M&A SECURITIES SDN BHD (15017-H) (A Wholly-Owned Subsidiary of Insas Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursa Malaysia Securities Berhad ( Bursa Securities ) has approved the listing of and quotation for the warrants to be issued under the Proposed Bonus Issue of Warrants (as defined herein). The approval of Bursa Securities shall not be taken to indicate that Bursa Securities recommends the Proposed Bonus Issue of Warrants or assumes responsibility for the correctness of any statement made or opinion or report expressed in this Circular. Shareholders should rely on their own evaluation to assess the merits and risks of the Proposed Bonus Issue of Warrants. Bursa Securities is not liable for any non-disclosure on the part of Caely Holdings Bhd ( Caely or the Company ), takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED BONUS ISSUE OF 40,000,000 FREE DETACHABLE WARRANTS ( WARRANT(S) ) ON THE BASIS OF ONE (1) WARRANT FOR EVERY TWO (2) EXISTING ORDINARY SHARES IN CAELY HELD BY THE ENTITLED SHAREHOLDERS ON AN ENTITLEMENT DATE TO BE DETERMINED LATER ( PROPOSED BONUS ISSUE OF WARRANTS ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING Principal Adviser M&A SECURITIES SDN BHD (15017-H) (A Wholly-Owned Subsidiary of Insas Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) Notice of the Extraordinary General Meeting ( EGM ) together with the Proxy Form is enclosed in this Circular. The Proxy Form should be lodged at the registered office of the Company at Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan on or before the time and date indicated below or at any adjournment thereof in order for it to be valid. A shareholder entitled to attend and vote at the EGM is entitled to appoint a proxy to attend and vote on his behalf. The lodging of the Proxy Form will not preclude a shareholder from attending and voting in person at the EGM should the shareholder subsequently decide to do so. Last date and time for lodging the Proxy Form for the EGM : Wednesday, 14 March 2018 at a.m. Date and time of the EGM : Thursday, 15 March 2018 at a.m. or any adjournment thereto Venue of EGM : Lower Perak Club, Jalan Denai Intan, Bandar Baru, Teluk Intan, Perak Darul Ridzuan This Circular is dated 28 February 2018

2 DEFINITIONS Except where the context otherwise requires, the following definition shall apply throughout this Circular and the accompanying appendix:- Act : Companies Act, 2016, as amended from time to time including any reenactment thereof Board : Board of Directors of Caely Bursa Depository : Bursa Malaysia Depository Sdn Bhd Bursa Securities : Bursa Malaysia Securities Berhad Caely or Company : Caely Holdings Bhd Caely Group or Group : Caely and its subsidiaries, collectively Caely Share(s) or Share(s) : Ordinary share(s) in Caely CDS : Central Depository System Circular : This circular to shareholders dated 28 February 2018 in relation to the Proposed Bonus Issue of Warrants Deed Poll : The Deed Poll governing the Warrants to be executed by the Company EGM : Extraordinary general meeting Entitled Shareholders : Shareholders of Caely whose names appear in the Record of Depositors on the Entitlement Date Entitlement Date : A date to be determined and announced later by the Board, as at the close of business on which the shareholders of Caely must be registered in the Record of Depositors in order to be entitled to participate in the Proposed Bonus Issue of Warrants EPS : Earnings per share FPE : Financial period ended/ending, as the case may be FYE : Financial year ended/ending 31 March, as the case may be GDP : Gross domestic product LPD : 22 February 2018, being the latest practicable date prior to the printing of this Circular Main Market : The Main Market of Bursa Securities Main Market LR : Main Market Listing Requirements of Bursa Securities M&A Securities or Principal Adviser : M&A Securities Sdn Bhd NA : Net assets i

3 DEFINITIONS (CONT D) PAT : Profit after taxation Proposed Bonus Issue of Warrants : Proposed bonus issue of 40,000,000 Warrants on the basis of one (1) Warrant for every two (2) existing Caely Shares held by the Entitled Shareholders on the Entitlement Date Record of Depositors : A record of securities holders established and maintained by Bursa Depository under the rules of Bursa Depository RM and sen : Ringgit Malaysia and sen, respectively Rules : Rules on Take-overs, Mergers and Compulsory Acquisitions, 2016, as amended from time to time and any re-enactment thereof USA : United States of America Warrants : 40,000,000 free detachable warrants to be issued pursuant to the Proposed Bonus Issue of Warrants 5D-VWAMP : Five (5)-day volume weighted average market price In this Circular, words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine gender and vice versa. References to persons shall, where applicable, include a corporation(s). Any reference in this Circular to any enactments is a reference to that enactment as for the time being amended or re-enacted. For the purpose of this Circular, all references to time of a day shall be reference to Malaysian time, unless otherwise stated. Certain figures included in this Circular have been subject to rounding adjustments. The remaining of this page is intentionally left blank ii

