MCB in aa a respect proxyproxyproxy to totoof attend attendattendthe proposal andandand votevotevote to onbeonon hisheldhishis behalf.behalf.behalf. at Canada TheTheThe ProxyPlace,ProxyProxy Form must be deposited at the Registered Office of MCB at 8th Storey South Block, Wisma Selangor Dredging, 142-A Jalan FormFormLevelA shareholder must2,must North bebe entitledBlock,depositeddeposited Wisma to attendatat Selangorthethe andRegisteredRegistered voteDredging, at OfficetheOffice 142D EGM ofof JalanMCBisMCB entitled Ampang,atat 88 ththto StoreyStorey Storeyappoint 50450 SouthSouthSouth aKuala proxy Block,Block,Block, Lumpur to attend WismaWismaWisma on Friday, and SelangorSelangorSelangor vote 20 on June Dredging,Dredging,Dredging, his 2014 behalf. at 142-A142-A142-A 10.00The JalanJalanProxy Jalana.m. Ampang, 50450 Kuala Lumpur on or before the date and time indicath ted below in order for it to be valid. The lodging of the Proxy Ampang,Ampang,Formtogether must 50450with50450 be the depositedKualaKuala Proxy LumpurLumpur Form at the are onon orenclosedRegisteredor beforebefore in thethe thisOffice datedate Circular. ofandand MCB timetime at indicaindica 8 Storeytedtedted belowbelowbelow South ininin order orderorderBlock, forforfor Wisma ititit tototo bebebe Selangor valid.valid.valid. TheTheThe Dredging, lodginglodginglodging ofofof142-A thethethe ProxyProxyProxyJalan FormAmpang, will not50450 preclude Kuala aLumpur shareholder on or frombefore attending the date and and voting time indicain personpersonted below atat thethe in EGMEGM order shouldshould for it thetheto beshareholdershareholder valid. The subsequently subsequentlylodging of the wisheswishes Proxy toFormFormA shareholderdo willso.will notnot precludepreclude entitled aato shareholdershareholder attend and fromfromvote attendingattendingat the EGM andand is votingvotingentitled inin to personperson appoint atat thethea proxy EGMEGM toshouldshould attend thethe and shareholdershareholder vote on his subsequentlysubsequently behalf. The wisheswishes Proxy tototoForm dododo so.so.willso. not preclude a shareholder from attending and voting inth person at the EGM should the shareholder subsequently wishes LasttoForm do date so.must and be time deposited for lodging at thethe RegisteredProxy Form Office : of Wednesday,MCB at 8 18Storey June South 2014, Block,at 10.00 Wisma a.m. Selangor Dredging, 142-A Jalan LastAmpang,Last datedate and50450and timetime Kuala forfor lodgingLumpurlodging the theon ProxyorProxy before FoFormrmrm the date : : : and Wednesday, Wednesday, Wednesday, time indica 181818ted JuneJuneJune below 2014,2014,2014, in order atatat 10.0010.0010.00 for it a.m.a.m.a.m. to be valid. The lodging of the Proxy DateLast dateand timeand timeof EGM for lodging the Proxy Form : : Friday, Wednesday, 20 June 18 2014,June 2014,at 10.00 at 10.00a.m. ora.m. any adjournment thereof DateFormDate and andwill timetimenot preclude ofof EGMEGM a shareholder from attending::: and Friday, Friday, Friday, voting 202020 in JuneJune Juneperson 2014,2014,2014, at the atatat 10.00 10.0010.00EGM should a.m.a.m.a.m. ororor the anyanyany shareholder adjournmentadjournmentadjournment subsequently thereofthereofthereof wishes toDate do andso. time of EGM : Friday, 20 June 2014, at 10.00 a.m. or any adjournment thereof
Last date and time for lodging the Proxy FormThis Circular : Wednesday, is dated 18 29 June May 2014, 2014 at 10.00 a.m. ThisThis CircularCircular isis dateddated 2929 MayMay 20142014 Date and time of EGM This Circular: Friday, is 20dated June 292014, May at 10.002014 a.m. or any adjournment thereof
This Circular is dated 29 May 2014
DEFINITION DEFINITION DEFINITION
Except where the context otherwise requires, the following definition shall apply throughout this Except where the context otherwise requires, the following definition shall apply throughout this Circular:Except where the context otherwise requires, the following definition shall apply throughout this Circular: Circular:
“Board” : Board of Directors of MCB “Board” : Board of Directors of MCB “Board” : Board of Directors of MCB “Bursa Depository” : Bursa Malaysia Depository Sdn Bhd (165570-W) “Bursa Depository” : Bursa Malaysia Depository Sdn Bhd (165570-W) “Bursa Depository” : Bursa Malaysia Depository Sdn Bhd (165570-W) “Bursa Securities” : Bursa Malaysia Securities Berhad (635998-W) “Bursa Securities” : Bursa Malaysia Securities Berhad (635998-W) “Bursa Securities” : Bursa Malaysia Securities Berhad (635998-W) “Circular” : This circular to shareholders dated 29 May 2014 “Circular” : This circular to shareholders dated 29 May 2014 “Circular” : This circular to shareholders dated 29 May 2014 “Deed Poll” : The deed poll governing the Warrants to be executed by the Company “Deed Poll” : The deed poll governing the Warrants to be executed by the Company “Deed Poll” : The deed poll governing the Warrants to be executed by the Company “EGM” : Extraordinary general meeting “EGM” : Extraordinary general meeting “EGM” : Extraordinary general meeting “Entitlement Date” : A date to be determined and announced later by the Board, as at the “Entitlement Date” : A date to be determined and announced later by the Board, as at the “Entitlement Date” : Aclose date of to business be determined on which and the announced shareholders later of MCBby the must Board, be registeredas at the close of business on which the shareholders of MCB must be registered inclose the of Record business of Depositorson which the of shareholdersthe Company of in MCB order must to bebe entitledregistered to in the Record of Depositors of the Company in order to be entitled to participatein the Record in the of ProposedDepositors Bonus of the Issue Company of Warrants in order to be entitled to participate in the Proposed Bonus Issue of Warrants participate in the Proposed Bonus Issue of Warrants “FYE” : Financial year ended “FYE” : Financial year ended “FYE” : Financial year ended “LPD” : 19 May 2014, being the latest practicable date prior to the printing of “LPD” : 19 May 2014, being the latest practicable date prior to the printing of “LPD” : this 19 May Circular 2014, being the latest practicable date prior to the printing of this Circular this Circular “Government” : Government of Malaysia “Government” : Government of Malaysia “Government” : Government of Malaysia “M&A Securities” : M&A Securities Sdn Bhd (15017-H) “M&A Securities” : M&A Securities Sdn Bhd (15017-H) “M&A Securities” : M&A Securities Sdn Bhd (15017-H) “Main Market LR” : Main Market Listing Requirements of Bursa Securities, as may be “Main Market LR” : Main Market Listing Requirements of Bursa Securities, as may be “Main Market LR” : Mainamended Market from Listingtime to Requirementstime of Bursa Securities, as may be amended from time to time amended from time to time “MCB” or “Company” : Menang Corporation (M) Berhad (5383-K) “MCB” or “Company” : Menang Corporation (M) Berhad (5383-K) “MCB” or “Company” : Menang Corporation (M) Berhad (5383-K) “MCB Group” or “Group” : MCB and its subsidiaries, collectively “MCB Group” or “Group” : MCB and its subsidiaries, collectively “MCB Group” or “Group” : MCB and its subsidiaries, collectively “MCB Share(s)” : Ordinary share(s) of RM0.50 each in MCB “MCB Share(s)” : Ordinary share(s) of RM0.50 each in MCB “MCB Share(s)” : Ordinary share(s) of RM0.50 each in MCB “PFI” : Private Finance Initiative “PFI” : Private Finance Initiative “PFI” : Private Finance Initiative “Proposed Bonus Issue : Proposed bonus issue of 133,553,500 Warrants on the basis of one (1) “Proposed Bonus Issue : Proposed bonus issue of 133,553,500 Warrants on the basis of one (1) “Proposedof Warrants” Bonus Issue : Warrant Proposed for bonus every issue two of(2) 133,553,500 existing MCB Warrants Shares heldon the on basisthe Entitlement of one (1) of Warrants” Warrant for every two (2) existing MCB Shares held on the Entitlement of Warrants” DateWarrant for every two (2) existing MCB Shares held on the Entitlement Date Date “Record of Depositors” : A record consisting of names of depositors provided by Bursa Depository “Record of Depositors” : A record consisting of names of depositors provided by Bursa Depository “Record of Depositors” : Apursuant record consistingto Chapter of 24 na mesof the of Rulesdepositors of Bursa provided Depository, by Bursa as Depository amended pursuant to Chapter 24 of the Rules of Bursa Depository, as amended frompursuant time toto Chaptertime 24 of the Rules of Bursa Depository, as amended from time to time from time to time “RM” and “sen” : Ringgit Malaysia and sen, respectively “RM” and “sen” : Ringgit Malaysia and sen, respectively “RM” and “sen” : Ringgit Malaysia and sen, respectively “UiTM” : Universiti Teknologi MARA “UiTM” : Universiti Teknologi MARA “UiTM” : Universiti Teknologi MARA “Warrants” : 133,553,500 warrants to be issued pursuant to the Proposed Bonus “Warrants” : 133,553,500 warrants to be issued pursuant to the Proposed Bonus “Warrants” : Issue 133,553,500 of Warrants warrants to be issued pursuant to the Proposed Bonus Issue of Warrants Issue of Warrants “5D-VWAP” : Five (5)-day volume weighted average market price “5D-VWAP” : Five (5)-day volume weighted average market price “5D-VWAP” : Five (5)-day volume weighted average market price
For the purpose of this Circular, all references to a time of day shall be a reference to Malaysian time For the purpose of this Circular, all references to a time of day shall be a reference to Malaysian time Forunless the otherwise purpose ofstated. this Circular, all references to a time of day shall be a reference to Malaysian time unless otherwise stated. unless otherwise stated.
