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NAIM INDAH CORPORATION BERHAD (“NICORP” OR THE “COMPANY”)

- PROPOSED AWARD;

- PROPOSED DIVERSIFICATION; AND

- PROPOSED SIS

(COLLECTIVELY KNOWN AS “PROPOSALS”)

1. INTRODUCTION

On behalf of the Board of Directors of NICORP (“Board”), TA Securities Holdings Berhad (“TA Securities”) wishes to announce that the Company had, on 11 February 2015, accepted a Letter of Award (“LOA”) for the role of project management consultant (“PMC”) for the mixed commercial development consisting of duplex shop office, hotel tower, anchor lot, cineplex and related external works at Lot 6879-6890 and 10293-10304, Mukim Klang, Daerah Klang, Selangor Darul Ehsan (“Gateway Klang project”) from Lagenda Erajuta Sdn Bhd (“Lagenda”) (“Proposed Award”).

In conjunction with the Proposed Award, the Company proposes to undertake a proposed diversification of the business of NICORP and its subsidiaries (“NICORP Group” or “Group”) to include construction, property investment, project management and renewable energy (“Proposed Diversification”).

Pursuant to Paragraph 10.08 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing Requirements”), in view of the interest of certain directors (including a former director of NICORP within the preceding six (6) months of the dates of the LOA, the Proposed Award is deemed to be a related party transaction. Refer to Section 10.1 of this announcement for further details of the interested directors to the Proposed Award.

In addition, the Company proposes to establish and implement a share issuance scheme of up to 15% of the Company’s issued and paid-up share capital (excluding treasury shares, if any) at any one time during the duration of the scheme (“Proposed SIS” or “Scheme”).

The Proposed Award, Proposed Diversification and Proposed SIS are collectively referred to as the “Proposals” hereinafter. Further details of the Proposals are set out in ensuing sections.

2. DETAILS OF THE PROPOSALS

2.1. Proposed Award

The Proposed Award would provide an opportunity for NICORP to participate in potentially visible development projects and potential foray in the property market in Klang, considering that Lagenda is the developer for the Gateway Klang project. The Board was also of the opinion that the Proposed Award will offer good mileage for the NICORP Group in the long term given that the Gateway Klang project is a major property project and is located in the prime area of Klang, Selangor.

The Group is principally engaged in the business of property development and logging and selling round end timber logs, leasing and renting of property as well as trading of building materials. The Proposed Award will potentially provide NICORP with an additional stream of revenue and will also increase the Group’s earnings base.

The value of the LOA is 4.0% of the gross development cost (“GDC”) of the Gateway Klang project. For illustration purposes, based on the preliminary estimated GDC of RM450.0 million, the value of the LOA is estimated to be RM18.0 million. Billings will be based on certificate of completion which is estimated to complete in financial year ending 31 December (“FYE”) 2017.

Please refer to the ensuing sections for further details in relation to Lagenda and the LOA.

2.1.1. Information on Lagenda

Lagenda was incorporated in Malaysia as a private limited company under the Companies Act, 1965 (“Act”) on 29 June 2010. As at the date of this announcement, Lagenda’s issued and paid-up share capital is RM2,000,000 comprising 2,000,000 fully paid-up ordinary shares of RM1.00 each. It is primarily engaged in property development and is a subsidiary of Sagajuta (Sabah) Sdn Bhd (“Sagajuta”).

Lagenda is the developer for the Gateway Klang project. A privatisation agreement was entered into between Lagenda and Port Kelang Authority (“PKA”) dated 2 August 2012 (“Privatisation Agreement”) whereby PKA had appointed Lagenda as the developer for the Gateway Klang project. Lagenda had obtained development order for the Gateway Klang project on 16 August 2012.

The directors of Lagenda are Dato’ Lim Thiam Huat, Datuk Raymond Chan Boon Siew (“DRCBS”) and Dato’ Siaw Swee Hin (“DSSH”).

The shareholders and their respective shareholdings of Lagenda are set out below:

 

No. of shares

%

Sagajuta Titan Formation Sdn Bhd (“Titan”) Total

1,700,000

85.0

300,000

15.0

2,000,000

100.0

DRCBS is also a director and shareholder of Sagajuta with a shareholding of 8.71% held in Sagajuta while DSSH is a shareholder of Titan with a shareholding of 13.33% held in Titan.

Hence, DRCBS and DSSH effectively hold 7.40% and 2.00% respectively of the shareholdings in Lagenda.

2.1.2. Details of the LOA and the Gateway Klang project

The scope of works of NICORP pursuant to the Proposed Award comprises project and construction management, general management and on-site staff, cost control, planning and scheduling, procurement, site quality control, commissioning, and manuals and training.

As stated in Section 1, the Gateway Klang project is a mixed commercial development consisting of duplex shop office, hotel tower, anchor lot and cineplex with a gross floor area of approximately 2.33 million square feet. As at the date of this announcement, piling works are being carried out at the Gateway Klang project. The Gateway Klang project, which commenced on 1 May 2014, had reached a percentage of completion of 6.10% as at 31 January 2015. The Gateway Klang project is expected to be completed by May 2017.

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2.2.

Proposed Diversification

The Group is principally engaged in the business of property development and logging and selling round end timber logs, leasing and renting of property as well as trading of building materials.

The Gateway Klang project provides a business opportunity for NICORP to diversify into project management business. Based on the preliminary estimated GDC of RM450.0 million where NICORP’s total PMC fee is estimated to be RM18.0 million over a period of 28 months, the Board anticipates that the Group’s venture into project management may contribute 25% or more of the net profit of the Group in the future from this project. In addition, the Board intends to diversify into the renewable energy business moving forward. Refer to Section 6.5 herein for further details. The Board also anticipates that construction, property development, property investment, project management and renewable energy activities will be major contributors to the Group’s future earnings.

Pursuant to paragraph 10.13(1) of the Listing Requirements, a listed issuer must obtain its shareholders’ approval in a general meeting for any transaction or business arrangement which might reasonably be expected to result in either:

(a)

the diversion of 25% or more of the net assets (“NA”) of the listed issuer to an operation which differs widely from those operations previously carried on by the listed issuer; or

(b)

the contribution from such an operation of 25% or more of the net profits of the listed issuer.