4 TABLE OF CONTENTS Page LETTER TO THE SHAREHOLDERS OF CAELY IN RELATION TO THE PROPOSED BONUS ISSUE OF WARRANTS 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED BONUS ISSUE OF WARRANTS 2 3. RATIONALE 7 4. FINANCIAL EFFECTS 8 5. INDUSTRY OVERVIEW AND PROSPECTS 9 6. APPROVALS REQUIRED HISTORICAL SHARE PRICE PERFORMANCE DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS DIRECTORS RECOMMENDATION ESTIMATED TIMEFRAME FOR COMPLETION OUTSTANDING PROPOSALS ANNOUNCED BUT NOT PENDING COMPLETION EGM FURTHER INFORMATION 15 APPENDIX I FURTHER INFORMATION 16 NOTICE OF EGM PROXY FORM ENCLOSED ENCLOSED iii

5 (Incorporated in Malaysia) Registered Office: Level 8, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Darul Ehsan 28 February 2018 Directors:- Datin Fong Nyok Yoon (Executive Chairperson/ Non-Independent Executive Director) Dato Chuah Chin Lai (Managing Director/ Non-Independent Executive Director) Siow Hock Lee (Independent Non-Executive Director) Ooi Say Teik (Independent Non-Executive Director) Hem Chan Hong Kee (Independent Non-Executive Director) To: The Shareholders of Caely Dear Sir/Madam, PROPOSED BONUS ISSUE OF WARRANTS 1. INTRODUCTION On 16 January 2018, M&A Securities had, on behalf of the Board, announced that the Company intends to undertake a proposed bonus issue of 40,000,000 Warrants on the basis of one (1) Warrant for every two (2) existing Caely Shares held by the Entitled Shareholders on the Entitlement Date. On 12 February 2018, M&A Securities, on behalf of the Board, announced that Bursa Securities had vide its letter dated 9 February 2018 approved the following:- (a) (b) admission to the Official List of Bursa Securities and the listing of and quotation for 40,000,000 Warrants to be issued pursuant to the Proposed Bonus Issue of Warrants; and listing of and quotation for up to 40,000,000 new Caely Shares to be issued pursuant to the exercise of the Warrants. Bursa Securities approval-in-principle is subject to the following conditions:- No. Conditions Status of Compliance (a) Caely and M&A Securities must fully comply with the relevant provisions under the Main Market LR pertaining to the implementation of the Proposed Bonus Issue of Warrants; To be complied 1

6 No. Conditions Status of Compliance (b) (c) (d) (e) Caely and M&A Securities to inform Bursa Securities upon the completion of the Proposed Bonus Issue of Warrants; Caely and M&A Securities to furnish Bursa Securities with a written confirmation of its compliance with the terms and conditions of Bursa Securities approval once the Proposed Bonus Issue of Warrants is completed; Caely to furnish Bursa Securities on a quarterly basis a summary of the total number of shares listed pursuant to the exercise of the Warrants as at the end of each quarter together with a detailed computation of listing fees payable; and To incorporate Bursa Securities comments in respect of the Circular to shareholders. To be complied To be complied To be complied Complied The purpose of this Circular is to provide the shareholders of Caely with the details of the Proposed Bonus Issue of Warrants, to set out the Board s opinion and recommendation in relation to the Proposed Bonus Issue of Warrants and to seek the approval of Caely s shareholders for the resolution pertaining to the Proposed Bonus Issue of Warrants to be tabled at the forthcoming EGM of Caely. The Notice of EGM together with the Proxy Form are enclosed in this Circular. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE ENTIRE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDIX CONTAINED HEREIN BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED BONUS ISSUE OF WARRANTS AT THE FORTHCOMING EGM. 2. DETAILS OF THE PROPOSED BONUS ISSUE OF WARRANTS 2.1 Basis and number of Warrants to be issued The Company proposes to implement a bonus issue of 40,000,000 Warrants, on the basis of one (1) Warrant for every two (2) existing Caely Shares held by the Entitled Shareholders on the Entitlement Date. The Entitlement Date will be determined and announced at a later date by the Board upon receipt of all relevant regulatory approvals. The Proposed Bonus Issue of Warrants is not intended to be implemented in stages over a period of time. The Warrants to be issued will be allotted and issued to the Entitled Shareholders on the Entitlement Date. Fractional entitlements, arising from the Proposed Bonus Issue of Warrants, if any, will be disregarded and shall be dealt with by the Board in such manner at its absolute discretion as it may deem fit and expedient in order to minimise the incidence of odd lots and in the best interest of the Company. 2.2 Capitalisation of reserves There will not be any capitalisation of reserves arising from the issuance of the Warrants pursuant to the Proposed Bonus Issue of Warrants. Paragraph 6.30 of the Main Market LR is not relevant with regards to the Proposed Bonus Issue of Warrants. 2

