Further details on the Proposed Acquisition are set out in the ensuing sections.

Transcription

1 DESTINI BERHAD ("DESTINI" OR THE "COMPANY") PROPOSED ACQUISITION BY DESTINI ARMADA SDN BHD, A WHOLLY OWNED SUBSIDIARY COMPANY OF DESTINI, OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF EVERYDAY SUCCESS SDN BHD, A WHOLLY-OWNED SUBSIDIARY COMPANY OF DESTINATION MARINE SERVICES SDN BHD, FOR AN INDICATIVE PURCHASE CONSIDERATION OF RM90.00 MILLION TO BE SATISFIED BY WAY OF COMBINATION OF CASH AND ISSUANCE OF NEW ORDINARY SHARES OF RM0.10 EACH IN DESTINI ("DESTINI SHARE(S)" OR "SHARE(S)") ("PROPOSED ACQUISITION") 1. INTRODUCTION We refer to the announcement dated 24 June 2015 made by the Company pertaining to the heads of agreement ("HOA") entered into between the Company and Utarasama Marine Sdn Bhd, Goldleaf Pavilion Sdn Bhd and Radzuan Bin Idris on 24 June On behalf of the Board of Directors of Destini ("Board"), RHB Investment Bank Berhad ("RHBIB") is pleased to announce that Destini Armada Sdn Bhd ("Destini Armada"), a whollyowned subsidiary of the Company had, on 23 July 2015, entered into a conditional share sale agreement ("SSA") with Destination Marine Services Sdn Bhd ("DMS" or the "Vendor"), for the proposed acquisition by Destini Armada of the entire issued and paid up share capital of Everyday Success Sdn Bhd ("Everyday Success") ("Sale Shares"), a wholly-owned subsidiary company of DMS, for an indicative purchase consideration of RM90,000,000 ("Purchase Consideration") to be satisfied via a combination of cash payment of RM15,000,000 ("Cash Consideration") and the remaining of the Purchase Consideration of RM75,000,000 to be satisfied via the issuance of 107,142,857 ordinary shares of RM0.10 each in Destini ("Destini Share(s)" or "Share(s)") (Consideration Shares") at the issue price of RM0.70 per Destini Share ("Proposed Acquisition"). Further details on the Proposed Acquisition are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED ACQUISITION Subject to the terms and conditions of the SSA, the Vendor as the legal and beneficial owner shall sell and Destini Armada relying on the warranties and representations by the Vendor shall purchase the Sale Shares, free from any and all encumbrances and with all rights, benefits and advantages now or thereafter attaching thereto, including all bonuses, rights, dividends and distributions declared, made and paid as from the completion date of the SSA. 2.1 Information on Everyday Success Everyday Success was incorporated in Malaysia on 23 October 2013 under the Companies Act, 1965 ("Act") as a private limited company under the present name. Everyday Success is currently dormant and the intended principal activities shall be the provision of shipbuilding and ship repair services. As at 22 July 2015, being the latest practicable date of this announcement ("LPD"), Everyday Success does not have any subsidiary nor associate companies. Pursuant to the terms of the SSA, DMS will inject into Everyday Success several identified/ agreed assets to enable Everyday Success to operate as a shipbuilding company by undertaking the following:- 1

2 i. Project DMS had, on 15 June 2015, received and accepted a letter of acceptance ("LOA") from the Agensi Penguatkuasaan Maritim Malaysia ("APMM") for the supply, delivery, testing and commissioning of six (6) patrol vessels to APMM for a contract period of thirty five months, effective from the said date, at a contract value of RM million ("Project"). DMS, APMM and Everyday Success shall execute a novation agreement for the purpose of effecting the novation to Everyday Success of all the rights and liabilities of DMS under the contract awarded by APMM to DMS in relation to the Project. ii. Licences & Permits DMS shall procure Everyday Success to obtain all consents, approvals, permits, licences, exemptions, orders and approvals of all relevant authorities including but not limited the licences issued by the relevant local authorities and/or municipal authorities to enable Everyday Success to carry on the business of shipbuilding, ship repair and to own DMS' assets. iii. Shipyard Facilities DMS shall transfer the assets of the shipyard facilities located in the Mukim and District of Klang, State of Selangor to Everyday Success to facilitate the implementation of the Project. (collectively referred to as the "Identified Assets") For the avoidance of doubt, items (i), (ii) and (iii) are part of the conditions precedent to the SSA which shall be fulfilled within the CP Period (as defined in Section 3.3(i) of this announcement). In the event that the conditions precedent are deemed not fulfilled according to the terms highlighted in the SSA, the SSA shall and be null and void and following which, Destini will not proceed with the Proposed Acquisition. The current principal markets of Everyday Success shall be in Malaysia. As at the LPD, the authorised share capital of Everyday Success is RM400,000 comprising 400,000 ordinary shares of RM1.00 each ("Everyday Success Shares"). The present issued and paid-up share capital of Everyday Success is RM2 divided into 2 ordinary shares of RM1.00 each. The shareholder and directors of Everyday Success as well as their respective shareholdings in Everyday Success as at the LPD are set out below:- Shareholder Nationality/ Place of incorporation < Direct > < Indirect > Everyday Everyday Success Success DMS Malaysian

