PROPOSED PRIVATE PLACEMENT OF UP TO TEN PERCENT (10%) OF THE ISSUED AND PAID-UP SHARE CAPITAL OF GADANG ( PROPOSED PRIVATE PLACEMENT )

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1 GADANG HOLDINGS BERHAD ( GADANG OR THE COMPANY ) PROPOSED PRIVATE PLACEMENT OF UP TO TEN PERCENT (10%) OF THE ISSUED AND PAID-UP SHARE CAPITAL OF GADANG ( PROPOSED PRIVATE PLACEMENT ) 1. INTRODUCTION On behalf of the Board of Directors of Gadang ( Board ), RHB Investment Bank Berhad ( RHBIB ) wishes to announce that the Company proposes to undertake a private placement of new ordinary shares of RM1.00 each in Gadang ( Gadang Shares ) of up to ten percent (10%) of the issued and paid-up share capital of the Company ( Placement Shares ), to investors to be identified and at an issue price to be determined by the Board and announced later ( Proposed Private Placement ). The Company had obtained the approval from its shareholders at the last annual general meeting ( AGM ) convened on 19 November 2015, authorising the Board to issue new Gadang Shares not exceeding ten percent (10%) of the issued and paid-up share capital of the Company pursuant to Section 132D of the Companies Act, 1965 ( Act ) ( General Mandate ). The said approval shall continue to be in force, unless revoked or varied by the Company at a general meeting, until the conclusion of the next AGM of the Company. Further details on the Proposed Private Placement are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED PRIVATE PLACEMENT 2.1 Size of the Proposed Private Placement As at 1 March 2016, being the latest practicable date prior to the date of this announcement ( LPD ), the issued and paid-up share capital of Gadang is RM235,112,378 comprising 235,112,378 Gadang Shares. Based on the above, the Proposed Private Placement will entail the issuance of up to 23,511,237 Gadang Shares, representing ten percent (10%) of the issued and paidup share capital of Gadang. The actual number of Placement Shares to be issued pursuant to the Proposed Private Placement will be determined at a later date. Subject to prevailing market conditions, the Proposed Private Placement may be implemented in one (1) or more tranches within six (6) months after the receipt of all relevant approvals for the Proposed Private Placement or any extended period as may be approved by Bursa Malaysia Securities Berhad ( Bursa Securities ), depending on the timing of identification of the placee(s) and investors interest at the point of implementation, subject always to the expiry of the General Mandate or a new mandate being obtained from shareholders of the Company, as the case may be. 2.2 Basis of determining and justification for the issue price of the Placement Shares The Placement Shares will be issued based on a discount, if any, of not more than ten percent (10%) to the five (5)-day volume weighted average price ( VWAP ) of Gadang Shares immediately preceding the price-fixing date, to be determined by the Board after obtaining all the relevant approvals for the Proposed Private Placement. In any case, the issue price of the Placement Shares will not be lower than the par value of Gadang Shares of RM1.00 each. 1

2 As the Proposed Private Placement may be implemented in tranches within six (6) months, there could potentially be several price fixing dates and issue prices. For illustrative purposes only, the indicative issue price of the Placement Shares is assumed at RM1.88 per Placement Share, which represents a discount of approximately 9.62% from the five (5)-day VWAP of Gadang Shares up to and including the LPD of RM2.08. (Source: Bloomberg) 2.3 Ranking and listing of the Placement Shares The Placement Shares shall, upon allotment and issuance, rank pari passu in all respects with the existing Gadang Shares in issue, save and except that the Placement Shares will not be entitled to any dividends, rights, allotment and/or distributions which the entitlement date precedes the date of allotment of the said Placement Shares. For the purpose hereof, entitlement date means the date as at the close of business on which shareholders must be registered on the Register of Depositors in order to participate in any dividends, rights, allotment and/or other distributions. An application will be made to Bursa Securities for the listing of and quotation for the Placement Shares to be issued pursuant to the Proposed Private Placement on the Main Market of Bursa Securities. 2.4 Allocation to placees The Placement Shares will be placed out to third party investor(s) to be identified at a later stage. In accordance with Paragraph 6.04(c) of the Main Market Listing Requirements of Bursa Securities ( Listing Requirements ), the Placement Shares will not be placed to the following parties: (a) (b) (c) a director, major shareholder or chief executive officer of Gadang or a holding company of Gadang ( Interested Person(s) ); a person connected with an Interested Person; and/or nominee corporations, unless the names of the ultimate beneficiaries are disclosed. 2.5 Utilisation of proceeds The Company is unable to determine the actual amount of proceeds to be raised from the Proposed Private Placement at this juncture as the amount to be raised will depend on, amongst others, the actual issue price and the actual number of Placement Shares to be issued. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 2