7 2.3 Basis and justification of determining the exercise price of the Warrants At this juncture, the Board has not determined the exercise price of the Warrants. The Board will determine and announce the exercise price of the Warrants at a later date after it has been fixed. The exercise price of the Warrants shall be determined and announced by the Board at a later date after taking into consideration, amongst others, the following:- (a) (b) (c) (d) (e) the historical price movement of Caely Shares; the 5D-VWAMP of Caely Shares prior to the price fixing date of the Warrants; the prevailing market conditions; the trading and liquidity of Caely Shares; and that the Warrants will be issued at no cost to the Entitled Shareholders. For illustrative purposes, the indicative exercise price of the Warrants is assumed at RM0.50, representing a discount of approximately 52.0% to the theoretical ex-all price of Caely Shares of approximately RM1.0417, based on the 5D-VWAMP of Caely Shares of RM up to and including 16 January 2018, being the date of the announcement of the Proposed Bonus Issue of Warrants. The exercise price of the Warrants shall be fixed at a discount of not more than 60% to the theoretical ex-all price of Caely Shares (calculated based on the five (5)-day VWAMP of Caely Shares immediately prior to the price fixing date). 2.4 Ranking of the Warrants and the new Caely Shares to be issued upon the exercise of the Warrants The holders of the Warrants will not be entitled to any voting rights or participation in any form of distribution other than on winding-up, compromise or arrangement of Caely as set out in a Deed Poll and/or any offer of further securities in Caely until and unless such holders of the Warrants exercise their Warrants into new Caely Shares. The new Caely Shares to be issued upon the exercise of the Warrants shall, upon allotment and issuance, rank pari passu in all respects with the then existing Caely Shares, save and except that they shall not be entitled to participate in any rights, allotments, dividends and/or other distributions, the entitlement date of which precedes the date of allotment of the said new Caely Shares issued pursuant to the exercise of the Warrants. 2.5 Listing and quotation for the Warrants and new Caely Shares to be issued upon the exercise of the Warrants Bursa Securities had on 9 February 2018, approved the admission of the Warrants to the Official List of Bursa Securities as well as for the listing of and quotation for the Warrants and the new Caely Shares to be issued upon the exercise of the Warrants on the Main Market. 2.6 Implications of the Rules As at the LPD, the substantial shareholders, namely Dato Chuah Chin Lai and Datin Fong Nyok Yoon hold 15.92% and 17.04% equity interest in Caely, respectively which amount to a collective holding of 32.96% equity interest in Caely. In the event that the substantial shareholders exercise their Warrants, it may give rise to consequences of a mandatory general offer obligation pursuant to the Rules. Should any of the above shareholders exercise their Warrants such that their collective shareholdings in the Company increase to above 33.0% or in the event that their collective shareholdings increase by more than 2.0% in six (6)-months period for shareholdings of between 33.0% to 50.0%, they will be required under the Rules to undertake a mandatory general offer for all the remaining Caely Shares not already held by them after the exercise of the Warrants. In such an event, the respective shareholders may seek the relevant exemptions under the Rules should they not intend to undertake such mandatory offer. 3

8 2.7 Indicative salient terms of the Warrants The indicative salient terms of the Warrants are set out below:- Terms Details Number of Warrants : 40,000,000 Warrants to subscribe for 40,000,000 new Caely Shares. Form and denomination : The Warrants will be issued in registered form and constituted by the Deed Poll. Tenure (a) : Three (3) years from the date of issuance of the Warrants. Exercise Rights : Each Warrant entitles the registered holder to subscribe for one (1) new Caely Share at the Exercise Price at any time during the Exercise Period, subject to any adjustments in accordance with the provisions of the Deed Poll. Exercise Price : The exercise price of the Warrants shall be determined and fixed by the Board and announced at a later date, after obtaining the relevant regulatory approvals but before the Entitlement Date. Kindly refer to Section 2.3 of this Circular for the basis of determining the exercise price of the Warrants. Exercise Period : The Warrants may be exercised any time during the tenure of the Warrants including and commencing from the issue date and ending at 5.00 p.m. on the Expiry Date. Any Warrants which have not then been exercised will lapse and every Warrant not exercised by then will cease to be valid for any purpose. Expiry Date : A date which falls on the day before the third (3 rd ) anniversary of the issue date, provided that if such day falls on a day which is not a market day, then it shall be the market day immediately preceding the said non-market day. Adjustment in the Exercise Price and/or the number of Warrants in the event of alteration to the share capital Modification of rights of Warrant holder : Subject to the provisions of the Deed Poll, the Exercise Price and/or the number of unexercised Warrants held by each holder of Warrants shall be adjusted by the Board in consultation with an approved adviser appointed by the Company and certification by the auditors of Caely in the event of alteration to the share capital of the Company. : The Company may, from time to time, without the consent or sanction of the holders of the Warrants but in accordance with the Deed Poll, modify the Deed Poll, if such modification made does not materially prejudice the interests of the holders of the Warrants or is made to correct a manifest error or to comply with prevailing laws of Malaysia, Rules of the Bursa Depository, Securities Industry (Central Depositories) Act, 1991 and/or Main Market LR. 4

