PROPOSED PRIVATE PLACEMENT OF UP TO 59,899,800 NEW ORDINARY SHARES OF RM0.50 EACH IN OMESTI, TO INDEPENDENT THIRD PARTY INVESTOR(S) TO BE IDENTIFIED

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1 OMESTI BERHAD ( OMESTI OR THE COMPANY ) PROPOSED PRIVATE PLACEMENT OF UP TO 59,899,800 NEW ORDINARY SHARES OF RM0.50 EACH IN OMESTI, TO INDEPENDENT THIRD PARTY INVESTOR(S) TO BE IDENTIFIED 1. INTRODUCTION On behalf of the Board of Directors of Omesti ( Board ), M&A Securities Sdn Bhd ( M&A Securities ) wishes to announce that the Company proposes to implement a private placement of up to 59,899,800 new ordinary shares of RM0.50 each in Omesti ( Share(s) or Omesti Share(s) ), to independent third party investor(s) to be identified ( Proposed Private Placement ). 2. DETAILS OF THE PROPOSED PRIVATE PLACEMENT As at 11 January 2016 (being the latest practicable date prior to this announcement ( LPD )), Omesti has a total issued and paid-up share capital of RM194,630,837 comprising 389,261,674 Omesti Shares. In addition, the Company also has: (i) 106,516,733 outstanding Warrants 2011/2016 with an exercise price of RM0.96 ( Warrants-A ); (ii) 83,142,487 outstanding Warrants 2013/2018 with an exercise price of RM0.50 ( Warrants-B ); and (iii) 9,755,000 outstanding employees share options scheme granted and vested with an exercise price of RM0.66 ( ESOS options ); and (iv) 10,322,800 outstanding ESOS options with an exercise price of RM0.50. Assuming all the outstanding Warrants-A, Warrants-B and ESOS options are exercised prior to the implementation of the Proposed Private Placement, the Proposed Private Placement will involve the issuance of up to 59,899,800 new Omesti Shares ( Placement Share(s) ), representing approximately ten percent (10%) of the enlarged issued and paid-up share capital of Omesti. In any event, the actual number of Placement Shares to be issued shall not exceed ten percent (10%) of the issued and paid-up share capital of the Company at any point in time. 2.1 Basis of arriving at the issue price of the Placement Shares The issue price of the Placement Shares shall be determined and fixed by the Board at a later date after obtaining the relevant approvals for the Proposed Private Placement. The Board will take into consideration inter-alia, the prevailing market conditions and the provisions of Paragraph 6.04(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Main Market LR ), in determining the issue price. Based on the foregoing, the issue price shall be priced at: (i) a discount of not more than ten percent (10%) (the actual quantum of which is to be determined by the Board) to the volume weighted average market price of Omesti Shares for the five (5) market days ( 5D-WAMP ) immediately preceding the price fixing date(s)); or (ii) the par value of Omesti Shares of RM0.50 each; whichever is higher. The mechanism to determine the issue price of the Placement Shares is in accordance with market based principles. 1

2 For illustrative purposes, assuming the Placement Shares are issued at an indicative issue price of RM0.50 per Placement Share, this represents a discount of approximately 2.72% to the 5D-WAMP up to and including 8 January 2016 (being the market day immediately preceding the date of this announcement) of RM0.514 per Omesti Share. 2.2 Placement arrangement The Placement Shares are proposed to be placed to independent third party investor(s) to be identified. In accordance with Paragraph 6.04(c) of the Main Market LR, the Placement Shares will not be placed to the following parties: (i) (ii) the interested director, interested major shareholder or interested chief executive of Omesti or a holding company of Omesti (if applicable), or interested person(s) connected with such director, major shareholder or chief executive; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. Subject to the prevailing market condition, the Proposed Private Placement may be implemented in tranches within six (6) months after the receipt of all relevant approvals for the Proposed Private Placement (depending on investors interest at the point of implementation). As such, there could potentially be several price fixing dates depending on the number of tranches and timing of implementation. 2.3 Ranking of the Placement Shares The Placement Shares shall, upon issuance and allotment, rank pari passu in all respects with the existing issued and fully paid-up Omesti Shares, save and except that the holders of the Placement Shares shall not be entitled to any dividends, rights, allotments and/or other forms of distributions for which the relevant entitlement date precedes the date of issuance and allotment of the Placement Shares. 2.4 Listing of and quotation for the Placement Shares Omesti shall make an application to Bursa Securities for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities. 2.5 Utilisation of proceeds For illustration purposes, based on the proposed placement size of up to 59,899,800 Placement Shares and assuming the Placement Shares are issued at an indicative issue price of RM0.50 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of up to RM29.95 million. The proceeds raised are expected to be utilised in the following manner: Minimum Scenario RM 000 Maximum Scenario RM 000 Expected time frame for utilisation of proceeds (from listing date) Repayment of bank borrowings 3,000 11,000 (i) Within six (6) months Working capital for general 11,375 11,320 (ii) Within twelve (12) months business purposes Capital expenditure for 4,888 7,330 (iii) Within twelve (12) months Home City Networks Estimated expenses for the (iv) Within one (1) month Proposed Private Placement Total estimated proceeds 19,463 29,950 2