In this Circular, words importing the singular shall, where applicable, include the plural and vice In this Circular, words importing the singular shall, where applicable, include the plural and vice versa,In this and Circular, words wordsimporting importing the masculine the singular gender shall, shall, where where applicable, applicable, includeinclude thethe feminineplural and gender vice versa, and words importing the masculine gender shall, where applicable, include the feminine gender andversa, vice and versa. words References importing tothe persons masculine shall, gender where sha applicable,ll, where includeapplicable, a corporation(s). include the feminine gender and vice versa. References to persons shall, where applicable, include a corporation(s). and vice versa. References to persons shall, where applicable, include a corporation(s).
Certain figures included in this Circular have been subject to rounding adjustments. Certain figures included in this Circular have been subject to rounding adjustments. Certain figures included in this Circular have been subject to rounding adjustments.
References to “we”, “us”, “our” and “ourselves” are to our Company save where the context References to “we”, “us”, “our” and “ourselves” are to our Company save where the context otherwiseReferences requires, to “we”, our “us”, subsidiaries “our” andand to“ourselves” “you” or “your”are to are our to theCompany shareholders save whereof the Company.the context otherwise requires, our subsidiaries and to “you” or “your” are to the shareholders of the Company. otherwise requires, our subsidiaries and to “you” ori “your” are to the shareholders of the Company. i i i
TABLE OF CONTENTS
Page
LETTER TO THE SHAREHOLDERS OF MCB CONTAINING:-
1. INTRODUCTION 1
2. THE PROPOSED BONUS ISSUE OF WARRANTS 2
3. RATIONALE FOR THE PROPOSED BONUS ISSUE OF WARRANTS 6
4. FINANCIAL EFFECTS OF THE PROPOSED BONUS ISSUE OF WARRANTS 7
5. INDUSTRY OVERVIEW AND PROSPECTS 8
6. APPROVALS REQUIRED 11
7. SHARE PRICE PERFORMANCE 11
8. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS 11
9. DIRECTORS’ RECOMMENDATION 12
10. ESTIMATED TIMEFRAME FOR COMPLETION 12
11. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION 12
12. EGM 12
13. FURTHER INFORMATION 13
APPENDICES
I FINANCIAL PERFORMANCE OF THE GROUP 14
II FURTHER INFORMATION 17
NOTICE OF EGM ENCLOSED
PROXY FORM ENCLOSED
ii
ii
MENANG CORPORATION (M) BERHAD (Company No. 5383-K) (Incorporated in Malaysia under the Companies Act, 1965)
Registered Office:
8th Storey South Block Wisma Selangor Dredging 142-A Jalan Ampang 50450 Kuala Lumpur
29 May 2014
Directors: Dato’ Abdul Mokhtar Ahmad (Group Executive Chairman) Dato’ Shun Leong Kwong (Group Managing Director / Group Chief Executive Officer) Datin Mariam Eusoff (Non-Executive Group Deputy Chairman) Dr. Christopher Shun Kong Leng (Non-Independent Non-Executive Director) Chiam Tau Meng (Independent Non-Executive Director) Too Kok Leng (Independent Non-Executive Director)
To: The Shareholders of Menang Corporation (M) Berhad
Dear Sir / Madam,
PROPOSED BONUS ISSUE OF 133,553,500 WARRANTS IN MCB ON THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) MCB SHARES HELD AT AN ENTITLEMENT DATE TO BE DETERMINED LATER
1. INTRODUCTION
On 3 April 2014, M&A Securities, on behalf the Board, had announced that the Company proposes to undertake a bonus issue of 133,553,500 Warrants on the basis of one (1) Warrant for every two (2) MCB Shares held.
Subsequently, on 20 May 2014, M&A Securities had announced that Bursa Securities had vide its letter dated 19 May 2014 approved in-principle the following:-
(i) Admission to the Official List of Bursa Securities and the listing of and quotation for 133,553,500 Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants; and
(ii) Listing of up to 133,553,500 new MCB Shares arising from the exercise of the Warrants.
Bursa Securities’ approval-in-principle is subject to the following conditions:-
Conditions Status of Compliance (a) MCB and M&A Securities must fully comply with the relevant To be complied provisions under the Main Market LR pertaining to the implementation of the Proposed Bonus Issue of Warrants;
(b) MCB and M&A Securities to inform Bursa Securities upon the To be complied completion of the Proposed Bonus Issue of Warrants;
1
1
Conditions Status of Compliance
(c) MCB to furnish Bursa Securities with a written confirmation of To be complied its compliance with the terms and conditions of Bursa Securities’ approval once the Proposed Bonus Issue of Warrants is completed; and
(d) MCB is required to furnish Bursa Securities on a quarterly To be complied basis a summary of the total number of shares listed pursuant to the exercise of Warrants as at the end of each quarter together with a detailed computation of listing fees payable.
The purpose of this Circular is to provide you with details of the Proposed Bonus Issue of Warrants, to set out the Board’s opinion and recommendation in relation to the Proposed Bonus Issue of Warrants and to seek your approval for the resolution pertaining to the Proposed Bonus Issue of Warrants to be tabled at the forthcoming EGM of the Company, scheduled to be held at Canada Place, Level 2, North Block, Wisma Selangor Dredging, 142D Jalan Ampang, 50450 Kuala Lumpur on Friday, 20 June 2014 at 10.00 a.m. or any adjournment thereof. The Notice of EGM together with the Proxy Form are enclosed with this Circular.
YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES BEFORE VOTING ON THE RESOLUTION TO GIVE EFFECT TO THE PROPOSED BONUS ISSUE OF WARRANTS AT THE FORTHCOMING EGM.