9 Terms Details Subject to the approval of any relevant authority, any modification, alteration or abrogation of the covenants or provisions contained in the Deed Poll, proposed or agreed to by the Company must be sanctioned by special resolution of the holders of the Warrants, effected by a Deed Poll, executed by the Company and expressed to be supplemental and comply with the requirements of the Deed Poll. Rights of holders of Warrants Rights in the event of winding up, liquidation or an event of default : The holders of Warrants are not entitled to any voting rights in any general meeting of the Company or to participate in any distribution and/or offer of further securities in the Company until and unless such holder of Warrants are issued with new Caely Shares arising from their exercise of the Warrants. : Where a resolution has been passed by the Company for a members voluntary winding-up or there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with one (1) or more companies then:- (a) (b) for the purpose of such a winding-up, compromise or arrangement (other than consolidation, amalgamation or merger in which the Company is the continuing corporation) to which the holders of Warrants or some persons designated by them for such purposes by special resolution, shall be a party, the terms of such winding-up, compromise or arrangement shall be binding on all the holders of Warrants; and in any other case, every Warrant holder shall be entitled at any time within six (6) weeks after the passing of such resolution for a members voluntary winding up of the Company or six (6) weeks after the granting of the court order approving the compromise or arrangement, by irrevocable surrender of his Warrants together with payment of the relevant subscription monies on a market day, to elect to be treated as if he had on the market day immediately prior to the commencement of such windingup, compromise or arrangement, exercised the subscription rights represented by such Warrants, to the extent specified in the exercise notice and be entitled to receive out of the assets of the Company which would be available in liquidation as if he had on such date been the holder of the new Caely Shares, to which he would have become entitled pursuant to such exercise; and the liquidator of the Company shall give effect to such election accordingly. Upon the expiry of the above six (6) weeks, all exercise rights of the Warrants shall lapse and cease to be valid for any purpose. 5

10 Terms Details Board Lot : The Warrants are tradeable upon listing in board lots of one hundred (100) units carrying the right to subscribe for one hundred (100) new Caely Shares at any time during the Exercise Period or such other denomination as may be prescribed by Bursa Securities. Listing : The Warrants will be listed and quoted on the Main Market of Bursa Securities. Transferability : The Warrants are transferable by transfer as prescribed by the rules of Bursa Depository and in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991 and the Rules of Bursa Depository. Governing Law : Laws of Malaysia Note:- (a) The Board has resolved to fix the tenure of the Warrants at three (3) years instead of a longer period after taking into account the future funding needs of the Group. 2.8 Utilisation of proceeds The Proposed Bonus Issue of Warrants is not expected to raise any immediate funds upon the issuance of Warrants as the Warrants will be issued at no cost to the Entitled Shareholders. The exact quantum of the future proceeds that may be raised by Caely from the exercise of the Warrants would depend on the actual number of Warrants exercised during the tenure of the Warrants and the exercise price of the Warrants. As such, the exact timeframe for the utilisation of the proceeds is not determinable at this juncture. For illustrative purpose only, assuming full exercise of the Warrants at the indicative exercise price of RM0.50 per Warrant, a total of 40,000,000 Caely Shares will be issued and the Company could potentially raise gross proceeds of RM20,000,000. The proceeds to be raised, as and when the Warrants are exercised, shall be utilised for repayment of bank borrowings and for future working capital requirements of the Caely Group, which include, amongst others, staff costs and other operating expenses. The proceeds to be utilised for each component of the borrowings and working capital and its timeframes are subject to the Group s operating requirements at the time of utilisation and therefore, cannot be determined at this juncture. As at the LPD, the Group s total bank borrowings stood at RM23.4 million. Assuming an amount of RM10.0 million from the proceeds of the exercise of the Warrants are utilised to pare down the bank borrowings, the expected interest savings to the Caely Group is expected to amount to RM0.5 million per annum, based on an average interest rate of 5.2% per annum. However, the actual interest savings may vary depending on the then applicable interest rate. The remaining of this page is intentionally left blank 6

11 3. RATIONALE The Company is embarking on the Proposed Bonus Issue of Warrants instead of other available proposals to reward existing shareholders of the Company after taking into cognisance the financial performance and financial position of the Group. The Board is of the view that the Proposed Bonus Issue of Warrants:- (a) (b) (c) (d) (e) (f) serves to reward the existing shareholders of the Company for their support by enabling them to participate in a derivative of the Company without incurring any cost; potentially enhances the Company s capital base; provides the existing shareholders with an opportunity to increase their equity participation in the Company at a predetermined price during the tenure of the Warrants; allows the existing shareholders to further participate in the future prospects and growth of the Company; provides the opportunity to increase the liquidity of Caely s Shares in the market upon the exercise of the Warrants; and provides the Company with additional capital as and when the Warrants are exercised during the tenure of the Warrants without incurring additional financing cost and minimise any potential cash outflow in respect of interest servicing. Part of the proceeds from the exercise of the Warrants which shall be utilised for repayment of borrowings and for working capital requirements is expected to contribute positively to the Group s profitability. Further, the utilisation of the proceeds as and when the Warrants are exercised towards the paring down of the Group s banking facilities would allow Caely Group to reduce its finance cost. The Proposed Bonus Issue of Warrants will involve the issuance of Warrants on a pro-rata basis to all Entitled Shareholders of the Company at the Entitlement Date. As such, the Proposed Bonus Issue of Warrants will not dilute the existing shareholders equity interest assuming all shareholders fully exercise their Warrants subsequently. Should all shareholders exercise their Warrants, the Company s capital base is expected to increase in terms of the size and strength, improving its gearing level and the increase in the issued share capital may enhance the liquidity of Caely Shares. Depending on the future performance of Caely Shares, the Entitled Shareholders will be able to enjoy the potential capital appreciation of Caely Shares when they exercise the Warrants, which are issued at no cost to the Entitled Shareholders. The remaining of this page is intentionally left blank 7