The diversification into construction includes the construction of infrastructure such as piping in the oil and gas industry, property investment, project management and renewable energy.

NICORP is exploring opportunities in the renewable energy industry, specifically in the manufacturing of palm biomass pellet from empty fruit bunch (“EFB”). The palm biomass pellet is an ideal green fuel which substitute conventional fossil fuels such as coal and diesel and hence can be used in furnace and foundries, power plant, and industrial boilers and burners.

In addition, the Company, which is currently involved in the trading of building materials, is looking into the trading of oil and gas products.

With the proposed diversification by the Group into construction, property investment, project management and renewable energy being approved by the shareholders at an extraordinary general meeting (“EGM”) to be held, the Group may be subjected to new challenges and risks arising from the Proposed Diversification which are set out in Section 4 of this announcement.

Nevertheless, certain Directors and key management of the Group have been involved in the construction, property investment and project management services. DSSH, the Managing Director/Group Chief Executive Officer of NICORP, has been involved in the construction and property development industry since 2006, having handled previous projects such as 1 Borneo Hypermall in Sabah. Ir. Lok Wung Yip, a senior Project Director in NICORP, and Chan Kok Leong, a Project Manager in NICORP, have more than 18 years’ experiences in the construction and property development sectors. Hud bin Abu Bakar, a Non-Independent Executive Director in NICORP, is equipped with more than 25 years of experiences in the architecture field. Cheang Soon Siang, a Non-

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Independent Executive Director in NICORP, has more than 20 years’ experience in banking and financial services. Dato’ Abdel Aziz @ Abdul Aziz bin Abu Bakar, a Non- Independent Executive Director as well as Chairman of NICORP, is equipped with a vast experience and knowledge in corporate companies, having spent 14 years on the Board of Airasia Berhad and hence would be able to provide his management expertise and skills in assisting the Group in the development and strategies in moving the Group to a higher level.

With the experiences of these Directors, coupled with the Board’s intention to further engage experience management team or joint venture partner to manage the respective business, the Group is confident of attaining the required expertise in running the business.

The Board believes that the Group has the capacity, capabilities and resources to diversify into construction, property investment and project management services after taking into consideration the competency and experience of the directors who have been involved in the construction, property development, property investment and project management as mentioned above as well as the assistance from external consultants (namely, the architects, engineers, surveyors, subcontractors and other consultants). Accordingly, they are well-positioned to provide business acumen and skills in property development which will be beneficial to the Group moving forward in relation to the Proposed Diversification.

As the manufacture of biomass is a new area of venture for the Group, the Group may not have the required capabilities, capacity and resources to run the operations efficiently. The Group will seek to limit this shortfall by seeking advice from various experts and its joint venture partner, if any, and intends to recruit experienced management team to drive the biomass manufacturing division, once the opportunity arises.

2.3. Proposed SIS

The Proposed SIS will involve the granting of options to subscribe for new NICORP Shares (“SIS Options”) to eligible Directors and employees of the NICORP Group (excluding dormant subsidiaries) who meet the criteria for eligibility for participation in the Proposed SIS (“Eligible Persons”), to subscribe for new NICORP Shares in accordance with the by-laws of the Proposed SIS (“By-Laws”).

The Proposed SIS will be administered by a committee to be duly appointed and authorized by the Board (“Scheme Committee”). The decision as to whether or not to stagger the allocation of the SIS Options over the duration of the Proposed SIS will be determined by the Scheme Committee at a later date.

The salient terms and conditions of the Proposed SIS are as follows:

2.3.1. Maximum number of new NICORP Shares available under the Proposed SIS

The maximum number of new NICORP Shares to be offered and issued under the Proposed SIS (“SIS Shares”) shall not be more than in aggregate 15% of the issued and paid-up share capital of NICORP (excluding treasury shares, if any) at any point in time during the duration of the Proposed SIS, as provided by the By-Laws.

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2.3.2.

Maximum allowable allotment of SIS Shares and basis of allocation

The total number of new NICORP Shares comprised in the SIS Options that may be offered and allocated to Eligible Persons shall be determined at the sole and absolute discretion of the Scheme Committee after taking into consideration, amongst others, the performance, position, annual appraised performance, seniority and length of service of the Eligible Person, and such other factors that the Scheme Committee may in its sole and absolute discretion deem fit, subject to the following:

(i)

that the number of SIS Options made available under the Scheme shall not exceed the amount stipulated in Section 2.3.1 above; and

(ii)

the allocation to any individual Eligible Person to whom an Offer (as defined below) is being made pursuant to the By-Laws (“Selected Person”) who, either singly or collectively through persons connected with him (as defined in the Listing Requirements), holds 20% or more in the issued and paid-up share capital of NICORP (excluding treasury shares, if any) does not exceed 10% of the SIS Shares available under the Scheme at any point in time when an Offer is made; and

(iii)

the Directors and employees of the Group do not participate in the voting, deliberation or discussion of their own allocation of SIS Options under the Proposed SIS,

provided always that the basis of allocation is in accordance with any prevailing guidelines, rules, regulations or requirements issued by Bursa Securities, the Listing Requirements or any other requirements of the relevant authorities and as amended from time to time issued by any other relevant authorities.

The actual number of NICORP Shares which may be offered to any Eligible Person shall be at the discretion of the Scheme Committee provided that the number of NICORP Shares so offered shall not be less than 100 NICORP Shares nor more than the maximum allowable allocation of such Eligible Person and shall be in multiples of 100 NICORP Shares (or in any other denomination as may be prescribed by Bursa Securities as a board lot).

