proposed amendments to the by-laws governing the existing share issuance scheme of NICORP ( SIS ) ( By-laws ) ( Proposed By-laws Amendments ).

Transcription

1 NAIM INDAH CORPORATION BERHAD ( NICORP OR THE COMPANY ) (I) (II) (III) (IV) PROPOSED CREDITORS CAPITALISATION; PROPOSED DEBT CAPITALISATION; PROPOSED PRIVATE PLACEMENT; AND PROPOSED BY-LAWS AMENDMENTS (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION On behalf of the Board of Directors of NICORP ( Board ), TA Securities Holdings Berhad ( TA Securities ) wishes to announce that the Company proposes to undertake the following proposals: (i) (ii) (iii) (iv) proposed settlement of debt owing to certain creditors of Consistent Harvest Sdn Bhd ( CHSB ), a wholly-owned subsidiary of NICORP via the issuance of 130,676,712 new ordinary shares in NICORP ( NICORP Shares ) ( Settlement Shares ) ( Proposed Creditors Capitalisation ); proposed settlement of debt owing to a former Director of NICORP and a party connected with him, namely Dato Sri Siaw Swee Hin and Mutiara Management Sdn Bhd ( MMSB ) respectively, via the issuance of 338,241,690 Settlement Shares ( Proposed Debt Capitalisation ); proposed private placement of new NICORP Shares ( Placement Shares ), representing not more than 30% of the enlarged number of issued NICORP Shares ( Proposed Private Placement ); and proposed amendments to the by-laws governing the existing share issuance scheme of NICORP ( SIS ) ( By-laws ) ( Proposed By-laws Amendments ). The details of the Proposals are set out in the ensuing sections of this announcement. 2. DETAILS OF THE PROPOSALS 2.1 Proposed Creditors Capitalisation and Proposed Debt Capitalisation Proposed Creditors Capitalisation On 9 November 2017, NICORP has entered into 2 separate settlement agreements with CHSB and certain creditors of CHSB ( Creditors ) ( Settlement Agreements with Creditors ). Pursuant to the Settlement Agreements with Creditors, NICORP shall pay on behalf of CHSB, the debt owing to the Creditors based on the cut-off date as at 30 September 2017 of approximately RM7.70 million via the issuance of 130,676,712 Settlement Shares as follows: 1

2 Name Voon Brothers Construction Sdn Bhd ( Voon Brothers ) Details of transaction leading up to the outstanding amount Renovation services at Centerpoint Seremban Shopping Mall ( Shopping Mall ) Amount outstanding as at 30 September 2017 (RM) Amount to be settled via issuance of Settlement Shares (RM) Number of Settlement Shares to be issued 6,462, ,462, ,721,089 Eakonmech Sdn Bhd ( Eakonmech ) Renovation services at the Shopping Mall 1,234, ,234, ,955,623 Total 7,696, ,696, ,676, Details of Voon Brothers Voon Brothers was incorporated in Malaysia under the Companies Act, 1965 on 10 April 2015 as a private limited company. Voon Brothers issued share capital is RM100,004 comprising 100,004 issued shares. Voon Brothers is principally involved in general building contractors and construction works. The directors and shareholders of Voon Brothers and their respective shareholdings in Voon Brothers (based on the searches extracted from Companies Commission of Malaysia as at 3 October 2017) are as follows: Directors and shareholders Nationality Number of shares % Voon Kong Wha Malaysian 25, Tay Lee Choo Malaysian 25, Tay Lee Lan Malaysian 25, Voon Kong For Malaysian 25, Details of Eakonmech Eakonmech was incorporated in Malaysia under the Companies Act, 1965 on 4 October 2007 as a private limited company under the name of Sunrich Matrix Sdn Bhd. The company changed its name to Eakonmech Sdn Bhd on 5 January Eakonmech s issued share capital is RM2,000,000 comprising 2,000,000 issued shares. Eakonmech is principally involved in contracting and servicing for air-conditioners and ventilation systems. The director and shareholder of Eakonmech and his shareholding in Eakonmech is as follows: Director and shareholder Nationality Number of shares % Dato Sri Yaw Chan Choy Malaysian 2,000,

3 Salient terms of the Settlement Agreements with Creditors (a) Conditions precedent The Settlement Agreements with Creditors are conditional upon the following being fulfilled or obtained within 4 months from the date of the Settlement Agreements with Creditors or such other extended date the parties may mutually agree in writing: (i) (ii) the approval from Bursa Malaysia Securities Berhad ( Bursa Securities ) for the listing and quotation of the Settlement Shares; and the approval of the shareholders of NICORP at an extraordinary general meeting ( EGM ) to be convened for the Proposed Creditors Capitalisation and Proposed Debt Capitalisation. The Settlement Agreements with Creditors shall become unconditional on the date of the last conditions precedent is satisfied. In the event that any one of the conditions precedent is not or cannot be fulfilled or waived during the conditional period or such other extended date the Parties mutually agreed in writing, either party shall be entitled, by written notice to the other, to terminate the Settlement Agreements with Creditors and upon such notice being served on the other, the Settlement Agreements with Creditors shall be null and void and be of no further effect. (b) Settlement and acceptance of Settlement Shares Subject to the fulfilment of the conditions precedent as stipulated in Section (a) above, NICORP acknowledges and confirms its obligations on the date no later than 8 market days from the unconditional date or such other extended date mutually agree in writing by the parties to settle to the Creditors the debts by issuing to the Creditors their respective Settlement Shares. The Creditors agree to accept their respective Settlement Shares being the full and final settlement of the debt owing by CHSB to the Creditors and mutually acknowledge and agree that upon the issuance of their respective Settlement Shares, the debt will be fully satisfied and extinguished and the parties will have no further obligation to each other in relation to the debt. (c) Termination The Settlement Agreements with Creditors shall be terminated in the event that: (i) (ii) the conditions precedent as set out in Section (a) above is not met within the conditional period; or a breach by NICORP of any of its representations and warranties or any other obligations under the Settlement Agreement with Creditors has occurred at any time and the Creditors has not agreed in writing to waive such breach. 3