3 Directors Nationality < Direct > < Indirect > Everyday Everyday Success Success Dato' Rosli bin Rashid Malaysian Dato' Asraf Ali bin A M Mohamed Sultan Malaysian Radzuan bin Idris Malaysian There is no financial information available for Everyday Success as the company is currently dormant. 2.2 Basis and justifications of arriving at the Purchase Consideration The Purchase Consideration was arrived at on a willing-buyer willing-seller basis, after taking into consideration the following:- i. The Vendor's guarantee of the cumulative profit after tax ("PAT") of Everyday Success that it shall be at least RM25,000,000 in aggregate for the two (2) financial years ending 31 December 2015 and 31 December This translates into an average PAT of RM12,500,000 per annum. Based on the above and the value accorded to 100% equity interest in Everyday Success of approximately RM90,000,000, the Purchase Consideration represents a price-to-earnings ("PE") multiple of 7.20 times; ii. iii. The contract value of the Project amounting to RM million which will provide earnings visibility up to May 2018; and The future earnings potential of the Identified Assets. 2.3 Mode of Settlement The Purchase Consideration will be satisfied entirely via a combination of RM15,000,000 cash and issuance of 107,142,857 new Destini Shares to be allotted to DMS at an issue price of RM0.70 per Destini Share in accordance with the SSA. 2.4 Source of funding The cash payment of RM15,000,000 which forms part of the Purchase Consideration shall be fully funded via bank borrowings. 2.5 Profit Guarantee Pursuant to the SSA, the Vendor agrees, undertakes and guarantees that the aggregate PAT of Everyday Success for the two (2) financial years ending 31 December 2015 and 31 December 2016 ("Profit Guarantee Period") shall not be less than RM25,000,000 ("Profit Guarantee"). Further details of the salient terms of the Profit Guarantee are set out in Section 3.5 of this announcement. 3

4 2.6 Basis of arriving at the Issue Price The issue price of RM0.70 per Consideration Share was fixed by the Board after taking into consideration the five (5)-day weighted average market price ("WAMP") of Destini Shares up to and including 22 July 2015, being the last market day prior to date of the execution of the SSA in connection with the Proposed Acquisition, of RM The issue price of RM0.70 represents a premium of approximately 18.64% to the five (5)-day weighted average market price of Destini Shares up to and including 22 July 2015, of RM Ranking of the Consideration Shares The Consideration Shares shall, upon issuance and allotment, rank pari passu in all respects with the existing Destini Shares, save and except that the Consideration Shares shall not be entitled to any dividends, rights, allotment and/ or any other forms of distribution that may be declared, made or paid prior to the relevant date of the issuance and allotment of the Consideration Shares. 2.8 Liabilities to be assumed by Destini Save for the obligations and liabilities in and arising from, pursuant to or in connection with the SSA, there are no other liabilities including contingent liabilities and/ or guarantees to be assumed by Destini arising from the Proposed Acquisition. 2.9 Additional financial commitment required Save for the total Purchase Consideration, there are no additional financial commitments required by Destini to put the business of Everyday Success on-stream Listing of and quotation for the Consideration Shares An application will be made to Bursa Malaysia Securities Berhad ("Bursa Securities") for the listing of and quotation for the Consideration Shares on the Main Market of Bursa Securities Information on the Vendor DMS is a private limited company incorporated in Malaysia on 26 August 1976 with an authorised share capital of RM25,000,000 divided into 25,000,000 ordinary shares of RM1.00 each. The present issued and paid-up share capital of DMS is RM21,730,000 divided into 21,730,000 ordinary shares of RM1.00 each. DMS is principally engaged in boat building, provision of ship repair and marinerelated engineering services. The shareholder and director of DMS as well as their respective shareholdings in DMS as at the LPD are set out below:- Shareholders Nationality/ Place of incorporation < Direct > < Indirect > DMS shares % DMS shares % Radzuan bin Idris Malaysian 2,793, Utarasama Marine Sdn Bhd Malaysia 12,420, Goldleaf Pavilion Sdn Bhd Malaysia 6,517,