2.3.3. Eligibility

Any Director or employee of the Group shall be eligible to participate in the Proposed SIS and qualify for selection by the Scheme Committee, if, as at the date of the offer of the SIS Options (“Date of Offer”), where applicable:

(i)

such Director or employee has attained the age of eighteen (18) years of age and is not an undischarged bankrupt nor subject to any bankruptcy proceedings;

(ii)

such employee has been employed on a full time basis and is on the payroll of any corporation within the Group and his employment has been confirmed or such employee is serving in a specific designation under an employment contract for a fixed duration of at least one (1) year;

(iii)

such Director has been appointed as a Director of NICORP or any company in the Group;

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(iv)

such Director or employee is not a participant of any other employee share option scheme implemented by any company within the Group which is in force for the time being; and

(v) has fulfilled any other eligibility criteria and/or falls within such grade/category as may be determined by the Scheme Committee at its sole discretion from time to time,

provided that nothing shall invalidate any selection of any Eligible Person which may have been made by the Board on or prior to the Effective Date (as defined below) of the Proposed SIS. For the avoidance of doubt, the Scheme Committee may determine any other eligibility criteria and/or waive any of the conditions of eligibility as set out above, for purposes of selecting an Eligible Person at any time and from time to time, in the Scheme Committee’s discretion.

Eligibility does not confer on an Eligible Person a claim or right to participate in the Proposed SIS unless an offer has been made in writing by the Scheme Committee to the Eligible Person (“Offer”) and the Eligible Person has accepted the Offer in accordance with the provisions of the By-Laws.

No Offers may be granted to any person who is a director, a major shareholder, chief executive of NICORP, or a person connected with a director, major shareholder or chief executive of NICORP, unless the specific grant of that Offer to that person shall have previously been approved by the shareholders of the NICORP in a general meeting.

Subject to the By-Laws, there are no performance targets to be achieved by the Eligible Person who has accepted the Offer in accordance with the By-Laws (“Grantee”) before the SIS Options can be exercised and the NICORP Shares can be vested on the Grantee.

2.3.4. Exercise price

Subject to any adjustments made under the By-Laws and pursuant to the Listing Requirements, the price at which the Grantee is entitled to subscribe for each SIS Shares pursuant to the exercise of an Offer (“Exercise Price”), is to be determined by the Board upon recommendation of the Scheme Committee based on:

(i)

the five (5) day weighted average market price of NICORP Shares immediately preceding the Date of Offer of the SIS Option, with a potential discount of not more than 10% or other percentage of discount in accordance with any prevailing guidelines, rules or regulations issued by Bursa Securities or any other relevant authorities as may be amended from time to time during the duration of the Proposed SIS; or

(ii)

at the par value of NICORP Shares (or such other par value as may be permitted by the Act),

whichever is higher.

2.3.5. Ranking of and rights of the SIS Shares

The SIS Shares to be allotted and issued upon any exercise of the SIS Options shall upon allotment and issuance, rank pari passu in all respects with the then existing NICORP Shares except that the new SIS Shares so issued will not be

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entitled to any dividends, rights, allotments and/or other distributions provided that the entitlement date is prior to the date of which the new SIS Shares are credited into the central depository system accounts (“CDS Accounts”) of the Grantee.

The Grantees will not be entitled to any dividends, rights, allotments and/or other distributions until and unless such Grantees exercise their SIS Options into new NICORP Shares and such new NICORP Shares are credited into the Grantees’ respective CDS Accounts.

The new NICORP Shares allotted and credited into the CDS Accounts would also carry rights to vote at any general meeting of NICORP provided that the shareholder is registered on the entitlement date as at the close of business to be entitled to attend and vote at the general meeting.

The new NICORP Shares shall be subjected to all the provisions of the articles of association of NICORP in relation to their issuance and allotment, transfer, transmission or otherwise.

2.3.6. Duration of the Proposed SIS

The Proposed SIS shall be in force for a period of five (5) years commencing from the effective date of the implementation of the Proposed SIS, which shall be the date of compliance with all relevant requirements pursuant to the Listing Requirements in relation to the Proposed SIS (“Effective Date”).

2.3.7. Retention period

The SIS Shares allotted and issued to the Grantee pursuant to the exercise of an SIS Option under the Proposed SIS may be subjected to any retention period at the discretion of the Scheme Committee.

An eligible non-executive Director shall not sell, transfer or assign the NICORP Shares obtained through the exercise of his SIS Options offered to him pursuant to the Proposed SIS within one (1) year from the Date of Offer of such SIS Options.

2.3.8. Listing of and quotation for the SIS Shares

An application will be made to Bursa Securities for the listing of and quotation for the SIS Shares on the Main Market of Bursa Securities within two (2) months from the date of this announcement.

3. UTILISATION OF PROCEEDS

The proceeds arising from the exercise of the SIS Options will be utilised for working capital purposes of the Group as and when the SIS Options are exercised and the proceeds are received throughout the duration of the Proposed SIS, as the Board may deem fit. However, the amount of proceeds arising from the exercise of the SIS Options cannot be determined at this juncture as these will depend on, amongst others, the number of SIS Options granted and exercised at the relevant point in time and the Exercise Price.

The proceeds to be utilised for each component of working capital are subject to the operating requirements at the time of utilization and therefore cannot be determined at this juncture. The proceeds are expected to be utilised within two (2) years from the receipt of proceeds from the exercise of the SIS Options.

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4.

RATIONALE FOR THE PROPOSALS

4.1. Proposed Award

The Proposed Award presents an opportunity for NICORP to venture into project management business for a major property development project located in the prime location in Klang, which is in proximity to many commercial amenities and future developments that sets to elevate the value and lifestyle of the area.

The Proposed Award is expected to provide the Group with additional source of income for the next two (2) financial years and the income generated from the PMC is in turn expected to contribute positively to the future earnings of the Group.

The Proposed Award represents an opportunity for the Group to expand the core business of the Group which contributes to its earnings. The terms of the LOA were negotiated on arm’s length and commercial basis subjected to due process and evaluation undertaken by Non-Interested Directors and management of NICORP.

4.2. Proposed Diversification

The proposed diversification of the Group into construction, property investment, project management and renewable energy is part of the Group’s long term strategy of diversifying into other industries with strong growth prospects instead of presently depending solely on its business in timber logging where revenue has been declining although there were pockets of earnings in the past from the property development activities. In view of the lackluster performance of the current business segments, the Group intends to diversify and expand its business activities to enhance its prospects through the property development and the Proposed Diversification. The Board is of the opinion that the expansion into property development and the diversification into other industries will provide more stable earnings for the Group in the future while capitalising on the experiences of the Directors and key management team.