3 For illustrative purposes, based on an indicative issue price of RM1.88 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of up to RM44.20 million. The proceeds raised will be utilised in the manner as set out below: Details of utilisation RM 000 Estimated timeframe for utilisation of proceeds Property development expenses and future land/project acquisition (1) 43,501 Within twenty-four (24) months from the date of completion of the Proposed Private Placement Estimated expenses (2) 700 Within one (1) month from the date of completion of the Proposed Private Placement Total 44,201 Notes: (1) The proceeds are intended to be utilised for Gadang and its subsidiaries ( Gadang Group ) property development expenditures (which includes, but is not limited to, payment to contractors, suppliers and consultants, mobilisation fees, clearing and demolition costs and applications for permits and licenses in respect of property development activities) as well as to support Gadang Group s expansion in its property development business which includes, amongst others, to acquire additional viable land banks and/or property development projects from third parties and/or from related parties. Upon finalisation of these future acquisitions, Gadang would make the necessary announcements and/or seek shareholders approval, where required in accordance with the Listing Requirements. As at the LPD, the Board has not decided on any specific land/project to be acquired. Any difference between the indicative proceeds mentioned above and the actual proceeds raised from the Proposed Private Placement (depending on the Placement Shares to be issued and the issue price of the Placement Shares) shall be adjusted to/from the property development expenses and future land/project acquisition. Any unutilised amount allocated for property development expenses and future land/project acquisition would be used for working capital of Gadang Group. (2) The estimated incidental expenses in relation to the Proposed Private Placement comprising professional fees, fees payable to relevant authorities and other related expenses are estimated to cost up to RM700,000. Any shortfall or excess in funds allocated for estimated expenses will be funded from or used for working capital of Gadang Group. The actual proceeds to be raised from the Proposed Private Placement are dependent on the issue price of the Placement Shares and the actual number of Placement Shares to be issued. Pending utilisation of proceeds from the Proposed Private Placement, the said proceeds will be placed in an interest bearing deposit account(s) with financial institutions or investments in money market instruments as the Board may deem fit. 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 Gadang Group. 3. RATIONALE FOR THE PROPOSED PRIVATE PLACEMENT The Proposed Private Placement is intended to raise funds to further grow and expand the property development business of Gadang, which is expected to contribute positively to the future profitability of Gadang Group. Such expansion activities for the core business of Gadang Group may include potential acquisition of additional viable land banks and/or property investment and property development projects, which are in line with Gadang s immediate strategic plan to augment its property development business. The utilisation of proceeds are detailed in Section 2.5 of this Announcement. 3

4 The Board is of the view that the Proposed Private Placement is currently the most appropriate avenue of fund raising after taking into consideration amongst others, the following factors: (a) (b) (c) it will enable Gadang to raise funds without incurring interest costs as compared to bank borrowings or issuance of debt instruments; it will enable the Company to expediently raise additional funds to fuel its future growth and expansion into its property development business without relying entirely on equity funding from the existing shareholders of Gadang; and the enlarged share base is also expected to enhance the liquidity of Gadang Shares on the Main Market of Bursa Securities. 4. EFFECTS OF THE PROPOSED PRIVATE PLACEMENT For illustration purpose, the effects of the Proposed Private Placement have been prepared based on the indicative issue price of RM Issued and paid-up share capital The proforma effects of the Proposed Private Placement on the issued and paid-up share capital of Gadang are set out below: Shares Existing as at the LPD 235,112, ,112,378 Shares to be issued pursuant to the Proposed Private Placement RM 23,511,237 23,511,237 Enlarged issued and paid-up share capital 258,623, ,623,615 THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 4

