shareholdings in Irat before and after the Proposed Subscription; and After the Proposed Subscription No. of Irat

Transcription

1 BOUSTEAD HOLDINGS BERHAD ( BHB OR COMPANY ) PROPOSED SUBSCRIPTION OF 60,000,000 NEW ORDINARY SHARES OF RM1.00 EACH IN IRAT PROPERTIES SDN BHD ("IRAT") ( IRAT SHARES ) REPRESENTING 50% OF THE ISSUED AND PAID-UP ORDINARY SHARE CAPITAL IN IRAT FOR A CASH CONSIDERATION OF RM MILLION ( PROPOSED SUBSCRIPTION ) 1. INTRODUCTION The Board of Directors of BHB ( Board ) wishes to announce that the Company is proposing to subscribe for 60,000,000 new Irat Shares representing 50% of the issued and paid-up ordinary share capital in Irat for a cash consideration of RM million. 2. DETAILS OF THE PROPOSED SUBSCRIPTION The Proposed Subscription will involve the Company subscribing for 60,000,000 new Irat Shares at the issue price of RM2.13 per Irat Share, representing 50% of the issued and paid-up ordinary share capital of Irat for a cash consideration of RM million ( Subscription Consideration ). The remaining 50% of the issued and paid-up ordinary share capital are held by the existing shareholders, namely Lembaga Tabung Angkatan Tentera ( LTAT ) and Irat Holdings Sdn Bhd. The table below sets out the following: (i) (ii) shareholdings in Irat before and after the Proposed Subscription; and number of new Irat Shares to be subscribed for by BHB and the Subscription Consideration. Before the Proposed Subscription After the Proposed Subscription No. of Irat No. of Irat Subscription Total new Name Shares held % Shares held % Consideration Irat Shares LTAT 59,000, ,000, Irat Holdings Sdn Bhd 1,000, ,000, BHB ,000, RM127,800,000 60,000,000 Total 60,000, ,000, LTAT is also subscribing for 550,000 redeemable convertible preference shares ( RCPS ) of RM0.01 par value each in Irat at the issue price of RM100 per RCPS for RM55.50 million. Subsequent to the Proposed Subscription, BHB and LTAT intend to have an eventual issued and paid-up share capital in Irat where both BHB and LTAT will be subscribing for such number of ordinary shares in Irat with a view of having a joint control in Irat ( Proposed Additional Subscription ). BHB intends to fund the Proposed Additional Subscription via internally generated funds and/or borrowings. Further announcement in relation to the Proposed Additional Subscription will be made in due course. 1

2 (a) Basis of arriving and justification for the Subscription Consideration The Subscription Consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration the following: (i) (ii) (iii) the historical financial performance of Irat and its subsidiary ( Irat Group ) as set out in Appendix I of this announcement; the unaudited consolidated net assets ( NA ) of Irat as at 31 December 2014 of RM million or the NA of RM2.13 per Irat Share; and the future prospects of Irat Group as set out in Section 6.2 of this announcement. (b) Mode of settlement and source of funding The Proposed Subscription is to be funded by internally generated funds of BHB and its subsidiaries ( BHB Group or Group ) and/or borrowings. (c) Information on Irat Irat was incorporated in Malaysia under the Companies Act, 1965 ( Act ) as a private limited company on 15 April The principal activity of Irat is investment holding whilst its subsidiary is involved in property investment. Irat owns 70% equity interest in Irat Hotels & Resorts Sdn Bhd. (The rest of this page is intentionally left blank) 2

3 The details of the properties under the Irat Group are as follows: Building/ Address Chulan Tower Office Block/ 3, Jalan Conlay Kuala Lumpur The Royale Chulan Hotel/ 6, Jalan Conlay Kuala Lumpur Description Commercial office Hotel Existing usage Leasing out to various tenants for rental income Leasing out to a hotel management company for rental income Built-up area (square meters Age of the ( sq m )) building 27,681 9 years and 2 months 75,277 5 years and 9 months Total and available space for letting Tenancy (sq m) period 24,843 Ranging from 6 months to 3 years Rental income per annum for the FYE 31 December 2013 Tenure/ (RM million) expiry date years leasehold/ 24 October ,277 3 years years leasehold (2) / 24 October 2098 Net book value as at 31 December 2013 (1) (RM million) Encumbrances Charged to Affin Hwang Investment Bank Berhad for Medium Term Note Issuance Nil Note: (1) The properties are measured at fair value which reflects the market conditions as at 31 December 2013 based on the audited consolidated financial statements of Irat for the financial year ended ( FYE ) 31 December Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers with recent experience in the location and categories of properties being valued. Gains or losses arising from changes in the fair values of the both properties are included in the profit of the year. (2) The title is currently held by the Ketua Pengarah Jabatan Tanah and Galian Kuala Lumpur. Based on the unaudited consolidated financial statements of Irat for the FYE 31 December 2014, Irat Group recorded profit after tax and non-controlling interest ( PATNCI ) of RM14.57 million whilst its consolidated NA as at 31 December 2014 was RM million. Please refer to Appendix I of this announcement for further information on Irat. (The rest of this page is intentionally left blank) 3