The Board believes that the Proposed Diversification would contribute positively to its future earnings and improve the financial position of the Group. The additional revenue contribution from construction, property investment and project management and renewable energy activities will provide the Group with additional streams of earnings which is expected to enhance the Group’s profitability and returns on shareholders’ fund.

Notwithstanding that the Group does not have any immediate construction, property investment and project management activities in the pipeline other than the Proposed Award, the Proposed Award will provide a platform for the Group to establish its credentials in the project management business, and open up new opportunities for the Group. With this readily available approval for the Proposed Diversification, the Group is able to capitalize on the opportunities in those sectors since time is of the essence in terms of securing viable business opportunities.

In view of the requirements under Paragraph 10.13(1) of the Listing Requirements, the Proposed Diversification becomes a necessary consequence of the Group’s decision to carry out the Proposed Award as the Board believes that, barring any unforeseen circumstances, the Proposed Award is reasonably expected to contribute 25% or more of the net profits of the Group and may result in a diversion of more than 25% of the net assets of the Group to the project management business.

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4.3.

Proposed SIS

The Proposed SIS is intended to achieve the following objectives:

(i)

to recognise and reward the contributions and services of the Eligible Person that are considered vital to the operation and continued growth of the NICORP Group;

(ii)

to align the interests of the Eligible Person through the Proposed SIS to focus on long-term financial performance and the shareholdersvalue enhancement via equity participation;

(iii)

to create a sense of belonging and ownership amongst the Eligible Person as they will be able to participate directly in the future growth of the Group;

(iv)

to serve as an alternative form of employee remuneration which does not result in cash outflow for the Group but instead allows for fund-raising upon exercise of the SIS Options by the Eligible Person; and

(v)

to attract and retain high calibre Eligible Person, hence ensuring that the loss of key personnel is kept to a minimum level.

The Proposed SIS is also extended to the eligible non-executive Directors of the Group (excluding dormant subsidiaries, if any). The Proposed SIS serves as a tool to recognise their contributions relating to their oversight responsibilities as independent members to the respective board and/or board committees, which are considered vital to the governance of the Group.

5. RISK FACTORS

The potential risk factors relating to the Proposals, which may not be exhaustive, are as follows:

5.1. Diversification risk

The Group is principally engaged in the business of property development, logging and selling round end timber logs, leasing and renting of property as well as trading of building materials. The undertaking of the Proposed Diversification would expose the Group to new challenges and risks arising from construction, property investment, project management and renewable energy industry in which the Group has no prior experience.

The new challenges and risks includes securing the services of competent professionals such as architects, surveyors, engineers, formulating effective marketing and sales strategies forming an effective project team to oversee and manage the development and construction project. As for the manufacturing of palm biomass pellet, the Company will face technical and management challenges as the Company does not have any track record to ensure the success of the manufacturing of palm biomass pellet.

In light of this, NICORP will endeavor to take necessary steps to ensure proper planning is in place and that each project is managed closely by experienced personnel. The Group also seeks to leverage on the competencies and experiences of the Directors and key management who have been involved in the construction and project management services and to recruit professionals with relevant experience to complement existing team members. As for the renewable energy industry, the Company intends to recruit experts and technical personnel with relevant experience to oversee this division.

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5.2.

Competition risk

The Group will face direct competition from both new entrants and existing players in construction, property investment, project management and renewable energy industries. The Group may also face further challenges as a new entrant in those industries as it lacks the relevant track record and brand name as compared to existing players who enjoy the privilege of their established brand name and reputation in the abovementioned industries. The Group’s competitiveness will largely depend on the ability of its management to secure strategically located land-bank for development and construction, supply of labour and building materials as well as to price its products competitively, to ensure the quality provided and timely delivery of development and to sell its properties. As for renewable energy, the Company will endeavor to carefully select its future joint venture partner, if any, to ensure the joint venture partner is capable and is equipped with the relevant experience.

Nevertheless, the Group seeks to be competitive in construction, property investment and project management by being cost efficient through effective project management and cost control policies, providing quality products and competitive pricing and actively seeking new opportunities in those industries.

5.3. Dependency on key management personnel

As in any other business, the Group’s involvement in construction, property investment, project management and renewable energy depends largely on the abilities, skills, experience, competency and continued efforts of the Directors and key management. The loss of any of the said Directors and key management personnel without suitable and timely replacement, or the inability of the Group to attract and retain other qualified personnel and in this instance, could adversely affect the Group’s role as the PMC for the Gateway Klang project and consequently the revenue stream to be derived from the Proposed Award.

Recognising the importance of the Directors and key management, the Group will continuously adopt appropriate approaches to retain the key personnel. To avoid over dependence on any key personnel, the Group strives to attract qualified and experienced employees, especially from the renewable energy industry, to complement the existing management team. This will in turn help to ensure continuity and competency of the management team.

5.4. Political, economic and regulatory considerations

Similar to other types of businesses, political and economic conditions as well as regulatory developments in Malaysia could have a material effect on the Group’s foray into the construction, property investment, project management and renewable energy businesses and consequently the financial performance of the Group. Adverse political, economic and/or regulatory conditions or developments include but are not limited to risk of change in political leadership and environment, unfavourable changes in government policies, laws and legislation, nationalization, changes in interest rates, changes in methods of taxation and economic recession. For example, the construction, property investment, project management and renewable industries will be sensitive to, inter alia, interest rate movements, consumer sentiments, regulation and taxation changes or the gradual tightening of credit conditions.

While the Group seek to limit the impact of such risks in its diversification by monitoring and adapting business strategies in response to major developments in the political,

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economic and regulatory environment, there is no assurance that any change to the above factors will not have a material adverse effect on the business and prospects of the Group’s construction, property investment, project management and renewable energy businesses.

6. ECONOMIC OUTLOOK AND PROSPECTS

6.1. Overview of the global economy

The global economy is expected to remain on a moderate and uneven growth trajectory in 2014 supported by a pickup in the US and the UK along with a steady, albeit lower pace of expansion, in major emerging market economies. Improvements in the euro area and Japan during the second half of the year are also expected to contribute positively to world economic activity. Asian economies, including China, India and major ASEAN countries, are expected to continue to drive global economic growth.