5 Directors Nationality < Direct > < Indirect > DMS shares % DMS shares % Dato' Rosli bin Rashid Malaysian Dato' Asraf Ali bin A M Mohamed Sultan Malaysian Radzuan bin Idris Malaysian 2,793, SALIENT TERMS OF THE SSA The salient terms of the SSA are, inter alia, as follows:- 3.1 Agreement for Sale and Purchase Subject to the terms and conditions of the SSA, the Vendor agrees to sell and transfer and Destini Armada agrees to purchase and accept the transfer of the Sale Shares free from any and all encumbrances together with all rights attaching thereto, including without limitation all dividends and other distributions declared or made in respect of the Sale Shares on or after the completion of the SSA. 3.2 Settlement of the Purchase Consideration Subject to the terms and conditions of the SSA, the Purchase Consideration shall be satisfied as follows:- (a) (b) partly by procuring the allotment and issuance to the Vendor, the Consideration Shares, credited as fully paid-up; and partly by the payment of the sum of Ringgit Malaysia Fifteen Million (RM15,000,000.00) only in the form of cash. 3.3 Conditions Precedent (i) The sale and purchase of the Sale Shares shall be conditional upon the following approvals ("Approvals") being obtained and conditions fulfilled by the respective parties within six (6) months from the date of the SSA or any other extended period as may be agreed in writing between the parties ("CP Period") ("Conditions Precedent"):- (a) (b) (c) the Vendor transferring the assets of the shipyard facilities to Everyday Success free from all encumbrances together with vacant possession, at the sole cost and expense of the Vendor; the Vendor obtaining and/or procuring the issuance of the Certificate of Completion and Compliance in respect of the assets of the shipyard facilities and the Vendor complying with all the terms and conditions for the issuance of the said Certificate of Completion and Compliance; the execution of a novation agreement between the Government of Malaysia ("Government"), the Vendor and Everyday Success for the purpose of effecting the novation to Everyday Success of all the rights and liabilities of the Vendor under the contract awarded by the Government to the Vendor in relation to the Project, to be procured by the Vendor; 5

6 (d) (e) (f) (g) (h) the Vendor procuring Everyday Success to obtain all consents, approvals, permits, licences, exemptions, orders and approvals of all relevant authorities including but not limited the licences issued by the relevant local authorities and/or municipal authorities to enable Everyday Success to carry on the business of shipbuilding, ship repair and to own its assets; where the terms or conditions of any agreement, contract, permit, license, approval or consent to which Everyday Success is a party, requires the consent or approval of the other party(s) (to such agreement, contract, permit, license, approval or consent) in respect of any sale or transfer of shares in Everyday Success or any change in the shareholders, directors or officers of Everyday Success, the Vendor shall procure such consent or approval of such other party(s); where applicable, the Vendor shall ensure that Everyday Success procures the issuance of bank guarantee(s) issued by licensed commercial banks/financial institutions in Malaysia which may be required to be obtained by Everyday Success to replace any existing bank guarantees provided by the Vendor and/or any other third party (ies) pursuant to the requirements of any agreements, contracts and/or deeds entered into by Everyday Success; the result of the financial, tax, technical and legal due diligence on all the affairs of Everyday Success having been found satisfactory by Destini Armada; if applicable, the receipt by the Vendor of the letters from the existing financiers of Everyday Success ("Letter of Consent") which have any security benefit over any asset of Everyday Success consenting to the:- (i) (ii) change in the shareholding of Everyday Success pursuant to the SSA; and continuation of the respective banking facilities granted by such existing financiers and taken up by Everyday Success; (i) (j) (k) (l) (m) the discharge of the charge over any asset of Everyday Success created in favour of the Vendor s and/or its related companies financiers (if applicable) to be procured by the Vendor; the Vendor procuring Everyday Success to obtain the approval of its board of directors vis-à-vis the sale and transfer of the Sale Shares to Destini Armada under the terms and conditions of the SSA; the Vendor obtaining approvals of its board of directors and shareholders at general meeting (if necessary) vis-à-vis the sale and transfer of the Sale Shares to Destini Armada under the terms and conditions of the SSA; Destini Armada obtaining approvals of its board of directors and shareholders at general meeting (if necessary) vis-à-vis the purchase of the Sale Shares from the Vendor under the terms and conditions of the SSA; Destini Armada procuring the approval of Destini s shareholders for the following:- 6