4 2.1.2 Proposed Debt Capitalisation Upon the termination of the Settlement Agreements with Creditors, the debt owing by CHSB to the Creditors shall immediately become due and payable by CHSB to the Creditors. On 9 November 2017, NICORP has entered into 3 settlement agreements with the following parties: (i) (ii) (iii) Dato Sri Siaw Swee Hin (a former Director of NICORP); CHSB and Dato Sri Siaw Swee Hin; and MMSB (a party connected with Dato Sri Siaw Swee Hin). (Collectively referred to as Debt Settlement Agreements ) Pursuant to the Debt Settlement Agreements, NICORP shall pay the debt owing by the Company and CHSB to Dato Sri Siaw Swee Hin and MMSB based on the cut-off date as at 30 September 2017 of approximately RM14.68 million and RM5.25 million via the issuance of 249,187,057 and 89,054,633 Settlement Shares, respectively as follows: Amount outstanding as at 30 September 2017 (RM) Amount to be settled via issuance of Settlement Shares (RM) Number of Settlement Shares to be issued Name Dato Sri Siaw 14,677, ,677, ,187,057 Swee Hin (1) MMSB (2) 5,245, ,245, ,054,633 Total 19,922, ,922, ,241,690 Notes: (1) On 9 November 2017, Dato Sri Siaw Swee Hin entered into a deed of assignment with Toh Hong Chye (an Executive Director of NICORP) to assign his 249,187,057 Settlement Shares to Toh Hong Chye. (2) On 9 November 2017, MMSB entered into a deed of assignment with Dato Sri Lee See Yang (an Executive Director of NICORP) to assign its 89,054,633 Settlement Shares to Dato Sri Lee See Yang. [The rest of this page has been intentionally left blank] 4

5 Dato Sri Siaw Swee Hin The details of the amount owing by NICORP and its subsidiaries ( NICORP Group or Group ) to Dato Sri Siaw Swee Hin as at 30 September 2017 are as follows: Financial year ended/ending 31 December ( FYE ) Details of amount owing Amount (RM) 2015 Advance for investment in Naim Indah Properties Sdn Bhd 2.00 Advance for investment in Naim Indah City Development Sdn Bhd Advance for investment in Naim Indah Mobile Communications Sdn Bhd , Advance for working capital of NICORP Group 6,680, Advance for CHSB s contractor payment for refurbishment of the Shopping Mall 2,821, Paid on behalf for NICORP Group s expenses 139, Repayment to Dato Sri Siaw Swee Hin (1,959,000.00) 2016 Advance for investment in Naim Indah Creative & Communications Sdn Bhd 2.00 Advance for investment in Naim Indah Energy Sdn Bhd 2.00 Advance for CHSB s contractor payment for refurbishment of the Shopping Mall 4,947, Advance for NICORP Group s working capital 1,113, Repayment to Dato Sri Siaw Swee Hin (1,124,120.56) 2017 Advance for NICORP Group s working capital 4,461, Advance for CHSB s contractor payment for refurbishment of the Shopping Mall 150, Paid on behalf for NICORP s expenses 10, Repayment to Dato Sri Siaw Swee Hin (2,963,116.76) Total 14,677,

6 After taking into account various methods to raise funds for purposes as stated above, the Board was of the opinion that advances from Dato Sri Siaw Swee Hin was an appropriate option as: (i) (ii) (iii) (iv) there is no interest charged for advances from Dato Sri Siaw Swee Hin as compared to bank borrowings; there is no fixed schedule of repayment for the advances from Dato Sri Siaw Swee Hin, thereby enabling NICORP Group to have better control and flexibility over its cash flow; no collateral is required for advances from Dato Sri Siaw Swee Hin as opposed to bank borrowings; and NICORP Group s immediate funding requirements could be addressed in a timely manner via advances from Dato Sri Siaw Swee Hin as opposed to debt financing and/or equity fund raising which require longer processing time. MMSB The details of the amount owing by NICORP to MMSB as at 30 September 2017 are as follows: FYE Details of amount owing (1) (RM) Amount 2016 Loan for working capital of NICORP Group 4,800, Loan interest (August 2016 December 2016) 139, Repayment of loan interest (10,356.16) 2017 Loan interest (January 2017 September 2017) 323, Repayment of loan interest (7,000.00) Total 5,245, Note: (1) The Company and Mutiara Credit Management ( MCM ) had entered into a contract dated 7 January 2016 ( Loan Agreement ), whereby MCM had granted a loan facility of RM10,000,000 to the Company at an interest rate of 9% per annum of which RM4,800,000 had been released. MCM was a holder of a licence issued under the Moneylenders Act 1951 which was licenced to carry on business as money lender under Section 5 of Moneylenders Act On 6 July 2017, MCM transferred the license which will expire on 2 September 2018 to MMSB as MCM s business license expired on 30 July On 28 July 2017, the Company, MCM and MMSB had entered into a deed of novation cum assignment for the assignment and transfer of all of MCM s right, title, interest, benefit, obligation and liabilities under and in the Loan Agreement to MMSB Details of Dato Sri Siaw Swee Hin Dato Sri Siaw Swee Hin, a Malaysian, 44, was appointed as an Executive Director of the Company on 22 October He was re-designated as Managing Director on 18 November 2014 and Managing Director/Group Chief Executive Officer on 26 November