Overall in 2014, global growth is expected to remain stable at 3.3% (2013: 3.3%) with stronger growth in advanced economies at 1.8% (2013: 1.4%) and slightly slower growth in emerging markets at 4.5% (2013: 4.7%). The expansion is expected to be supported by slightly stronger growth of 3.9% (2013: 3%) in world trade following higher demand in the US and emerging economies. Meanwhile, foreign direct investment flows are expected to rise 10.3% to USD1.6 trillion (2013: 9.2%; USD1.5 trillion) mainly driven by investments in developed economies that have started to recover.

The global economies is expected to strengthen in 2015 given the continued policy mix of fiscal and monetary measures undertaken by major economies, aiming at spurring growth. The advanced economies are expected to grow 2.3% in 2015 (2014: 1.8%) led by the US and the UK, while the euro area and Japan are expected to improve.

The global inflation is projected to remain mild due to large output gaps in advanced economies. Inflation in advanced economies is forecast to increase to 1.8% (2014:1.6%) while in emerging market and developing economies, inflation is expected to remain at 5.5% (2014: 5.5%).

(Source: Economic Report 2014/2015, Ministry of Finance Malaysia)

6.2. Overview of the Malaysian economy

The Malaysian economy expanded by 5.6% in the third quarter of 2014 (“3Q 2014”) (Second quarter of 2014 (“2Q 2014”): 6.5%). Overall, growth was supported by private domestic demand, amid continued contraction in public expenditure. As real exports of goods and services recorded a positive growth amid a slower pace of expansion in real imports of goods and services, net exports continued to contribute positively to growth during the quarter. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.9% (2Q 2014: 1.9%).

Domestic demand grew by 4.8% in the 3Q 2014 (2Q 2014: 5.8%), with private sector activity being the key driver of growth. Public sector spending declined further during the quarter as the contraction in public investment more than offset the improvement in public consumption.

Private sector activity grew by 6.7% (2Q 2014: 8.1%), driven by stronger growth in private consumption of 6.7% (2Q 2014: 6.5%). Household spending remained supported by stable employment conditions and continued wage growth. Private investment

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expanded at a slower pace of 6.8% (2Q 2014: 12.1%), attributed to a decline in spending on machinery and equipment, particularly in the transportation segment. Going forward, investment activity will be supported by continued flow of ongoing and new projects by the private and public sectors.

Public sector expenditure registered a negative growth of 1.2% (2Q 2014: -1.6%). Public consumption turned around to register a positive growth of 5.3% (2Q 2014: -0.5%), reflecting higher government spending on supplies and services. Public investment, however, declined further by 8.9% (2Q 2014: -3.3%), attributed mainly to the near completion of a few projects by public enterprises and the continued contraction in the federal government development expenditure.

On the supply side, positive growth was experienced across all economic sectors in the 3Q 2014. The services sector recorded sustained growth, supported by the continued expansion in both the consumption and production-related services. In the manufacturing sector, after an exceptionally strong performance in the 2Q 2014, the sector expanded at a more moderate pace amid slower domestic-oriented activity.

For 2014, the economy is projected to grow 5.5% - 6% (2013: 4.7%), which is higher than the initial forecast of 4.5% - 5.5% in early 2014. 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 effort to strengthen the private sector’s role in the economy. On the supply side, all economic sectors are expected to record positive growth in 2014, with the services and manufacturing sectors remaining the major contributors to growth. Sustained growth in domestic demand, albeit a moderate pace, is expected to contribute to the expansion in domestic-related activities. Hence, the economy is projected to grow 5% - 6% in 2015.

(Sources: Economic Report 2014/ 2015, Ministry of Finance, Malaysia and Economic and Financial Developments in the Malaysian Economy in the Third Quarter of 2014, BNM)

6.3.

Overview of the construction, property investment, and project management services industries in Malaysia

Growth in the construction sector remained sustained during the 3Q 2014 at 9.6% (2Q 2014: 9.9%), driven mainly by the residential and non-residential sub-sectors. The residential sub-sector continued to record firm growth, supported by the construction of high-end properties in the Klang Valley, Penang and Johor, while on-going construction for offices and retail projects and storage facilities contributed to growth in the non- residential sub-sector.

The construction sector continue to register a double-digit growth of 14.3% during the first half of 2014 (H1 2014”) (First half 2013 (“H1 2013”): 12%). During the period, 19649 construction projects were undertaken with contract value of RM50.1 billion. The civil engineering subsector contributed 33% to the construction works, followed by the non-residential (32.3%), residential (29.6%) and the special trade (5%). The private sector contributed 71.4% to the total value of construction works. Meanwhile, the higher construction activity was led by the residential and non-residential subsectors, while growth in the civil engineering subsector moderated following the completion of some major projects, including KLIA2, the Second Penang Bridge and the Manjung coal- power plant.

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Moving forward, the sector is expected to grow 12.7% in 2014 (2013: 10.9%) and contribute 4% to GDP supported by ongoing residential, oil and gas and transportation projects.

The construction sector is projected to increase 10.7% in 2015 (2014: 12.7%) supported by commencement of some oil and gas related projects such as Refinery and Petrochemical infrastructure projects.

The non-residential subsector is also expected to remain stable supported by encouraging demand for industrial and commercial buildings. Major commercial building projects such as the 118-storey Menara Warisan and Bukit Bintang City Centre are expected to contribute to the growth in this sector.

Meanwhile, the residential subsector is expanded to remain strong in view of the increased demand for housing, particularly from the middle-income group. The residential subsector expanded strongly by 22.1% during the H1 2014 (H1 2013: 15.7%) supported by higher growth in incoming supply at 9.5% (H1 2013: 15.3%) and new housing approvals increased significantly by 32.6% to 96.115 units (H1 2013: 6.8% 72,461 units). With regard to the provision of adequate houses for the low-income group, the government continues to allocate funds to build affordable houses under various government programmes, such as Rumah Mesra Rakyat, Rumah Mampu Milik and Rumah Idaman Rakyat.