3 Minimum Scenario Maximum Scenario : Assuming none of the 106,516,733 outstanding Warrants-A, 83,142,487 outstanding Warrants-B and existing 20,077,800 ESOS options are exercised into new Omesti Shares prior to the implementation of the Proposed Private Placement. : Assuming all of the 106,516,733 outstanding Warrants-A, 83,142,487 outstanding Warrants-B and all the existing 20,077,800 ESOS options are exercised into new Omesti Shares prior to the implementation of the Proposed Private Placement. Notes: (i) (ii) The Group proposes to utilise RM3.00 million (Minimum Scenario) and RM11.00 million (Maximum Scenario) of the proceeds to repay part of the Group s existing bank borrowings amounting to approximately RM million as at 31 March The proposed repayment is expected to result in annual interest savings of approximately RM0.36 million (Minimum Scenario) and RM1.32 million (Maximum Scenario) based on the effective interest rate of 12.0% per annum. The Group s principal activities are in the distribution and maintenance of computer equipment and software, development of application software, system integration services and the provision of hardware and software maintenance services. Current businesses being nurtured and expanded are spearheading of information communication technology development in the areas of infrastructure, content and application, network connectivity and bandwidth services in Malaysia and project management services in relation to telecommunication as well as development of proprietary technology and remittance systems. The working capital of RM11.38 million will be used to fund the Group s capacity expansion initiatives and day-to-day operations which include staff salaries; critical data hosting services, software development and other operational expenses. Minimum/Maximum Scenario RM 000 Staff related expenses (a) 8,600 Data centre hosting (b) 362 Software development (c) 900 Office overheads (d) 1,513 11,375 Notes: (a) Staff related expenses are predominantly associated with the increase in operational, administrative, finance and marketing headcount as well as training for the Group s businesses which are currently being nurtured and expanded. These businesses include: e-payment The Group is currently rolling out its MyATM platform, a platform which offers a variety of cash-out options, bill payment services, easily implemented technologies for remittance of monies, invoicing and payment processing that can be integrated as a payment system via websites, mobile phones and self-service kiosks; and connectivity and infrastructural services The Group has secured contracts to wire up more than 15,000 new residential and commercial units with open access network allowing consumers to have access to 3

4 broadband, television programmes, closed circuit television or other related communications. This open access platform is provided through the construction and installation of high speed fibre optic infrastructure which is owned and operated by the Group. (b) (c) As part of the Group s cloud computing solutions and e-payment ecosystem businesses, the Group rents rack spaces from several external data centres to host computer servers, networking systems and applications. These hosting services and facilities provide network connectivity to ensure high levels of availability for customers access, to facilitate and store critical transaction processing information as well as contingencies for disaster recovery. Expenses for ongoing software development initiatives include the employment of outsourced programmers to script, code and programme the Group s MyATM kiosks existing software. The upgrades would be focused in transaction processing, terminal device control and remote software deployment areas. Transaction processing Presently, the MyATM kiosk allows for the reload and sale of the Touch n Go cards. The flexible architecture being developed will facilitate new features such as remittance, bill payments, reload mobile phone credit and perform transactions involving debit and credit cards. Terminal device control In addition to reading Touch n Go cards, the MyATM kiosks will be capable of incorporating hardware devices to support multi-function card and barcode reading, electronic data capture devices and change dispenser necessary to support the transaction features as described above. Remote software deployment Currently, the Group deploys technical teams on-site to perform technical troubleshooting issues and to update the MyATM kiosks software. With this upgrade, the Group is able to diagnose technical issues and deploy new application features remotely which would then be more cost efficient. (d) Overheads refer to expenses such as office rentals, utilities, professional fees for the Group s operations. (iii) (iv) The capital expenditure is expected to be utilised for the Group s business of providing open access network and infrastructural services to residential and commercial outlets. The capital expenditure for Home City Networks is for the construction and installation of high speed fibre optic consisting of active network equipment and backhaul fibre trunking which are purchased by the Group, linking the infrastructural services from the main fibre optic backbone to respective residential and commercial development projects. The estimated expenses consist of fees payable to relevant authorities, advisory and placement fees. Any variation in the actual amount of expenses will be adjusted to/from the amount allocated for working capital. The actual proceeds to be raised from the Proposed Private Placement are dependent on the issue price and actual number of Placement Shares issued. Any excess or shortfall of the actual proceeds raised will be adjusted against the working capital of the Group. 4

