Hlt Global Berhad (“Hlt” Or “Company”)

HLT GLOBAL BERHAD (“HLT” OR “COMPANY”)

PROPOSED ACQUISITION BY HL ADVANCE TECHNOLOGIES (M) SDN. BHD. (“HLA” OR “PURCHASER”), A WHOLLY-OWNED SUBSIDIARY OF HLT, OF A PARCEL OF LEASEHOLD LAND TOGETHER WITH AN OFFICE CUM FACTORY ERECTED THEREON FOR A TOTAL CASH CONSIDERATION OF RM16.25 MILLION

1.0 INTRODUCTION

The Board of Directors of HLT (“Board”) wishes to announce that HLA, a wholly-owned subsidiary of the Company, is proposing to acquire a parcel of leasehold land under HS(D) 34158, PT No. 35212, Mukim Tanjong Dua Belas, Daerah Kuala Langat, Negeri Selangor, together with an office cum factory erected thereon (“Subject Property” or “Property”) from Sri Taming Sdn. Bhd. (“STSB” or “Vendor”), for a total cash consideration of RM16.25 million (“Proposed Acquisition”).

2.0 DETAILS OF THE PROPOSED ACQUISITION

2.1 Background information

HLA had on 19 April 2021 entered into a conditional sale and purchase agreement (“SPA” or “Agreement”) with STSB, wherein HLA agrees to buy and STSB agrees to sell the Subject Property for a cash consideration of RM16,250,000 (“Purchase Consideration”).

The Subject Property is to be acquired by the Vendor via a sale and purchase agreement made between the Vendor and Alpha Variamas Sdn. Bhd. (“the Proprietor”) dated 16 December 2020 (“First Agreement”).

2.2 Information of the Subject Property

The Subject Property comprised of a one (1)-storey detached factory with a three (3)-storeys annexed office building located at No. 6, Jalan TPP 8, Taman Perindustrian Putra, Puchong, Selangor. Located in the Putra Industrial Park to the south-east of Taman Putra Prima and the north of Bandar Saujana Putra, the Subject Property is well connected via a web of key expressways including, North–South Expressway Central Link (ELITE), Damansara-Puchong Expressway (LDP), New Klang Valley Expressway (NKVE), Shah Alam Expressway (KESAS) and Maju Expressway (MEX).

The detailed information of the Subject Property is set out as below:-

Title description : HS(D) 34158, PT No. 35212, Mukim Tanjong Dua Belas, Daerah Kuala Langat, Negeri Selangor

Postal address : No. 6, Jalan TPP 8, Taman Perindustrian Putra, 47130 Puchong, Selangor

Registered owner : Alpha Variamas Sdn. Bhd.

Category of land use : Industrial

Tenure : Leasehold land expiring on 16 December 2111

Titled land area : 2.551 acres

Total built-up area : Factory area 18,589.36 square feet Office area 3,937.65 square feet Total 22,527.01 square feet

Existing use : Unoccupied

Proposed use : Office cum factory for the fabrication of glove-dipping lines

Age of building : Approximately three (3) years

Net book value : HLT is not privy to this information

Restriction in interest : The land is subject to the following restriction in interest: “Tanah ini boleh dipindahmilik, dipajak atau digadai setelah mendapat kebenaran Pihak Berkuasa Negeri”

Encumbrances : Nil

2.3 Information on the Vendor

STSB was incorporated in Malaysia on 3 December 2003 as a private limited company under the Companies Act, 1965 (deemed registered under Companies Act, 2016) and having its registered office at 7-2, Tingkat 2, the Boulevard, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur. As at the date of this announcement, the issued share capital of STSB is RM2 comprising two (2) ordinary shares. The directors and shareholders of STSB are Liow Chee Keong and Tan Chey Ling.

2.4 Basis and justifications of arriving at the Purchase Consideration

The Purchase Consideration was arrived at on a “willing-buyer willing-seller” basis after taking into consideration the following:-

(i) the market research and assessment conducted by the management of HLT on subsisting offers for similar properties within close proximity to the existing factory premises of HLT and the Subject Property; and

(ii) the prospects of the Subject Property, including:-

▪ close proximity to the existing factory premises of HLT, which will facilitate more effective administration and management functions to be carried out by the management of HLT over the two factory premises;

▪ suitability, in terms of land/factory size, accessibility and readily available infrastructure, to cater for the production expansion plan of HLT.