5 4.2 Net Assets ( NA ) and gearing Based on the latest audited consolidated financial statements of Gadang as at 31 May 2015, the proforma effects of the Proposed Private Placement on the NA per Share and gearing of Gadang Group are set out below: Audited as at 31 May 2015 Adjusted for the subsequent event Proforma I After the Proposed Private Placement RM RM RM Share capital 216,369, ,112,378 (1) 258,623,615 (3) Share premium 12,736,117 18,621,399 (2) 38,611,288 (3)(4) Warrant reserves 6,173, Capital reserves 1,346,681 1,346,681 1,346,681 Foreign exchange reserves (4,613,491) (4,613,491) (4,613,491) Retained profits 149,344, ,632,764 (2) 149,632,764 Shareholders equity/ NA 381,356, ,099, ,600,857 Non-controlling interest 7,029,567 7,029,567 7,029,567 Total equity 388,386, ,129, ,630,424 No. of ordinary shares 216,369, ,112, ,623,615 NA per Share (RM) Borrowings (RM) 193,012, ,012, ,012,454 Gearing (times) Notes: (1) Adjusted for the exercise of 18,742,935 warrants subsequent to the financial year end up to the LPD. (2) Adjusted for the exercise of warrants and the reversal of warrants reserves subsequent to the expiry of warrants on 29 September (3) Assuming 23,511,237 Placement Shares are issued at an indicative issue price of RM1.88 per Placement Share. (4) After deducting the estimated expenses for the Proposed Private Placement of RM700,000. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 5

6 4.3 Substantial shareholders shareholdings The proforma effects of the Proposed Private Placement on the substantial shareholders shareholdings as at the LPD are set out below: Shareholders As at the LPD Proforma I After the Proposed Private Placement Direct Indirect Direct Indirect Shares % Shares % Shares % Shares % Sumber Raswira Sdn Bhd 32,550, ,550, Tan Sri Dato Kok Onn 5,536, ,537,327 (1) ,536, ,537,327 (1) Meloria Sdn Bhd 34,987, ,987, Puan Sri Datin Chan Ngan Thai ,987,166 (2) ,987,166 (2) Notes: (1) Deemed interest by virtue of his shareholding in Sumber Raswira Sdn Bhd and Meloria Sdn Bhd pursuant to Section 6A of the Act. (2) Deemed interest by virtue of her shareholding through Meloria Sdn Bhd pursuant to Section 6A of the Act. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 6

7 4.4 Earnings and earnings per share ( EPS ) The Proposed Private Placement is not expected to have any material effect on the earnings of Gadang Group for the financial year ending 31 May The EPS of Gadang Group may, however, be reduced correspondingly as a result of the increase in the number of Gadang Shares in issue pursuant to the Proposed Private Placement. The proceeds from the Proposed Private Placement are expected to contribute positively to Gadang Group for the future financial years when benefits from the proposed utilisation (as set out in Section 2.5 of this Announcement) are realised. 4.5 Convertible securities As at the LPD, the Company does not have any other existing convertible securities. 5. APPROVALS REQUIRED The Proposed Private Placement is subject to the approvals being obtained from the following: (a) (b) Bursa Securities for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities; and approvals of any relevant authorities and/or parties, if required. The Company had obtained approval from its shareholders at the last AGM convened on 19 November 2015 authorising the Board to issue new Gadang Shares not exceeding ten percent (10%) of the issued and paid-up share capital of the Company pursuant to Section 132D of the Act. The approval shall continue to be in force, unless revoked or varied by the Company at a general meeting, until the conclusion of the next AGM of the Company. The Proposed Private Placement is not conditional upon any other corporate exercise undertaken by Gadang. 6. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders of Gadang and/or persons connected to them have any interests, 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, utilisation of proceeds and financial effects of the Proposed Private Placement, is of the opinion that the Proposed Private Placement is in the best interest of the Company. 8. APPLICATION TO THE AUTHORITIES The applications to the relevant authorities, in particular Bursa Securities, will be made within one (1) month from the date of this announcement. 7

8 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Private Placement is expected to be completed by the second (2 nd ) quarter of calendar year ADVISER RHBIB has been appointed by Gadang to act as the Adviser and sole Placement Agent for the Proposed Private Placement. This announcement is dated 7 March