12 4. FINANCIAL EFFECTS For illustration purposes, the pro forma effects of the Proposed Bonus Issue of Warrants on the issued share capital, NA, NA per Share, earnings, earnings per Share, gearing, convertible securities and substantial shareholders shareholdings of the Company are as set out below:- 4.1 Issued share capital The pro forma effects of the Proposed Bonus Issue of Warrants on the issued share capital of Caely are as follows:- No. of Caely Shares 000 RM 000 As at the LPD 80,000 49,419 Caely Shares to be issued assuming full exercise of the 40,000 (a) 20,000 Warrants Enlarged issued share capital 120,000 69,419 Note:- (a) Based on the indicative exercise price of RM0.50 per Warrant. 4.2 NA and gearing Based on the audited consolidated financial statements of the Caely Group as at 31 March 2017, the proforma effects of the Proposed Bonus Issue of Warrants on the NA and gearing position of the Caely Group are as follows:- (I) (II) As at 31 March 2017 After the Proposed Bonus Issue of Warrants After (I) and assuming full exercise of Warrants RM 000 RM 000 RM 000 Share Capital 49,419 49,419 (b) 69,419 Other reserves 10,300 10,300 10,300 Retained profits 28,339 (a) 28,209 28,209 Shareholders fund/na 88,059 87, ,928 No. of shares outstanding ( 000) 80,000 80, ,000 NA per share (RM) Borrowings (RM 000) 23,613 23,613 (c) 13,613 Gearing (times) Notes:- (a) (b) (c) After taking into consideration the estimated expenses in relation to the Proposed Bonus Issue of Warrants of RM130,000. Based on the indicative exercise price of RM0.50 per Warrant. Assuming RM10.0 million of the proceeds of the exercise of the Warrants is used to repay the Group s bank borrowings. 8

13 4.3 Earnings and EPS The Proposed Bonus Issue of Warrants is not expected to have an immediate material effect on the earnings and EPS of Caely. Although the exercise of the Warrants is expected to dilute the consolidated EPS as a result of the increase in the number of Caely Shares in issue, the proceeds derived from the exercise of the Warrants are expected to contribute positively to the future earnings of the Caely Group. 4.4 Existing convertible securities As at the LPD, Caely does not have any convertible securities. 4.5 Substantial shareholders shareholdings The Proposed Bonus Issue of Warrants will not have any effect on the substantial shareholders shareholdings in the Company as the Warrants will be allotted on a pro-rata basis to all the Entitled Shareholders. Assuming full exercise of the Warrants, there will be no effect to the percentage shareholdings of the substantial shareholders, but the number of Caely Shares held by each substantial shareholder will increase proportionately. 5. INDUSTRY OVERVIEW AND PROSPECTS 5.1 The Malaysian economy Malaysia s economic growth was markedly stronger in the third quarter with real GDP expanding by 6.2% (Q3 2016: 4.3%) supported by higher domestic demand and exports. On the domestic front, growth was underpinned by strong private sector spending. Meanwhile, on the supply side, all sectors recorded positive growth led by services and manufacturing sectors. Domestic demand recorded a robust growth of 6.6% (Q3 2016: 4.5%) mainly led by the favourable performance of private sector expenditure which expanded 7.3% (Q3 2016: 5.9%). Private consumption rose 7.2% (Q3 2016: 6.3%) largely in communication, food and beverages as well as tourism-related segments, supported by job market stability and steady income growth. Consumer spending also benefited from higher commodity prices. The continued expansion in households spending was reflected in the growth of imports of consumption goods, sales of food and motorcycles and loans disbursed for consumption purposes. The wholesale and retail trade subsector grew 7.5% (Q3 2016: 6.7%). Growth was contributed largely by the wholesale segment which increased 6.9% (Q3 2016: 9.0%) supported by other specialised wholesale and wholesales of household goods. The retail segment expanded strongly by 10.3% (Q3 2016: 7.6%) supported by retail sales of other goods in specialised stores and non-specialised stores. Meanwhile, the motor vehicles segment rebounded 0.4% (Q3 2016: -2.9%) driven by sales of motor vehicle parts and accessories. Malaysia s total trade surged 21% to RM451.7 billion in the third quarter of 2017 (Q3 2016: 1.1% or RM373.4 billion) amid strong regional demand and domestic economic activity. The trade surplus widened to RM26.7 billion as export growth outpaced imports (Q3 2016: RM18.4 billion). Gross exports rebounded significantly by 22.1% to RM239.2 billion (Q3 2016: -2.1% or RM195.9 billion) supported by higher exports of manufactured goods and commodities. Likewise, gross imports turned around 19.8% to RM212.5 billion (Q3 2016: - 9

