JAKS RESOURCES BERHAD ( JRB OR COMPANY ) PROPOSED PRIVATE PLACEMENT OF UP TO 43,836,100 NEW ORDINARY SHARES OF JRB REPRESENTING APPROXIMATELY 10% OF THE EXISTING TOTAL NUMBER OF ISSUED SHARES OF JRB ( PROPOSED PRIVATE PLACEMENT ) 1. INTRODUCTION On behalf of the Board of Directors of JRB ( Board ), Kenanga Investment Bank Berhad ( Kenanga IB ) is pleased to announce that the Company proposes to undertake the Proposed Private Placement. Further details of the Proposed Private Placement are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED PRIVATE PLACEMENT The Proposed Private Placement would involve the issuance of up to 43,836,100 new ordinary shares in JRB ( JRB Share(s) ) ( Placement Share(s) ), representing approximately 10% of the existing total number of issued shares of the Company, at an issue price to be determined and announced later. The Company intents to place out the Placement to third party investor(s) to be identified at a later date, under the existing general mandate pursuant to Section 132D of the Companies Act, 1965 ( CA 1965 ) ( General Mandate ) which was approved by the shareholders of JRB at the Company s 14 th Annual General Meeting ( AGM ) convened on 28 June 2016. The current General Mandate which is valid until the next AGM empowers the Board to allot and issue new JRB at any time upon such terms and conditions and for such purposes as the Board may, in its absolute discretion, deem fit provided that the aggregate number of JRB to be issued pursuant to the General Mandate does not exceed 10% of the total number of issued share of the Company. As at 20 February 2017, being the latest practicable date prior to the date of this Announcement ( LPD ), the share capital of JRB is RM438,361,072 comprising 438,361,072 JRB. Although the Company has implemented a long-term incentive plan ( LTIP ) of up to 65,754,160 new JRB to be issued pursuant to the LTIP ( LTIP ) on 5 July 2016, for a duration of up to 5 years, no LTIP has been granted to the eligible persons under the LTIP. The committee appointed by the Board to administer the scheme in accordance to the LTIP By-Laws confirms that no LTIP will be granted prior to the implementation of the Proposed Private Placement. Accordingly, a total of up to 43,836,100 Placement may be issued in relation to the Proposed Private Placement. 2.1. Placement arrangement The Placement are intended to be placed out to third party investor(s) to be identified at a later date and who qualify under Schedules 6 and 7 of the Capital Markets and Services Act 2007. In addition, the Placement are not intended to be placed out to the following parties: (i) (ii) the director, major shareholder or chief executive of JRB or any interested person connected with such director, major shareholder or chief executive; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. 1
The Proposed Private Placement may be implemented in tranches within 6 months from the date of the approval of Bursa Malaysia Securities Berhad ( Bursa Securities ) for the Proposed Private Placement or any extended period as may be approved by Bursa Securities, subject to the prevailing market conditions and validity of the existing General Mandate or a new mandate being obtained from shareholders of JRB, as the case may be. The final issue price for each tranche of the Placement shall be determined separately in accordance with market-based principles. 2.2. Basis and justification of arriving at the issue price of the Placement The issue price of each tranche of the Placement, where applicable, shall be determined separately and fixed by the Company and announced at a later date following the receipt of all relevant approvals for the Proposed Private Placement ( Price-Fixing Date ) based on the volume weighted average market price ( VWAMP ) of JRB for the 5 market days immediately prior to the Price-Fixing Date, with a discount of not more than 10%. For illustrative purposes, the 5-day VWAMP of JRB up to and including 24 February 2017 is RM1.33 per JRB Share. The illustrative issue price of RM1.20 per Placement Share represents a discount of not more than 10% to the 5-day VWAMP of JRB. 2.3. Ranking of the Placement The Placement shall, upon allotment and issue, rank pari passu in all respects with the existing JRB, save and except that the holder of the Placement will not be entitled to any dividends, rights, allotments and/ or any other distributions that may be declared, made or paid to shareholders, the entitlement date of which is prior to the date of allotment of the Placement, as the case may be. 2.4. Listing of the Placement An application will be made to Bursa Securities for the listing of and quotation for the Placement to be issued pursuant to the Proposed Private Placement on the Main Market of Bursa Securities. (The rest of this page has been intentionally left blank) 2