7 (i) (ii) the acquisition by Destini Armada of the Sale Shares from the Vendor under the terms and conditions of the SSA; and issuance and allotment of the Consideration Shares to the Vendor on the terms and conditions set out in the SSA. (n) Destini Armada procuring Destini to obtain the approval in-principle of Bursa Securities in relation to the listing and quotation of the Consideration Shares on the Official List of the Main Board of Bursa Securities. (ii) (iii) If any of the Conditions Precedent is not fulfilled within the CP Period by reason other than the default of either Destini Armada or the Vendor, any party may rescind the SSA by written notice to the other party. If the Conditions Precedent are not fulfilled within the CP Period by reason of the default of either Destini Armada or the Vendor, the party not in default may rescind the SSA by written notice to the other party. Where any party elects to rescind the SSA in accordance with the provisions of the SSA, the Vendor shall within fourteen (14) days from the date of the written notification given by Destini Armada to the Vendor ( Refund Period ) refund to Destini Armada the Cash Consideration paid by Destini Armada without any deduction and/or withholdings, failing which Destini Armada, may at its sole and absolute discretion, grant an extension of time to the Vendor to refund the Cash Consideration to Destini Armada, subject to the payment by the Vendor to Destini Armada, interest on late refund at the rate of ten per centum (10%) per annum on the Cash Consideration, then outstanding, calculated on day to day basis from the expiry of the Refund Period until the date of full payment. Thereafter, Destini Armada shall return or cause to be returned to the Vendor, all documents and items (whether original or copies) forwarded to Destini Armada by the Vendor. In the event the Vendor fails to refund the Cash Consideration paid by Destini Armada under the SSA, the said sum shall be deemed a debt due and owing by the Vendor to Destini Armada whereby Destini Armada shall be entitled to take the necessary legal action to recover the said sum from the Vendor at the cost and expense of the Vendor and thereafter the SSA shall be treated as terminated. 3.4 Results of due diligence If Destini Armada is not satisfied with the results of the conduct of financial, tax, technical and legal due diligence on all the affairs of Everyday Success by the duly authorised advisers and/or representatives of Destini Armada, Destini Armada shall be entitled to discuss with the Vendor any adverse findings with a view of reaching acceptable solution to the issue(s) identified. In the event that pursuant to such discussion, Destini Armada and the Vendor could not agree to resolve such adverse findings, Destini Armada shall be entitled to do either of the following:- (a) (b) to notify the Vendor of its proposal that the Purchase Consideration shall be adjusted downwards and the parties may discuss with each other with a view of reaching the adjusted amount as acceptable to the Vendor, failing which the Condition Precedent in relation to Clause 3.3(i)(g) shall be deemed not fulfilled; or to notify the Vendor that the Condition Precedent in relation to Clause 3.3(i) (g) shall be deemed not fulfilled and Clauses 3.3(ii) and 3.3(iii) shall come into effect. 7

8 3.5 Specific Obligation by the Vendor The Vendor hereby guarantees that the PAT for Everyday Success for the two (2) financial years ending 31 December 2015 and 31 December 2016 are as follows:- (a) (b) a sum of Ringgit Malaysia Ten Million (RM10,000,000.00) only for the year 2015; and a sum of Ringgit Malaysia Fifteen Million (RM15,000,000.00) only for the year For the purpose of securing the payment of the Profit Guarantee by the Vendor to Destini Armada, the Vendor shall throughout the Profit Guarantee Period, pledge the Consideration Shares or any part thereof, the Market Price (as defined below) of which, is equivalent to the aggregate sum of the Profit Guarantee due and payable to Destini Armada ("Pledged Shares"). "Market Price" here means the market price of the Consideration Share based on five (5) days weighted average market price (as quoted by Bloomberg, Malaysia) immediately prior to the date of calculation. The Pledged Shares shall be deposited into the securities account to be maintained by a security stakeholder duly appointed by the Vendor and Destini Armada to undertake the obligations as contained in the SSA. 4. RATIONALE FOR THE PROPOSED ACQUISITION Destini is currently involved in the marine safety and survival business activities via its subsidiary company, Vanguard Composite Engineering Pte Ltd ("Vanguard"), which manufactures life boats and davits systems and the Techno Fibre group, which provides maintenance, repair and overhaul ("MRO") services on life boats, davits systems and other lifesaving equipment. Vanguard s factory in Nantong, People's Republic of China has a capacity to build about 150 boats per year. Due to the increase in demand, Vanguard plans to set up another facility in Malaysia. DMS has existing facilities to accommodate this requirement. DMS is a manufacturer of paramilitary boats of various types and sizes of vessels. It currently operates at its fully equipped shipyard on an approximately 6-acre land located at Port Klang. Its track record includes projects awarded by the government agencies and commercial sectors not only in Malaysia but also other countries such as India, Bangladesh and Kuwait. DMS also specialises in building small-medium size vessels, including but not limited to ferries, barges, tugs, offshore support vessels ("OSV"), yachts, fishing vessels and patrol crafts with vessels sizes of up to 45 metres in length, and 450 tonnes deadweight tonnage ("DWT"). For the avoidance of doubt, the Identified Assets which are currently held in the ownership of DMS will be transferred to Everyday Success pursuant to the Proposed Acquisition and will result in establishing Everyday Success as a shipbuilding and ship repair company. The Proposed Acquisition represents a gateway for Destini to further increase its range of products and expand its supply of vessel segment in terms of product complexity, technology, technical knowledge and expertise by venturing into the supply, testing and commissioning of paramilitary boats and its related MRO services to a different market segment pursuant to the implementation of the Project. Destini's attempt on the Project also forms part of the Destini Group's strategy to continuously explore growth opportunities with a view to unlock Destini Group's potential and to bring diversity to their existing shipbuilding and ship repair business. 8