7 He resigned as the Company s Managing Director/Group Chief Executive Officer on 16 October Details of MMSB MMSB was incorporated in Malaysia under the Companies Act, 1965 on 7 January 2015 as a private limited company under the name of HH Mutiara Sdn Bhd. The company changed its name to Mutiara Management Sdn Bhd on 12 February MMSB s issued share capital is RM100,000 comprising of 100,000 issued shares. MMSB is principally involved in the business of money lending. The director and shareholder of MMSB and his shareholding in MMSB is as follows: Director and shareholder Nationality Number of shares % Dato Sri Siaw Swee Hin Malaysian 100, Details of Toh Hong Chye Toh Hong Chye, a Malaysian, 42, was appointed as an Executive Director of the Company on 9 November He is also an Executive Director of Sersol Berhad and AppAsia Berhad, which are listed on the ACE Market of Bursa Securities Details of Dato Sri Lee See Yang Dato Sri Lee See Yang, a Malaysian, 47, was appointed as an Executive Director of the Company on 16 October Salient terms of the Debt Settlement Agreements (a) Conditions precedent The Debt Settlement Agreements are conditional upon the following being fulfilled or obtained within conditional period: (i) (ii) the approval from Bursa Securities for the listing and quotation of the Settlement Shares; and the approval of the shareholders of NICORP at an EGM to be convened for the Proposed Creditors Capitalisation and Proposed Debt Capitalisation. The Debt Settlement Agreements shall become unconditional on the date of the last conditions precedent is satisfied. In the event that any one of the condition precedent is not or cannot be fulfilled or waived during the conditional period or such other extended date the Parties mutually agreed in writing, either party shall be entitled, by written notice to the other, to terminate the Debt Settlement Agreements and upon such notice being served on the other, the Debt Settlement Agreements shall be null and void and be of no further effect. 7

8 (b) Settlement and acceptance of Settlement Shares Subject to the fulfilment of the conditions precedent as stipulated in Section (a) above, NICORP acknowledges and confirms its obligations on the date no later than 8 market day from the unconditional date or such other extended date mutually agree in writing by the parties to settle to Dato Sri Siaw Swee Hin and MMSB (as the case may be) the debts by issuing to the Dato Sri Siaw Swee Hin and MMSB (as the case may be) their respective Settlement Shares. Dato Sri Siaw Swee Hin and MMSB (as the case may be) agree to accept their respective Settlement Shares being the full and final settlement of the debt owing by NICORP and CHSB (as the case may be) to Dato Sri Siaw Swee Hin and MMSB (as the case may be) and mutually acknowledge and agree that upon the issuance of their respective Settlement Shares, the debt will be fully satisfied and extinguished and the parties will have no further obligation to each other in relation to the debt. (c) Termination The Debt Settlement Agreements shall be terminated in the event that: (i) (ii) the conditions precedent as set out in Section (a) above is not met within the conditional period; or a breach by NICORP of any of its representations and warranties or any other obligations under the Debt Settlement Agreements has occurred at any time and Dato Sri Siaw Swee Hin and MMSB (as the case may be) has not agreed in writing to waive such breach Ranking of the Settlement Shares Upon the termination of the Debt Settlement Agreements, the debt owing by NICORP and CHSB to Dato Sri Siaw Swee Hin and MMSB (as the case may be) and the repayment of the same shall be subject to the terms mutually agreed between NICORP and CHSB and Dato Sri Siaw Swee Hin and MMSB (as the case may be). The Settlement Shares shall, upon allotment and issue, rank pari passu in all respects with the existing NICORP Shares, but will not be entitled to any dividends, rights, allotments and/or any other distributions, the entitlement date of which is prior to the date of allotment and issuance of the Settlement Shares Listing of and quotation for the Settlement Shares An application will be made to Bursa Securities for the listing of and quotation for the Settlement Shares on the Main Market of Bursa Securities within 2 weeks from the date of this announcement. 8

9 2.1.5 Basis of pricing The issue price of the Settlement Shares has been fixed by the Board at RM per Settlement Share, after taking into consideration 5-day volume weighted average market price ( 5D-VWAP ) of NICORP Shares up to and including 8 November 2017 (being the date prior to the Settlement Agreements with Creditors and Debt Settlement Agreements) of RM Proposed Private Placement Size of placement The Proposed Private Placement entails the issuance of up to 413,708,500 Placement Shares, representing up to 30% of the enlarged number of 1,379,028,366 issued NICORP Shares, after taking into consideration the following: (i) the existing number of 876,459,964 issued NICORP Shares as at 8 November 2017 (being the latest practicable day prior to this announcement ( LPD )); (ii) (iii) (iv) assuming full exercise of the 33,650,000 outstanding SIS options granted pursuant to the Company s SIS ( SIS Options ) as governed by By-laws dated 18 August 2015 into 33,650,000 NICORP Shares prior to the implementation of the Proposed Private Placement; assuming full settlement of Proposed Creditors Capitalisation via issuance of 130,676,712 Settlement Shares prior to the implementation of the Proposed Private Placement; and assuming full settlement of Proposed Debt Capitalisation via issuance of 338,241,690 Settlement Shares prior to the implementation of the Proposed Private Placement. (Collectively referred to as Maximum Scenario ) Under the minimum scenario, the size of the Proposed Private Placement is up to 262,937,900 Placement Shares, representing approximately 30% of the existing number of issued shares of 876,459,964 NICORP Shares as at the LPD ( Minimum Scenario ). The actual number of Placement Shares to be issued will depend on the total number of issued shares of the Company on a date to be determined later, after the approvals set out in Section 6 of this announcement have been obtained Placement arrangement The Company intends to place out the Placement Shares to independent third party investors to be identified later other than the following: (i) (ii) (iii) a director, major shareholder or chief executive of NICORP or a holding company of NICORP ( Interested Person ); a person connected with an Interested Person; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. 9