14 0.1% or RM177.5 billion) in tandem with the strong domestic consumption and investment activities. (Source: Ministry of Finance Malaysia, Quarterly Update on the Malaysian Economy Third Quarter 2017) The Malaysian economy will remain resilient in 2018, with real GDP expanding between 5.0% and 5.5%, led by the domestic demand. Private sector expenditure continues to be the primary driver of growth with private investment and consumption growing 8.9% and 6.8%, respectively. Meanwhile, the public sector expenditure is forecast to decline, in line with lower capital outlays by public corporations. On the supply side, growth is expected to be broadbased, with all sectors registering positive growth. Malaysia s external position is forecast to remain favourable supported by the global growth and trade. (Source: Ministry of Finance Malaysia, 2018 Economic Report) 5.2 Outlook and prospects of the manufacturing/ textiles industry in Malaysia Value-added of the manufacturing sector registered a strong growth of 7.0% (Q3 2016: 4.3%) underpinned by the robust performance of both export-oriented and domestic-oriented industries. The output increased significantly by 7.1% (Q3 2016: 4.0%) during the third quarter of Meanwhile, the sales registered a double-digit growth of 16.2% to RM194.4 billion (Q3 2016: -0.9% or RM167.2 billion). The export-oriented industries expanded 5.9% (Q3 2016: 4.0%) driven by higher production in the electronics and electrical cluster. The growth of the industry was also supported by the higher production of chemicals and chemical products, plastic products, off-estate processing and textiles wearing apparel, leather products and footwear. Meanwhile, domestic-oriented industries increased further by 7.8% (Q3 2016: 3.8%) backed by higher production of food products and beverages. (Source: Ministry of Finance Malaysia, Quarterly Update on the Malaysian Economy Third Quarter 2017) The textiles and textile products industry comprises both upstream, i.e. primary textiles and downstream activities, i.e. garments, textile products and accessories. In 2016, the textiles and textile products industry was the 10 th largest export earner with RM13.9 billion, contributing to approximately 1.8% to Malaysia s total exports of manufactured goods. The USA, Japan, and Turkey were Malaysia s top three (3) export destinations. The USA remained as the leading export market for Malaysian textiles products, with 16.0% of the industry s total exports. The apparel sub-sector has developed capabilities in contract manufacturing. Contract manufacturers in the sub-sector have shifted from producing low-end products to medium and high-end and high value products. New growth areas in textiles industry have been targeted for promotion under the Third Industrial Master Plan (IMP3). The growth areas for the industry include technical textile, smart textile and nano technology, industrial and home textiles, functional fabrics, high-end fabrics and garments, ethnic fabrics and key support facilities and services such as design houses and fashion centres, specialised dyeing, finishing facilities and others. To encourage investments in the textiles and textile products industry, several textile products/activities have been gazetted as promoted products/activities under the Promotion of Investment Act, 1986 and could be considered for tax incentives in the form of Pioneer Status or Investment Tax Allowance. The products/activities are:- (a) (b) (c) (d) Natural or man-made fibres; Yarn of natural or man-made fibres; Woven fabrics; Knitted fabrics; 10

15 (e) (f) (g) (h) Finishing of fabrics such as bleaching, dyeing and printing; Non-woven fabrics; Specialised apparel; and Technical or functional textiles and textile products Textile and apparel industry in Malaysia is forecast to continue fulfilling an important role in Malaysia s overall economic development. The investment in Malaysian textile and clothing industry is expected to reach USD$3 billion during the period from 2011 to The Malaysian Government has set a target for textile and clothing exports to almost double over the period. This production is based on ambitious government plans for further development of the industry which involve a focus on high-tech and highly added value products. Under the 11 th Malaysian plan, various initiatives will be undertaken in key areas, i.e. upstream and downstream activities, for investments, exports and market share of targeted growth areas in textiles and apparel and to enhance the industry s overall competitiveness including in promoting and attracting research and development activities as well as to strengthen the linkages between the sub-sectors and support industries. The proposed program identified under the 11 th Malaysian Plan for textile industry is expected to provide solid outcome which include higher export value, quality investments, increase in employment opportunities and higher productivity. (Source: Extracted from Malaysian Investment Development Authority website) 5.3 Outlook and prospects of the property development/construction industry in Malaysia Market activity recorded 153,729 transactions worth RM67.81 billion in the first half of 2017, down by 6.0% in volume but up by a marginal 5.0% in value against similar half of Residential sub-sector continued to dominate the market, with 61.8% contribution in volume and 48.4% in value. All sub-sectors recorded softer market volume ranging from -12.8% to - 0.9%. In terms of value, all sub-sectors recorded growth except for industrial subsector, down by 4.2%. Development land saw its total value shot up by nearly 30.0% due to several major land dealings namely those in Bandar Malaysia and TRX area, which dated in 2016 and 2015, respectively but concluded in (Source: Valuation and Property Services Department, Property Market Report First Half 2017) The construction sector grew 6.1% during Q (Q3 2016: 7.9%). The growth was primarily attributed to civil engineering and specialised construction activities which grew 13.7% and 8.6%, respectively (Q3 2016: 16.2%; 5.4%). Transportation and utility related projects supported the growth of the civil engineering subsector. Meanwhile, the specialised construction activities expanded further driven by painting, interior designing, wiring and installations of sanitary equipment. The non-residential subsector rebounded 0.6% (Q3 2016: -4.2%) primarily supported by Government projects. However, the residential subsector moderated 0.5% (Q3 2016: 13%) as developers were cautious in launching new projects following high overhang. During the quarter, the total value of construction work done recorded a steady growth of 8.1% to register RM34.5 billion covering 8,844 projects (Q3 2016: 10.7%; RM31.9 billion; 9,725 projects). The increase in total value of construction work done was driven largely by civil engineering (18%) and special trade activities (10.5%). In terms of project ownership, the private sector continues to lead the construction activity which accounted for 62.6% of the total value of work done. (Source: Ministry of Finance, Quarterly Update on the Malaysian Economy - Third Quarter 2017) Value added of the construction sector recoded a robust growth of 7.4% during the first half of 2017 (January to June 2016: 8.5%), primarily attributed to strong civil engineering activities. Accordingly, total value of completed construction works increased 10.4% to 11