2. THE PROPOSED BONUS ISSUE OF WARRANTS
2.1 Basis and number of Warrants to be issued
As at the LPD, MCB has an issued and paid-up capital of RM133,553,500, comprising 267,107,000 MCB Shares. Accordingly, the Proposed Bonus Issue of Warrants will involve an issuance of 133,553,500 Warrants on the basis of one (1) Warrant for every two (2) MCB Shares held by the shareholders of MCB on the Entitlement Date.
The Entitlement Date will be determined and announced after the receipt of all relevant approvals for the Proposed Bonus Issue of Warrants. The Proposed Bonus Issue of Warrants will be implemented in a single issuance.
2.2 Basis of determining the exercise price of the Warrants
The exercise price of the Warrants shall be determined and announced by the Board at a later date after obtaining the relevant approvals but before the Entitlement Date, after taking into consideration, amongst others, the following:-
(i) the historical price movement of MCB Shares; (ii) the 5D-VWAP of MCB Shares; (iii) prevailing market conditions; (iv) trading and liquidity of MCB Shares; (v) the par value of MCB shares of RM0.50 each; and (vi) that the Warrants will be issued at no cost to the entitled shareholders of MCB.
At this juncture, the Board has yet to determine the range of premium or discount to be applied in determining the exercise price of the Warrants. For illustrative purposes, in the event the indicative exercise price of the Warrants is assumed at RM1.00, it represents a premium of approximately 8.7% to the 5D-VWAP of MCB Shares of RM0.92 up to 2 April 2014, being the date immediately preceding the date of the announcement of the Proposed Bonus Issue of
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Warrants on 3 April 2014. In the event the indicative exercise price of the Warrants is assumed at RM0.85, it represents a discount of approximately 7.6% to the 5D-VWAP of MCB Shares of RM0.92 up to 2 April 2014, being the date immediately preceding the date of the announcement of the Proposed Bonus Issue of Warrants on 3 April 2014.
The Board wishes to emphasise that the indicative exercise price of the Warrants of RM1.00 or RM0.85 per Warrant should not be taken as an indication of or reference to the actual exercise price of the Warrants, which will be determined and announced at the price fixing date.
2.3 Capitalisation of reserves
There will not be any capitalisation of reserves arising from the issuance of the Warrants pursuant to the Proposed Bonus Issue of Warrants. Therefore, the requirement to ensure that the necessary reserves required for capitalisation of bonus issues is unimpaired by losses of the Company on a consolidated basis pursuant to Paragraph 6.30 of the Main Market LR is not relevant with regard to the Proposed Bonus Issue of Warrants.
2.4 Ranking of the Warrants and the new MCB Shares to be issued arising from the exercise of the Warrants
The holders of the Warrants will not be entitled to any voting rights or participation in any form of distribution other than on winding-up compromise or arrangement of MCB as set out in the Deed Poll and/or any offer of further securities in MCB until and unless such holders of the Warrants exercise their Warrants into new MCB Shares.
The new MCB Shares to be issued upon the exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing MCB Shares, save and except that they shall not be entitled to participate in any rights, allotments, dividends and/or other distributions, the entitlement date of which precedes the date of allotment of the said new MCB Shares issued pursuant to the exercise of the Warrants.
2.5 Entitlement to the Warrants
The Warrants to be issued will be allotted and issued to the shareholders of MCB whose names appear in the Record of Depositors of the Company on the Entitlement Date.
In determining the shareholders’ entitlement to the Warrants, fractional entitlements, if any, shall be dealt with in such manner as the Board shall in its absolute discretion deems fit and expedient in order to minimise the incidence of odd lots and in the best interest of the Company.
2.6 Indicative principal terms of the Warrants
Terms Details Number of Warrants : 133,553,500 Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants.
Form and : The Warrants will be issued in registered form and will be denomination constituted by the Deed Poll.
Exercise Rights : Each Warrant entitles the registered holder to subscribe for one (1) new MCB Share at the Exercise Price during the Exercise Period and shall be subject to adjustment in accordance with the provisions of the Deed Poll.
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Terms Details Exercise Price : The exercise price of the Warrants shall be determined and fixed by the Board and announced at a later date, after obtaining the relevant approvals but before the Entitlement Date. Kindly refer to Section 2.2 of this Circular for the basis of determining the exercise price of the Warrants.
Exercise Period : The Warrants may be exercised any time during the tenure of the Warrants of five (5) years including and commencing from the issue date and ending at 5.00 p.m. on the Expiry Date. Any Warrants which have not then been exercised will lapse and every Warrant not exercised by then will cease to be valid for any purpose.
Expiry Date : A date which falls on the day before the fifth (5th) anniversary of the issue date, provided that if such day falls on a day which is not a market day, then it shall be the market day immediately preceding the said non-market day.
Mode of Exercise : The holders of Warrant is required to lodge an exercise form with the Company’s share registrar, duly completed, signed and stamped together with cash payment of the Exercise Price by banker’s draft or cashier’s order drawn on a bank or post office operating in Malaysia.
Adjustment in the : Subject to the provisions of the Deed Poll, the Exercise Price Exercise Price and/or and/or the number of Warrants held by each holder of Warrants the number of shall be adjusted by the Board in consultation with an approved Warrants in the event adviser appointed by the Company and certification by the of alteration to the auditors of MCB in the event of alteration to the share capital of share capital the Company.
Status of the new MCB : The new MCB Shares to be issued upon the exercise of the Shares to be issued Warrants shall, upon allotment and issue, rank pari passu in all pursuant to the respects with the then existing MCB shares, save and except that exercise of the they shall not be entitled to participate in any rights, allotments, Warrants dividends and/or other distributions, the entitlement date of which precedes the date of allotment of the said new MCB Shares issued pursuant to the exercise of the Warrants.
Modification of rights : The Company may, from time to time, without the consent or of the holders of sanction of the holders of the Warrants but in accordance with Warrants the Deed Poll, modify the Deed Poll, if such modification made does not materially prejudice the interests of the holders of the Warrants or is made to correct a manifest error or to comply with prevailing laws of Malaysia, Rules of Bursa Depository, Securities Industry (Central Depositories) Act, 1991 and/or the Main Market LR.
Subject to the approval of any relevant authority, any modification, alteration or abrogation of the covenants or provisions contained in the Deed Poll proposed or agreed to by the Company must be sanctioned by special resolution of the holders of the Warrants, effected by the Deed Poll, executed by the Company and expressed to be supplemental and comply with the requirements of the Deed Poll.
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Terms Details Rights of holders of : The holders of the Warrants will not be entitled to any voting Warrants rights in any general meeting of the Company or to participate in any form of distribution and/or offer of further securities in the Company until and unless such holders of Warrants exercise their Warrants into new MCB Shares.
Rights in the event of : Where a resolution has been passed by the shareholders of the winding up, liquidation Company for a members’ voluntary winding-up or there is a or an event of default compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with one (1) or more companies then:
(a) for the purpose of such a winding-up, compromise or arrangement (other than consolidation, amalgamation or merger in which the Company is the continuing corporation) to which the holders of Warrants or some persons designated by them for such purposes by special resolution, shall be a party, the terms of such winding-up, compromise or arrangement shall be binding on all the holders of Warrants; and
(b) in any other case, every holder of Warrants shall be entitled at any time within six (6) weeks after the passing of such resolution for a members’ voluntary winding up of the Company or six (6) weeks after the granting of the court order approving the compromise or arrangement, by irrevocable surrender of his Warrants together with payment of the relevant subscription monies, to elect to be treated as if he had immediately prior to the commencement of such winding-up, compromise or arrangement, exercised the subscription rights represented by such Warrants to the extent specified in the exercise notice and be entitled to receive out of the assets of the Company which would be available in liquidation if he had on such date been the holder of the new MCB Shares to which he would have become entitled pursuant to such exercise; and the liquidator of the Company shall give effect to such election accordingly. Upon the expiry of the above six (6) weeks, all exercise rights of the Warrants shall lapse and cease to be valid for any purpose.
