DAYANG ENTERPRISE HOLDINGS BERHAD ( DAYANG OR COMPANY ) PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE TOTAL NUMBER OF ISSUED SHARES OF DAYANG ( PROPOSAL ) 1. INTRODUCTION On behalf of the Board of Directors of ( Board ), Kenanga Investment Bank Berhad ( Kenanga IB ) wishes to announce that the Company proposes to undertake a private placement of up to 10% of the total number of issued shares of the Company. The shareholders of had passed a resolution at its 10 th annual general meeting ( AGM ) convened on 25 May 2016 authorising the Board to issue new shares in not exceeding 10% of the total number of issued shares of at any time, pursuant to Section 132D of the Companies Act, 1965 ( Mandate ). Further details of the Proposed Private Placement are set out in this announcement. 2. DETAILS OF THE PROPOSAL 2.1 Size of the Proposal As at 31 December 2016, the Company's share capital was RM438,549,967.50 comprising 877,099,935 ordinary shares ( ). Based on the above, the Proposal shall involve the issuance of up to 87,709,993 new ( Placement ), representing approximately 10% of total number of issued shares of the Company. 2.2 Basis of determining the issue price of the Placement The Board will determine and announce the issue price at a later date ( Price Fixing Date ) after receiving the relevant approvals for the Proposal. In determining the issue price, the Board will take into consideration: the prevailing market conditions; and the provisions of Paragraph 6.04 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Listing Requirements ) which stipulates that the issue price be determined at a discount of not more than 10% to the weighted average market price ( WAMP ) of the for the 5 market days immediately preceding the price fixing date. For illustrative purposes, based on the 5-day WAMP of the up to and including 23 February 2017, being the last full trading day prior to the date of this announcement, of approximately RM1.0661 (Source : Bloomberg), the indicative issue price of the Placement will be RM1.00 ( Indicative Placement Price ), representing a discount of about 6.20% which is not more than 10%. 2.3 Ranking of the Placement The Placement shall, upon issuance and allotment, rank pari passu in all respects with the existing, except that the holders of the Placement will not be entitled to any dividends, rights, allotments and/or other distributions that may be declared, made or paid, the entitlement date of which is prior to the date of allotment of the Placement. - 1 -
2.4 Listing of and quotation for the Placement The Board will make an application to Bursa Securities for the listing of and quotation for the Placement on the Main Market of Bursa Securities. 2.5 Placement arrangement The Placement shall be placed to third (3 rd ) party investor(s) who falls under Schedules 6 and/or 7 of the Capital Markets and Services Act, 2007, to be identified at a later date. In compliance with Paragraph 6.04(c) of the Listing Requirements, the Placement shall not be placed out to the following parties: (c) director, major shareholder or chief executive officer of or a holding company of ( Interested Person ); a person connected with an Interested Person; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. Subject to prevailing market conditions, the Proposal may be implemented in multiple tranches within a period of six (6) months or any extended period as maybe approved by Bursa Securities. 2.6 Utilisation of proceeds The proceeds to be raised from the Proposal are dependent on the actual issue price and actual number of Placement to be issued. For illustrative purposes, based on the Indicative Placement Price of RM1.00 per Placement Share, the Proposal is expected to raise gross proceeds of approximately RM87.71 million. intends to utilise all the gross proceed for repayment of the borrowings of and its subsidiaries ( Group ) and defray the expenses relating to the Proposal as follows: Purpose Notes RM 000 Estimated timeframe for utilisation Repayment of borrowings of the Group 86,210 Within 6 months Estimated expenses in relation to the Proposal 1,500 Within 1 month Total 87,710 Notes: The Group s total bank borrowings as at 31 December 2016 amounted to approximately RM1,639.40 million. For illustrative purposes, based on the Group's average bank facilities interest rate of 6.14%, the partial repayment of the Group s bank borrowings is expected to result in interest cost savings of approximately RM5.29 million per annum. Comprises of professional fees and placement fees (RM1.37 million) and other incidental expenses in connection with the Proposal (RM0.13 million). In the event that the actual amount varies from the above estimate, the excess or deficit, as the case may be, would be adjusted from the amount earmarked for repayment of borrowings. Pending utilisation of the proceeds from the Proposal, the funds raised will be placed with reputable financial institutions. - 2 -