The value of total property transactions increased to RM82 billion (H1 2013: RM68.8 billion), with volume expanding 3.3% to 193,405 transactions during the H1 2014. Residential property transactions formed the bulk with a share of 63.5%. However, following several cooling measures imposed to curb speculative activity in the property sector, the number of residential property transactions decreased 2.7% in the H1 2014 (Second half of 2013 (“H2 2013”): 5.1%). During the same period, residential transactions declined in Kuala Lumpur (-4.8%) and Selangor (-2.1%), while Johor and Pulau Pinang registered positive growth of 17.5% and 2.7, respectively.

House prices in Malaysia continue to rise, albeit at a slower pace, amid several measures to curb rising house price since 2010. The increase in house prices was driven by strong demand following favourable labour market conditions and growing household income. The Malaysian House Price Index, which measures the change in prices paid for an average house, increased moderately by 6.6% in the 2Q 2014, compared with 11.3% in the corresponding period in 2013. This was the lowest quarterly rate of increase since the third quarter of 2010.

However, higher-than-average prices were recorded in Selangor (10.1%), Pulau Pinang (9.6%) and Kuala Lumpur (9.1%). The highest price increase was recorded for terrace houses, which grew 8.2% followed high-rise units (7.9%), detached (2.5%) and semi- detached (2.4%) houses.

(Sources: Economic Report 2014/2015, Ministry of Finance and Economy and Financial Developments in the Malaysian Economy in the Third Quarter of 2014, BNM)

6.4.

Overview of the construction, property investment, and project management services industries in Selangor

The property market in Kuala Lumpur was on a recovery path as market activity sustained, prices remained strong and unsold situation improved across the board. On the hindsight, residential primary market saw a softening demand probably due to effect of the cool off measures implemented in 2013. There were 10,033 transactions recorded in

13

H1 2014 worth RM11.78 billion, down by a mere 0.2% in volume against H1 2013 (- 36.9%). However, value of transactions continued to be on upward trending, charted double-digit growth of 18.1%, a turnaround from -12.1% recorded in H1 2013.

The residential sub-sector retained its lion share of the market, contributed 73.9% of total transactions followed by the commercial (22.8%), development land (2.0%) and industrial (1.3%).

Market activity across all sub-sectors showed improvements. Positive growths were recorded by commercial and industrial sub-sectors after experiencing double-digit contractions in H1 2013. On the other hand, though residential and development land sub-sectors registered negative growths, the rate of decline reduced significantly. In terms of value, all sub-sectors noted an uptrend. The residential, commercial and industrial sub-sectors witnessed double digit growth over H1 2013.

Prices and rentals of residential property revealed encouraging growth across the board. Residential properties in prominent and established areas served with efficient connectivity continued to gain premiums. As at Q2 2014, the All House Price Index for Wilayah Persekutuan Kuala Lumpur (“WPKL”) stood at 251.7 points, up by 9.1% over Q2 2013. However, the rate of index point increase moderated as compared to 19.3% increase in H1 2013. In line with the index increase, the All House Price increased by 3.8% to RM667,674; remained the highest in the country.

Prices of shops were stable with increases noted in established commercial areas. Similar trend was seen in the rental market. Rentals of ground floor shops were generally stable with few exceptionally high increases recorded at selected areas, namely those in historic shopping districts as well as in new established shopping localities.

In general, purpose built office rental market stabilised at previous years’ rents. Investment grade buildings in good locations with close proximity or within city transit hub are amongst those which were in demand and fetched higher rents. New commercial enclave in Pantai area served with connectivity to Kerinchi LRT Station also gained added advantage. As at Q2 2014, the Composite Index WPKL stood at 117.0 points, up by a mere 1.8% (Q-on-Q). The WPKL average rental also moved up in tandem by 1.9% (Q-on-Q) to RM4.20 p.s.f.

In the retail segment, rentals of retail space were generally stable for most shopping complexes with notable movements witnessed at selected complexes.

Construction activities saw minimal actions. Residential sub-sector recorded more completions and new planned supply but fewer starts. On the other hand, shops sub- sector recorded more units in the new planned supply as against nil in H1 2013.

(Sources: Property Market Report First Half 2014, Valuation and Property Services Department, Ministry of Finance)

6.5. Overview of the renewable energy industry

The National Renewable Energy Policy and Action Plan (2009) lay out the policy vision which includes enhancing the utilisation of indigenous renewable energy resources to contribute towards national electricity supply security and sustainable socioeconomic development. Itsobjectives covers to increase renewable energy contribution in the national power generation mix; facilitate the growth of the renewable energy industry, ensure reasonable renewable energy generation costs, conserve the environment for future generations, and enhance awareness on the role and importance of renewable energy.

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Like the rest of the world, Malaysia needs to achieve greater energy independence and efficiency through the use of renewable energy sources such as solar energy, wind energy and biofuels. At the same time, it is important to find innovative ways to mitigate climate change and conserve the integrity of our natural environment through ecodesign solutions and environmental technologies. Malaysia is adopting a voluntary national reduction indicator of up to 40% in terms of GDP emission intensity by 2020 compared with 2005 levels. This move towards greater environmental sustainability is a tremendous opportunity for businesses interested in participating in the green economy. As one of the country's leading energy and environmental technology research institutes, SIRIM is ready to do its part to answer tomorrows challenges today.

The Malaysian Government encourages greater use of non-depleting and environmentally friendly energy sources. The Government policies on renewable energy have been documented in the Eighth and Ninth Malaysia Plans (8MP and 9MP), and the ten-year Third Outline Perspective Plan (OPP3). The integration of renewable energy as the Fifth Fuelin the national energy scenario supports these policies, and encourages rapid up-take for physical implementation of renewable energy projects. The core focus of the policies was to supplement our national energy mix to include contribution from renewable energy and reducing the national dependence on depletable fossil fuel.

As Malaysia works towards its goal of becoming a developed nation by year 2020, this country, which is blessed with an abundance of natural resources continues to rely heavily on economic growth spurred by its agriculture sector. This sector contributes to approximately 8% of the country’s GNI and by far the largest contributor to Malaysia’s GNI is the palm oil industry. The industry also correspondingly generates the highest amount of biomass, compared to the Malaysia’s other main crops such as rubber and rice. The main types of oil palm biomass are palm oil mill effluent (POME), oil palm fronds, oil palm trunks, EFB, palm kernel shells and mesocarp fibre. As of year 2010, an estimated 80 million dry tonnes of palm biomass was generated and this is expected to increase further to 100 million dry tonnes by year 2020. Thus, the huge amount of empty fruit bunches being accumulated during production process of palm oil depicts the potential biomass as Malaysia’s top renewable energy source.