4 On 27 February 2015, Irat entered into 2 conditional share sale and purchase agreements dated 27 February 2015 ( SPAs ) to acquire: (i) (ii) 100,000 ordinary shares of RM1.00 each in A.T.E.S. Sdn Bhd ( ATES ) ( ATES Shares ), representing 100% of the issued and paid-up ordinary share capital of ATES from its shareholders and 210,000 Islamic Redeemable Non-cumulative Preference Shares in the share capital of ATES ( RNCPS ) from the RNCPS holder (collectively, ATES Vendors ); and 19,000,000 ordinary shares of RM1.00 each in Beta Tegap Sdn Bhd ( Beta Tegap ) ( Beta Tegap Shares ), representing 100% equity interest of Beta Tegap from its shareholders ( Beta Tegap Vendors ). (Collectively the Proposed Acquisitions, and ATES and Beta Tegap hereinafter are referred to as the Target Companies ). The completion of the Proposed Acquisitions are pending the fulfilment of the conditions precedent in the respective SPAs. (aa) Information on ATES ATES was incorporated in Malaysia under the Act as a private limited company on 12 February ATES is principally engaged to undertake the operation of automated traffic enforcement system ( AES ) in Perlis, Kedah, Pulau Pinang, Perak, Kelantan, Sarawak, Sabah and Labuan. (1) The shareholdings of ATES Vendors in ATES are as follows: Name No. of ATES Shares held % Commercial Circle (Malaysia) Sdn Bhd 40, Traffen Force Sdn Bhd 60, Total 100, Name No. of RNCPS held % Angsana Tiara Sdn Bhd 210, (2) The directors of ATES are as follows: Foong Yook Lawrence Foong Yook Seng Norsiah Binti Abu Asid Abdul Hamid Bin Sh. Mohamed Michael Foong Ka-Meng Chee Chwee Cheong Based on the unaudited consolidated financial statements of ATES for the FYE 30 June 2014, ATES recorded loss after tax ( LAT ) of RM20.61 million whilst its consolidated net liabilities as at 30 June 2014 was RM47.12 million. (bb) Information on Beta Tegap Beta Tegap was incorporated in Malaysia under the Act as a private limited company on 7 February Beta Tegap is principally engaged to undertake the operation of the AES in Kuala Lumpur, Putrajaya, Selangor, Negeri Sembilan, Melaka, Johor, Pahang and Terengganu. 4

5 (1) The shareholdings of Beta Tegap Vendors in Beta Tegap are as follows: Name No. of Beta Tegap Shares held % To Puan Rozana Binti Hj Redzuan 7,980, Dr Andreas Teoh 5,700, General (R) Tan Sri Dato Sri Nik Ismail 4,370, Bin Nik Mohamed Yap Kim Yap Ai Lin 950, Total 19,000, (2) The directors of Beta Tegap are as follows: General (R) Tan Sri Dato Sri Nik Ismail Bin Nik Mohamed To Puan Rozana Binti Hj Redzuan Dr Andreas Teoh Based on the unaudited financial statements of Beta Tegap for the FYE 30 June 2014, Beta Tegap recorded LAT of RM22.58 million whilst its consolidated net liabilities as at 30 June 2014 was RM32.80 million. (cc) Information on the AES project AES is an automated traffic enforcement system concession which was awarded by the government of Malaysia ( Government ) to ATES and Beta Tegap pursuant to 2 separate concession agreements executed on 9 December 2011 ( CA ). Under the CA, the Target Companies are to establish and operate a network of AES to monitor all federal roads, highway and expressway in Malaysia under a build-operate-transfer ( BOT ) basis for a concession period of 66 months ( Concession Period ). Not less than 1 year from the expiry of the Concession Period, the Target Companies can apply to the Government for an extension of the Concession Period which should not be more than 5 years at the Government s absolute discretion. The concession is undertaken on a BOT basis. Broadly, the responsibilities of the Target Companies under the BOT arrangement for the operation of the AES are as follows: (i) (ii) (iii) to undertake to design, supply, develop, configure, integrate, install, test, commission and calibrate AES cameras as well as the AES system throughout Malaysia in the respective designated regions as set out in the CA; to operate (capture the offences, process the captured images of the offences and pass the images to the Road Transport Department for the issuance of summons), support as well as maintain the operation of the AES at the Target Companies cost until the expiry of the Concession Period; and to pass the ownership of hardware to the Government upon expiry of the Concession Period or early termination of the CA. 5

6 The Government may expropriate the CA by giving notice of not less than 3 months to that effect to the Target Companies if it considers that such expropriation is in the national interest, public interest, public policy, Government policy or national security or terminate the CA at any time by giving notice to the Target Companies in the event of defaults by the Target Companies as set out in the CA. The operation of the AES commenced with 14 cameras installed since September 2012 and the said operation is financed through bank borrowings, proceeds from issuance of securities and internally generated funds. 3. LIABILITIES TO BE ASSUMED PURSUANT TO THE PROPOSED SUBSCRIPTION There are currently no liabilities, including contingent liabilities and guarantees to be assumed by BHB pursuant to the Proposed Subscription. 4. RATIONALE FOR THE SUBSCRIPTION The principal activities of BHB are investment holding, provision of management services to its subsidiaries and property investment. The subsidiaries, associated companies and joint venture companies of BHB are mainly involved in: (a) planting of oil palm and processing of crude palm oil; (b) shipbuilding, fabrication of offshore structures as well as the restoration and maintenance of vessels and defence related products; (c) property development, construction and leasing of commercial and retail properties as well as owning and operating hotels ( Property Division ); (d) investing activities of the BHB Group; (e) manufacturing, trading and marketing of pharmaceutical products, research and development of pharmaceutical products and the supply of medical and hospital equipment; and (f) owning and operating the BHPetrol brand of retail petrol station network and the manufacturing and trading of building materials. The Proposed Subscription forms part of BHB Group s strategy to continue exploring growth opportunities with a view of driving and realising its potential to add value to the BHB Group. The external sales generated by the Property Division in the FYE 31 December 2013 was RM million, representing 5.57% of the total revenue of the BHB Group of RM11.21 billion. The Proposed Subscription will allow BHB Group to expand its investment in the property sector as well as the hospitality and tourism sector which is in-line with its strategic plan to further expand its Property Division to gain more market share in these sectors. Upon completion of the Proposed Acquisitions, the BHB Group will also be invested in the AES project in Malaysia by virtue of Irat being a jointly controlled company of BHB after the Proposed Subscription. The Board is of the view that the positive outlook of the offices market, leisure sub-sector and various government incentives in boosting the tourism industry in Malaysia (as set out in Section 6.1 of this announcement) are expected to augur well for the Irat Group s property segment. 6