2.5 Source of funding

The Company intends to fund the Proposed Acquisition through internal funds of HLT and its subsidiaries (“HLT Group” or “Group”).

2.6 Assumption of liabilities

HLT and/or HLA will not assume any liabilities, including contingent liabilities and guarantees, pursuant to the Proposed Acquisition.

2.7 Estimated financial commitment

The Board does not foresee any additional financial commitment arising from the Proposed Acquisition, save for the Purchase Consideration and the capital expenditures to be incurred and financed by HLA (the exact quantum of which have yet to be finalised and determined at this juncture) for the setting-up of production facilities, such as overhead crane and production machineries, at the Subject Property for the fabrication of glove-dipping lines.

3.0 SALIENT TERMS OF THE SPA

3.1 Purchase Consideration

The Purchase Consideration of RM16,250,000 will be payable to the Vendor in the following manner:-

(a) Simultaneously with the execution of the SPA, HLA shall pay to the Vendor a sum of RM1,625,000, representing ten per centum (10%) of the Purchase Consideration (“Deposit”).

(b) Simultaneously with the execution of the SPA, HLA shall deposit with the stakeholder’s solicitors as stakeholder for the Vendor the balance Purchase Consideration of RM14,625,000, representing ninety per centum (90%) of the Purchase Consideration (“Balance Purchase Consideration”).

3.2 Other salient terms

The salient terms of the SPA, including Conditions Precedent, Non Registration of Transfer, Default by Purchaser and Vendor’s default are set out in Appendix I of this announcement.

4.0 RATIONALE FOR THE PROPOSED ACQUISITION

The Proposed Acquisition serves to expand the Group’s production capacity of glove-dipping lines capitalising on the increasing application of rubber gloves driven by the growing demand in the global and domestic healthcare industry and other end-user markets, such as the manufacturing industry and the food and beverages services sector as more particularly set out in Section 6.2 of this announcement. Driven by the strong demand for rubber gloves, many companies have ventured/diversified into rubber gloves manufacturing since last year and at the same time, a number of existing rubber gloves manufacturers are in the midst of stepping-up their production capacity.

In view of the favourable prospects of the rubber gloves industry, the proposed expansion of production capacity through the Proposed Acquisition would enable HLA to secure/undertake more orders for the fabrication of glove-dipping lines from its existing/new customers, thereby enhancing the revenue, profitability and future sustainability of the Group. Currently, the Group is operating at its peak production capacity. Through the Proposed Acquisition, HLT would be able to increase its production capacity of glove-dipping lines by approximately 80%.

5.0 RISK FACTORS

5.1 Non-completion risk

The Proposed Acquisition is conditional upon fulfilment of the conditions precedent to the SPA. There is a possibility that the Proposed Acquisition cannot be completed within the respective time period permitted under the SPA due to failure in fulfilling the conditions precedent as set out therein. In the event that the conditions precedent are not fulfilled within the stipulated time period or in the event any approvals shall contain terms which are not acceptable to the parties to the SPA, the completion of the Proposed Acquisition may be affected. In this regard, the Board shall take reasonable steps to ensure that there is no delay in fulfilling all the conditions precedent to the SPA by the parties concerned and should there be any delay beyond the agreed time period, the Board shall negotiate with the relevant parties to the SPA to mutually extend the said period prior to its expiry.

5.2 Compulsory Acquisition by the Government of Malaysia

The Government of Malaysia has the power to compulsorily acquire any land in Malaysia pursuant to the provisions of the applicable legislation including the Land Acquisition Act, 1960. In the event of any compulsory acquisition of property in Malaysia, the amount of compensation to be awarded is based on the fair market value of the property and is assessed on the basis prescribed in the Land Acquisition Act, 1960 and other relevant laws or regulations. If the Subject Property is compulsorily acquired by the Government of Malaysia at a point in time when the market value of the Subject Property is lower, the compensation amount paid to the Group might be less than the Purchase Consideration. This might result in an adverse impact to the financial result of the Group. Should such circumstances arise, HLT will seek to minimise any potential losses from such transaction, including invoking the relevant provisions of the Land Acquisition Act, 1960 in relation to its rights to submit an objection in respect of the compensation, where necessary.