Board Lot : The Warrants are tradeable upon listing in board lots of 100 units carrying the right to subscribe for 100 new MCB Shares at any time during the Exercise Period or such other number of units as may be prescribed by Bursa Securities.
Listing : The Warrants will be listed on the Main Market of Bursa Securities.
Transferability : The Warrants are transferable by transfer prescribed by the Rules of Bursa Depository and in accordance with the provisions of the Securities Industry (Central Depositories) Act.
Governing Law : Laws of Malaysia.
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2.7 UTILISATION OF PROCEEDS
The Proposed Bonus Issue of Warrants is not expected to raise any immediate funds upon its issuance as the Warrants will be issued at no cost to the entitled shareholders of MCB. The exact quantum of the future proceeds that may be raised by MCB from the exercise of the Warrants would depend upon the exercise price of the Warrants and the actual number of Warrants exercised during the tenure of the Warrants. As such, the exact timeframe for the utilisation of the proceeds is not determinable at this juncture.
Assuming full exercise of the Warrants at an indicative exercise price of RM1.00 per Warrant, a total of 133,553,500 new MCB Shares will be issued and the Company could potentially raise the gross proceeds of RM133.5 million.
The proceeds to be raised, as and when the Warrants are exercised, shall be utilised for repayment of bank borrowings and future working capital requirements of the MCB Group, which include, amongst others, staff costs and other operating expenses. The proceeds to be utilised for each component of working capital and its timeframes are subject to the MCB Group’s operating requirements at the time of utilisation and therefore cannot be determined at this juncture.
3. RATIONALE FOR THE PROPOSED BONUS ISSUE OF WARRANTS
After due consideration, the Company is embarking on the Proposed Bonus Issue of Warrants instead of other available proposals to reward existing shareholders of the Company. After taking into cognizance the financial performance and financial position of the Group, the Board is of the view that:-
(i) whilst rewarding the existing shareholders of the Company for their support by enabling them to participate in a derivative of the Company without incurring any cost, the Proposed Bonus Issue of Warrants potentially enhances the Company's capital base;
(ii) it provides the existing shareholders of the Company with an opportunity to increase their equity participation in the Company at a predetermined exercise price during the tenure of the Warrants;
(iii) it allows the existing shareholders of the Company to further participate in the future prospects and growth of the Company;
(iv) it provides the opportunity to increase the liquidity of MCB’s Shares in the market; and
(v) it provides the Company with additional capital as and when the Warrants are exercised during the tenure of the Warrants without incurring additional financing cost and minimise any potential cash outflow in respect of interest servicing. Part of the proceeds from the exercise of Warrants which shall be utilised for working capital requirements is expected to contribute positively to the Group’s profitability. Furthermore, the utilisation of the proceeds as and when the Warrants are exercised towards the paring down of the Group’s outstanding banking facilities would allow MCB to reduce its finance cost.
The Proposed Bonus Issue of Warrants will involve the issuance of Warrants on a pro-rata basis to all entitled shareholders of the Company at the Entitlement Date. As such, the Proposed Bonus Issue of Warrants will not dilute the existing shareholders’ equity interest assuming all shareholders fully exercise their Warrants subsequently. Should all shareholders exercise their Warrants, the Company’s capital base is expected to increase in terms of the size and strength, improving its gearing level and the increased in the paid-up share capital may enhance the liquidity in MCB Shares. Depending on the future performance of MCB Shares, entitled shareholders will be able to enjoy the potential capital appreciation of MCB Shares when they exercise the Warrants, which are issued at no cost to the entitled shareholders.
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4. FINANCIAL EFFECTS OF THE PROPOSED BONUS ISSUE OF WARRANTS
4.1 Share capital
The proforma effects of the Proposed Bonus Issue of Warrants on the issued and paid-up share capital of MCB is set out as follows:-
No. of MCB Shares RM
As at the LPD 267,107,000 133,553,500 To be issued pursuant to the full exercise of the Warrants 133,553,500 66,776,750 Enlarged share capital 400,660,500 200,330,250
4.2 Earnings and earnings per share
The Proposed Bonus Issue of Warrants is not expected to have an immediate material effect on the earnings and earnings per share of MCB.
Although the exercise of the Warrants is expected to dilute the consolidated earnings per share as a result of the increase in the number of the MCB Shares in issue, the proceeds derived from the exercise of the Warrants are expected to contribute positively to the future earnings of the MCB Group.
4.3 Net assets and gearing
Based on the audited consolidated financial statements of MCB as at the financial year ended 30 June 2013, the proforma effects of the Proposed Bonus Issue of Warrants on the net assets and gearing of the MCB Group is set out below:-
I II After the After I and Proposed Bonus assuming full As at Issue of exercise of 30 June 2013 Warrants Warrants RM’000 RM’000 RM’000 Share capital 133,553 133,553 200,330 Share premium - - 66,777^ Capital reserve 84,044 84,044 84,044 Available-for-sale reserve 5 5 5 Accumulated losses (39,358) (39,708)* (39,708) Shareholders’ funds/Net assets 178,244 177,894 311,448
No. of MCB Shares (‘000) 267,107 267,107 400,661 Net assets per MCB Share (RM) 0.67 0.67 0.78 Interest-bearing borrowings+ 349,909 349,909 349,909 Gearing (times) 1.96 1.97 1.12
Notes:
* After deducting estimated expenses in relation to the Proposed Bonus Issue of Warrants of RM350,000. ^ Based on the indicative exercise price of RM1.00 per Warrant. + Approximately RM281.3 million out of the total borrowings of RM349.9 million is secured over three (3) separate concession agreements with the Government as represented by the Ministry of Education Malaysia and UiTM for the Group to undertake the construction of three (3) UiTM campuses on a PFI basis. The PFI is undertaken under the concept of “Build-Lease-Maintain-Transfer”. Upon completion of the buildings, the buildings will be leased to the Government/UiTM for a concession period of 23 years (inclusive of the three (3) years construction period) for which, the MCB Group will maintain the facilities and infrastructure of the buildings.
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4.4 Existing convertible securities
As at the LPD, the Company does not have any outstanding convertible securities in issue.
4.5 Substantial shareholders’ shareholdings
The Proposed Bonus Issue of Warrants will not have any effect on the shareholdings of the substantial shareholders of MCB. Assuming full exercise of the Warrants, there is no effect to the percentage shareholdings of the substantial shareholders, but the number of MCB Shares held by each substantial shareholder will increase proportionately.
5. INDUSTRY OVERVIEW AND PROSPECTS
5.1 Overview of the Malaysian economy
In 2013, the economy expanded by 4.7%. The Malaysian economy is expected to remain on a steady growth path in 2014, expanding by 4.5%-5.5%. The growth momentum will be supported by better performance in the external sector amid some moderation in domestic demand. Domestic demand will remain the key driver of growth, albeit at a more moderate pace, reflecting the continued public sector consolidation. Private investment is forecast to register robust growth for the fifth consecutive year, driven by the ongoing implementation of multi-year projects and the improvement in external demand. Private consumption will be underpinned by healthy labour market conditions and sustained income growth. Nonetheless, household spending is expected to moderate towards its long-term trend growth, reflecting in part the impact of higher inflation. Public consumption is anticipated to record lower growth, following the ongoing consolidation of the Government’s fiscal position, while public investment is projected to register a higher growth, supported by both Government and public enterprise capital spending.
Headline inflation is expected to average 3%-4% in 2014 (2013: 2.1%) due mainly to domestic cost factors including price adjustments arising from subsidy rationalisation and the spill-over effects of these adjustments on the prices of other goods and services. The higher cost pressures, however, will be partly contained by subdued external price pressures, given the expectations of lower global food and energy prices. Continued expansion in domestic capacity and a moderation in domestic demand would also contribute towards attenuating the cost pressures. There is, however, a risk that higher global commodity prices and stronger-than- expected demand conditions could put an upward pressure on inflation. Rising inflationary expectations and excessive wage increases, if they occur, would also pose upside risks to inflation. However, these risks are assessed to be contained at this juncture.