7 The Proposed Acquisitions undertaken by Irat will provide the Irat Group with another source of revenue. Nonetheless, the success of the implementation of the AES project is dependent on, inter-alia, the completion of the Proposed Acquisitions, the roll-out of camera installation throughout the country and support from the suppliers as set out in Section 5 of this announcement. The Board is of the view that the Proposed Subscription also provides the BHB Group an opportunity to participate in a project which aims at reducing the number of road accidents and road fatality in Malaysia upon the completion of the Proposed Acquisitions. 5. RISK FACTORS IN RELATION TO THE PROPOSED SUBSCRIPTION The risks in relation to the Proposed Subscription include but are not limited to the following: (a) Business risk Both the Irat Group and BHB Group are subject to risks inherent in the property sector as well as the hospitality and tourism sector of which they are already involved in, which include, inter-alia, adverse changes in real estate market prices, changes in demand for types of residential and commercial properties, competition from other property investment companies, changes in economic, social and political condition, labour and material supply shortages, changes in tourists arrival rate and implementation of goods and services tax which in turn affect the rentals of offices and hotels. Any adverse change in such conditions may have an adverse material effect on the BHB Group. (b) Investment risk The investment in Irat is illiquid where there may not be a ready market to dispose of BHB s holdings in Irat since it is a privately owned company (unlike holdings of shares in a listed entity). There is a risk that BHB may not be able to find a buyer for its interest in Irat to realise any gain on the investment in the future. Any future sale is subject to, interalia, the general market, political and economic conditions, changes in earnings estimates, changes in governmental policy, legislation or regulation, and general operational and business risks. The Irat Group is also potentially facing the following risks with regards to the Proposed Acquisitions and the operation of the AES. These risks include but are not limited to the following: (a) Non-completion risk The SPAs are subject to the risk of non-completion if the conditions precedents set out in the SPAs are not fulfilled or waived (as the case maybe) before the expiration of the agreed period. In addition, there can be no assurance that the Proposed Acquisitions can be completed within the time frame set out in the SPA or that the Proposed Acquisitions will not be exposed to risks such as the inability to obtain the approvals from the relevant authorities/parties and/or inability to comply with the conditions imposed by the relevant authorities/parties such as their financier, if any. 7

8 (b) Business risk On completion of the Proposed Acquisitions, the Irat Group s business will include the operation of the AES. The Irat Group will then be subject to new challenges and risks arising from the operation of the AES. These may include shortage of labour, rapid changes in technology which are relevant to the AES, changes in the attitude of drivers on the road, as well as changes in economic, social and political conditions in Malaysia. However, it is the intention of Irat to retain the key management and technical personnel of the Target Companies to ensure that Irat together with the Target Companies are kept abreast with the latest development in AES technology and the changes in economic, social and political conditions surrounding the AES. Currently, there are only 14 cameras in operations. The AES project is pending a full rollout of camera installation throughout the country. Therefore, there is a gestation period for the full implementation of the AES project and there is no assurance that such implementation will be timely and successfully completed. In an effort to mitigate this risk, the Irat Group will continue to engage the relevant authorities/parties involved in the implementation of the AES project. Notwithstanding the above and taking into account that the Proposed Acquisitions will be the Irat Group s maiden undertaking in the operation of the AES, there is no assurance that any changes to the abovementioned factors will not materially affect the Irat Group s performance which may affect its profit contribution to the BHB Group. (c) Reliance on the CA awarded by the Government The Target Companies rely on the CA awarded by the Government. As such, the Irat Group s business may be materially and adversely affected if the termination/expropriation clause is invoked by the Government or the CAs are renegotiated with less favourable terms. Such occurrence will expose the Irat Group to the risk of being unable to continue to operate the AES which in turn will affect the viability of the Irat Group s business. Nonetheless, Irat Group intends to continue discussion with the Government in relation to the terms and conditions of the CA to ensure the continuity of the CA. Although the Irat Group seeks to limit this risk by having continuous discussion with the Government to ensure the continuity of the CA, no assurance can be given that any failure in the discussion will not have a material adverse effect on the operation of the AES. (d) Reliance on supplier agreements The Target Companies rely on third party suppliers to provide hardware and software to operate the AES. As such, the Irat Group s business may be materially and adversely affected if these third party products and services are no longer provided. ATES currently has a key agreement with international hardware and software supplier for the AES equipment. Beta Tegap also has a key agreement with the supplier of the AES equipment. The Irat Group is exposed to the risk of being unable to continue to secure the hardware or software to run the operation of the AES should these agreements be renegotiated or terminated. Nonetheless, the management of the Irat Group together with the Target Companies are committed to prevent any disruption to the operations of the Target Companies by reaffirming and/or signing a supplemental agreement with the suppliers, where necessary. 8