2.5. Utilisation of proceeds The quantum of proceeds to be raised by the Company pursuant to the Proposed Private Placement would depend on the actual number and issue price of the Placement. For illustrative purposes, the Proposed Private Placement may raise gross proceeds of approximately RM52.60 million assuming the Placement are placed out at an issued price of RM1.20 per Placement Share. The proceeds raised are proposed to be utilised as follows: Proposed utilisation of proceeds Notes RM 000 % Timeframe for utilisation * On-going projects undertaken by JRB and its subsidiaries ( JRB Group or Group ) (1) 34,000 64.64 Within 12 months Working capital (2) 17,312 32.91 Within 6 months Estimated expenses relating to the Proposed Private Placement Total gross proceeds raised from the Proposed Private Placement (3) 1,291 2.45 Within 3 months 52,603 100.00 Notes: * From the date of completion of the Proposed Private Placement. (1) The Group intends to utilise approximately RM34.00 million to part finance the construction cost such as payments to suppliers and contractors and other general expenses. Details of the on-going projects are as follows: (a) Project Pacific 63 consisting of a single block of 21-storey-office units in Section 13, Petaling Jaya which was awarded by Pacific Place Land Sdn Bhd for a contract amount of approximately RM70 million. The Project Pacific 63 is expected to be completed in the 2 nd quarter 2017. (b) Project Pacific Star is a mixed development project located in Section 13, Petaling Jaya consisting of 5 blocks of residential units and commercial space with a gross development value of approximately RM1.1 billion. The project is expected to be completed in the 1 st quarter 2018. (2) The Group intends to utilise approximately RM17.31 million for the Group s business operations comprising payment for the Group s general and other operating expenses such as quit rent, utilities, finance costs and other administrative and office expenses. For efficient use of funds, the Company may use the aforesaid proceeds allocated to repay its bank overdraft facilities pending the utilisation of the proceeds for working capital. Assuming that the bank overdraft facilities are drawn down on the 6 th month from repayment, the Company may save approximately RM0.73 million computed based on the effective interest of the Group s bank overdraft of approximately 8.40% per annum. (3) The estimated expenses consist of professional fees, fees payable to authorities, placement fee and other miscellaneous expenses to be incurred in relation to the Proposed Private Placement. Any variation to the amount of estimated expenses in relation to the Proposed Private Placement will be reallocated to/ from working capital. 3
3. RATIONALE FOR THE PROPOSED PRIVATE PLACEMENT The Proposed Private Placement will enable the Company to raise funds primarily for the ongoing projects and working capital, as set out in Section 2.5 of this Announcement. The Board is of the view the Proposed Private Placement is the most appropriate avenue to raise funds for JRB Group premised on the following reasons: (i) (ii) (iii) (iv) Enable the Group to raise funds expeditiously and cost effectively as compared to other fund raising exercises involving a pro-rata issuance of securities such as a rights issue; Allow the Group to raise funds without incurring interest expenses as compared to borrowings; The issuance of shares under a rights issue exercise usually requires higher discount to the prevailing market price as compared to an issuance of shares under a private placement exercise; and Improve the liquidity and financial flexibility of the Group by strengthening its financial position. 4. FINANCIAL EFFECTS OF THE PROPOSED PRIVATE PLACEMENT Based on the record of depositors as at the LPD, the issued share capital of JRB stood at RM438,361,072 comprising 438,361,072 JRB. The effects of the Proposed Private Placement on the share capital of the Company, net assets attributable to the equity holders of the Company ( NA ), NA per Share and gearing of the Group and shareholdings of the Company s substantial shareholders are set out in the following manner: 4.1. Issued share capital The pro forma effects of the Proposed Private Placement on the total number of issued shares of the Company are as follows: No. of JRB RM Share capital as at the LPD 438,361,072 438,361,072 To be issued in relation to the Proposed Private Placement 43,836,100 (1) 52,603,320 Enlarged share capital 482,197,172 490,964,392 Note: (1) Assuming 43,836,100 Placement are issued at an illustrative issue price of RM1.20 per Share and the amount is fully credited to the share capital account in accordance with the Companies Act 2016 ( CA 2016 ). 4