(Source: Annual Report 2013, Bank Negara Malaysia)
The Malaysian economy registered a strong growth of 6.2% in the first quarter of 2014 (4Q 2013: 5.1%), driven by a stronger expansion in domestic demand and a turnaround in net exports. On the supply side, the major economic sectors grew further, supported by both domestic and trade activities. Private consumption growth remained strong at 7.1% (4Q 2013: 7.4%) in the first quarter, supported by stable employment conditions and continued wage growth. Growth in public consumption increased to 11.2% (4Q 2013: 5.2%), reflecting higher Government spending on supplies and services. Gross fixed capital formation grew by 6.3% (4Q 2013: 6.5%), driven by robust private sector capital spending amidst a decline in public investment growth.
The trade surplus amounted to RM26.4 billion in the first quarter of 2014 (4Q 2013: RM27.5 billion). Gross exports grew at a stronger pace of 10.9% (4Q 2013: 10.2%), reflecting the continued expansion of global economic activity while gross imports expanded at a more moderate pace of 5.5% (4Q 2013: 11.6%).
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The Malaysian economy’s growth will remain anchored by domestic demand, with additional support from the improvement in the external environment. Exports will continue to benefit from the recovery in the advanced economies while private domestic demand is expected to remain the key driver of the overall growth.
(Source: Quarterly Bulletin, First Quarter 2014, Bank Negara Malaysia)
5.2 Overview and prospects of the property sector in Malaysia
In 2013, the property market performed moderately with lesser in number but at higher value of transaction recording 381,130 transactions worth RM152.37 billion as opposed to 427,520 transactions worth RM142.84 billion in 2012, indicating a reduction of 10.9% in volume and an increase of 6.7% in value. The property market observed a fair and sustainable sales performance of 45.1% (2012: 47.7%), as units launched decreased by 14.9% (2013: 48,617; 2012: 57,162 units) in 2013. The overhang* performance continued to improve as the number of residential overhang dropped further to 13,547 units in 2013 (2012: 15,091; 2011: 19,607 units); despite an increase in overhang value from RM4.74 billion to RM4.80 billion this year. On the supply side, completion of residential, shop and industrial sub-sectors improved with 8.3%, 18.2% and 15.8% increments respectively. Similarly, construction activities for residential, shop and industrial sub-sectors continued to grow with more starts and new planned supply.
* Overhang is defined to include residential units, retail shops and industrial units, which were completed and issued with Certificate of Fitness for Occupation or Temporary Certificate of Fitness for Occupation but remained unsold for more than nine months after it was launched for sale on or after 1 January 1997.
The construction performance for both purpose built office and shopping complex improved with recorded growth of 45.7% and 5.6% respectively. Office and retail completion contracted by 71.2% and 29.0% respectively. Purpose built office starts and new planned supply increased significantly (2013: 270,799 s.m.; 2012: 185,865 s.m.) and (2013: 86,741 s.m.; 2012: 31,097 s.m.) respectively. Shopping complex increased marginally by 5.6% in starts and 63.8% in new planned supply. The occupancy rates of the purpose-built offices and retail sub-sectors remained strong at 82.9% (2012: 81.2%) and 79.5% (2012: 78.9%) respectively despite more new spaces entered the market.
The residential sub-sector continued to spearhead the property market activities, taking up 64.6% share. Prevailing low interest rate environment with the base lending rate (BLR) of commercial banks sustaining at 6.53% and weighted average lending rate (ALR) to 5.4% continued to support the domestic property market. Bank Negara Malaysia’s pre-emptive strategies to preserve household sector resilience through application of 70% loan-to-value ratio on third housing loans onwards as well as guidelines on responsible funding, had gradually impacted the housing market.
Housing approvals reduced substantially by 22.5% compared to 47.4% expansion last year. Total loans disbursed for purchase of residential properties however, increased to RM74.40 billion from RM64.10 billion in 2012. Simultaneously, in terms of residential market activity, the number of transaction contracted by 9.7% but value wise, a 6.3% expansion was recorded.
The market performance of commercial sub-sector subdued with lower volume of transaction. The commercial property subsector registered 34,298 transactions worth RM35.56 billion in 2013, representing a decrease of 16.5% from the previous year. Market activity of industrial sub-sector was also in tandem with the manufacturing activities. The industrial property transaction in the year dropped further by 15.7% after experiencing 4.7% contraction in 2012.
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Market activities softened across the board with all sub-sectors recorded decreases in the transaction activity. The commercial sub-sector led with 16.5% followed by the industrial sub- sector 15.7%, agricultural sub-sector 12.4%, residential sub-sector 9.7% and development land by 6.8%. By market share, residential sub-sector continued to dominate with 64.6% and trailed by agricultural (18.5%), commercial (9.0%), development land (5.6%) and industrial sub-sectors (2.2%).
In terms of value, with exception to development land and agricultural sub-sectors which declined by 8.8% and 7.0% respectively, all other sub-sectors sustained growth albeit at a smaller pace. Commercial, residential and industrial sub-sectors grew by 28.0%, 6.3% and 2.7% respectively. Seven states saw higher value of transaction preceded by Selangor (30.5%) and trailed by Johor (19.8%), WP Kuala Lumpur (13.1%), Pulau Pinang (8.9%), Perak (5.6%), Sarawak (3.7%) and Negeri Sembilan (3.6%). Other states registered lower value of transaction between 0.2% and 3.1%.
Note: s.m. : square metres
(Source: Press Release, Malaysia Property Market 2013, National Property Information Centre, Valuation & Property Services Department, 22 April 2014)
5.3 Future prospects of the Group
The Group is principally engaged in property development, construction and property management. The current Group’s revenue is largely derived from its concession arrangements for the construction and maintenance of facilities and infrastructure. The Group currently has three (3) concession agreements with the Government as represented by the Ministry of Education Malaysia and UiTM to undertake the construction of three (3) UiTM campuses on a PFI basis.
The PFI is undertaken by the Group under the concept of “Build-Lease-Maintain-Transfer”. Upon completion of the buildings, the buildings will be leased to the Government/UiTM for a concession period of 23 years (inclusive of the three (3) years construction period) for which, the MCB Group will maintain the facilities and infrastructure of the buildings. During the period of the lease, the Group expects to obtain regular monthly campus lease payments and fees for the maintenance of the campus facilities and infrastructure.
On 4 May 2010, the Group entered into its first concession arrangement with the Government/UiTM for the construction of a UiTM campus to cater for 3 faculties of a population of 5,000 students, located at the Seremban 3 Township currently developed by the MCB Group. The said campus is within 10 minutes drive from the Seremban town centre and is accessible via the North-South Expressway and the Seremban-Port Dickson Highway. The completion of the UiTM campus in Seremban 3 has become a major catalyst, driving demand and price levels for the Group’s Seremban 3 Township.
Subsequently on 30 April 2012 and 25 July 2012, the MCB Group entered into its second and third concession arrangements for the construction of UiTM’s satelit C campus in Puncak Alam (Selangor) catering for 2 faculties of a population of 3,000 students and a training centre for staff and trainees with a capacity of 650 in Bandar Baru Estek, Nilai (Negeri Sembilan).
Moving forward, the Board expects the concession arrangements to provide the Group with a stable and recurring monthly revenue for the duration of the concessions. The Group’s growth in the near to medium term, however, is expected to be driven by its property division from its considerable landbank amounting to an aggregate of not less than 744 acres, of which, 460 acres is located in Seremban 3, Negeri Sembilan, 142 acres is located in Klang, 64 acres is located in Mukim Rantau, Seremban, 67 acres is located in Ulu Bernam and 11 acres is located in Port Dickson.
