1. INTRODUCTION The Board of Directors of Malton wishes to announce that the Company had on 22 January 2016 entered into a conditional subscription agreement ( SA ) with Memang Perkasa Sdn Bhd ( MPSB ) and Tegap Dinamik Sdn Bhd ( TDSB ) to subscribe for 51,000 new ordinary shares of RM1.00 each ( MPSB Shares ) ( Subscription Shares ) representing 51% of the enlarged issued and share capital of MPSB at an issue price of RM1.00 per MPSB Share for a total cash consideration of RM51,000 ( Proposed Subscription ). TDSB, the existing sole shareholder of MPSB shall concurrently subscribe for 48,990 new MPSB Shares. The shareholding of MPSB upon the completion of the Proposed Subscription is as follows: No. of MPSB Shares (%) TDSB 49,000 49% Malton 51,000 51% 100,000 100% 2. DETAILS OF PROPOSED SUBSCRIPTION 2.1 Information on MPSB MPSB was incorporated in Malaysia as a private limited company under the Companies Act, 1965 on 20 February 1997. The present authorised share capital of MPSB is RM6,000,000 comprising 5,000,000 ordinary shares of RM1.00 each and 10,000,000 preference shares of RM0.01 each, of which 10 ordinary shares and 40,000,000 redeemable preference shares of RM0.01 each ( RPS ) have been issued and fully paid-up. Currently, the existing sole shareholder of MPSB is TDSB, a private limited company incorporated in Malaysia. The existing shareholders and Directors of TDSB are Ahmad Lazri Bin Long Ahmad Zainal Abidin (49%), Rosmanira Binti Jusoh (30%) and Mohd Khairuddin Bin Hj Nawawi (21%). TDSB also holds all the 40,000,000 RPS in MPSB. The RPS shall be mandatorily redeemed by MPSB on 3 December 2025 at RM6.00 per RPS, unless they are early redeemed by MPSB at a price to be fixed by the directors of MPSB after taking into account the return on investment of the RPS holders, subject to a minimum redemption price of RM4.00 per RPS. The principal business of MPSB is property development and it had on 7 April 2014 entered into a Joint Venture Agreement with Yayasan Wilayah Persekutuan ( YWP ) on 7 April 2014 to develop a 12 acre leasehold land held under HS(D) 119599, PT9244 in the Town and District of Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur ( JV Land )( JVA ) into a residential development ( JV Development ) Page 1 of 6
Under the JVA, MPSB has the absolute and exclusive right to carry out the JV Development and is solely responsible for carrying it out at its own costs and expenses all aspects of the JV Development, subject to YWP being entitled to a fixed sum of RM160 million in cash. The audited loss after taxation of MPSB for the financial year ended 31 December 2014 amounted to RM250,428, while the audited net liabilities of MPSB as at 31 December 2014 stood at RM760,113. Upon completion of the Proposed Subscription, MPSB will become a 51%-owned subsidiary company of Malton. 2.2 Basis of Consideration The subscription price of RM1.00 for each Subscription Share was arrived at between Malton and MPSB based on the par value of the MPSB Shares of RM1.00 each. 2.3 Salient Terms of the SA A. Subscription (i) (ii) (iii) MPSB has agreed to issue 51,000 new MPSB Shares at the issue price of RM1.00 ( 51% Subscription Shares ) each to Malton and the remainder 48,990 new MPSB Shares at the issue price of RM1.00 each ( 48.99% Subscription Shares ) to TDSB. Malton and TDSB have agreed to subscribe for the 51% Subscription Shares and 48.99% Subscription Shares respectively in accordance with the terms and conditions of the SA and Articles of Association of MPSB. Subject to the fulfilment of the conditions precedent under the SA, the Subscription Price shall be paid by Malton and TDSB to MPSB on or before the date of completion of the SA. The Subscription Shares to be issued shall be free from any and all mortgages, claims, encumbrances, charges, liens, priorities or options of any nature whatsoever and shall rank pari passu with all other MPSB Shares whereas all other rights attached to the MPSB Shares shall be set out in the Articles of Association of MPSB. Page 2 of 6
B. Conditions Precedent (i) The SA shall be conditional upon the fulfillment of the following conditions precedent ( Conditions Precedent ) within three (3) months from the date of the SA or such extended period as the parties may mutually agree in writing ( Conditional Period ):- (1) the conduct and completion of a legal and financial due diligence review on MPSB, its financial position and the JV Land ( Due Diligence Review ) and the results thereof being to the satisfaction of Malton or deemed satisfactory to Malton; (2) the written consent of YWP to be obtained by MPSB for the change in shareholdings of MPSB ( YWP Approval ) of which has been obtained on 19 January 2016; and (3) any other relevant approvals, if any. (ii) If any of the Conditions Precedent shall have been refused or shall not have been obtained or fulfilled upon the expiry of the Conditional Period, then either party shall have the option to either waive the Conditions Precedent or to terminate the SA by giving written notice to MPSB to terminate the SA and thereafter neither party shall have any claims or actions whatsoever against the other party under or arising from the SA. C. Advances Malton shall advance a sum of not less than RM14,238,690 to MPSB for MPSB to repay 51% of the outstanding shareholder s loan as at the completion date of the SA to TDSB after the completion of the Proposed Subscription. 