(Sources:

Supporting the nation’s move towards renewable energy and environmental sustainability,

Malaysia’s Palm Oil Industry: Developing Green Technologies While Ensuring Sustainability & The Development of Bioenergy in Malaysia and Germany, September/ October 2013, MGCC

energy); Renewable Energy, Energy Commission Malaysia,

The

National

Renewable

Energy

Policy

and

Action

Plan

(2009),

seda.gov.my;

Perspectives, Malaysian-German Chamber of Commerce and Industry)

6.6. Prospect of the Proposed Award

As stated in Section 2, the Proposed Award would provide the Group with the potential foray in the property market in Klang as well as will offer good mileage for the NICORP Group in the long term given that the Gateway Klang project is a major property project and is located in the prime area of Klang, Selangor.

The Gateway Klang project is located between Persiaran Raja Muda Musa and Lebuh Turi, both high traffic roads which makes the project easily assessable and highly visible. It is minutes from all the major hubs of Klang including the downtown area, Bukit Tinggi, Port Klang including Berkeley and Batu Tiga. In addition, the development is expected to be well received as it is located near Port Klang, Malaysia’s key port and the region’s transhipment hub which is located 6 km to the southwest of Klang town. The

15

port’s progressive development has enormously contributed to the strong growth of the Klang’s economy.

Therefore, by embarking on the role of PMC for the Gateway Klang project, the Group is of the view that this would provide a platform for the Group to spearhead into future property development, construction and property management projects and thus enables the Group to accumulate experiences in this sector. Taking into consideration the favourable prospects of the construction, property investment and project management industries in Malaysia and in Selangor as stated in Section 6.3 and 6.4 and in line with the Group’s long term objectives in venturing into sustainable industries, the Board is of the view that the Proposed Award would augur well for the Group’s performance in the long run.

7. EFFECTS OF THE PROPOSALS

7.1. Issued and paid-up share capital

The Proposed Diversification and Proposed Awards will not have any effect on the issued and paid-up share capital of NICORP as the Proposed Diversification and Proposed Awards do not involve any issuance of new shares in NICORP.

The pro-forma effect of the Proposed SIS on the issued and paid-up share capital of NICORP is as follows:

 

No. of NICORP Shares

 

(‘000)

RM’000

Issued and paid-up share capital as at date of announcement To be issued pursuant to the Proposed SIS (up to) Enlarged issued and paid-up share capital

772,237

77,224

115,836

11,584

888,0723

88,808

7.2. Net assets (“NA”) and gearing

Barring any unforeseen circumstances, the Proposals are not expected to have any material impact on the net assets and gearing of the Group for FYE 2015. However, the Proposals are expected to enhance the net assets of the Group through contribution in earnings in the future.

The Proposed SIS will not have an immediate effect on the consolidated NA per NICOPR Share and the gearing of the Group until such time when the new NICORP Shares are allotted and issued pursuant to the vesting of the SIS Options. Any potential effect on the consolidated NA per NICORP Share will depend on the number of new NICORP Shares to be allotted and issued which can only be determined at the point of the vesting of the SIS Options on the date of vesting.

For illustration purposes, upon the vesting of the SIS Options, the consolidated NA per NICORP Share is expected to decrease whilst the gearing is expected to improve resulting from the allotment and issuance of new NICORP Shares under the SIS Options.

7.3. Earnings and earnings per share (“EPS”)

The Proposals (save for the Proposed SIS), as a whole, are expected to contribute positively to the earnings and EPS of the Group for FYE 2015.

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The Proposed SIS is not expected to have any immediate material effect on the earnings of the Group, save for the possible impact of the Malaysian Financial Reporting Standard 2 on Share-based Payment (“MFRS 2”). However, any potential effect on the EPS of the Group in the future would depend on the impact of MFRS 2, the number of SIS Options exercised as well as the utilization of the proceeds raised from the exercise of the SIS Options.

Under MFRS 2, the potential cost arising from the issuance of the SIS Options, which is measured by the fair value of the SIS Options after taking into account, inter alia, the number of SIS Options granted and vested and the Exercise Price will need to be measured at the grant date and to be recognised as an expense over the vesting period, and therefore may affect the future earnings of the Group, the quantum of which can be determined only at the grant date. However, the estimated cost does not represent a cash outflow by the Company as it is merely an accounting treatment.

The Company has taken note of the potential impact of MFRS 2 on the Group’s future earnings and shall take into consideration such impact in the allocation and granting of the SIS Options to the Eligible Persons.

The EPS of the Company shall correspondingly be diluted as a result of the increase in the number of NICORP Shares in issue pursuant to the new NICORP Shares arising from the exercise of the SIS Options in the future. The effect of any exercise of the SIS Options on the Group’s consolidated EPS would be dependent on the returns generated by the Group from the utilization of proceeds arising from the exercise of the SIS Options.

7.4. Substantial shareholders’ shareholdings

The Proposed Award and Proposed Diversification are not expected to have any effect on the substantial shareholders’ shareholdings of NICORP as the Proposed Award and Proposed Diversification do not involve issuance of NICORP Shares.

The Proposed SIS is not expected to have any immediate effect on the shareholdings of the substantial shareholders of NICORP until and unless new NICORP Shares are allotted and issued pursuant to the vesting of the SIS Options. Any potential effect on the shareholdings of the substantial shareholders of NICORP would depend on the number of new NICORP Shares issued and vesting of new NICORP Shares at the relevant point in time.

7.5. Convertible securities

As at the date of this announcement, the Company does not have any convertible security.

8. INTER-CONDITIONALITY OF THE PROPOSALS

The Proposed Award is conditional upon the Proposed Diversification but not vice versa. The Proposed SIS is not conditional upon the Proposed Award and the Proposed Diversification or vice versa.

Save for the above, the Proposals are not conditional upon any other corporate proposal undertaken or to be undertaken by the Company.