10 In addition, the independent third party investors shall be persons who qualify under Schedules 6 or 7 of the Capital Markets and Services Act, 2007, which include interalia, the issuance of the Placement Shares to each of them for a consideration of not less than RM250,000 or the issuance of the Placement Shares is made to high-net worth individuals whose net personal assets exceed RM3,000,000 or to corporations with net assets exceeding RM10,000,000. Subject to market conditions and the timing of identification of placees, the Proposed Private Placement may be implemented in 1 or more tranches within 6 months from the date of approval from Bursa Securities for the Proposed Private Placement or any extended period as may be approved by Bursa Securities. The implementation of the placement arrangement in multiple tranches would provide flexibility to the Company to procure interested investors to subscribe for the Placement Shares within the approval period as approved by Bursa Securities. If issued in multiple tranches, the issue price for each tranche of the Placement Shares may be determined separately. The basis of determining the issue price of the Placement Shares will be in accordance with market-based principles Ranking of the Placement Shares The Placement Shares shall, upon allotment and issue, rank pari passu in all respects with the existing NICORP Shares, but will not be entitled to any dividends, rights, allotments and/or any other distributions, the entitlement date of which is prior to the date of allotment and issuance of the Placement Shares Listing of and quotation for the Placement Shares An application will be made to Bursa Securities for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities within 2 weeks from the date of this announcement Basis of pricing The issue price of the Placement Shares shall be determined and fixed by the Board at a later date ( Price Fixing Date ), after the receipt of Bursa Securities approval for the Proposals. The Placement Shares will not be priced at more than 10% discount to the 5-D- VWAP of NICORP Shares immediately before the Price Fixing Date. For illustrative purposes, the 5D-VWAP of NICORP Shares up to and including the LPD is RM per NICORP Share. Hence, for the purpose of this announcement, the issue price of the Placement Shares is assumed to be RM0.055 per NICORP Share, represents a discount of approximately RM or 6.62% to the 5D-VWAP of NICORP Shares up to and including the LPD. [The rest of this page has been intentionally left blank] 10

11 2.2.6 Utilisation of proceeds Based on the assumed issue price of RM0.055 per Placement Share, the gross proceeds of up to approximately RM22.75 million from the Proposed Private Placement will be utilised by NICORP Group in the following manner: Utilisation purposes Repayment to other creditors Repayment of bank borrowings Event, marketing and upkeep and enhancement expenses for the Shopping Mall Notes Minimum Scenario (RM 000) Maximum Scenario (RM 000) Expected time frame for the utilisation of proceeds (from the date of listing of the Placement Shares) (1) 2,334 2,334 Within 6 months (2) 5,427 10,602 Within 12 months (3) 1,320 1,590 Within 12 months Working capital (4) 4,991 7,798 Within 12 months Estimated expenses in relation to the Proposals Total estimated proceeds Notes: (5) Within 2 weeks 14,462 22,754 (1) The NICORP Group intends to utilise RM2.33 million for repayment to other creditors relating mainly to contracting and consulting services. (2) The NICORP Group intends to utilise up to RM10.60 million under the Maximum Scenario for repayment of bank borrowings which consist of term loans. The repayment of bank borrowings is expected to result in an annual saving of up to approximately RM0.87 million based on the effective interest rate of 8.16% per annum. The total borrowings of the Group were RM21.34 million as at 30 September (3) The NICORP Group intends to utilise up to RM1.59 million under the Maximum Scenario for the Shopping Mall in Negeri Sembilan which was reopened during the 4 th quarter of 2016 as follows: Minimum Scenario Maximum Scenario Expenses (RM 000) (RM 000) (a) Event (b) Marketing expenses (c) Upkeep and enhancement expenses Total 1,320 1,590 (a) (b) Comprise payment for events to be held during festive seasons/major holidays throughout the year such as Christmas Eve and New Year, Chinese New Year, Hari Raya, Mid Autumn and Deepavali. Comprise payment for marketing expenses in relation to designing and printing expenses, advertising fee and leasing consultant fee/commission. 11

12 (c) Comprise payment for upkeep and enhancement expenses for the shopping mall s landscape, closed-circuit television for security system, public address system, information counter and purchases of additional benches/chairs. (4) Under the Maximum Scenario, the NICORP Group intends to utilise up to RM7.80 million for working capital purposes as follows: Minimum Scenario Maximum Scenario Working capital (RM 000) (RM 000) (a) Staff costs 3,180 3,180 (b) Other administrative and operating expenses 1,811 4,618 Total 4,991 7,798 (a) (b) Comprise payment of wages, Employees Provident Fund (EPF) and Social Security Organisation (SOSCO) contributions to the staffs of the NICORP Group. Comprise payment for utilities, cleaning services, security services and other expenses, the breakdown of which has yet to be determined by the Board at this juncture. (5) The estimated expenses mainly consist of professional fees and fees payable to the relevant authorities. Any variation to the actual amount of expenses for the Proposals will be adjusted accordingly against the allocation for the working capital of the Group. The actual proceeds to be raised from the Proposed Private Placement will depend on the final issue price of the Placement Shares and the number of Placement Shares issued. Any shortfall/surplus in proceeds from the expected amount will be adjusted against the amount allocated for the working capital of the Group. Pending utilisation of the proceeds from the Proposed Private Placement for the abovementioned purposes, the proceeds will be placed in deposits with financial institutions or short-term money market instruments, as the Board may deem fit. Any interest income earned from such deposits or instruments will be used as working capital of the Group. 2.3 Proposed By-laws Amendments Pursuant to the Companies Act 2016 ( Act ) which came into effect on 31 January 2017, the Proposed By-laws Amendments are intended to streamline the By-laws of the Company to be aligned with the Act. Please refer to Appendix I of this announcement for further details of the Proposed By-laws Amendments. 3. RATIONALE FOR THE PROPOSALS 3.1. Proposed Creditors Capitalisation and Proposed Debt Capitalisation The Board is of the view that the settlement via issuance of Settlement Shares is currently an appropriate option as the Proposed Creditors Capitalisation and Proposed Debt Capitalisation would enable the NICORP Group to: (i) (ii) reduce its trade payables and debt without incurring significant cash outflow; preserve its cash for other purposes, such as working capital requirements; and 12