5 Pending the full utilisation of the proceeds raised from the Proposed Private Placement, the Company intends to place these proceeds (including accrued interest, if any) or the balance thereof in interest-bearing deposit accounts with licensed financial institution(s) or in short-term money market instruments. The interest derived from the deposits with financial institutions or any gains arising from the short-term money market instruments will be used as additional working capital of the Group. 3. RATIONALE The Proposed Private Placement will enable the Group to raise the necessary funds to further expand its operations without incurring additional interest costs associated with bank borrowings or the issuance of debt instruments. The Proposed Private Placement will also strengthen the capital base of Omesti to support the continuous business growth of its subsidiaries. Omesti has sought to raise funds via the Proposed Private Placement as the Board is of the opinion that this exercise is the most cost-effective source of capital to meet the Group s working capital needs and to partially fund capital expenditure in relation to the Group s optic fibre network infrastructure, Home City Networks. The Proposed Private Placement shall provide the Group with an immediate funding solution to meet its financial needs for the next twelve (12) months. The Proposed Private Placement allows the Group to have the financial flexibility to formulate and implement its business strategies to further nurture and grow the Group s earnings moving forward. The Proposed Private Placement will also allow the Group to pare its debt through the repayment of bank borrowings which carries a high interest rate of 12.0% per annum, hence enabling the Group to save on finance costs as well as reduce the Group s gearing level. Based on the above and after taking into consideration other various methods of fund-raising, the Board is of the opinion that the Proposed Private Placement is currently the most appropriate means of raising funds. 5

6 4. EFFECTS OF THE PROPOSED PRIVATE PLACEMENT 4.1 Share capital The pro forma effects of the Proposed Private Placement on the issued and paid-up share capital of Omesti are as follows: Minimum Scenario No. of Shares RM Maximum Scenario No. of Shares RM Issued and paid-up capital as at the LPD 389,261, ,630, ,261, ,630,837 Shares to be issued ,516,733 53,258,367 assuming full exercise of the outstanding Warrants-A Shares to be issued ,142,487 41,571,243 assuming full exercise of the outstanding Warrants-B Shares to be issued ,077,800 10,038,900 assuming full exercise of the outstanding ESOS options vested Share capital after the 389,261, ,630, ,998, ,499,347 exercise of the outstanding Warrants-A, Warrants B and ESOS options To be issued pursuant to 38,926,100 19,463,050 59,899,800 29,949,900 the Proposed Private Placement Enlarged share capital 428,187, ,093, ,898, ,449,247 6

7 4.2 Net Assets ( NA ) and gearing For illustrative purposes, the pro forma effects of the Proposed Private Placement on the NA and gearing of Omesti based on the audited consolidated financial statements of Omesti as at 31 March 2015 are as follows: Minimum Scenario After the Audited as at 31 March 2015 Adjustment for subsequent events (i) Proposed Private Placement (iii) RM 000 RM 000 RM 000 Share capital 193, , ,094 Share premium 15,574 15,615 15,415 (iv) Capital reserve 24,663 24,663 24,663 Warrant reserve 11,307 11,307 11,307 Equity compensation reserve 2,813 2,790 (vi) 2,790 Exchange translation reserve (251) (251) (251) Retained earnings 21,253 20,449 (ii)(vi) 20,449 Shareholders fund/na 269, , ,467 Number of Shares in issue ( 000) 387, , ,188 NA per ordinary share (RM) Borrowings (interest-bearing) 113, , ,693 (v) Gearing ratio (times) Notes: (i) (ii) (iii) (iv) (v) (vi) After incorporating the effects of 205,000 Shares issued pursuant to the exercise of the ESOS options at an exercise price of RM0.50 per ESOS option and 1,571,500 Shares issued pursuant to a share grant scheme after 31 March 2015 and up to the LPD. After incorporating the adjustment pursuant to expenses recognised in relation to the share grant issuance. Assuming 38,926,100 Placement Shares are issued at RM0.50 per Placement Share. After deducting estimated expenses for the Proposed Private Placement of approximately RM0.20 million. After repayment of RM3.0 million of bank borrowings. Further details of the Group s borrowings are set out in Note (i) of Section 2.5 above. After incorporating the transfer of fair value adjustment on ESOS options to retained earnings amounting to RM22,550 upon the exercise of 205,000 ESOS options. 7