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9.

APPROVALS REQUIRED

The Proposals are subject to and conditional upon approvals being obtained from the following:

(i)

Bursa Securities, for the listing and quotation of up to 15% of the issued and paid-up capital of NICORP on the Main Market of Bursa Securities pursuant to the Proposed SIS;

(ii)

the shareholders of NICORP at an EGM to be convened;

(iii)

any other relevant authorities and/or parties, if required.

10. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM

10.1. Proposed Award

DSSH is a Non-Independent Executive Director of NICORP as well as a Director of Lagenda. Through Titan, he has an effective 2.00% shareholding in Lagenda.

DRCBS was a Non-Independent Non-Executive Director of NICORP and is currently a Director of Lagenda. Through Sagajuta, he has an effective 7.40% shareholding in Lagenda. Even though DRCBS had, on 14 November 2014, resigned from position of Non-Independent Non-Executive Director of NICORP, he is still deemed an interested party to the Proposed Award pursuant to Chapter 10 of the Listing Requirements.

Accordingly, DSSH has abstained and will continue to abstain from deliberating and voting on and from forming any opinion on the Proposed Award at the relevant meetings of the Board. Further, he will abstain from voting in respect of his direct and/or indirect shareholdings in NICORP on resolution pertaining to the Proposed Award. In addition, DSSH will undertake to ensure that persons connected with him, if any, will abstain from voting in respect of his direct and/or indirect shareholdings in NICORP on resolution pertaining to the Proposed Award to be tabled at the EGM.

10.2. Proposed SIS

All the Directors of NICORP are entitled to participate in the Proposed SIS. Therefore, they are deemed interested to the extent of their respective allocation of SIS Options. Accordingly, the Board has deliberated on the Proposed SIS as a whole at the relevant Board meetings.

In respect of the allocation of SIS Options to the Directors of NICORP, the respective Directors have abstained and will continue to abstain from all deliberations and voting at the relevant Board meetings in respect of their allocation of SIS Options. In addition, they will abstain from voting in respect of their direct and/or indirect shareholdings in NICORP, if any at the EGM to be convened on the resolutions pertaining to their allocation of the SIS Options.

Further, they have undertaken that they shall ensure that persons connected with them, if any, will abstain from voting in respect of their direct and/or indirect shareholdings in NICORP, if any at the forthcoming EGM on the resolutions pertaining to their allocation of SIS Options to them.

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The direct and indirect interests of the Directors in NICORP as at the date of this announcement are as follows:

 

Direct

Indirect

   

No. of

 

Directors

No. of shares

%

shares

%

DSSH Md. Noor bin Abdul Rahim Hud bin Abu Bakar Cheang Soon Siang Dato’ Abdel Aziz @ Abdul Aziz bin Abu Bakar Chua Eng Chin George Alfonso Miranda

39,172,600

5.07

67,847,976

(1)

8.79

-

-

 

- -

9,434,000

1.22

- -

270,000

0.03

- -

9,434,000

1.22

- -

-

-

250,000

(2)

0.03

-

-

-

-

Notes:

(1)

Deemed interest by virtue of his shareholdings in Quantum Discovery Sdn Bhd pursuant to Section 6A of the Act.

(2)

Deemed interested by virtue of his spouse’s shareholdings in NICORP pursuant to Section 134(12)(c) of the Act.

Save as disclosed above, none of the Directors or major shareholders or persons connected with them has any direct or indirect interest in the Proposals.

11. TRANSACTIONS WITH THE SAME RELATED PARTY FOR THE PRECEDING TWELVE (12) MONTHS

Save for the following, there is no transaction entered into by NICORP and DSSH and/or DRCBS for the past twelve (12) months:

(i)

announcement in respect of proposed acquisition of Lagenda, which was eventually aborted on 9 December 2014; and

(ii)

the Proposed Award.

12. PERCENTAGE RATIO

The highest percentage ratio applicable to the Proposed Award pursuant to Paragraph 10.02(g) of Chapter 10 of the Listing Requirements is 24.64%, computed based on the value of the LOA of 4% of RM450.0 million as compared to the consolidated audited NA of NICORP as at 31 December 2013.

13. DIRECTORS’ STATEMENT

Save for DSSH, the Board, having considered all aspects of the Proposals including the rationale and effects, is of the opinion that the Proposals are in the best interest of NICORP. However, in view that all Directors of NICORP are interested in the Proposed SIS, they have abstained from expressing an opinion in respect of their respective participation in the proposed allocation of the SIS Options.

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14.

AUDIT COMMITTEE’S STATEMENT

The Audit Committee of NICORP, after having considered the rationale and all other relevant aspects of the Proposed Award and the preliminary opinion of the Independent Adviser, the Audit Committee members are of the opinion that the Proposed Award is in the best interest of the Company and is fair, reasonable and on normal commercial terms and is not detrimental to the interest of the non-interested shareholders of NICORP.

15. PRINCIPAL ADVISER

TA Securities has been appointed to act as the Adviser for NICORP the Proposals.

16. INDEPENDENT ADVISER

In view of the interest of the Interested Directors as set out in Section 10 of this announcement, the Proposed Award is deemed a related party transaction pursuant to Paragraph 10.08 of the Listing Requirements. In this respect, FHMH Corporate Advisory Sdn Bhd has been appointed to act as the Independent Adviser to advise the non-interested Directors and non-interested shareholders of NICORP as to whether the Proposed Award is fair and reasonable as far as the non-interested shareholders are concerned and whether the Proposed Award is to the detriment of the non-interested shareholders of NICORP.

17. ESTIMATED TIMEFRAME FOR COMPLETION

Barring any unforeseen circumstances, the Proposals are expected to be completed by the end of the first (1 st ) quarter of 2015.

18. APPLICATIONS TO THE RELEVANT AUTHORITIES

The applications to the relevant authorities in relation to the Proposed SIS are expected to be submitted within two (2) months from the date of this announcement.

19. DOCUMENT FOR INSPECTION

The LOA is available for inspection during the normal office hours (except public holidays) at the registered office of NICORP at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur for a period of three (3) months from the date of this announcement.

This announcement is dated 11 February 2015.

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