9 The continuous relationships with these suppliers are important for mutual business support. It is the intention of Irat to retain the key management and technical personnel of the Target Companies to also help maintain the said relationships. In the event that there is any termination of distribution by any supplier, Irat will take the necessary steps to ensure the continuity of its operations and source the AES equipment from other suppliers. (e) Financing risk Following the completion of the Proposed Acquisitions, the Irat Group will consolidate the borrowings of the Target Companies in its financial statements. Accordingly, the Irat Group is subject to risks associated with debt financing, including changes in the level of interest rates and liquidity risk. Any adverse fluctuations in interest rates may have a significant impact on the Irat Group s financial performance. While we understand that the management of the Irat Group endeavours to take every effort to ensure that no adverse effects will arise from the interest commitments, there is no assurance that it will not have any material impact on the Irat Group s financial performance in the future. Although the BHB Group will continuously take appropriate measures to mitigate such risks, no assurance can be given that any change to these factors will not have a material adverse impact on the BHB Group. 6. OUTLOOK AND PROSPECTS The Irat Group is currently involved in property investment through the letting out of office space and a hotel. Accordingly, the Irat Group is dependent on the prospects of the general Malaysian economy, property sector as well as the hospitality and tourism sector. On completion of the Proposed Acquisitions, the Irat Group will be involved in the operation of the AES project. 6.1 Outlook (a) The Malaysian economy The economic growth momentum in 2014 is expected to continue in 2015 driven by improving external demand and resilient domestic economic activity. Growth will be private-led in line with the Government s efforts to strengthen the private sector s role in the economy. On the supply side, all economic sectors are expected to record positive growth in 2015, with the services and manufacturing sectors remaining the major contributors to growth. Sustained growth in domestic demand, albeit at a moderate pace, is expected to contribute to the expansion in domestic-related activities. The economy is projected to grow 5%-6% in (Source: Economic Report 2014/2015, Ministry of Finance, Malaysia) 9

10 The 2015 Budget was formulated based on: (i) Price of Brent crude oil forecasted at USD100 per barrel; (ii) Gross Domestic Product growth estimated between 5% and 6%; (iii) A stable exchange rate of RM3.20 against the US dollar; and (iv) 2015 world economic growth projected at 3.4% and 3.9% by the World Bank and International Monetary Fund respectively. Since then, the World Bank and the International Monetary Fund have revised global growth to 3% and 3.8% respectively. However, the external situation has changed lately and Malaysia is impacted directly as Malaysia is among the largest trading nations in the world. Compared to the situation a few months ago, the global economic landscape has since changed significantly. This necessitates the review and clarification of some of the earlier macro and fiscal assumptions. In the revised 2015 Budget, the forecast for Malaysia's 2015 economic growth has been revised to 4.50% to 5.50% from 5.00% to 6.00% whilst the fiscal deficit target has been revised to 3.2% of Gross Domestic Product in 2015 from the earlier fiscal deficit target of 3% of Gross Domestic Product. (Source: Malaysia's revised Budget 2015 speech by YAB Dato' Sri Mohd Najib Tun Haji Abdul Razak, Prime Minister and Minister of Finance Malaysia on 20 January 2015) (b) The property sector Growth in the non-residential subsector turned around sharply by 14% (January to June 2013: 1%) in line with healthy business activity during the first half of This was reflected by increased construction activities especially for commercial buildings with the incoming supply of shops increasing to 72,117 units (January June 2013: 66,167 units). Meanwhile, construction starts for purpose-built offices ( PBO ) decreased substantially to 2,965 sq m (January to June 2013: 263,284 sq m), after experiencing strong growth of 61.2% in PBO starts in However, the national occupancy rate of office buildings remained stable at 83.4% (end-june 2013: 82%) despite an additional 194,798 sq m of space. During the second quarter of 2014, the Purpose-Built Office Rent Index Wilayah Persekutuan Kuala Lumpur ( PBO-RI WPKL ) showed that PBO rentals in Kuala Lumpur continued to remain stable despite announcements of large planned projects such as the Tun Razak Exchange. The PBO-RI WPKL recorded 117 points (second quarter of 2013: points), increasing 1.8% on account of higher growth Within the City Centre ( WCC ) area. Likewise, the average rental rate of PBO in WCC recorded an increase of 5.8% to RM4.41 per square foot ( sq ft ) (second quarter of 2013: 10%; RM4.10 per sq ft). The average rental of investment-grade buildings in Kuala Lumpur, particularly Kuala Lumpur City Centre/Golden Triangle stood at RM6.18 per sq ft (second quarter of 2013: RM6.17 per sq ft), indicating stable rentals for offices in good locations. (Source: Economic Report 2014/2015, Ministry of Finance, Malaysia) The office market also moved along the positive trend as indicated by the increase in the overall occupancy from 82.1% to 83.4%, sustaining a positive take-up of 297,403 sq m (first half of ( H1 ) 2013: 290,981 sq m). Ten states recorded positive take-up whereas Sabah recorded otherwise. The highest take-up was recorded in Wilayah Persekutuan Kuala Lumpur at 188,987 sq m. 10