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6. APPROVALS REQUIRED
The Proposed Bonus Issue of Warrants is subject to the following approvals:-
(i) Bursa Securities, which was obtained on 19 May 2014, for:-
(a) the admission of the Warrants to the Official List; and
(b) the listing of and quotation for the Warrants and the new MCB Shares to be issued arising from the exercise of the Warrants,
on the Main Market of Bursa Securities;
(ii) the shareholders of MCB at the forthcoming EGM; and
(iii) any other relevant authority, if required.
The Proposed Bonus Issue of Warrants is not conditional upon any other proposals undertaken or to be undertaken by the Company.
7. SHARE PRICE PERFORMANCE
The monthly highest and lowest prices of MCB Shares as traded on Bursa Securities for the past twelve (12) months are as follows:
High Low 2013 (RM) (RM) May 0.405 0.300 June 0.355 0.320 July 0.385 0.330 August 0.380 0.325 September 0.515 0.345 October 0.690 0.470 November 0.690 0.630 December 0.660 0.625
2014 January 0.640 0.610 February 0.910 0.615 March 1.020 0.835 April 1.040 0.855
The last transacted price of MCB Shares on 2 April 2014, being the date preceding the announcement of the Proposed Bonus Issue of Warrants on 3 April 2014 was RM0.960 per Share.
The last transacted price of MCB Shares as at the LPD was RM1.02 per Share.
(Source: M&A Securities)
8. DIRECTORS’ AND MAJOR SHAREHOLDER’S INTERESTS
None of the Directors and major shareholders of the Company, as well as persons connected with them have any interest, direct and/or indirect, in the Proposed Bonus Issue of Warrants other than their respective entitlements under the Proposed Bonus Issue of Warrants, for which all shareholders of MCB are entitled to.
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9. DIRECTORS’ RECOMMENDATION
After having considered all aspects of the Proposed Bonus Issue of Warrants, including the rationale for the Proposed Bonus Issue of Warrants, the Board is of the opinion that the Proposed Bonus Issue of Warrants is in the best interest of MCB, and accordingly recommends that the shareholders vote in favour of the resolution pertaining to the Proposed Bonus Issue of Warrants to be tabled at the forthcoming EGM of the Company.
10. ESTIMATED TIMEFRAME FOR COMPLETION
The tentative timetable in relation to the Proposed Bonus Issue of Warrants is as follows:
Date Events
20 June 2014 EGM to approve the Proposed Bonus Issue of Warrants
End June 2014 Announcement of the Entitlement Date
End July 2014 Listing of and quotation for the Warrants on Bursa Securities
Barring any unforeseen circumstances and subject to receipt of all relevant approvals, the Proposed Bonus Issue of Warrants is expected to be completed in the third quarter of 2014.
11. OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING IMPLEMENTATION
Save for the Proposed Bonus Issue of Warrants, there are no other proposals announced but pending implementation.
12. EGM
An EGM, the notice of which is enclosed together with this Circular, will be held at Canada Place, Level 2, North Block, Wisma Selangor Dredging, 142D Jalan Ampang, 50450 Kuala Lumpur on Friday, 20 June 2014 at 10.00 a.m. or any adjournment thereof for the purpose of considering and, if thought fit, passing the resolution so as to give effect to the Proposed Bonus Issue of Warrants.
If you are unable to attend and vote in person at the EGM, you may complete and return the relevant Proxy Form in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive at the Registered Office of the Company at 8th Storey South Block, Wisma Selangor Dredging, 142-A Jalan Ampang, 50450 Kuala Lumpur not later than 48 hours before the date and time fixed for the EGM or any adjournment thereof. The lodging of the Proxy Form will not, however, preclude you from attending the EGM and voting in person should you subsequently wish to do so.
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13. FURTHER INFORMATION
Please refer to the attached appendices for further information.
Yours faithfully, for and on behalf of the Board of Directors of MENANG CORPORATION (M) BERHAD
DATO’ ABDUL MOKHTAR AHMAD Group Executive Chairman
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APPENDIX I
FINANCIAL PERFORMANCE OF THE GROUP
------Audited------ ---Unaudited--- FYE 31 18-month period FYE 6-month period December ended 30 June 30 June ended 31 December 2010 2012 2013 2012 2013 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue 40,136 226,362 238,197 106,991 129,345 Profit from operations 5,846 46,766 67,533 32,720 41,414 Profit/(loss) before taxation (832) 31,531 45,441 22,549 26,058 Profit/(loss) after taxation (832) 15,896 32,115 16,850 18,619 Profit attributable to owners of 474 3,833 17,354 10,082 10,064 the Company
Shareholders’ funds/Net assets 157,052 160,889 178,244 170,971 188,308 Net asset per Share (RM) 0.59 0.60 0.67 0.64 0.70
Interest-bearing borrowings - Secured borrowings 61,873 174,664 349,909 281,417 456,746 - Unsecured borrowings - -- - -
Gearing (times)* 0.39 1.09 1.96 1.64 2.43 Current Ratio (times)# 0.73 0.45 0.76 0.68 1.01
Notes:
* Calculated as interest bearing borrowings over net assets. # Calculated as current assets over current liabilities.
Commentary on financial performance
FYE 31 December 2010
The Group recorded an increase in revenue in the FYE 31 December 2010 of RM40.14 million in comparison to RM14.65 million in the previous financial year. The significant increase in revenue was mainly due to the sale of three (3) parcels of land measuring in aggregate 21.1 hectares to the Government for RM35.4 million in relation to the development of the UiTM campus in the Group’s Seremban 3 township. On 4 May 2010, the Group entered into its first concession arrangement with the Government/UiTM for the construction of a UiTM campus in Seremban 3, wherein the Group will develop the UiTM campus to cater for three (3) faculties with a target population of 5,000 students. The project is undertaken under the concept of “Build-Lease-Maintain-Transfer” wherein, the concession period is 23 years, which include the three (3) years construction period. Upon completion of the campus, the campus will be leased to the Government/UiTM for 20 years for which the Group will maintain the facilities and infrastructure of the campus.
The Group recorded a slight loss after taxation of RM0.83 million for the FYE 31 December 2010 as compared to a profit after taxation of RM3.55 million in the previous year. The profit after taxation of RM3.55 million recorded in the previous year was predominantly due to the write-back of RM17.67 million of deferred liabilities charges in respect of an Islamic facility, which had been fully settled. The Group would have otherwise registered an operational loss of RM14.12 million for the FYE 31 December 2009 net of this write-back. Notwithstanding the slight loss after taxation of RM0.83 million, the Company realised a profit after taxation attributable to the owners of the Company for the FYE 31 December 2010 of RM0.47 million.
The gearing ratio of the Group stood at 0.39 times as at 31 December 2010.
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18-month financial period ended 30 June 2012
In the eighteen (18)-month financial period ended 30 June 2012, the Group recorded a 464% increase in revenue of RM226.36 million (which translates into an annualised amount of RM150.91 million) from RM40.14 million recorded in the FYE 31 December 2010. The significant jump in revenue arose mainly from the percentage of work completed for the UiTM concession project in Seremban 3, which construction commenced in early 2011 upon fulfillment of the conditions precedent. In compliance with Financial Reporting Standards in Malaysia, construction revenue and costs is recognised by reference to the stage of completion of the construction works. As at 30 June 2012, the UiTM campus in Seremban 3 was 50.01% completed.
The Group registered a profit after taxation of RM15.90 million for the eighteen (18)-month financial period ended 30 June 2012 on the back of revenue of RM226.36 million. The improvement in profit after taxation as compared to the loss after taxation of RM0.83 million in the previous financial year was due to the construction of the UiTM campus in Seremban 3.