9 In addition, the Board is of the view that the issuance of the Consideration Shares to partly satisfy the Purchase Consideration is the most appropriate avenue as it will lessen the cash outlay by Destini Group, which can be channelled towards operations and other working capital purposes. In addition, issuance of the Consideration Shares will strengthen the financial position of Destini Group. 5. INDUSTRY OUTLOOK AND FUTURE PROSPECTS OF EVERYDAY SUCCESS 5.1 Outlook of the shipbuilding and ship repair industry in Malaysia Malaysia s shipbuilding and ship repair industry includes the manufacture of a wide range of ships as well as ship repairing activities. According to United Nations Conference on Trade and Development s Review of Maritime Transport 2014, Malaysia has the 25th largest registered fleet in the world, with 531 ships and a combined tonnage of 9,212 thousand DWT. There are around 100 registered shipyards in Malaysia, most of which specialise in building small-to-medium vessels. Larger shipyards service bigger ships like bulkers and tankers as well as manufacture or service offshore structures. They can also upgrade and convert Floating Production Storage and Offloading/ Floating Storage and Offloading vessels. Six projects worth RM3.1 billion were approved in 2014, with domestic investments accounting for 70 per cent (RM2.2 billion) of the total and foreign investments making up the rest (RM0.9 billion). The projects are expected to create 2,310 jobs, one of which is a new, RM2.9 billion joint venture project between a Malaysian majorityowned company and its Korean partner to manufacture Wing-In-Ground ("WIG") craft. The technology transfer between the partners will enhance local capabilities and set a course for Malaysians to develop expertise in the whole WIG chain within the next three years. As a whole, the approved investments in the shipbuilding and ship repair industry are a good sign, especially since local players still dominate the Malaysian scene. There is plenty of room for expansion within for parts and components manufacturing, systems integration and other marine equipment production. (Source: Malaysia Investment Performance Report 2014, Malaysian Investment Development Authority) The shipbuilding and ship repair industry has been specifically identified in the Third Industrial Master Plan ("IMP3") as an industry which can contribute to the country s wealth from the transportation sector. The first roadmap for shipbuilding and ship repair industry titled Malaysian Shipbuilding/ Ship Repair Industry Strategic Plan 2020 ("SBSR 2020") was launched on 6th December 2011 by the Prime Minister of Malaysia, Dato Sri Mohd Najib Tun Abdul Razak to chart the way forward for the industry. In SBSR 2020, seven (7) key strategies with forty (40) recommended actions have been outlined with the objective to capture 80 per cent of the local new build market, capture 2 per cent of the global new build market, capture 3 per cent of the market for repairing vessels plying the Straits of Malacca, capture 80 per cent of the South China Sea offshore repair market, focus development initiatives on niche markets involving vessels shorter than 120m in length. By achieving the above, the maritime industry aims to generate RM6.35 billion in Gross National Income and provide 55,000 jobs by 2020 through a growth trend that is both sustainable and inclusive 9

10 The shipbuilding and ship repair industry in Malaysia is expected to continue its growth trend although at a slower rate based on the recommended systematic changes as documented in The Malaysian Shipbuilding/ Ship Repair Industry 2020, which includes commitment by the local shipyards to improve their productivity, efficiency and upgrade their technological capability. As the maritime industry is part of the country s Economic Transformation Programme, the shipbuilding and ship repair industry is expected to receive strong governmental support to progress to the next level. Several strategies have been put forward and recommended to be incorporated as part of the national agenda under the 11th Malaysia Plan within transport industry focus area of the manufacturing sector. The main objective is to develop a niche market and subsequently migrate shipbuilding, ship repair and parts and component manufacturing activities towards higher value added services. (Source: Malaysian Shipbuilding/Ship Repair Industry Report 2015/2016, Malaysian Industry Government Group for High Technology) 5.2 Future prospects of Everyday Success Based on the contract value of the Project amounting to RM million, the Management of Everyday Success is optimistic that the Project will provide earnings visibility to Everyday Success up to May Furthermore, by inheriting DMS s track record of servicing various paramilitary forces as well as with the capability of the key management of Everyday Success who are well qualified and have vast experience in their respective field of expertise in the shipbuilding and ship repair industry, Everyday Success may possibly secure future contracts from customers in both the defence and commercial sectors of business. Notwithstanding the above, Everyday Success also plans to provide shipbuilding and ship repair services to the global paramilitary forces in the near future. The Management of Everyday Success believes that Everyday Success is well positioned to operate as a full-fledged shipbuilding and ship repair company in view of the abovementioned prospects of Everyday Success and in light of the positive outlook of the shipbuilding and ship repair industry as set out in Section 5.1 of this announcement. (Source: Management of Everyday Success) Barring any unforeseen circumstances, the Board after having considered all the relevant aspects, including the aforementioned prospects of Everyday Success as well as industry outlook as set out in Sections 5.1 of this announcement, is of the opinion that the Proposed Acquisition is expected to contribute positively to the future earnings of the group and to enhance shareholders' value in the long term. 6. RISK FACTORS IN RELATION TO THE PROPOSED ACQUISITION 6.1 Dependence on the Project The Project was granted by APMM on 15 June 2015 to DMS, which has been transferred to Everyday Success under the SSA. However, the Project will expire in May 2018 and may not be extendable upon expiry. As at the LPD, the Project is the single source of income for Everyday Success. In the event the Project is suspended, terminated and/or not substituted with other marine services contracts, the expected revenue to be generated from the Project will be adversely affected and this may result in a material negative impact on the sustainability of Everyday Success and its contribution to Destini Group's revenue and earnings. 10