6.0 INDUSTRY OUTLOOK AND PROSPECTS

6.1 Overview and outlook of Malaysian economy

The Malaysian economy contracted by 8.3% in the first half of 2020, with a decline of 17.1% in the second quarter. The economy is expected to contract at a slower pace in the second half of the year, aided by the speedy implementation of various stimulus packages to support the people and revitalise the economy. In 2020, the economy is expected to contract by 4.5% (2019: 4.3%). The impact of the packages is anticipated to have spill-over effects and provide an additional boost to the economy in 2021. With the anticipated improvement in global growth and international trade, the Malaysian economy is projected to rebound between 6.5% and 7.5% in 2021. Growth will continue to be supported by strong economic fundamentals and a well-diversified economy. However, the favourable outlook hinges on two major factors – the successful containment of the pandemic and sustained recovery in external demand.

The services sector contracted by 6.7% in the first half of 2020 largely due to worldwide travel bans, domestic movement restrictions and quarantines, which severely affected the tourism-related subsectors and airlines. Among the subsectors that have been severely affected include wholesale and retail trade, food & beverages and accommodation, transportation and storage as well as real estate and business services. Nevertheless, the information and communication subsector expanded as online transactions increased significantly during the MCO. The services sector is expected to record a smaller decline of 1% in the second half of the year, reflecting the gradual resumption of economic activities. Overall, the sector is projected to contract by 3.7% in 2020 (2019: 6.1%) before rebounding by 7% in 2021. With the normalisation of economic activities in 2021, all subsectors are projected to record positive growth.

The manufacturing sector contracted by 8.7% during the first half of 2020, as almost all industry operations were temporarily halted, following supply chain disruptions amid the MCO. Within the export-oriented industries, the electrical and electronic cluster was severely affected as global demand decelerated sharply. Domestic-oriented industries also recorded sluggish growth, with transport equipment; and non-metallic mineral products, basic metal and fabricated metal products segments registering a double-digit contraction. Nonetheless, the manufacturing sector is expected to improve by 2.4% in the second half of 2020, as industrial activities resume operations in line with the gradual lifting of the MCO. Within the export-oriented industries, the electrical and electronic segment is projected to improve following rising demand for computer and electronic products. Chemical and rubber products are anticipated to continue to record high growth, benefitting from higher demand for rubber gloves and pharmaceutical products. Within the domestic-oriented industries, the food products and transport equipment segments are expected to rebound, supported by higher demand. Overall, for the year, the manufacturing sector is expected to decline by 3% (2019: 3.8%). The manufacturing sector is forecast to rebound by 7% in 2021, driven by steady improvement in both the export- and domestic-oriented industries.

(Source: Economic Outlook 2021, Ministry of Finance)

6.2 Rubber glove industry in Malaysia

Malaysia is the world’s largest manufacturer of rubber gloves, with its local production of rubber gloves satisfying more than half of global demand. Malaysia’s rubber gloves are more competitively priced than its closest competitor, Thailand, as production costs are lower due to higher labour productivity, efficient transportation system and lower fuel costs.

Malaysia dominates the global rubber glove industry as the largest producer and exporter. In 2019, Malaysia exported approximately RM17.35 billion worth of rubber gloves. The rubber glove industry is a vibrant and growing industry, as evidenced by the growth in exports from RM13.10 billion in 2015 to RM17.35 billion in 2019, registering a compound annual growth rate of 7.3%. Much of this growth was driven by the growing end-user industries, particularly the healthcare industry where rubber gloves play a significant role as well as the improving hygiene standards at manufacturing facilities and the food and beverages establishments.

Though Malaysia is one of the main producers of natural rubber in the world, raw materials continued to be imported from neighbouring Thailand and Vietnam to boost its rubber glove industry. Aside from the abundance of raw material, Malaysia holds advantage in terms of advanced infrastructure, research and development programmes, development of supporting industries and support from government agencies. As the rubber glove industry is a major contributor to the Malaysian economy, the government has taken measures to boost the development of this industry. The Tun Abdul Razak Research Centre is a unit of the Malaysian Rubber Board and promotes the Malaysian rubber and rubber product industries, besides researching on advancement of the industry through science and technology, processing and design.