13 (iii) improve the gearing ratio of the Group as a result of the increase in the share capital of NICORP. In addition, the Proposed Debt Capitalisation would reduce the Group s interest cost as the amount owing to MMSB is subject to interest Proposed Private Placement As at 30 September 2017, NICORP s total trade payables and other payables stood at approximately RM13.18 million, of which RM7.70 million will be settled via the Proposed Creditors Capitalisation. The Group s total borrowings were approximately RM21.34 million as at 30 September 2017, of which approximately RM5.25 million owing to MMSB will be settled via the Proposed Debt Capitalisation. In view of the above and the Group s cash and bank balances of approximately RM2.29 million as at 30 September 2017 which have been preserved for their day-to-day working capital requirements, the additional funds to be raised from the Proposed Private Placement are expected to ease NICORP Group s cash flows. After due consideration of the various methods of fund raising available, the Board is of the opinion that the Proposed Private Placement is an appropriate avenue of fund raising as it would allow the Company to raise required funds expeditiously for the purposes as stated in Section of this announcement. In addition, the Proposed Private Placement would further strengthen the capital base of NICORP Group Proposed By-laws Amendments The Proposed By-laws Amendments are intended to streamline the By-laws of the Company to be aligned with the Act. 4. INDUSTRY OUTLOOK AND PROSPECTS OF NICORP GROUP 4.1 Overview and outlook of the Malaysian economy In 2016, the Malaysian economy recorded a growth of 4.2% (2015: 5.0%) despite considerable external and domestic headwinds. The global economic landscape was challenging given the subdued global demand and low commodity prices. Domestically, the economy continued to face headwinds from the higher cost of living amid soft employment conditions. Concurrently, business and consumer sentiments were affected by a confluence of global and domestic factors, including the heightened volatility in financial markets and the significant underperformance of the ringgit. Domestic demand continued to anchor growth, supported mainly by private sector spending. Private consumption growth, in particular, was sustained at 6.1% (2015: 6.0%), supported by continued employment and wage growth following the increase in minimum wage and civil servant salaries. Government measures to boost disposable income such as the temporary reduction in employees contribution to the Employees Provident Fund, higher Bantuan Rakyat 1Malaysia payouts and tax relief to lower-income tax payers also supported household spending. Public consumption growth moderated to 1.0% (2015: 4.4%) following the expenditure rationalisation adopted by the Government in early 2016 given the lower petroleum related revenue because of low crude oil prices. On the supply side, all economic sectors continued to expand in 2016, with the exception of the agriculture sector. Agriculture production declined by 5.1% (2015: 1.2%), as crude palm oil output was affected by the El Niño weather phenomenon. While growth in the services sector was higher at 5.6% (2015: 5.1%) following sustained demand in the consumer-related sectors, other sectors expanded more moderately. 13

14 Overall, the strong fundamentals of the Malaysian economy have accorded Malaysia the ability to weather these external and domestic challenges. The diversified sources of growth in the economy have helped to contain the spill over effects of sector-specific shocks. Stable labour market conditions amid continued wage growth continued to support household spending. Healthy financial institutions and ample domestic liquidity also ensured orderly financial intermediation. Notwithstanding the weak global demand, Malaysia s external position remained strong, supported by ample international reserves and manageable levels of external debt. (Source: Bank Negara Malaysia ( BNM ) Annual Report 2016, BNM) The Malaysian economy recorded a sterling growth of 5.7% during the first six months of 2017 underpinned by strong domestic demand and reinforced by improved external sector. Given the robust economic growth during the first half, real gross domestic product for the year is expected to strengthen further between 5.2% and 5.7% (2016: 4.2%), surpassing the earlier estimates. Accordingly, gross national income at current prices is estimated to expand 9.1% to RM1.3 trillion (2016: 6.2%; RM1.2 trillion), with income per capita increasing 7.7% to RM40,713 (2016: 4.7%; RM37,791). Aggregate domestic demand is expected to remain resilient, primarily driven by private sector expenditure, while the public sector gradually consolidates. Of significance, private consumption will continue to support economic growth. The propensity to consume will be enhanced by stable labour market, higher export earnings and manageable inflation amid low interest rate environment. Meanwhile, private investment is projected to expand at a stronger pace supported by higher capital outlays, particularly in the services and manufacturing sectors. Investments will also be supported by steady inflows of foreign direct investment. On the supply side, growth will be supported by stronger performance across all sectors with services and manufacturing remaining as the main drivers of growth. The services sector is projected to expand at a faster rate, reflecting stronger expansion across most subsectors, particularly wholesale and retail trade; information and communication; as well as food and beverages and accommodation. Within the manufacturing sector, the export-oriented industries are projected to expand significantly following higher global demand for semiconductors. Similarly, growth in the domestic-oriented industries will strengthen following improved demand for consumer products and construction-related materials. In the agriculture sector, growth is expected to be supported by the recovery in output of crude palm oil and rubber. The construction sector will be led by higher civil engineering activities while the mining sector continues to expand, though at a slower pace supported by higher production of natural gas. Malaysia s external position is estimated to remain resilient in line with the increase in global trade activities. The current account is forecast to improve mainly backed by sizeable surplus in the goods account. Impetus to export growth is expected to stem from strong demand for electrical and electronics and commodities. Meanwhile, imports will continue to increase in line with strong domestic investment activities. The Malaysian economy is projected to continue its strong growth momentum with real gross domestic product expanding between 5% and 5.5% in 2018 (2017: 5.2% and 5.7%). Growth will be mainly driven by resilient domestic demand amid favourable external sector. Given the robust economic development, gross national income per capita is estimated to increase 5.1% to RM42,777 (2017: 7.7%; RM40,713). Despite the strong growth momentum, Malaysia as an open economy is not immune to external headwinds. These includes rising protectionism; policy uncertainties in the advanced countries; and volatility in the financial markets. Nevertheless, structural reforms undertake over the years to diversify the economy and strengthen the financial system have provided sufficient buffer to weather these external challenges. 14