11 Notwithstanding the above, Everyday Success will take over all ship repair and maintenance jobs from DMS, this will provide for recurring revenues in the future. Also, the company would leverage on the experience and expertise of the management team of Destini, as well as to seek consultation and advice from the skilled personnel in Vanguard and Techno Fibre group who are well equipped with extensive expertise and experience in the shipbuilding and ship repair industry, and collaborate on the Project to ensure that its works schedules will be completed on time and the six (6) patrol vessels will be delivered to APMM accordingly. 6.2 Availability of supplies and skilled workers Destini does not manufacture components for shipbuilding locally and the Company is highly dependent on the import from foreign countries whereby it will source its major equipment and machineries from multiple overseas suppliers, whilst certain modifications will be carried out locally to suit the domestic conditions. No assurance can be given that any significant adverse changes in supply and pricing as well as the lead time for delivery of equipment, machineries, parts and products required for the manufacturing of the six (6) patrol vessels will not affect the scheduled delivery of the Project. As the shipbuilding and ship repair services for the shipbuilding and ship repair industry is labour intensive in nature, the need for skilled workers coupled with the tight labour market poses a challenge to many companies in sourcing quality personnel in the shipbuilding and ship repair industry due to rigid rules on work permit for certain nationalities. Nevertheless, Destini has a relatively stable workforce with a low staff turnover rate, mainly due to its strategies implemented to attract and retain its personnel. Upon completion of the Proposed Acquisition, Destini Group shall also endeavour to ensure there will be sufficient engineers and skilled workers to provide needed coverage on the Project. 6.3 Regulatory constraints Destini is currently, via its subsidiaries, holding a manufacturing licence which permits it to engage in, amongst others, the manufacturing of life boats and provision of MRO services. For the manufacturing of paramilitary vessels, Everyday Success is required to hold the necessary licences to operate and there is no assurance that these licenses (or other relevant permits) currently held by DMS can be successfully transferred to Everyday Success or will be renewed by the relevant authorities within the anticipated timeframe in the near future. Any delays or inability to obtain the transfer, renewal or issuance of these licences may materially impact the Project. 6.4 Acquisition risks Although the Board believes that Destini Group may derive benefits from the Proposed Acquisition, there is no assurance that the anticipated benefits of the Proposed Acquisition will be realised or that the Group will be able to generate sufficient revenues from the Proposed Acquisition to offset the associated acquisition costs incurred. In addition, it can be challenging or impossible to detect all defects and deficiencies on certain assets due to the limitations inherent in the scope of the inspections, or methodology used and other factors. There is also no assurance that the Destini Group is able to meet the standards of quality and services expected from APMM on the (6) patrol vessels. However, the Company has mitigated such risk by adopting prudent investment strategies and conducting assessment and review including a due diligence review on Everyday Success and all relevant documents in relation to the Identified Assets, prior to making its investment decisions and completing the Proposed Acquisition. 11

12 6.5 Non-completion risks The completion of the Proposed Acquisition is subject to the fulfillment of the conditions precedent to the SSA as set out in Section 3.3(i) of this announcement. In the event any of these conditions precedent are not fulfilled, the SSA may be terminated and as a result, Destini may not be able to complete the Proposed Acquisition. Nevertheless, Destini will take and continue to undertake all reasonable steps to ensure the successful completion of the Proposed Acquisition and fulfill all conditions precedents as stipulated in the SSA. 7. EFFECTS OF THE PROPOSED ACQUISITION For illustration purposes, the effects of the Proposed Acquisition shall be based on the following scenarios:- Minimum Scenario : Assuming none of the outstanding Company's warrants 2013/ 2016 ("Warrants") and employees' share option scheme ("ESOS") options ("ESOS Options") are exercised prior to the implementation of the Proposed Acquisition Maximum Scenario : Assuming all of the outstanding Warrants and ESOS Options are exercised prior to the implementation of the Proposed Acquisition 7.1 Issued and paid-up share capital The proforma effects of the Proposed Acquisition on the issued and paid-up share capital of Destini are set out below:- Minimum Scenario Maximum Scenario Shares RM Shares RM Existing issued and paid-up share capital as at the LPD Shares to be issued assuming the full exercise of the outstanding Warrants and ESOS Options 807,820,961 80,782, ,820,961 80,782, ,432,567 25,843, ,820,961 80,782,096 1,066,253, ,625,353 Shares to be issued pursuant to the Proposed Acquisition Enlarged issued and paidup share capital 107,142,857 10,714, ,142,857 10,714, ,963,818 91,496,382 1,173,396, ,339, NA per Share and gearing Based on the latest audited consolidated financial statements of Destini Group for the financial year end ("FYE") 31 December 2014, and subsequent adjustment up to and including the LPD, the proforma effects of the Proposed Acquisition on the consolidated net assets ("NA") per share and gearing of Destini Group are as follows:- 12