Demand for rubber gloves is growing due to its significance to the healthcare industry, which is enhanced by epidemic and pandemic disease outbreaks. In 2003 and 2004, the number of gloves manufactured increased by 23.4% and 20.6% respectively, due to outbreaks of H5N1 bird flu and Severe Acute Respiratory Syndrome (SARS). There was a 13.5% growth in 2010 because of a worldwide H1N1 swine flu pandemic, which carried over to 2011, increasing production by 17.7%. In 2013, there was a surge of 9.1% in production to cope with the outbreaks of H7N9 bird flu and Ebola virus disease (Ebola).

The outbreak of Middle East Respiratory Syndrome (MERS) in South Korea contributed to the growth in rubber glove production in 2015. Rubber glove production of Malaysia grew by 5.5% to 59.4 billion pairs in 2015, from 56.3 billion pairs in 2014. With the impact of COVID-19, in the first three (3) months of 2020, Malaysia exported 22.57 billion pairs of rubber gloves, which grew by 14.0%, from 19.80 billion pairs in the first three (3) months of 2019.

(Source: Management of HLT, Malaysian Rubber Council (formerly known as Malaysia Rubber Export Promotion Council) website, www.mrepc.com and Industry Brief 2020 on the Rubber Glove Industry by Malaysian Rubber Glove Manufacturers Association (“MARGMA”))

6.3 Future plan for the Subject Property

In view of the favourable prospects of the rubber gloves industry, the Group envisages strong demand for new glove-dipping lines driven by the number of new entrants that have ventured/diversified into rubber gloves manufacturing during the year as well as the expansion plan embarked by the existing rubber gloves manufacturers. In order to capitalise such potential business opportunities, the Group plans to expand its production capacity as it is currently operating at its peak production capacity. Upon completion of the Proposed Acquisition, the Subject Property will be fully utilised for the fabrication of glove-dipping lines, which is anticipated to increase HLA’s production capacity of glove-dipping lines by approximately 80%. For the financial year ended 31 December 2020, this business segment contributed RM68.49 million and RM11.29 million to the audited consolidated revenue and profit before taxation of HLT.

7.0 EFFECTS OF THE PROPOSED ACQUISITION

7.1 Issued share capital and substantial shareholders’ shareholdings

The Proposed Acquisition is not expected to have any effect on the issued share capital and substantial shareholders’ shareholdings of HLT as it does not involve any issuance of new shares by HLT.

7.2 Earnings and earnings per share (“EPS”)

Barring any unforeseen circumstances and on the assumption that the Proposed Acquisition will be completed by the third (3rd) quarter of 2021, the Proposed Acquisition is expected to contribute positively to the consolidated earnings and EPS of HLT for the financial year ending 31 December 2021.

7.3 Net assets (“NA”) and gearing

The Proposed Acquisition is not expected to have any material effect on the NA, NA per share and gearing of HLT for the financial year ending 31 December 2021.

7.4 Convertible securities

As at the LPD, save for the outstanding options of the Company’s employee share option scheme and the outstanding warrants 2017/2022 of HLT, the Company does not have any other convertible securities.

8.0 APPROVALS REQUIRED

The Proposed Acquisition is subject to the following approvals being obtained:-

(i) the relevant consent from the State of Selangor to the transfer of the Subject Property from the Vendor to HLA; and

(ii) any other relevant parties/authorities (if applicable).

9.0 PERCENTAGE RATIO

The highest percentage ratio applicable to the Proposed Acquisition pursuant to Rule 10.02(g) of the Listing Requirements is 16.06% based on the latest audited consolidated financial statements of HLT for the financial year ended 31 December 2020.

10.0 CONDITIONALITY

The Proposed Acquisition is not conditional upon any other corporate proposals undertaken or to be undertaken by HLT.

11.0 DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

None of the Directors, major shareholders and/or persons connected with the Directors and major shareholders of HLT has any interest, direct or indirect, in the Proposed Acquisition.

12.0 DIRECTORS’ STATEMENT / RECOMMENDATION

The Board, having considered all aspects of the Proposed Acquisition, including but not limited to the rationale, financial effects, terms of the SPA and risks associated with the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the Company.