15 On the demand side, household spending will remain as the key source of growth, benefiting from higher income following stable employment conditions and firmer commodity prices. Private investment is forecast to remain resilient primarily attributed to capital outlays in the services and manufacturing sectors. Private sector continues to spearhead growth, while public sector remains committed towards its fiscal consolidation path. The external sector is expected to remain resilient supported by sustained demand from major trading partners. Inflation will remain benign between 2.5% and 3.5% while the economy continues to operate under full employment. On the supply side, growth is expected to be broad-based with positive contribution from all sectors in the economy. Growth in services sector is expected to remain strong, largely led by the final services group in line with the trends in private consumption. Likewise, the manufacturing sector is anticipated to expand in line with sustained external demand and consumption activities. The agriculture sector is forecast to increase supported by higher output and firmer commodity prices. Growth in the construction sector will be driven by major civil engineering projects while the mining sector is projected to continue expanding at a moderate pace supported by the natural gas production. (Source: Economic Report 2017/2018, Ministry of Finance Malaysia) 4.2 Overview and outlook of the construction and property industries in Malaysia The construction sector recorded moderate growth in 2016 (7.4%; 2015: 8.2%). The faster pace of expansion in the civil engineering and residential sub-sectors was partially offset by a decline in non-residential activity. Growth in the civil engineering sub-sector was driven by higher activity in existing multi-year projects, particularly in the petrochemical, transportation and utilities segments. Activity in the residential sub-sector was supported by large property launches in the previous years while growth in the special trade sub-sector continued to be supported by early and end-works activity. Growth in the non-residential sub-sector, however, was weighed down by slower activity in the commercial property segment amid the oversupply of office and retail space. (Source: Economic Developments in 2016, Annual Report 2016, BNM) Activities in the housing market have shown some signs of a pick-up in 2017, with total housing transaction value recording a positive annual growth of 0.9% (4Q 2016: -11.6%), the first time since Housing transaction volume has also showed improvement, recording a smaller contraction of 5.4% (4Q 2016: -12.7%) in the first quarter of This was mainly contributed by transactions for the purchase of houses priced above RM500,000 in both the primary and secondary markets. Based on the preliminary data, the average house price registered an annual growth of 5.3% in the first quarter of 2017 (4Q 2016: +7%). Financing by banks for the purchase of affordable houses remains available as reflected by the loan approval rate of about 72% for houses priced below RM500,000. New launches of houses in this price segment, however, remains lagged, a trend observed since Consequently, housing affordability remains challenging, particularly for first-time house buyers. (Source: Economic and Financial Developments in the Malaysian Economy in the Second Quarter of 2017, BNM) The civil engineering subsector continued to record a double-digit growth of 13.7% (January June 2016: 17.7%) supported by major infrastructure projects under the Eleventh Malaysia Plan. Among the rail projects were Mass Rapid Transit Sungai Buloh Serdang Putrajaya line and Electrified Double Track Gemas Johor Bahru. In addition, growth of the subsector was further supported by construction and upgrading of roads such as Setiawangsa Pantai Expressway and Pan Borneo Highway. The subsector also benefited from the construction of combined cycle gas turbine power plant in Melaka. 15