The gearing ratio of the Group increased significantly from 0.39 times as at 31 December 2010 to 1.09 times as at 30 June 2012 arising mainly from the draw down in bank borrowings in relation to the construction of the UiTM campus concession project in the Group’s Seremban 3 township.
Notwithstanding the increased in the Group’s gearing level and decrease in its current ratio, barring any unforeseen circumstances, the Directors are confident that the Group is able to successfully complete and implement the UiTM project in Seremban 3 and operate profitably with the continuing financial support from lenders and have adequate working capital to finance the development of the said campus. The term loan for the UiTM project in Seremban 3 is “ring-fenced” via the securitisation against the future earnings of the said project, as well as the tenure of the term loan sufficiently matched against the tenure of the project. The concession for the UiTM project in Seremban 3 is expected to provide the Group with sustainable earnings going forward and to generate sufficient cash flows to meet its liabilities as and when they fall due, thus reducing over time, the gearing level arising from the draw down in borrowings from the UiTM project in Seremban 3. The Group’s total assets are also exceeded by its total liabilities, and should the need arise, the Group will realise their assets and discharge their liabilities in the normal course of business.
During the period under review, the Group secured its second PFI project – the proposed concession UiTM campus project in Puncak Alam, Selangor, wherein the Group will develop the UiTM campus, designed to cater for two (2) faculties with a target capacity of 3,000 students. The concession agreement for the UiTM project in Puncak Alam was executed in 30 April 2012 and as such, did not materially affect the results for the FYE 31 June 2012.
FYE 30 June 2013
For the FYE 30 June 2013, the Group registered revenue of RM238.20 million, an increase of 58% against annualised revenue of RM150.91 million for the previous 18-month financial period ended 30 June 2012 arising mainly from the higher percentage of completion of construction works of the UiTM concession project in Seremban 3 and the commencement of the UiTM campus in Puncak Alam. As at 30 June 2013, the UiTM campuses in Seremban 3 and Puncak Alam were 83.38% and 21.16% completed respectively.
The Group registered a profit after taxation of RM32.11 million in the FYE 30 June 2013, an increase of 102% as compared to the previous eighteen (18)-month financial period ended 30 June 2012 of RM15.90 million (which translates into an annualised amount of RM10.60 million) arising from the construction of the UiTM campuses in Seremban 3 and Puncak Alam.
The gearing ratio of the Group increased from 1.09 times as at 30 June 2012 to 1.96 times as at 30 June 2013 arising mainly from the draw down in bank borrowings for the construction of the UiTM Puncak Alam project and ongoing project in Seremban 3. Although the Group’s gearing level further
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increased, barring any unforeseen circumstances, the Directors are confident that the Group is able to successfully complete and implement the UiTM projects and operate profitably with the continuing financial support from lenders and have adequate working capital to finance the development of the said projects. The term loans for the UiTM projects are securitised against the future earnings of the respective projects, and with the tenure of the term loans sufficiently matched against the tenure of the projects. The concessions are expected to provide the Group with sustainable earnings going forward and to generate sufficient cash flows to meet their respective liabilities as and when they fall due, reducing over time, the gearing level. The Group’s total assets are also exceeded by its total liabilities, and should the need arise, the Group will realise their assets and discharge their liabilities in the normal course of business.
Six (6)-month financial period ended 31 December 2013
For the six (6)-month financial period ended 31 December 2013, the Group recorded a revenue of RM129.35 million and a profit after taxation of RM18.62 million which were contributed mainly from the ongoing UiTM concession projects in Seremban 3, Puncak Alam and the UiTM training institute in Nilai. (The Group successfully secured its third PFI project – the proposed concession UiTM training institute in Nilai, Negeri Sembilan, with a capacity to accommodate 650 trainees. The construction of the UiTM training institute in Nilai commenced in the second half of 2013).
The Group recorded a further increased in gearing as at 31 December 2013 of 2.43 times as compared to 1.96 times as at 30 June 2013 arising from the further increase in draw down of bank borrowings for the financing of all three (3) of the Group’s concession projects arising from the higher percentage of work completed. Barring any unforeseen circumstances, the Directors are confident that the Group is able to successfully complete and implement the UiTM projects in Seremban 3, Puncak Alam and Nilai and operate profitably with the continuing financial support from lenders and have adequate working capital to finance the development of the said campuses and training institute. The term loans for the three (3) UiTM projects are securitised against the future earnings of the respective projects, and with the tenure of the term loans sufficiently matched against the tenure of the projects. The concessions are expected to provide the Group with sustainable earnings going forward and to generate sufficient cash flows to meet their respective liabilities as and when they fall due, reducing over time, the gearing level. The Group’s total assets are also exceeded by its total liabilities, and should the need arise, the Group will realise their assets and discharge their liabilities in the normal course of business.
Whilst the high gearing level initially depicts a significant risk for the Group, the gearing risk is mitigated with the continuing financial support from lenders to fund the PFI projects via the securitisation against future earnings of the respective PFI projects, with the tenure of the term loans sufficiently matched against the tenure of the PFI projects (i.e. long term loans of 12 years matching sufficiently the long term tenure of the PFI projects) as well as the Group’s total assets exceeding its total liabilities which, should the need arise, the Group will dispose its assets to raise working capital. Upon the completion of the construction of the campuses and training institute, the concessions are expected to provide the Group with sustainable earnings going forward and to generate sufficient cash flows to meet the respective liabilities as and when they fall due, thus reducing over time, the gearing level.
As at 31 December 2013, the construction of the UiTM campuses in Seremban 3 had been completed whilst Puncak Alam and the UiTM training institute in Nilai were 27.36% and 12.09% completed respectively.
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APPENDIX II
FURTHER INFORMATION
1. DIRECTORS' RESPONSIBILITY STATEMENT
This Circular has been seen and approved by the Board and they individually and collectively accept full responsibility for the accuracy of the information given in this Circular and confirm that, after making all enquiries as were reasonable in the circumstances and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading.
2. CONSENT AND DECLARATION
M&A Securities, being the Adviser has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereon in the form and context in which they appear. M&A Securities has given its confirmation that no conflict of interest exists or is likely to exist in relation to its role as the Adviser for the Proposed Bonus Issue of Warrants.
3. MATERIAL LITIGATION
As at the LPD, to the best knowledge of the Board, neither MCB nor its subsidiaries are engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the Board has no knowledge of any proceedings pending or threatened against the MCB Group or of any facts likely to give rise to any proceeding which may materially and adversely affect the financial position or business of the MCB Group.
4. MATERIAL COMMITMENT
As at the LPD, the Board is not aware of any material commitment, incurred or known to be incurred, which may have a material impact on the results or financial position of the MCB Group.
5. CONTINGENT LIABILITIES
As at the LPD, the Board is not aware of any contingent liabilities, incurred or known to be incurred, which upon becoming enforceable, may have a substantial impact in the ability of MCB to meet its obligations as and when they fall due.
6. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection at the Registered Office of the Company at 8th Storey South Block, Wisma Selangor Dredging, 142-A Jalan Ampang, 50450 Kuala Lumpur during normal business hours (except public holidays) from the date of this Circular up to and including the date of the EGM:
(i) Memorandum and Articles of Association of MCB;
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(ii) The audited consolidated financial statements of MCB for the two (2) financial years ended 30 June 2012 and 30 June 2013 and the unaudited consolidated financial statements for the nine (9)-month financial period ended 31 March 2014;
(iii) Consent letter and declaration referred to in Section 2 above; and
(iv) The draft Deed Poll.