2.4 Liabilities to be assumed by Malton There is no liability, including contingent liability and guarantee, to be assumed by Malton pursuant to the Proposed Subscription, except for Malton s commitment to advance a sum of RM14,238,690 to MPSB for purpose of repayment of 51% of the existing shareholders advances. 2.5 Source of funding The Proposed Subscription would be funded by internally generated funds of Malton. Page 3 of 6
3. RATIONALE & PROSPECTS The Proposed Subscription would enable Malton to participate directly in the development potential of the JV Land which is located adjacent to Taman Tun Dr. Ismail and the Kuala Lumpur Golf and Country Club. MPSB has received an approval in-principle for the development of the JV Land into a residential project comprising 1,804 units of serviced apartments together with 350 units of affordable apartments. The development is expected to generate gross development value in excess of RM3.0 billion over the next seven (7) years of development period. 4. RISK FACTORS The risk factors associated with the Proposed Subscription are as follows:- 4.1 Business risks Pursuant to the Proposed Subscription, the Group will be exposed to certain risks inherent in the development of the JV Land, in which the Group is already presently exposed. These risks include but are not limited to changes in general economic conditions, changes in construction costs, availability of construction materials and labour, delay in construction delivery, changes in property market conditions, changes in demand and supply of residential properties, increased competition from residential projects in the vicinity and changes in credit and interest rate levels. In addition, Malton may also be exposed to the risk of MPSB being unable to fulfil its obligations under the JVA which may potentially result in termination of the JVA and loss of MPSB s development rights over the JV Land. 4.2 Non-completion risk The completion of the Proposed Subscription is conditional upon the conditions precedent of the SA being fulfilled and/or waived by the completion date. There can be no assurance that the conditions precedent will be fulfilled and/or waived. 5. FINANCIAL EFFECTS 5.1 Share Capital and Substantial Shareholders Shareholdings The Proposed Subscription will not have any effects on the issued and paid-up share capital of the Company and the shareholdings of the substantial shareholders of the Company. Page 4 of 6
5.2 Net Assets & Gearing The Proposed Subscription will not have any material effects on the net assets and gearing of the Group. 5.3 Earnings The Proposed Subscription will not have any material impact on the earnings of the Group for the financial year ending 30 June 2016 as the JV Development is still in early stage of development. Nevertheless, in the longer term, the Proposed Subscription is expected to contribute positively to the future earnings of the Group. 6. APPROVALS REQUIRED The Proposed Subscription is conditional upon the consent of YWP being obtained for the proposed changes in shareholdings in MPSB pursuant to the Proposed Subscription, which has been obtained on 19 January 2016. Other than the above, the Proposed Subscription is not subject to the approval of the shareholders of the Company and/or other regulatory bodies. 7. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the directors and/or major shareholders of the Company and/or persons connected to them have any interest, direct or indirect, in the Proposed Subscription. 8. STATEMENT BY DIRECTORS The Directors of the Company having considered the terms and conditions, rationale and all aspects of the Proposed Subscription, are of the opinion that the Proposed Subscription is in the best interest of the Company and the Group. 9. OTHER MATTERS 9.1 Estimated timeframe for completion The Proposed Subscription is expected to be completed by the end of January 2016. 9.2 Percentage Ratio The highest percentage ratio applicable to the Proposed Subscription pursuant to paragraph 10.02(g) Chapter 10 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 2.16%. Page 5 of 6
9.3 Documents available for inspection A copy of the SA is available for inspection at the registered office of Malton at 19-0, Level 19, Pavilion Tower, 75 Jalan Raja Chulan, 50200 Kuala Lumpur during normal office 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 22 January 2016 Page 6 of 6