11 In terms of performance, 14 states secured more than 80.0% occupancy, of which one was fully occupied and seven obtained more than 90.0% occupancy. Wilayah Persekutuan Kuala Lumpur (80.1%) and Selangor (76.3%) witnessed better performance against H whereas Johor (75.7%) dwindled slightly and Pulau Pinang sustained at 81.0% occupancy. (Source: Property Market Report, First Half 2014, Valuation and Property Services Department, Ministry of Finance, Malaysia) (c) The hospitality and tourism sector The wholesale and retail trade as well as accommodation and restaurant subsectors are anticipated to increase 7.1% and 5.9%, respectively in 2015 (2014: 7.7%; 6.1%) driven by strong domestic consumption and higher tourist arrivals following the Malaysia Year of Festivals The year 2015 has been designated Malaysia Year of Festivals. Boosted by targeted marketing and promotional activities, tourist spending is expected to remain robust. The extension of the Visit Malaysia Year into 2015, coupled with continuous efforts to develop new and strengthen niche tourism products, as well as upgrade of existing tourismrelated facilities are expected to contribute to higher gross receipts in the travel account at RM78.2 million (2014: RM76.3 billion). (Source: Economic Report 2014/2015, Ministry of Finance, Malaysia) The leisure sub-sector showed a moderate performance as the three to five star hotels recorded an overall occupancy of 50.4%, lower than 52.5% in H On the contrary, the one to five star hotels recorded an increase in the overall occupancy from 49.1% (H1 2013) to 53.1% (H1 2014). Although January May 2014 tourist arrivals (11.53 million) showed a 10.1% increase over the same period of 2013, the Malaysian Institute of Economic Research Tourism Market Index recorded a decline at 96.7 points in second quarter of ( Q2 ) 2014 (Q2 2013: points). Performance of three to five star hotels across the states varied. Nine states recorded higher overall occupancy than the national average. The top three performers were Wilayah Persekutuan Putrajaya, Selangor and Pahang with an overall occupancy of more than 75.0%. (Source: Property Market Report, First Half 2014, Valuation and Property Services Department, Ministry of Finance, Malaysia) The 2015 Budget is formulated with a focus on the people's economy and outlines seven main strategies: First Strategy: Second Strategy: Third Strategy: Fourth Strategy: Fifth Strategy: Sixth Strategy: Seventh Strategy: Strengthening Economic Growth; Enhancing Fiscal Governance; Developing Human Capital and Entrepreneurship; Advancing Bumiputera Agenda; Upholding Role of Women; Developing National Youth Transformation Programme; and Prioritising Well-Being of the Rakyat. 11

12 Under the first strategy, strengthening economic growth, the Government will continue to provide a conducive and comprehensive ecosystem to accelerate domestic and foreign investment. One of the measurements is boosting the tourism industry. In conjunction with Malaysia - Year of Festivals 2015, the Government is targeting 29.4 million foreign tourist arrivals with expected income of RM89 billion. For this, RM316 million is allocated for various programmes under the Ministry of Tourism and Culture. (Source: Malaysia's Budget 2015 speech by YAB Dato' Sri Mohd Najib Tun Haji Abdul Razak, Prime Minister and Minister of Finance Malaysia on 10 October 2015) (d) AES Following the completion of the SPAs, the Irat Group will also be dependent on the outlook for the operation of the AES project. Malaysia is among the top 25 most dangerous countries for road users, with 30 fatalities per 100,000 individuals, according to research by the University of Michigan. Conducted by the university s Transportation Research Institute using 2008 World Health Organisation ( WHO ) data on 193 countries, the February 2014 research lists Malaysia as 17th most dangerous for drivers. The only other Southeast Asian nation within the 25 most dangerous is Thailand, ranked second most dangerous for drivers, with 44 fatalities per 100,000 people. In comparison, the United States of America registered only 14 fatalities, France recorded seven, Germany and Singapore six, and the United Kingdom only five fatalities per 100,000 people. The world average is 18 fatalities per 100,000 people. Namibia topped the most dangerous list with 45 deaths and the safest place to enjoy a cruise is the small island nation of the Maldives with two deaths. (Source: Malaysia has 17th most dangerous roads in the world, according to Michigan university research, dated 22 February 2014, The Star Online, In terms of number of vehicles on Malaysian roads, the sales of new motor vehicles (or total industry volume ( TIV )) in 2014 grew 1.6% to 666,465 units eclipsing the previous 2013 sales record of 655,793 units. This is a new all-time high record for the local automotive industry. The TIV achieved had been on the upward trend since 2012 when the TIV achieved then was 627,753 units. However, the growth rate achieved in 2014 (i.e. 1.6%) was much lower than the growth rates achieved during the previous two years (i.e. 4.5% in 2013 and 4.6% in 2012). The total registration of new passenger vehicles in 2014 rose to 588,341 units from 576,657 units in This was an increase of 11,684 units or a 2.0% growth. However the total registration for commercial vehicles declined to 78,124 units in 2014 compared to 79,136 units in This means commercial vehicles sales had declined by 1,012 units or 1.3%. 12

13 The Malaysian Automotive Association ( MAA ) has forecasted a TIV of 680,000 for the year 2015 vis-à-vis 666,465 actual TIV for the year 2014 and has taken the following economic and environmental factors into account in their forecast for the TIV in 2015: (i) (ii) (iii) The global economy is expected to moderate owing to a number of uncertainties such as the declining crude oil prices, political instability in Middle East etc; In tandem with the declining world economic outlook and weakening ringgit, the Malaysian economy is expected to face greater challenges in 2015; Inflation and the impending implementation of the Goods and Services Tax ( GST ) in April are two key concerns affecting consumers at large; (iv) Continuation of the Economic Transformation Programme projects would contribute to the growth momentum of the local economies and help to spur greater demand for new vehicles; (v) (vi) (vii) Slowdown in consumers' spending in light of the economic uncertainties, impact of inflationary pressures, and implementation of the GST; The tightening of lending guidelines including for hire purchase loans by the authorities in order to rein in household debts; and Aggressive promotional campaigns by car companies. In view of the above, MAA s TIV forecast for 2015 versus 2014 is shown in table below: Market segment Variance (Forecast) (Actual) Units % Passenger vehicles 600, ,341 12, Commercial vehicles 79,300 78,124 1, Total vehicles 680, ,465 13, (Source: Press Conference: Market Review for 2014 and Outlook for 2015 dated 21 January 2015, MAA) The AES system is an automatic enforcement of traffic laws, and is a continuation of the Road Safety Plan It is also part of the on-going efforts of road safety activists (Jabatan Pengangkutan Jalan, Polis Diraja Malaysia, Jabatan Keselamatan Jalan Raya Malaysia, Malaysian Institute of Road Safety Research, Jabatan Kerja Raya Malaysia) focusing on 4E (Engineering, Enforcement, Education and Environment). The AES system necessitates adaptations of the enforcement system to be sustainable in driving attitude changes regardless of the increase in number of vehicles, drivers or constraints in enforcement, and is a system based approach that could change the attitude of Malaysian drivers. (Source: FAQ Automated Enforcement System, Official Portal of Road Transport Department Malaysia, Accident rates at 14 locations nationwide where the AES cameras were installed have dropped by up to 30% in the first 8 months since the AES was implemented. Transport Minister Datuk Seri Liow Tiong Lai said studies conducted by the Malaysian Institute of Road Safety Research ( MIROS ) showed that there were 19 fatal accidents in 8 months prior to the AES installation at the accident-prone areas. However, that figure dropped to only 12 after the cameras were installed. This translates to a reduction of fatal accidents by 36.84% or 7 cases within the period of 8 months. 13