16 The residential subsector continued to expand 4.7% (January June 2016: 6.7%) supported by firm demand for affordable housing in choice locations with easy access. Housing starts rebounded significantly by 12.1% to 67,662 units (January June 2016: -40%; 60,378 units). Condominiums and apartments accounted for 42.9% of total housing starts in line with the increasing demand, especially for high-rise units in major cities. However, the increase was offset by a decline in incoming supply at 3.4% to 485,433 units (January June 2016: 14.1%; 502,345 units) as developers were cautious in launching new projects to prevent accumulation of unsold properties. Likewise, new approvals declined 2.8% to 43,133 units (January June 2016: -33.5%; 44,389 units) as developers reviewed their future plans in response to market situation. In terms of demand, the take-up rate for residential units grew 23.9% with 6,775 units during the period (January June 2016: 22.7%; 3,289 units) amid continued access to housing loans, especially for first-time house buyers. Accordingly, transaction value improved with smaller contraction of 0.3% to RM32.9 billion (January June 2016: -9.6%; RM33 billion). However, total properties transacted declined 6.9% to 95,010 (January June 2016: -14.5%; 102,096 transactions) mainly due to the adoption of macroprudential measures to deter market speculation and ensure only those who are credit-worthy eligible for financing. The residential overhang increased 55.4% to 20,876 units with a total value of RM12.3 billion during the period (January June 2016: 28.3%; 13,438 units; RM7.6 billion) with Kedah accounting for the highest overhang at 20.9%, followed by Johor (18.2%) and Selangor (17.6%). However, the property market is expected to adjust accordingly in the long-run given the robust economic growth prospects. Malaysian House Price Index grew at a moderate pace, reflecting various cooling measures adopted by the Government to contain spiraling prices. The Malaysian House Price Index stood at points (at base year 2010) during the second quarter of 2017(Q2 2016: points). Meanwhile, the average house price grew 5.6% to RM397,190 during the period (Q2 2016: 7.1%; RM376,247) with terrace recording the highest increase at 6.8%, followed by high-rise units (5.8%), semi-detached (4.1%) and detached (2.4%) houses. The non-residential subsector grew 4.9% to RM6.4 billion (January June 2016: RM6.1 billion). The growth was mainly supported by starts for shops and services apartments which rebounded 29.3% and 14% (January June 2016: -46.7%; -35%), respectively. However, construction starts in the industrial and small office home office declined 9.7% and 16.1%, respectively (January June 2016: -76.7%; -24.9%) mainly due to moderation in the oil and gas related industries. Similarly, planned supply of Purpose-Built Office contracted 6.1% to 972,995 square metres (January June 2016: 60.1%; 1,036,671 square metres). Meanwhile, construction starts for Purpose-Built Office remained unchanged at 277,776 square metres. The shop overhang increased 54.3% to 7,754 units valued at RM5.1 billion (January June 2016: 2.2%; 5,024 units; RM2.5 billion). Nevertheless, demand for commercial buildings remained favourable with the average occupancy rate of office and retail space at 83.5% and 81.5%, respectively indicating sustained demand for commercial space, especially in prime areas. As of June 2017, the existing stock for shopping complexes and industrial buildings stood at 15.1 million square metres and 111,792 units (end-june 2016: 14.2 million square metres; 106,453 units), respectively. Meanwhile, shop segment recorded 5,829 transactions worth RM4.6 billion (January June 2016: 6,452; RM4.7 billion), constituting 56.2% of total transactions in commercial property. Johor and Selangor contributed the highest market volume with 18.4% and 16.8%, respectively. 16

17 The construction sector is projected to grow 7.5% in 2018 (2017: 7.6%), primarily supported by the ongoing civil engineering infrastructure projects such as East Coast Rail Link, Mass Rapid Transit Sungai Buloh Serdang Putrajaya line, Electrified Double Track Gemas Johor Bahru, Setiawangsa Pantai Expressway, Pan Borneo Highway and Bokor Central Processing Platform. Meanwhile, the residential subsector is expected to expand further with several new planned townships by private developers. In addition, the subsector will also benefit from various affordable housing programmes by the Government such as 1Malaysia Civil Servants Housing, MyBeautiful New Home and 1Malaysia People-Friendly Houses. On the contrary, the non-residential subsector is forecast to grow moderately following property overhang, particularly in the shops segment. (Source: Economic Report 2017/2018, Ministry of Finance Malaysia) 4.3 Overview and outlook of the retail industry in Malaysia In year 2016, the services sector recorded a higher growth of 5.6% (2015: 5.1%). Growth was supported by expansion across all sub-sectors. The retail and food and beverage and accommodation sub-sectors recorded higher growth, supported by continued wage and employment growth and a recovery in tourist arrivals. (Source: Economic Developments in 2016, Annual Report 2016, BNM) Value added of services sector increased further by 6.1% during the first half of 2017 (January June 2016: 5.4%) mainly driven by strong domestic consumption activities. In 2017, the sector is expected to record 5.9% growth, accounting for 54.5% of gross domestic product (2016: 5.6%; 54.3%). The final services group is projected to sustain at 6% (2016: 6%) led by the wholesale and retail trade as well as the food and beverages and accommodation subsectors. The intermediate services group is anticipated to grow 6.4% (2016: 5.5%) supported by the information and communication as well as finance and insurance subsectors. Meanwhile, government services subsector is expected to increase 4.4% (2016: 4.9%). The wholesale and retail trade subsector recorded a stronger growth of 7% (January June 2016: 5.9%) supported by higher consumer spending. The retail segment increased 9.6% (January June 2016: 6.3%) driven by sales in non-specialised stores and other goods in specialised stores which recorded double-digit growth of 12.5% and 13.3%, respectively (January June 2016: 8.3%; 8.4%). The wholesale segment grew 5.8% (January June 2016: 8.4%) led by other specialised wholesale (9.7%), household goods (5.2%) as well as food, beverages and tobacco which rose 9.2%) (January June 2016: 3.4%; 6.6%; 8.1%). Meanwhile, the motor vehicle segment rebounded 2.2% (January June 2016: -3.9%) following the introduction of new car models and rebates on a wide range of earlier models. This was reflected in sales of motor vehicles which turned around 2.2% to RM39.6 billion, while parts and accessories increased 5.4% to RM16.9 billion (January June 2016: -7.1%; RM38.8 billion ; 2.2%; RM16 billion). In 2017, the subsector is expected to expand further by 6.5% (2016: 6.2%). The food and beverages and accommodation subsector increased 7.2% (January June 2016: 6.6%). The food and beverages segment expanded 7.9 (January June 2016: 7.4%) driven by increased spending on dining at restaurants. Meanwhile, the accommodation segment grew 4.8% (January June 2016: 4%) mainly supported by domestic tourism activities, opening of new budget hotels and aggressive online promotions. Tourist arrivals contracted 1.5% during the first eight months of 2017 (January August 2016: 3.8%). Nevertheless, the introduction of new direct flights to the country as well as the hosting of the ASEAN Para Games, Formula 1 Petronas Malaysia Grand Prix and Shell Malaysia Motorcycle Grand Prix are expected to support growth of the segment. For the year, the subsector is projected to grow 7.6% (2016: 7.1%). 17