16 RM68.9 billion involving 18,977 projects (January to June 2016: 11.4%; RM62.4 billion; 20,026 projects). The private sector contributed 63.6% of the total value of construction work. The construction sector is projected to grow 7.5% (2017: 7.6%), primarily supported by the ongoing civil engineering infrastructure projects such as East Coast Rail Link, MRT SSP line, Electrified Double Track Gemas Johor Bahru, SPE, 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 PPA1M, MyBeautiful New Home and 1Malaysia People-Friendly Houses. On the contrary, the nonresidential subsector is forecast to grow moderately following property overhang, particularly in the shops segment. (Source: Ministry of Finance, Economic Report 2017/2018) 5.4 Future prospects of the Group The Group is principally involved in the business of manufacturing, retail, export and direct sales of undergarments, garments, leather goods, sportswear, household products and property development and construction. The Group s products are categorised under three (3) main business segments, as illustrated in the diagram below:- Caely Group Manufacturing and trading of ladies undergarments for local and export markets Property development and construction Trading of in-house brands of ladies undergarment and other household products For the FYE 31 March 2017, the operating environment for the Malaysian manufacturing sector has been challenging due to the continued economic uncertainties, escalation of costs due to inflationary pressure and fluctuation in foreign exchange rates. Despite this, the Group has managed to record a profit after taxation position of RM5.10 million for the FYE Notwithstanding the aforesaid challenges, the Group believes that the demand for textiles and apparels remain positive, given the importance of the manufacturing industry in Malaysia. The Group s manufacturing segment has contributed to approximately 52.7% to the Group s total revenue during FYE Moving forward, the global economy is expected to remain tilted to the downside despite better growth projection for 2018 due to the uncertainties with the new administration and policies of the USA that may affect other regions. Domestically, the Malaysian economy is expected to chart a steady growth for 2018 and the Malaysian Institute of Economic Research is expecting a growth projection within the range of 4.7% to 5.3%. The Group will preserve its business initiatives to secure more projects from the local and export markets, continuously looking for new business opportunities and to streamline its manufacturing process to achieve cost optimisation through greater efficiency and productivity. On the domestic front, the Group plans to increase its market share and promote its in-house brands of ladies undergarment and other consumer products in its retail and direct selling business segments to the local market. The initiatives to be undertaken by the Group include upgrading and improving its retail outlets and undertake product assortments in order to attract more customers while building its own brand and reputation in the domestic market. 12

17 On the foreign front, in view that the export market was the dominant revenue contributor to the Group for the FYE 2017, the Group aims to be the dominant Malaysian manufacturer of ladies undergarments in the export markets such as USA, Canada and Germany. As such, the Group is expecting to engage more subcontractors from Myanmar, Bangladesh and other countries in an effort to mitigate the increasing labour costs, alleviate the shortage of labour force in Malaysia and at the same time, increase its manufacturing capacity. The Group will also continue to manufacture and focus on high margin orders as well as to undertake research and development of new designs and fittings. Further, the Group will continue its efforts to procure new customers from overseas to expand its revenue base by promoting its latest designs and quality of its ladies undergarment products. As for the property division, the property market is expected to remain soft in 2018 mired by issues such as unaffordability, bank tightening in mortgage facilities and macro-economic issues such as rising living cost and smaller growth in incomes. The increasing living cost and economic uncertainties have led to an upswing in worries about job security, resulting in more cautious consumer spending. Caely anticipates the demand for affordable housing to pick up as people are becoming more realistic about their expectations. Amongst other smaller property projects which are currently on-going, the Group has two (2) on-going main projects. The first project is in Perak along Tapah Road, which is a mixed development of residential and commercial buildings. Phase 1 of this project is expected to be completed in the FYE 31 March Later phases are expected to continue but the pace of development is expected to be slow due to the weak sentiment in the property market. The second project is in Ulu Kelang area in Selangor comprising the development of two (2) blocks of high rise condominium. Block B is expected to be completed in the FYE 31 March 2018 whereas Block C is in the planning stage and will be launched in the near future. Based on the foregoing, the Board, after having considered all the relevant aspects including the above-mentioned prospects, outlook and prospects of the manufacturing/textiles industry as well as the property development/ construction industry as set out in Sections 5.2 and 5.3 of this Circular, is of the opinion that the prospects of the Group remain optimistic for the FYE 2018 and beyond. (Source: Caely Annual Report 2017 and management of Caely) 6. APPROVALS REQUIRED The Proposed Bonus Issue of Warrants is subject to the following approvals being obtained:- (a) Bursa Securities, for the following:- (i) (ii) the admission of the Warrants to the Official List of Bursa Securities pursuant to the Proposed Bonus Issue of Warrants; the listing of and quotation for the Warrants and the new Caely Shares to be issued arising from the exercise of the Warrants on the Main Market of Bursa Securities; and (b) (c) the shareholders of Caely at the forthcoming EGM to be convened; and any other relevant authorities/parties, if required. The Proposed Bonus Issue of Warrants is not conditional upon any other proposals undertaken or to be undertaken by the Company, if any. 13