8 Maximum Scenario Audited as at 31 March 2015 Assuming full exercise of Warrants-A, Warrants-B and the ESOS options After the Proposed Private Placement (iv) Adjustment for subsequent events (i) RM 000 RM 000 RM 000 RM 000 Share capital 193, , , ,449 Share premium 15,574 15,615 66,173 (iii) 65,874 (v) Capital reserve 24,663 24,663 24,663 24,663 Warrant reserve 11,307 11,307 - (iii) - Equity compensation reserve 2,813 2,790 (vii) - (iii) - Exchange translation reserve (251) (251) (251) (251) Retained earnings 21,253 20,449 (ii)(vii) 34,546 (iii) 34,546 Shareholders fund/na 269, , , ,281 Number of Shares in issue 387, , , ,898 ( 000) NA per ordinary share (RM) Borrowings (interest-bearing) 113, , , ,693 (vi) Gearing ratio (times) Notes: (i) After incorporating the effects of 205,000 Shares issued pursuant to the exercise of the ESOS options at an exercise price of RM0.50 per ESOS option and 1,571,500 Shares issued pursuant to a share grant scheme after 31 March 2015 and up to the LPD. (ii) After incorporating the adjustment pursuant to expenses recognised in relation to the share grant issuance. (iii) Recognition of the reversal of approximately RM14.12 million from warrant reserve and equity compensation reserve into retained earnings as well as recognition of share premium of approximately RM50.56 million assuming full exercise of Warrants-A at an exercise price of RM0.96 per Warrant-A and 9.76 million ESOS options at an exercise price of RM0.66 per ESOS option. (iv) Assuming 59,899,800 Placement Shares are issued at RM0.50 per Placement Share. (v) After deducting estimated expenses for the Proposed Private Placement of approximately RM0.30 million. (vi) After repayment of RM11.0 million of bank borrowings. Further details of the Group s borrowings are set out in Note (i) of Section 2.5 above. (vii) After incorporating the transfer of fair value adjustment on ESOS options to retained earnings amounting to RM22,550 upon the exercise of 205,000 ESOS options. 8

9 4.3 Earnings and earnings per Share ( EPS ) The Proposed Private Placement is not expected to have a material effect on the earnings of the Group for the financial year ending 31 March 2016 as it will only be completed in the second quarter of However, the Proposed Private Placement is expected to be earnings accretive arising from the utilisation of proceeds from the Proposed Private Placement to finance the working capital requirements and capital expenditure of the Group. The Proposed Private Placement is expected to contribute positively to the earnings of the Group in the future years as and when the benefit of the utilisation of proceeds are realised. The earnings per Share of the Group may however be proportionately diluted as a result of the increase in the number of Shares after the Proposed Private Placement. 4.4 Dividends The Proposed Private Placement will not have any effect on the dividend policy of the Company. Future dividends to be declared by the Company will be dependent on, inter-alia the future financial performance as well as cash position of the Omesti Group. 9

10 4.5 Substantial shareholders shareholding The pro forma effects of the Proposed Private Placement on the shareholding of the substantial shareholders of Omesti based on the Company s Register of Substantial Shareholders as at the LPD are set out in the table below: Minimum Scenario As at the LPD After the Proposed Private Placement <---Direct---> <---Indirect---> <---Direct---> <---Indirect---> Substantial shareholders ( 000) % ( 000) % ( 000) % ( 000) % Tan Sri Dato Seri Megat Najmuddin Bin Datuk Seri Dr Hj Megat Khas 19, , Dato Mah Siew Kwok 87, , (i) 87, , (i) Red Zone Development Sdn Bhd 68, , Monteiro Gerard Clair 2, , (ii) 2, , (ii) Dato Wong Kit-Leong , (ii) , (ii) Raymond Tan , (ii) , (ii) Insas Plaza Sdn Bhd 37, , Insas Berhad , (iii) , (iii) Dato Sri Thong Kok Khee , (iv) , (iv) Dato Gan Nyap Gan Nyap Liow 15, , (v) 15, , (v) 10