13 Minimum Scenario I II Audited as at 31 December 2014 Subsequent adjustments up to and including the LPD After I and the Proposed Acquisition RM'000 RM'000 RM'000 Share capital 79,942 80,783 91,497 Share premium 126, ,229 *1 194,515 *2 ESOS reserve 1,490 1,490 1,490 Foreign currency translation reserve 3,830 3,830 3,830 Retained profits 36,182 36,182 35,682 *3 Net assets attributable to owners of Destini/ NA 248, , ,014 ordinary shares outstanding ('000) 799, , ,964 NA per Share (RM) Borrowings (RM'000) 37,868 37,868 37,868 Gearing (times) Notes:- *1 After adjusting for the issuance of new Destini shares arising from the exercise of the following outstanding convertible securities up to and including the LPD:- i. 2,333 Warrants at the exercise price of RM0.40 per Warrant ii. 8,407,300 ESOS Options at the exercise price of RM0.53 per ESOS Option *2 *3 After accounting for the increase in share premium of approximately RM64.29 million pursuant to the issuance of the Consideration Shares After accounting for the estimated expenses of RM500,000 in relation to the Proposed Acquisition Maximum Scenario Audited as at 31 December 2014 Subsequent adjustments up to and including the LPD I II III After I and assuming all of the outstanding Warrants and After II and ESOS the Options are Proposed exercised Acquisition RM'000 RM'000 RM'000 RM'000 Share capital 79,942 80, , ,341 Share premium 126, ,229 *1 209,896 *2 274,181 *3 ESOS reserve 1,490 1,490 1,490 1,490 Foreign currency translation 3,830 3,830 3,830 3,830 reserve Retained profits 36,182 36,182 36,182 35,682 *4 Net assets attributable to owners of Destini/ NA 248, , , ,524 13

14 Audited as at 31 December 2014 Subsequent adjustments up to and including the LPD I II III After I and assuming all of the outstanding Warrants and After II and ESOS the Options are Proposed exercised Acquisition RM'000 RM'000 RM'000 RM'000 ordinary shares outstanding ('000) 799, ,454 1,064,887 1,172,030 NA per Share (RM) Total borrowings (RM'000) 37,868 37,868 37,868 37,868 Gearing ratio (times) Notes:- *1 After adjusting for the issuance of new Destini shares arising from the exercise of the following outstanding convertible securities up to and including the LPD:- i. 2,333 Warrants at the exercise price of RM0.40 per Warrant ii. 8,407,300 ESOS Options at the exercise price of RM0.53 per ESOS Option *2 Assuming all of the following outstanding convertible securities are exercised prior to the implementation of the Proposed Acquisition:- i. 241,997,667 Warrants at the exercise price of RM0.40 per Warrant ii. 16,434,900 ESOS Options at the exercise price of RM0.53 per ESOS Option *3 *4 After accounting for the increase in share premium of approximately RM64.29 million pursuant to the issuance of the Consideration Shares After accounting for the estimated expenses of RM500,000 in relation to the Proposed Acquisition 7.3 Earnings and EPS For the FYE 31 December 2014, Destini had recorded an audited consolidated PAT of RM16.34 million or 2.04 sen per Destini Share. Pursuant to the Proposed Acquisition, the Vendor had provided a profit guarantee of RM25.00 million for the financial years ending 31 December 2015 and 31 December 2016, translating to an average PAT of RM12.50 million per annum. Moving forward, barring any unforeseen circumstances, the Proposed Acquisition is expected to be earnings accretive based on the Profit Guarantee and contribute positively to the future earnings of the enlarged Destini Group. 14

15 7.4 Substantial shareholders' shareholdings The effects of the Proposed Acquisition on the substantial shareholders' shareholdings of Destini are set out below:- Minimum Scenario Substantial shareholders I Shareholdings as at the LPD After the Proposed Acquisition < Direct > < Indirect > < Direct > < Indirect > Existing BPH Capital Sdn Bhd 255,036, ,036, Dato' Rozamujib bin Abdul Rahman 401, ,907,700 * , ,907,700 * Harbour Asia Opportunity Master Fund 88,971, ,971, Harbour Capital Management Limited ,971,500 * ,971,500 * Harbour Asset Management ,971,500 * ,971,500 * Merill Lynch International 40,763, ,763, Merrill Lynch International Incorporated ,763,700 * ,763,700 * Merrill Lynch Europe Limited ,763,700 * ,763,700 * Merrill Lynch UK Holdings ,763,700 * ,763,700 * ML UK Capital Holdings ,763,700 * ,763,700 * Bank of America Corporation ,763,700 * ,763,700 * ML EMEA Holdings LLC ,763,700 * ,763,700 * MLEIH Funding ,763,700 * ,763,700 * NB Holdings Corporation ,763,700 * ,763,700 *