3. RATIONALE FOR THE PROPOSAL The plunge in the oil prices in the past 2 years has adversely impacted the oil and gas industry with oil majors cutting back on their capital and operational spending. This has resulted in scale down of existing projects, delay in award of new projects, lower contract margin as well as reduced demand for the Group's products and services. Accordingly, the Group had focused on rationalising its operations and improving utilisation rate of its strategic assets during such challenging times. The recent improvement of oil price to about United States Dollar 50 per barrel has brought some reprieve to the oil and gas industry with oil majors set to increase spending on maintenance jobs for their production facilities to sustain and enhance production. As such, the Group anticipates more maintenance jobs to come in the next few quarters or years and the Board is optimistic that the Group's longer term prospects are still intact in view of the Group s healthy order book of around RM2.8 billion to last until 2018 and currently awaiting the results of some tenders for jobs amounting to RM4.0 billion. The Proposal provides an opportunity for to tap into the equity capital market to raise funds to strengthen its capital structure and partially repay its bank borrowings which will reduce interest expenses. This will enable the Group to better manage its gearing level and add financial flexibility to its cash flow management to position the Group for securing and implementing new projects in the future. The Board, after due consideration of the various fund raising options as well as the capital structure of, is of the view that the Proposal is the most appropriate avenue of raising funds expeditiously. In addition, upon completion of the Proposal, s enlarged capital base will also further strengthen the Group's financial position and potentially increases the liquidity of arising from the increase in the number of in issue. 4. EFFECTS OF THE PROPOSAL 4.1 Share capital The proforma effects of the Proposal on the share capital of are as follows:- RM Number of Share capital as at 31 December 2016 438,549,967.50 877,099,935 To be issued pursuant to the Proposal 87,709,993.00 87,709,993 Enlarged share capital 526,259,960.50 964,809,928 Note: Assuming 87,709,993 Placement are issued at the Indicative Placement Price of RM1.00 per Placement Share and the amount is fully credited to the share capital account of in accordance with the Companies Act, 2016 ( Act ) 4.2 Earnings and earnings per share ( EPS ) The Proposal is not expected to have any material effect on the earnings of the Group for the financial year ending 31 December 2017. However, the Placement may result in a corresponding dilution in the Group s EPS due to the increase in the number of in issue. Nevertheless, the utilisation of the proceeds to be raised from the Proposal for repayment of borrowings are expected to contribute positively to the future earnings of the Group. - 3 -
4.3 Net assets ( NA ) and gearing Based on the audited consolidated financial statements of as at 31 December 2015, the proforma effects of the Proposal on the NA per Share and gearing of the Group are as follows:- RM'000 As at 31 December 2015 Audited Proforma I Proforma II Unaudited as at 31 December 2016 After the Proposal Share capital 438,550 438,550 ** 526,260 Share premium 146,687 146,687 *** 145,187 Other reserves 87,238 * 113,769 113,769 Retained earnings 516,381 * 571,311 571,311 Total equity/ NA 1,188,856 1,270,317 1,356,527 Number of ( 000) 877,099 877,099 964,810 NA per Share (RM) 1.36 1.45 1.41 Total borrowings 1,805,191 1,639,402 **** 1,553,192 Gearing (times) 1.52 1.29 *** 1.14 Notes:- * Adjusted for the following