18 7. HISTORICAL SHARE PRICE PERFORMANCE The monthly highest and lowest prices of Caely Shares as traded on Bursa Securities for the past twelve (12) months are as follows:- High RM Low RM 2017 December November October September August July June May April March February January The last transacted price of Caely Shares on 15 January 2018, being the market day immediately preceding the date of the announcement of the Proposed Bonus Issue of Warrants on 16 January 2018 is RM1.33 per Share. The last transacted price of Caely Shares as at the LPD was RM1.10 per Share. (Source: Bloomberg) 8. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors, major shareholders of the Company and/or persons connected with them have any interest, direct and/or indirect, in the Proposed Bonus Issue of Warrants, other than their respective entitlements as shareholders of the Company under the Proposed Bonus Issue of Warrants, the rights of which are also available to all other existing shareholders of the Company as at the Entitlement Date. 9. DIRECTORS RECOMMENDATION The Board, after having considered all aspects of the Proposed Bonus Issue of Warrants, including but not limited to the rationale and financial effects of the Proposed Bonus Issue of Warrants, is of the opinion that the Proposed Bonus Issue of Warrants is in the best interest of the Company, and accordingly recommends that the shareholders vote in favour of the resolution pertaining the Proposed Bonus Issue of Warrants to be tabled at the forthcoming EGM of the Company. 10. ESTIMATED TIMEFRAME FOR COMPLETION The tentative timetable in relation to the Proposed Bonus Issue of Warrants is as follows:- Dates Events 15 March 2018 EGM to approve the Proposed Bonus Issue of Warrants 14

19 Dates End March 2018 Mid-April 2018 Events Announcement of the Entitlement Date and the price-fixing date Listing of and quotation for the Warrants on Bursa Securities Barring any unforeseen circumstances and subject to receipt of all relevant regulatory approvals, the Proposed Bonus Issue of Warrants is expected to be completed by the second quarter of OUTSTANDING PROPOSALS ANNOUNCED BUT PENDING COMPLETION Save for the Proposed Bonus Issue of Warrants, as at the LPD, there is no other corporate exercise which has been announced but not yet completed. 12. EGM The EGM, the notice of which is enclosed together with this Circular, will be held at Lower Perak Club, Jalan Denai Intan, Bandar Baru, Teluk Intan, Perak Darul Ridzuan on Thursday, 15 March 2018 at a.m. or any adjournment thereof for the purpose of considering and, if thought fit, passing the resolution so as to give effect to the Proposed Bonus Issue of Warrants. If you are unable to attend and vote in person at the EGM, you may complete and return the relevant Proxy Form in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive at the registered office of the Company, not later than twenty-four (24) hours before the date and time stipulated for holding the EGM or any adjournment thereof. The lodging of the Proxy Form will not, however, preclude you from attending and voting in person at the EGM should you subsequently decide to do so. 13. FURTHER INFORMATION Please refer to the attached appendix for further information. Yours faithfully, For and on behalf of the Board of Directors of CAELY HOLDINGS BHD DATIN FONG NYOK YOON EXECUTIVE CHAIRPERSON/NON-INDEPENDENT EXECUTIVE DIRECTOR 15

20 APPENDIX I - FURTHER INFORMATION 1. DIRECTORS' RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Board and they individually and collectively accept full responsibility for the accuracy of the information given in this Circular and confirm that, after making all reasonable enquiries and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading. 2. CONSENT AND DECLARATION M&A Securities, being the Principal Adviser for the Proposed Bonus Issue of Warrants, has given and has not subsequently withdrawn its written consent to the inclusion of its name and all references in the form and context in which they appear in this Circular. M&A Securities has given its confirmation that no conflict of interest exists or is likely to exist in relation to its role as the Principal Adviser for the Proposed Bonus Issue of Warrants in the Circular. 3. MATERIAL LITIGATION The Caely Group is not involved in any material litigation, claims or arbitration, either as plaintiff or defendant, which may have a material adverse effect on the business and financial position of the Caely Group and the Board is not aware of any legal proceedings, pending or threatened against the Caely Group or of any fact which is likely to give rise to any proceeding which may materially and adversely affect the business or financial position of the Caely Group as at the LPD. 4. MATERIAL COMMITMENTS As at the LPD, the Board is not aware of any material commitment, incurred or known to be incurred, which may have a material impact on the results or financial position of the Caely Group. 5. CONTINGENT LIABILITIES As at the LPD, the Board is not aware of any contingent liabilities incurred or known to be incurred, which upon becoming enforceable, may have a material impact on the results or financial position of the Caely Group. 6. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for inspection at Caely s registered office at Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan during normal business hours from Mondays to Fridays (except public holidays), from the date of this Circular up to and including the date of the EGM:- (a) The Constitution of Caely; (b) The audited consolidated financial statements of Caely for the past two (2) FYEs 31 March 2016 to 31 March 2017; 16

21 (c) Latest quarterly results of Caely for FPE 30 September 2017; (d) (e) Consent letter and declaration referred to in Section 2 above; and The draft Deed Poll. The remaining of this page is intentionally left blank 17