11 Maximum Scenario Substantial shareholders Pro forma (I) Assuming full exercise of Warrants-A, As at the LPD Warrants-B and ESOS options <---Direct---> <---Indirect---> <---Direct---> <---Indirect---> ( 000) % ( 000) % ( 000) % ( 000) % Tan Sri Dato Seri Megat Najmuddin Bin Datuk Seri Dr Hj Megat Khas 19, , Dato Mah Siew Kwok 87, , (i) 124, , (i) Red Zone Development Sdn Bhd 68, , Monteiro Gerard Clair 2, , (ii) 4, , (ii) Dato Wong Kit-Leong , (ii) , (ii) Raymond Tan , (ii) , (ii) Insas Plaza Sdn Bhd 37, , Insas Berhad , (iii) , (iii) Dato Sri Thong Kok Khee , (iv) , (iv) Dato Gan Nyap Gan Nyap Liow 15, , (v) 29, , (v) 11

12 Substantial shareholders Pro forma (II) After (I) and after the Proposed Private Placement <---Direct---> <---Direct---> ( 000) % ( 000) % Tan Sri Dato Seri Megat Najmuddin Bin 41, Datuk Seri Dr Hj Megat Khas Dato Mah Siew Kwok 124, , (i) Red Zone Development Sdn Bhd 89, Monteiro Gerard Clair 4, , (ii) Dato Wong Kit-Leong , (ii) Raymond Tan , (ii) Insas Plaza Sdn Bhd 44, Insas Berhad , (iii) Dato Sri Thong Kok Khee , (iv) Dato Gan Nyap Gan Nyap Liow 29, , (v) Notes: (i) (ii) (iii) (iv) (v) Deemed interest by virtue of his daughter s shareholding in Omesti pursuant to Section 134(12)(c) of the Companies Act, 1965 ( Act ). Deemed interest by virtue of his substantial shareholding in Red Zone Development Sdn Bhd pursuant to Section 6A of the Act. Deemed interest by virtue of its substantial shareholding in Insas Plaza Sdn Bhd and M&A Securities Sdn Bhd, which are wholly-owned subsidiaries of Insas Berhad pursuant to Section 6A of the Act. Deemed interest by virtue of his substantial shareholding in Insas Berhad pursuant to Section 6A of the Act. Deemed interest by virtue of his substantial shareholding in PlanetBiz Investments Limited pursuant to Section 6A of the Act. 12

13 5. APPROVALS REQUIRED The Proposed Private Placement is subject to the approvals being obtained from the following: (i) (ii) Bursa Securities, for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities; and Any other relevant persons or authorities, if required. Approval has been obtained from the shareholders of Omesti at the last Annual General Meeting ( AGM ) convened on 23 September 2015 authorising the Board to issue new Omesti Shares not exceeding ten percent (10%) of the total issued and paid-up share capital of the Company pursuant to Section 132D of the Act at any point in time. The approval is valid, unless revoked or varied by the Company at a general meeting, until the next AGM of Omesti. The Proposed Private Placement is not conditional upon any other corporate proposals undertaken or to be undertaken by Omesti. 6. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the Directors and/or major shareholders of Omesti and/or persons connected with them have any interest, whether direct or indirect, in the Proposed Private Placement. 7. DIRECTORS RECOMMENDATION The Board, after having considered all aspects of the Proposed Private Placement (including, but not limited to the rationale as set out in Section 3 of this announcement and the effects as set out in Section 4 of this announcement), is of the opinion that the Proposed Private Placement is in the best interest of the Group and its shareholders. 8. ADVISER AND PLACEMENT AGENT M&A Securities has been appointed as the Adviser and Placement Agent to the Company for the Proposed Private Placement. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring unforeseen circumstances, the application to Bursa Securities in relation to the Proposed Private Placement is expected to be made within two (2) months from the date of this announcement. The Proposed Private Placement is expected to be completed by the second quarter of This announcement is dated 11 January