14 The Transport Minister, quoting the MIROS studies, also found that on average, compliance to speed limits in 6 locations prior to the implementation of AES was only 63%. However, it increased to 91% once the system kicked in. The number of motorists who beat the red lights also fell from 4.3% to 2.2% at 4 traffic junctions where AES cameras were placed. (Source: AES helps reduce accidents, says Liow, dated 30 October 2014, The Star Online, Prospects Currently, the business of the Irat Group is focused on property investment which involves letting out of office space and a hotel. The details of the Irat Group s properties are as set out below: Building/ Address Chulan Tower Office Block/ 3, Jalan Conlay Kuala Lumpur Type of property Commercial office Available space for letting (sq m) Occupancy rate (%) , % 100% 100% The Royale Chulan Hotel/ 6, Jalan Conlay Kuala Lumpur Hotel 75, % 100% 100% The prospects of the Irat Group are expected to be positive in the medium to longer term in view of the following: (a) the Malaysian economy is expected to grow by 4.50% to 5.50% in 2015 and growing demand in the non-residential sub-sector which is supported by encouraging demand for commercial buildings. The national occupancy rate of office buildings remained stable at 83.4%. The rentals for offices in good locations, particularly investment-grade buildings in Kuala Lumpur City Centre/Golden Triangle are stable as well; (b) the occupancy rate of the Chulan Tower Office Block of 100% for the year 2012 to 2014 has outperformed the national occupancy rate of 83.4% for office buildings; (c) (d) (e) the Royale Chulan Kuala Lumpur Hotel leased in its entirety to a hotel management company for rental income; even though the leisure sub-sector showed a moderate performance in 2014 but under Budget 2015, RM316 million is allocated for various programmes under the Ministry of Tourism and Culture to boost the tourism industry; and the proven track record and experience of its management team to generate recurring income from its properties. 14

15 As such, taking into consideration the successes of the Irat Group in property investment, its proven track record and the experience of the existing management, positive prospects of the property sector, and government incentive in hospitality and tourism sector as set out in Section 6.1 of this announcement, the management of the BHB Group is optimistic of the sustainability and growth of the financial performance of the Irat Group in the property segment moving forward. In addition to the existing business of the Irat Group, the Irat Group will potentially venture into the operation of the AES project following the completion of the SPAs. The full rollout of the AES operations are expected to provide another source of revenue to the Irat Group which in turn will contribute to the financial result of BHB in the longer term after taking into account the following: (a) Malaysia is among the top 25 most dangerous countries for road users, with 30 fatalities per 100,000 individuals; (b) (c) MAA has forecasted a TIV of 680,000 for the year 2015 vis-à-vis 666,465 actual TIV for the year 2014; and the determination of the Government enforcement body to change the attitude of Malaysian drivers to reduce the fatality rate on the road through the implementation of the AES. 7. EFFECTS OF THE PROPOSED SUBSCRIPTION 7.1 Issued and paid-up share capital and substantial shareholders shareholdings The subscription will not have any effect on the issued and paid-up share capital and the substantial shareholders shareholdings in BHB as the Proposed Subscription will not involve any issuance of new ordinary share of RM0.50 each in BHB ( Share or BHB Share ). (The rest of this page is intentionally left blank) 15

16 7.2 Earnings and earnings per Share ( EPS ) Based on the unaudited consolidated financial statements of BHB for the FYE 31 December 2014 and on the assumption that the Proposed Subscription had been effected on that date, the proforma effects of the Proposed Subscription on the earnings and EPS of the BHB Group is as illustrated below: Unaudited FYE 31 December 2014 After the Proposed Subscription (RM' million) (RM' million) PATNCI Add: 50.00% PATNCI contribution of the Irat Group (1) Less: Finance cost for the Proposed Subscription (2) - (5.5) PATNCI after the Proposed Subscription No. of BHB Shares (millions) 1, ,034.2 EPS (sen) Note: (1) Based on the latest unaudited consolidated financial statements of Irat as at 31 December 2014 and after taking into account of the 50.00% PATNCI contribution of the Irat Group of RM14.57 million following the Proposed Subscription. (2) On the assumption that the Proposed Subscription is partly funded via borrowings of RM million and the interest rate is based on the interest rate of 5.5% per annum. Based on the proforma effects of the Proposed Subscription on the earnings and EPS of BHB Group, the Proposed Subscription is expected to increase the earnings of the BHB Group marginally. This is attributable to the effects of the 50% income contribution from the Irat Group following the Proposed Subscription, where the Irat Group becomes a jointly controlled company of BHB. Based on the unaudited financial statements of ATES and Beta Tegap for the FYE 30 June 2014, ATES and Beta Tegap recorded LAT of RM20.61 million and RM22.58 million respectively. The Target Companies suffered from losses due to inadequate revenue to cover overheads, mainly advocacy fees, depreciation of the property, plant and equipment, and salary to staffs. Following the completion of the Proposed Acquisitions, ATES and Beta Tegap will become wholly-owned subsidiaries of Irat. On the assumption that the Proposed Acquisitions had been effected on 31 December 2014, the proforma effects of the Proposed Acquisitions on the earnings and EPS of the Irat Group is as illustrated below: Unaudited FYE 31 December 2014 After the Proposed Acquisitions (RM' million) (RM' million) PATNCI Add: Total LAT contribution of the - (43.2) Target Companies PATNCI/(LATNCI) after the Proposed 14.6 (28.6) Acquisitions No. of Irat Shares (millions) EPS/(losses) per share (sen) (47.67) 16