16 Substantial shareholders Shareholdings as at the LPD After the Proposed Acquisition < Direct > < Indirect > < Direct > < Indirect > New DMS ,142,857 * Notes:- *1 *2 *3 *4 Deemed interested pursuant to Section 6A of the Act by virtue of his shareholdings in BPH Capital Sdn Bhd and R Capital Sdn Bhd Deemed interested pursuant to Section 6A of the Act by virtue of shares held through Harbour Asia Opportunity Master Fund Deemed interested pursuant to Section 6A of the Act by virtue of shares held through Merill Lynch International For the avoidance of doubt, the Proposed Acquisition will result in the Vendor becoming a substantial shareholder of Destini. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 16

17 Maximum Scenario I II Shareholdings as at the LPD Assuming the full exercise of all outstanding Warrants and ESOS Options After I and the Proposed Acquisition < Direct > < Indirect > < Direct > < Indirect------> < Direct > < Indirect > Substantial shareholders Existing BPH Capital Sdn Bhd 255,036, ,129, ,129, Dato' Rozamujib bin Abdul Rahman Harbour Asia Opportunity Master Fund Harbour Capital Management Limited 401, ,907,700 * ,908, ,301,412 * ,908, ,301,412 * ,971, ,971, ,971, ,971,500 * ,971,500 * ,971,500 * Harbour Asset Management ,971,500 * ,971,500 * ,971,500 * Merill Lynch International 40,763, ,763, ,763, Merrill Lynch International Incorporated ,763,700 * ,763,700 * ,763,700 * Merrill Lynch Europe Limited ,763,700 * ,763,700 * ,763,700 * Merrill Lynch UK Holdings ,763,700 * ,763,700 * ,763,700 * ML UK Capital Holdings ,763,700 * ,763,700 * ,763,700 * Bank of America Corporation ,763,700 * ,763,700 * ,763,700 * ML EMEA Holdings LLC ,763,700 * ,763,700 * ,763,700 * MLEIH Funding ,763,700 * ,763,700 * ,763,700 *

18 I II Shareholdings as at the LPD Assuming the full exercise of all outstanding Warrants and ESOS Options After I and the Proposed Acquisition < Direct > < Indirect > < Direct > < Indirect------> < Direct > < Indirect > Substantial shareholders NB Holdings Corporation ,763,700 * ,763,700 * ,763,700 * New DMS ,142,857 * Notes:- *1 *2 *3 *4 Deemed interested pursuant to Section 6A of the Act by virtue of his shareholdings in BPH Capital Sdn Bhd and R Capital Sdn Bhd Deemed interested pursuant to Section 6A of the Act by virtue of shares held through Harbour Asia Opportunity Master Fund Deemed interested pursuant to Section 6A of the Act by virtue of shares held through Merill Lynch International For the avoidance of doubt, the Proposed Acquisition will result in the Vendor becoming a substantial shareholder of Destini. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 18

19 7.5 Convertible securities As at the LPD, save for the existing Warrants and ESOS Options, the Company does not have any convertible securities. The Proposed Acquisition will not give rise to adjustments to the exercise price and / or subscription rights of the outstanding Warrants held by each holder of the Warrants pursuant to the deed poll dated 13 September The Proposed Acquisition will also not give rise to adjustments to the exercise price and/ or number of outstanding ESOS Options pursuant to the terms of the ESOS bylaws. 8. APPROVALS REQUIRED The Proposed Acquisition is subject to the following approvals being obtained:- i. Bursa Securities, for the listing of and quotation for the Consideration Shares to be issued on the Main Market of Bursa Securities; ii. iii. The shareholders of Destini at an Extraordinary General Meeting ("EGM") to be convened; and Any other relevant authorities, if required. The Proposed Acquisition is not conditional upon any other proposals undertaken or to be undertaken by the Company. 9. HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Acquisition pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities is 36.28%, derived from the aggregate value of the consideration given in relation to the Proposed Acquisition, compared with the audited consolidated net assets of Destini for the FYE 31 December INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/ OR PERSONS CONNECTED None of the Directors, major shareholders of Destini and/ or persons connected to them have any interest, whether direct or indirect, in the Proposed Acquisition. 11. DIRECTORS' STATEMENT The Board, having considered all aspects of the Proposed Acquisition, including the outlook and prospects of Everyday Success, rationale for the Proposed Acquisition and the risk factors as set out in Sections 4, 5 and 6 of this announcement, respectively, is of the opinion that the Proposed Acquisition is in the best interest of the Company and the terms and conditions of the SSA are fair and reasonable. 12. APPLICATION TO THE AUTHORITIES Barring any unforeseen circumstances, the application to the relevant authorities in relation to the Proposed Acquisition is expected to be made within a period of two (2) months from the date of this announcement.

20 13. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all relevant approvals being obtained, the Proposed Acquisition is expected to be completed by the fourth quarter of ADVISER RHBIB has been appointed by the Company to act as the Adviser for the Proposed Acquisition. 15. DOCUMENTS FOR INSPECTION A copy of the SSA will be made available for inspection at Suite 10.03, Level 10, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200, Kuala Lumpur during normal business hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 23 July