4.2. NA and gearing For illustrative purposes, the pro forma effects of the Proposed Private Placement on the consolidated NA per JRB Share and gearing of the JRB Group based on the audited consolidated statement of financial position of the JRB Group as at 31 December 2015 are as follows: Audited as at 31 December 2015 RM 000 After the Proposed Private Placement RM 000 Share capital 438,361 (1) 490,964 Share premium 8,369 8,369 Retained profits 54,383 (2) 53,092 Shareholders equity/ NA 501,113 552,425 No. of JRB ( 000) 438,361 482,197 NA per JRB Share (RM) 1.14 1.15 Total borrowings 556,562 556,562 Gearing (times) 1.11 1.01 Notes: (1) Assuming 43,836,100 Placement are issued at an illustrative issue price of RM1.20 per Share and the amount is fully credited to the share capital account in accordance with the CA 2016. (2) After deducting estimated expenses of approximately RM1.29 million which consist of professional fees, fees payable to authorities, placement fee and other miscellaneous expenses to be incurred in relation to the Proposed Private Placement. 4.3. Earnings and earnings per share ( EPS ) The effect of the Proposed Private Placement on the future earnings and EPS of JRB cannot be ascertained at this juncture as it would depend on, among others, the actual issue price of the Placement and the future earnings of JRB. The Proposed Private Placement is not expected to have any immediate material effect on the consolidated earnings of JRB for the financial year ending 31 December 2017, save for the dilution in EPS as a result of the increase in the number of JRB to be issued pursuant to the Proposed Private Placement. Nevertheless, barring unforeseen circumstances, the Proposed Private Placement is expected to contribute positively to the future earnings of the Group when the benefits of utilisation of proceeds (as set out in Section 2.5 of this Announcement) are realised. (The rest of this page has been intentionally left blank) 5
4.4. Substantial shareholders shareholdings The pro forma effects of the Proposed Private Placement on the substantial shareholders shareholdings in the Company based on the Register of Substantial Shareholders of the Company as at the LPD are as follows: Substantial shareholders As at the LPD (1) After the Proposed Private Placement (2) Direct Indirect Direct Indirect No. of % No. of % No. of % No. of % Ang Lam Poah 38,147,902 8.70 - - 38,147,902 7.91 - - Original Invention Sdn Bhd 26,121,000 5.96 - - 26,121,000 5.42 - - Dato Razali Merican Bin Naina Merican - - (3) 26,121,000 5.96 - - (3) 26,121,000 5.42 Notes: (1) Based on the existing total number of issued share of the Company of 438,361,072 JRB as at the LPD. (2) Based on the enlarged share capital of the Company of 482,197,172 JRB after the Proposed Private Placement. (3) Deemed interested by virtue of his substantial shareholdings in Original Invention Sdn Bhd pursuant to Section 8 of the CA 2016. 4.5. Convertible securities Save for the LTIP to be issued pursuant to the LTIP, the Company does not have any other outstanding convertible security as at the LPD. 5. APPROVALS REQUIRED The Proposed Private Placement is subject to the approvals being obtained from the following: (i) (ii) Bursa Securities for the listing of and quotation for the Placement to be issued pursuant to the Proposed Private Placement on the Main Market of Bursa Securities; and any other relevant authorities, if required. The Company had obtained the approval of its shareholders at the last AGM convened on 28 June 2016 pursuant to Section 132D of the CA 1965 that authorises the Board to issue new JRB from time to time upon such terms and conditions and for such purposes as the Board may deem fit provided that the aggregate number of JRB to be issued does not exceed 10% of the total number of issued shares of JRB. The said approval is valid until the next AGM. In the event that the Proposed Private Placement is not completed by the time of the Company s forthcoming 15 th AGM, the Company will procure the approval of its shareholders for a new general mandate pursuant to Section 75 of the CA 2016. 6. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors, major shareholders and/ or persons connected with the Directors and/ or major shareholders of JRB have any interest, directly or indirectly, in the Proposed Private Placement. 6
7. DIRECTORS STATEMENT After taking into consideration all aspects of the Proposed Private Placement, the Board is of the opinion that the Proposed Private Placement is in the best interest of the Company and its shareholders. 8. ADVISER AND PLACEMENT AGENT The Board has appointed Kenanga IB as the Adviser and the placement agent for the Proposed Private Placement. 9. APPLICATION TO THE RELEVANT AUTHORITIES Barring any unforeseen circumstances, the application to Bursa Securities in relation to the Proposed Private Placement is expected to be made within 1 month from the date of this Announcement. 10. ESTIMATED TIME FRAME FOR COMPLETION Subject to the relevant approvals being obtained and barring any unforeseen circumstances, the Proposed Private Placement is expected to be completed by the 3 rd quarter 2017. This Announcement is dated 27 February 2017. 7