17 Based on the proforma effects of the Proposed Acquisitions on the earnings and EPS of Irat Group, the Proposed Acquisitions are expected to decrease the earnings of Irat Group after consolidating the financial result of the Target Companies. Following the consolidation of the financial result of the Target Companies, the proforma effects of the Proposed Acquisitions on the earnings and EPS of the BHB Group is as illustrated below: Unaudited FYE 31 December 2014 After the Proposed Acquisitions (RM' million) (RM' million) PATNCI Add: 50.00% LATNCI contribution of - (14.3) the Irat Group after the completion of the Proposed Acquisitions Less: Finance cost for the Proposed - (5.5) Subscription (1) PATNCI after the Proposed Acquisitions No. of BHB Shares (millions) 1, ,034.2 EPS (sen) Note: (1) On the assumption that the Proposed Subscription is partly funded via borrowings of RM million and the interest rate is based on the interest rate of 5.5% per annum and the Proposed Subscription is completed upon the completion of the Proposed Acquisitions. As such, the effect of the aforesaid losses are expected to impact the earnings of the BHB Group marginally for the FYE 31 December 2014 taking into consideration the 50.00% LATNCI contribution from the Irat Group after the Proposed Acquisitions. 7.3 NA and gearing Based on the unaudited consolidated financial statements of BHB for the FYE 31 December 2014 and on the assumption that the Proposed Subscription had been effected on that date, the proforma effects of the Proposed Subscription on the NA and gearing of the BHB Group are as follows: As at 31 December 2014 (RM' million) After the Proposed Subscription (RM' million) Share capital Perpetual Sukuk 1, ,140.7 Share premium 1, ,165.1 Revaluation & fair value reserve Statutory reserve Other reserve Retained profit 2, ,233.3 (1) NA 5, ,881.6 Non-controlling interest ( NCI ) 1, ,693.5 Total equity 7, ,

18 As at 31 December 2014 (RM' million) After the Proposed Subscription (RM' million) No. of BHB Shares 1, ,034.2 Borrowings 7, ,180.7 (2) Deposit, cash and bank balance 1, ,157.9 NA per BHB Share Gearing (3) Note: (1) Based on the latest unaudited consolidated financial statements of Irat as at 31 December 2014 and after taking into account of the 50.00% PATNCI contribution of the Irat Group of RM14.57 million following the Proposed Subscription and the finance cost for the Proposed Subscription. (2) On the assumption that the Proposed Subscription is partly funded via borrowings of RM million. (3) Gearing is calculated based on the borrowings divided by the total equity. The Proposed Subscription will not result in any material changes in the gearing ratio of the BHB Group. Nonetheless, following the completion of the Proposed Acquisitions and on the assumption the Proposed Acquisitions had been effected on that date, the consolidated LATNCI of the Irat Group will potentially reduce the retained earnings of the BHB Group by approximately RM19.8 million and the NA of the BHB Group will decrease accordingly. 8. APPROVALS REQUIRED FOR THE PROPOSED SUBSCRIPTION The Proposed Subscription is not subject to the approval of the shareholders of BHB or any other relevant authorities. 9. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS AND PERSONS CONNECTED TO THEM Save as disclosed below, none of the Directors and/or major shareholders of BHB and/or persons connected to them, have any interest, direct or indirect, in the Proposed Subscription as at the date of this announcement. (a) Tan Sri Dato Seri Lodin Wok Kamaruddin Tan Sri Dato Seri Lodin Wok Kamaruddin is deemed interested in the Proposed Subscription by virtue of him being the Deputy Chairman/Group Managing Director of BHB (the subscriber), with direct equity interest of 2.73% in BHB and he is also a member appointed by the minister to the Board of Directors of LTAT (LTAT is the major shareholder of BHB and Irat). (b) Dato Ghazali Mohd Ali Dato Ghazali Mohd Ali is deemed interested in the Proposed Subscription by virtue of him being the Non-Independent Executive Director of BHB (the subscriber), and he is also a director of Irat (the issuer) and a member appointed by the minister to the Board of Directors of LTAT (LTAT is the major shareholder of BHB and Irat). (Collectively the Interested Directors ) 18