13.0 ESTIMATED TIMEFRAME FOR COMPLETION

Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the third (3rd) quarter of 2021.

14.0 DOCUMENT AVAILABLE FOR INSPECTION

The SPA dated 19 April 2021 is available for inspection at the registered office of HLT at Third Floor, No. 77, 79 & 81, Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor during ordinary business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement.

This announcement is dated 19 April 2021.

APPENDIX I SALIENT TERMS OF THE SPA

The salient terms of the SPA are as follows:-

1. SALE AND PURCHASE

1.1 Subject to the provisions of the SPA, the fulfillment of the Conditions Precedent set out in Clause 2 below and the completion of the First Agreement (as defined below), the Vendor hereby agrees to sell and the Purchaser hereby agrees to purchase from the Vendor the Property on an “as is where is basis” with vacant possession thereof free from all encumbrances but subject to such conditions and restrictions express or implied in the issue document of title to the Property at the Purchase Consideration upon the terms but subject to the conditions contained in the SPA.

2. CONDITIONS PRECEDENT

The sale and purchase of the Property is conditional upon, inter-alia, the following terms and conditions:-

2.1 Completion of the agreement between the Vendor and the original proprietor of the Property for the Vendor to complete the purchase of the Property (“First Agreement”).

2.2 The Vendor shall obtain the approval from the State Authority within three (3) months from the date of the Purchaser’s solicitors payment and submission of the relevant documents to the State Authority (“Procurement Period”).

2.3 In the event the State Authority Consent is not obtained within the Procurement Period including any appeal made by the Vendor the Purchaser shall automatically grant to the Vendor an extension of two (2) months free of interest commencing from the date next after the expiration of the Procurement Period to enable the Vendor to obtain the State Authority Consent.

2.4 The SPA shall become unconditional on the date of receipt by the Purchaser’s solicitors of a copy of the State Authority Consent from the Vendor (“Commencement Date”).

2.5 Each of the parties hereto shall at all times observe and comply with any or all conditions which at the date of the SPA have been or may hereafter be imposed on the Property pursuant to the provisions of The National Land Code, 1965 (“NLC”) and with the conditions and obligations implied by virtue of the provision of the NLC.

2.6 The Purchaser shall deliver to the Vendor approvals of the shareholders of the Purchaser’s holding company for the purchase of the Property in accordance with the terms of the SPA and any other relevant authorities and/or parties (if applicable).

3. NON REGISTRATION OF TRANSFER

3.1 If due to no fault default neglect misconduct and/or omission on the part of the Vendor and/or the Purchaser the duly executed adjudicated and stamped instrument of transfer (“Memorandum of Transfer”) in favour of the Purchaser is rejected for registration for any reason(s) not rectifiable the Purchaser or the Purchaser’s solicitors as the case may be shall serve a fourteen (14) days’ prior notice in writing on the Vendor commencing from the date of posting thereof to terminate the SPA. The Vendor or the stakeholder solicitors as the case may be shall refund all such monies paid by the Purchaser and the Purchaser shall return/redeliver the following to the Vendor:-

(a) the Memorandum of Transfer to be destroyed where no stamp duty has been paid or in the case where the stamp duty has been paid after receipt of the cancelled Memorandum of Transfer from the stamp duties office (if returnable) and the original issue document of title to the Property with the Vendor’s interest intact; and

(b) vacant possession of the Property in the same state nature and condition when the same was first delivered to the Purchaser; and

thereafter the SPA shall be null and void and shall have no effect whatsoever and neither party shall have any claim against the other for any cost damages or compensation or otherwise against the other save for any antecedent breach in respect of the SPA.

3.2 In the event that the Memorandum of Transfer in respect of the Property is rejected for registration due to reason(s) rectifiable by attendance at the land office/registry the Vendor and/or the Purchaser or the Purchaser’s Solicitors as the case may be shall upon receipt of notification by the land office/registry attend to the rectification within the time stipulated by the land office/registry or if no time is stipulated not later than fourteen (14) days from the date of receipt of such notification.