18 The services sector is projected to grow 5.8% in 2018, increasing its share to 54.8% of gross domestic product (2017: 5.9%; 54.5%) with all subsectors continuing to expand. The wholesale and retail trade; and food and beverages and accommodation are anticipated to increase 6.1% and 7.2%, respectively in 2018 (2017: 6.5%; 7.6%). Growth will be supported by steady domestic consumption and higher tourist arrivals. (Source: Economic Report 2017/2018, Ministry of Finance Malaysia ) 4.4 Prospects of NICORP Group For the FYE 2016, the project management consultancy ( PMC ) segment reported a total revenue of RM11.9 million (2015: RM7.9 million), representing 99% (2015: 89%) of the Group s total revenue. The Group has diversified into PMC segment, which has better profit margin. The Group has also expanded the PMC business in the property industry to include advertising, marketing and events consultancy services to further penetrate into new markets. In the FYE 2016, the Group acquired the entire equity interest in Naim Indah Creative & Communications Sdn Bhd (formerly known as Pedoman Nusantara Sdn Bhd), which provides PMC services in advertising, marketing and events, thus allowing the Group to enter into new markets. This will reduce the reliance on a single market and overall risk of the Group. As at end of September 2017, the PMC project from GE Properties Sdn Bhd for the project known as Likas Bouvelard is 51.50% completed, with an unbill amount of RM11.64 million. The PMC project is expected to be completed by According to the Ministry of Finance Malaysia s Economic Report 2017/2018, the residential subsector is expected to expand further with several new planned townships by private developers. In addition, the subsector will also benefit from various affordable housing programmes by the Government such as 1Malaysia Civil Servants Housing, MyBeautiful New Home and 1Malaysia People-Friendly Houses. The Group will continue to look for more PMC contracts in the future. For the FYE 2016, the Shopping Mall reported a total revenue of RM0.13 million (2015: RM0.09 million), representing 1% (2015: 1%) of the Group s total revenue. In September 2014, the Shopping Mall was closed for refurbishment with upgrading works and enhancement to improve the Shopping Mall s atmosphere and offer new lifestyle to the community. The Shopping Mall was reopened to public at the end of September 2016 with an increased lettable area from 217,096 square feet to 246,511 square feet, representing an increase of 13.5% or approximately 29,415 square feet with creation of new drive thru area, alfresco and improved design in floor-to-floor. As at the LPD, the Shopping Mall had an increased tenancy occupancy rate and sign-up rate of 47% and 56%, respectively. As the Shopping Mall is located in sub-urban area, there is lesser direct competitors with other established malls in Seremban, however filling up the Shopping Mall s remaining vacancies remain a challenge as there are many options available in the market and attractive rents which are being offered by competitor to seize potential tenants. The fresh look of the Shopping Mall with active marketing activities such as social media and performance events are expected to create attraction and raise awareness of the Shopping Mall to the surrounding community. The Group will focus on increasing the occupancy rate by putting in more marketing effort to atttract more potential tenants and thus generate recurring rental income and improve profitability of the Group. Currently, the Group is in the midst of discussing and finalising the renovation and opening timeline with the anchor tenant of the Shopping Mall. Upon confirmation of the opening for business by the anchor tenant, it will boost the confidence of other tenants to open for business as well. Furthermore, the newly created drive-thru areas at the Shopping Mall managed to attract two well-known tenants whereby one of them has commenced business in October The Group is also planning to intensify the marketing and promotional activities to increase aggressively the occupancy rate of the Shopping Mall. Meanwhile, the Group is persistently identifying suitable business opportunities to venture into property investment, construction and other feasible development project, where these businesses are expected to contribute positively to the Group s performance. (Source: The management of NICORP) 18

19 5. EFFECTS OF THE PROPOSALS The Proposed By-laws Amendments will have not any effect on NICORP s share capital, NICORP Group s net assets ( NA ), gearing and earnings per Share ( EPS ) as well as the substantial shareholders shareholdings in the Company Share capital The pro forma effects of the Proposed Creditors Capitalisation, Proposed Debt Capitalisation and Proposed Private Placement on the issued share capital of NICORP are as follows: Minimum Scenario Maximum Scenario No. of NICORP Shares RM No. of NICORP Shares RM Issued share capital as at LPD 876,459,964 87,645, ,459,964 87,645,996 Assuming full exercise of SIS ,650,000 3,365,000 (1) Options 876,459,964 87,645, ,109,964 91,010,996 To be issued pursuant to the ,676,712 7,696,858 (2) Proposed Creditors Capitalisation 876,459,964 87,645,996 1,040,786,676 98,707,854 To be issued pursuant to the ,241,690 19,922,436 (2) Proposed Debt Capitalisation 876,459,964 87,645,996 1,379,028, ,630,290 To be issued pursuant to the 262,937,900 14,461,500 (3) 413,708,500 22,753,968 (3) Proposed Private Placement Enlarged share capital 1,139,397, ,107,496 1,792,736, ,384,258 Notes: (1) Based on the exercise price of RM0.10 per SIS Option. (2) Based on the issue price of RM per Settlement Share. (3) Based on the assumed issue price of RM0.055 per Placement Share. [The rest of this page has been intentionally left blank] 19