19 (c) LTAT ( Major Shareholder ) LTAT is deemed interested in the Proposed Subscription by virtue of it being the major shareholder of BHB (the subscriber) with equity interest of 58.89% equity interest in BHB and the major shareholder of Irat (the issuer) with equity interest of 98.33% equity interest in Irat. In this regard, the Interested Directors have abstained and will continue to abstain from all deliberations and voting on the resolution pertaining to the Proposed Subscription at the relevant board meetings. 10. STATEMENT BY THE DIRECTORS The Board (save for the Interested Directors), after having considered all aspects of the Proposed Subscription, is of the opinion that the Proposed Subscription is in the best interest of the Company. 11. AUDIT COMMITTEE S STATEMENT The audit committee of the Company, after having considered all aspects of the Proposed Subscription including but not limited to the rationale and effects of the Proposed Subscription and the prospects of the Irat Group as set out in Section 6.2 of this announcement, is of the opinion that the Proposed Subscription is in the best interest of the Company, fair, reasonable and on normal commercial terms, and is not detrimental to the interest of the non-interested shareholders of BHB. 12. HIGHEST PERCENTAGE RATIO APPLICABLE Based on BHB s unaudited consolidated financial statements for the FYE 31 December 2014, the highest percentage ratio pursuant to paragraph 10.02(g) of the Main Market of the Listing Requirements of Bursa Malaysia Securities Berhad resulting from the Proposed Subscription is 2.17%. 13. TRANSACTION WITH THE SAME RELATED PARTY FOR THE PRECEDING 12 MONTHS As at the date of this announcement, there is no transaction entered into by BHB with Irat for the preceding 12 months. 14. ESTIMATED TIME FRAME FOR COMPLETION OF THE PROPOSED SUBSCRIPTION Barring any unforeseen circumstances, the Proposed Subscription is expected to be completed by the 2 nd quarter of This announcement is dated 6 March

20 APPENDIX I INFORMATION ON IRAT 1. HISTORY AND BUSINESS OVERVIEW Irat was incorporated in Malaysia under the Act as a private limited company on 15 April The principal activity of Irat is investment holding whilst the subsidiary is principally involved in property investment. The business description of the Irat Group is set out in Section 5 of this appendix. On 27 February 2015, Irat entered into the 2 SPAs for the Proposed Acquisitions. 2. SHARE CAPITAL The authorised share capital as well as issued and paid-up share capital of Irat are as follows: Ordinary shares: No. of Irat Shares Par value Amount RM RM Authorised share capital 499,000, ,000,000 Issued and paid-up share capital 60,000, ,000,000 Following the Proposed Subscription, the issued and paid-up capital of Irat will be RM120,000,000 comprising 120,000,000 Irat Shares. Following the subscription of RCPS by LTAT, the issued and paid-up capital in term of RCPS will be RM55,000,000 comprising 550,000 RCPS. 3. SHAREHOLDERS The shareholders of Irat and their respective shareholdings are as follows: Country of Direct Indirect incorporation/ No. of Irat % No. of Irat % Name nationality Shares held Shares held LTAT Malaysia 59,000, Irat Holdings Sdn Bhd Malaysia 1,000, Tengku Tan Sri Dato Seri Ahmad Rithauddeen Bin Tengku Ismail Malaysia - - (1) 1,000, Note: (1) Deemed interested by virtue of his interest in Irat Holdings Sdn Bhd pursuant to Section 6A of the Act. 20

21 APPENDIX I INFORMATION ON IRAT 4. BOARD OF DIRECTORS The Directors of Irat and their respective shareholdings in Irat are as follows: Direct Indirect No. of Irat % No. of Irat % Name Nationality Shares held Shares held Dato Ghazali bin Mohd Ali Malaysian Laksamana Madya Tan Sri Malaysian Dato Seri Ahmad Ramli bin Hj Mohd Nor (R) Ali Shahrir Roose Malaysian Datuk Haji Abdul Aziz bin Ismail Malaysian SUBSIDIARY The subsidiary of Irat is as follows: Name Irat Hotels & Resorts Sdn Bhd Date / Country of incorporation 17/07/1995 Malaysia Issued and paidup share capital RM14,290,000 comprising 14,290,000 ordinary shares of RM1.00 each Effective equity interest Principal activity 70% Letting out of office space and a hotel RM51,549,304 comprising 51,549,304 redeemable preference shares of RM1.00 each - As at the date of this announcement, Irat does not have any associated company. (The rest of this page is intentionally left blank) 21

22 APPENDIX I INFORMATION ON IRAT 6. FINANCIAL INFORMATION OF IRAT The audited consolidated financial statements of Irat for the past 3 years from FYE 31 December 2011 to 31 December 2013 are as follows: Audited consolidated FYE 31 December RM RM RM Revenue 27,221,301 27,901,642 28,964,810 PBT 11,192,468 23,595,991 16,767,560 PAT 9,943,835 22,215,133 8,881,734 NCI (2,827,967) (6,528,229) (2,503,339) PATNCI 7,115,868 15,686,904 6,378,395 NA 91,347, ,034, ,412,788 Total equity 121,484, ,699, ,581,446 Paid-up capital 60,000,000 60,000,000 60,000,000 Total borrowings 329,949, ,749, ,149,304 PBT margin (%) 41.12% 84.57% 57.89% PAT margin (%) 36.53% 79.62% 30.66% No. of Irat Shares 60,000,000 60,000,000 60,000,000 NA per Irat Share (RM) EPS (RM) Gearing (1) (times) Note: (1) Gearing is calculated based on the total borrowings divided by the total equity. Revenue of the Irat Group increased by approximately 2.50% from FYE 31 December 2011 to FYE 31 December 2012, driven mainly by the increase in rental income from the office premises during the financial year. PATNCI of the Irat Group also increased by approximately % from the FYE 31 December 2011 to FYE 31 December 2012, mainly due to the net fair value gain on investment properties which was revalued by the accredited independent valuers and reduction in administrative expenses. For the FYE 31 December 2013, the revenue of the Irat Group increased by approximately 3.81% from the previous FYE 31 December 2012, mainly due to increase in income rental from the office premises. The PATNCI decreased by 59.34% mainly due to the higher administrative expenses incurred and the one-off net fair value gain on investment properties recorded in the previous financial year under review. During the financial years under review, the Irat Group managed to pare down its borrowings over the years with its gearing level reduced from 2.72 times as at FYE 31 December 2011 to 2.14 times as at FYE 31 December