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MENANG CORPORATION (M) BERHAD (Company No. 5383-K) (Incorporated in Malaysia under the Companies Act, 1965)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting (“EGM”) of Menang Corporation (M) Berhad (“MCB” or the “Company”) will be held at Canada Place, Level 2, North Block, Wisma Selangor Dredging, 142D Jalan Ampang, 50450 Kuala Lumpur on Friday, 20 June 2014 at 10.00 a.m., for the purpose of considering and, if thought fit, passing with or without modifications, the following resolution:
ORDINARY RESOLUTION
PROPOSED BONUS ISSUE OF 133,553,500 WARRANTS IN MCB (“WARRANTS”) ON THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) ORDINARY SHARES OF RM0.50 EACH HELD IN MCB (“MCB SHARES”) HELD ON AN ENTITLEMENT DATE TO BE DETERMINED LATER (“PROPOSED BONUS ISSUE OF WARRANTS”)
"THAT subject to the approvals of all relevant authorities or parties (where required) being obtained, the Board of Directors of the Company (“Board”) be and is hereby authorised to issue 133,553,500 Warrants in registered form and constituted by a deed poll to be executed by the Company constituting the Warrants ("Deed Poll") to the shareholders of the Company whose names appear on the Record of Depositors of the Company as at the close of business on an entitlement date to be determined and announced later by the Board, on the basis of one (1) Warrant for every two (2) existing MCB Shares held;
THAT fractional entitlements of the Warrants arising from the Proposed Bonus issue of Warrants, if any, shall be dealt with in such manner as the Board shall in its absolute discretion deems fit and expedient in the best interest of the Company;
THAT the Board be and is hereby authorised to enter into and execute the Deed Poll with full powers to assent to any conditions, variations, modications and/or amendments in any manner as may be required or imposed by the relevant authorities or deemed necessary by the Board, and subject to all provisions and adjustments contained in the Deed Poll, to assent to any modifications and/or amendment to the exercise price, exercise period and/or number of Warrants as may be required or permitted to be revised as a consequence of any adjustments under the provisions of the Deed Poll, with full power to implement and to give effect to the terms and conditions of the Deed Poll, and to take all steps as the Board deems fit or expedient in order to implement, finalise and give full effect to the Deed Poll;
THAT the Board be and is hereby authorised to issue and allot such appropriate number of new MCB Shares arising from the exercise of the Warrants by the holders of the Warrants in accordance with the provisions of the Deed Poll;
THAT the new MCB Shares to be issued pursuant to the exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing MCB Shares in issue, save and except that they will not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid to the shareholders of the Company, the entitlement date of which is prior to the date of allotment of the said new MCB Shares;
AND THAT the Board be and is hereby authorised to sign and execute all documents to give effect to the Proposed Bonus Issue of Warrants with full power to assent to any conditions, variations, modifications and/or amendments in any manner as may be required or imposed by the relevant authorities or deemed necessary by the Board, and to take all steps and do all such acts and matters in the manner as the Board may consider necessary or expedient to implement, finalise and give full effect to the Proposed Bonus Issue of Warrants."
BY ORDER OF THE BOARD
NG AH WAH (MIA 10366) Company Secretary
Kuala Lumpur 29 May 2014
Notes:
1. In respect of deposited securities, only members whose names appear in the record of depositors on 13 June 2014 shall be eligible to attend the meeting. 2. A member of the Company entitled to attend and vote at the abovementioned meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company. 3. The Proxy Form must be signed by the appointer or his/her attorney duly authorised in writing or in the case of a corporate member, the instrument appointing a proxy shall be under its Common Seal or under the hand of a duly authorised officer or attorney. 4. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. 5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 6. Any alteration to the instrument appointing a proxy must be initialled. The instrument appointing a proxy must be deposited at the Company’s Registered Office at 8th Storey, South Block, Wisma Selangor Dredging, 142-A Jalan Ampang, 50450 Kuala Lumpur not less than 48 hours before the time fixed for the EGM or any adjournment thereof.
✄
Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If no specific instruction is given on th on given is instruction specific no If cast. be to vote your wish you how provided spaces the in Dated this______day of______2014 “X” an with indicate Please istovote proxy *My/Our as indicatedbelow:- Friday, 20June 2014at10.00 a.moratanyadjournment thereof. Place, Level 2, NorthBlock, Wisma Selangor Dredging, 142DJalan Ampang, 50450 Kuala Lumpur on *my/our behalf attheExtraordinaryGeneralMeeting or failinghim/her,the Chairmanof the Meeting as of…………………………………………………………………………….………………………………………………………………… (Full name in blockletters) No….…………..……………..…………………………..………. ……….……………………………………………….………NRIC being a member(s) of MENANG CORPORATION No……………………………………………………of………………………………………………..…………… NRIC/Company I/We,………….………………………………………………………………………….………………………………………………… PROXY FORM 2. voting, the proxy/proxies will vote or abstain from voting on the resolution at his/her discretion. discretion. his/her at resolution the on voting from abstain or vote will proxy/proxies the voting, (* Delete if not applicable) applicable) not if Delete (*
3. The Proxy Form must be signed by the appointer or his/her attorney duly authorised in writing or in the case of a a of case the in or writing in authorised duly attorney his/her or appointer the by signed be must Form Proxy The 3. Notes: Notes:
1. 1. nominee which holds ordinary shares in the Company for for Company the in shares ordinary holds which nominee authorised exempt an is Company the of member a Where 5. 4. Where a member appoints more than one proxy, the appoin the proxy, one than more appoints member a Where 4. 6. Any alteration to the instrument appointing a proxy must proxy a appointing instrument the to alteration Any 6. ………….………………………………………………………………………….………………………………………………………… riayRslto Proposed Bonus Issue of Warrants Ordinary Resolution Resolution
Si g In respect of deposited securities, only securities, deposited of respect In be eligible to attend the meeting. meeting. the attend to eligible be A member of the Company entitled to attend and vote at the abovementioned meeting is entitled to appoint a proxy to to proxy a appoint to entitled is meeting abovementioned the at vote and attend to entitled Company the of member A attend and vote in his stead. A proxy need not be a member of the Company. Company. the of member a be not need proxy A stead. his in vote and attend corporate member, the instrument appointing a proxy shall shall proxy a appointing instrument the member, corporate his shareholdings to be represented by each proxy. proxy. each by represented be to shareholdings his authorised officer or attorney. or officer authorised multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which which proxies of number the to limit no is there account”), (“omnibus account securities one in owners beneficial multiple 50450 Kuala Lumpur not less than 48 hours before the ti the before hours 48 than less not Lumpur Kuala 50450 the exempt authorised nominee may appoint in in appoint may nominee authorised exempt the deposited at the Company’s Registered Office at 8th Storey 8th at Office Registered Company’s the at deposited nature of shareholder nature of
(Full name in block letters) letters) in block name (Full ( s (Incorporated inMalaysia under the Companies Act, 1965) Ordinary Business
) orCommon Seal MENANGCORPORATION (M) BERHAD members whose names appear in the record of depositors on 13 June 2014 shall shall 2014 June 13 on depositors of record the in appear names whose members
(Company No. 5383-K) (Company No. 5383-K) respect of each omnibus account it holds. holds. it account omnibus each of respect (Full address) CDS Account No. (Full address) (M) BERHAD herebyappoint …………………..……………… me fixed for the EGM or any adjournment thereof. thereof. adjournment any or EGM the for fixed me
, South Block, Wisma Selangor Wisma Block, South , *my/our proxy toattendand votefor*me/us on be initialed. The instrument The initialed. be tment shall be invalid unless he specifies the proportions of of proportions the specifies he unless invalid be shall tment (“EGM”) oftheCompanytobeheldatCanada be under its Common Seal or under the hand of a duly duly a of hand the under or Seal Common its under be
Dredging, 142-A Jalan Ampang, Ampang, Jalan 142-A Dredging,
No. ofShares held appointing a proxy must be be must proxy a appointing O AGAINST FOR e e …
… . . … Fold this flap for sealing
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AFFIX Affix STAMP Stamp
The Company Secretary Menang Corporation (M) Berhad (5383-K) Box #2, Wisma Selangor Dredging 8th Storey, South Block 142-A Jalan Ampang 50450 Kuala Lumpur
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