4. DEFAULT BY PURCHASER

4.1 Event(s) Of Default

Notwithstanding any provisions to the contrary contained in the SPA if the Purchaser:-

(a) fails refuses and/or neglects to pay any monies covenanted to be paid under the SPA including any interest due and owing to the Vendor (if any); or

(b) commits any breach of any term(s) and/or condition(s) contained in the SPA or fails refuses and/or neglects to perform or observe any of the Purchaser’s covenants herein contained (provided that such breach or failure is not cause by any default fault omission or blameworthy conduct on the part of the Vendor); or

(c) before payment in full of the Purchase Consideration the Purchaser enters into any statutory or other composition or arrangement with the Purchaser’s creditors or enters into liquidation whether compulsory or voluntary the Vendor shall subject to Clause 4.3 below be entitled to seek/pursue an action for specific performance of the SPA and all costs and expenses incurred in bringing the action or in connection therewith shall be solely borne and be paid by the Purchaser or terminate the SPA by notice in writing to the Purchaser to that effect.

4.2 Where the Vendor elects to terminate the SPA then and in such an event:-

(a) the Vendor shall be entitled to deal with or otherwise dispose or sell the Property in such manner as the Vendor shall see fit at its absolute discretion as if the SPA had not been entered into;

(b) all monies previously paid by the Purchaser to the Vendor shall be dealt with as follows:-

(i) firstly all interest howsoever and wheresoever payable under the SPA shall be paid forthwith by the Purchaser to the Vendor or set-off against the monies previously paid (if any);

(ii) secondly a sum equivalent to ten per cent (10%) of the Purchase Consideration (“Forfeitable Sum”) shall be forthwith forfeited to the Vendor absolutely as agreed liquidated damages; and

(iii) lastly the residue thereof if any shall be refunded free of interest to the Purchaser;

(d) subject to the due compliance of the provisions of sub-Clause 3.1(a) to (c) hereinabove neither party shall have any further claims against the other for any cost damages or compensation or otherwise thereafter.

4.3 Period To Rectify Default

Upon occurrence of any event(s) set out in Clause 4.1 hereof the Vendor shall give the Purchaser or the Purchaser’s solicitors as the case may be fourteen (14) days’ notice in writing commencing from the date of posting thereof to treat the SPA as having repudiated by the Purchaser and unless in the meanwhile such default and/or breach alleged is rectified and/or other monies are fully paid the SPA shall at the expiration of the said notice at the option of the Vendor be deemed to be terminated.

4.4 Insufficient Monies

In the event that the Purchase Consideration and such other monies paid by the Purchaser to the Vendor under the SPA shall be insufficient to pay the sum(s) provided in Clause 4.2 hereof the outstanding sum(s) shall be a debt due from the Purchaser to the Vendor and shall become payable to the Vendor forthwith whether demanded or not in which event all costs and expenses incurred thereby shall be borne and be paid by the Purchaser.

5. VENDOR’S DEFAULT

5.1 Event(s) of Default

If the Vendor fails to effect the transfer of the Property to the Purchaser free from all encumbrances within twelve (12) months from the date of the SPA or be in breach of any covenants hereinbefore or after contained (provided that such breach or failure is not cause by any default fault omission or blameworthy conduct on the part of the Purchaser and/or the Purchaser’s solicitors) the Purchaser or the Purchaser’s solicitors as the case may be shall serve a fourteen (14) days prior notice commencing from the date of posting thereof on the Vendor to remedy the breach and on the expiration of the said fourteen (14) days without the breach complained of having been remedied by the Vendor then the Purchaser shall be entitled to:-

(a) to commence an action for specific performance against the Vendor; or

(b) deem that the SPA has been rescinded whereupon the Vendor shall forthwith refund or cause to be refunded to the Purchaser all monies paid towards account of the Purchase Consideration free of interest including the Deposit and the apportionment sum (if paid) and in addition to the said refund the Vendor shall further pay a sum equivalent to ten per cent (10%) of the Purchase Consideration to the Purchaser.

5.2 The Vendor shall refund such monies paid by the Purchaser and the Purchaser shall comply with his obligations in Clause 3.1(a)-(c) above and thereafter the SPA shall be null and void and shall have no effect whatsoever and neither party shall have any claim against the other for any cost damages or compensation or otherwise against the other save for any antecedent breach in respect of the SPA.