completed events up to 31 December 2016 (source : 's unaudited quarterly announced for the 12 months ended 31 December 2016): (c) net increase in other reserves of RM26.53 million arising from foreign currency translation differences for foreign operations and cash flow hedge; unaudited profit for the year of RM54.93 million; and net reduction in total borrowings of RM165.79 million ** Assuming 87,709,993 Placement are issued at the Indicative Placement Price of RM1.00 per Placement Share and the amount is fully credited to the share capital account of in accordance with the Act *** After deducting estimated expenses of RM1.50 million in relation to the Proposal **** The reduction in total borrowings and gearings due to repayment of borrowings from the proceed from the Proposal, details of which are set out in Section 2.6 of this announcement 4.4 Convertible securities does not have any convertible securities. [ The rest of this page is left blank intentionally ] - 4 -
4.5 Substantial shareholders shareholding structure The proforma effects of the Proposal on the shareholdings of the substantial shareholders of as at 31 December 2016 are as follows:- Existing After Proposal Direct Indirect Direct Indirect Substantial Shareholders Naim Holdings Bhd 254,922 29.06 - - 245,922 26.42 - - Datuk Ling Suk Kiong 77,279 8.81 102,727 11.71 77,279 8.01 102,727 10.65 Kumpulan Wang Persaraan (Diperbadankan) 75,025 8.55 8,650 0.99 75,025 7.78 8,650 0.90 Lembaga Tabung Haji 76,368 8.71 1,558 0.18 76,368 7.92 1,558 0.16 Tengku Dato Yusof Bin Tengku Ahmad Shahruddin Vogue Empire Sdn Bhd 65,917 7.52 - - 65,917 6.83 - - 61,218 6.98 - - 61,218 6.35 - - Joe Ling Siew Loung @ Lin Shou Long 41,464 4.73 138,542 15.80 41,464 4.30 138,542 14.36 Datuk Hasmi Bin Hasnan 961 0.11 (c) 254,922 29.06 961 0.10 (c) 254,922 26.42 Datuk Abdul Hamed Bin Sepawi - - (c) 254,922 29.06 - - (c) 254,922 26.42 Wong Siew Hong 45 0.00 (d) 179,961 20.52 45 0.00 (d) 179,961 18.65 Notes: (c) (d) Deemed interested by virtue of the interest of his wife (Wong Siew Hong) and son (Joe Ling Siew Loung @ Lin Shou Long) in the Company pursuant to Section 8 of the Act. Deemed interested by virtue of Section 8 of the Act held through his parent Deemed interested by virtue of Section 8 of the Act held through Naim Holdings Berhad. Deemed interested by virtue of Section 8 of the Act held through Vogue Empire Sdn Bhd, her husband and son. [ The rest of this page is left blank intentionally ] - 5 -
5. APPROVALS REQUIRED The Proposal is conditional upon approvals being obtained from the following:- Bursa Securities for the listing of and quotation for the Placement ; and any other relevant authorities, if required. The shareholders of had passed a resolution at its 10 th AGM convened on 25 May 2016 authorising the Mandate. Such authority shall continue to be in force until the conclusion of s next AGM. Therefore, the Proposal does not require another specific approval from the shareholders of up to the forthcoming 11 th AGM. However, approval will be sought from the shareholders of at the forthcoming 11 th AGM for the renewal of authority for the Directors to allot and issue new not exceeding ten percent (10%) of the total number of issued shares of in accordance with the provision of the Act. The Proposal is not conditional upon any other corporate proposal undertaken or to be undertaken by. 6. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the directors and/or major shareholders of, and/or persons connected to them have any interest, direct or indirect, in the Proposal. 7. DIRECTORS STATEMENT The Board, having considered all aspects of the Proposal, including the rationale, proceed raised and the effects of the Proposal is of the opinion that the Proposal is in the best interest of the Company. 8. APPLICATION TO THE RELEVANT AUTHORITIES Barring any unforeseen circumstances, the application to the relevant authorities in relation to the Proposal will be made within two (2) weeks from the date of this announcement. 9. ESTIMATED TIMEFRAME FOR COMPLETION Subject to the relevant approvals being obtained, the Proposal is expected to be completed by the second ("2nd") quarter of 2017. 10. ADVISER AND PLACEMENT AGENT Kenanga IB has been appointed as the Adviser and Placement Agent for the Proposal. This announcement is dated 24 February 2017. - 6 -