NOVA MSC BERHAD
12 Jul 2018
(Unless otherwise specified, where applicable throughout this announcement, the exchange rate used shall be RM2.9632 Singapore Dollars (“SGD”): RM1.00, based on the middle rate at 5.00 p.m. published by Bank Negara Malaysia on 11 July 2018)
1. INTRODUCTION
The Board of Directors of NOVAMSC (“Board”) wishes to announce that NOVAMSC had on 12 July 2018 entered into a Share Sale Agreement (“SSA”) with JAG Limited to dispose of 31,875 ordinary shares (“Sale Shares”) in PrimusTech representing 51% equity interest held by NOVAMSC for a total cash consideration of SGD3,000,000 (equivalent to approximately RM8.9 million) (“Proposed Disposal”).
Upon completion of the Proposed Disposal, PrimusTech and Primussoft Pte Ltd, a wholly owned subsidiary of PrimusTech shall cease to be subsidiaries of the Company.
2. DETAILS OF THE PROPOSED DISPOSAL
2.1 Information of the PrimusTech
PrimusTech was incorporated in Singapore under the Companies Act (Chapter 50) on 24 February 2000. As at the date of this announcement, the principal business are those relating to the provision, design and implementation of integrated control and automation systems and information technology solutions for buildings and facilities and the provision of engineering maintenance services.
The financial information of PrimusTech and its subsidiary (“PrimusTech Group”) for the audited financial years ended 31 March 2017 (“FYE 2017”) and unaudited financial year ended 31 March 2018 (“FYE 2018”) are summarised in the table below:-
| FYE 2017
RM’000 (audited) |
FYE2018
RM’000 (unaudited) |
|
| Revenue | 72,900 | 37,483 |
| (Loss)/Profit before taxation | 1,851 | (1,718) |
| (Loss)/Profit after taxation | 1,573 | (1,762) |
| Net asset | 9,257 | 8,665 |
| Total borrowing | – | 15,617 |
2.2 Information of the Purchaser
JAG Limited was incorporated in Japan under the Companies Act in March 1988. As at the date of this announcement, the principal activities of JAG Limited are Geospatial Information, Green Energy, and Forestry Revitalization
2.3 Basis and justification of arriving at the Disposal Consideration
The disposal consideration of SGD3,000,000 (equivalent to RM8.9 million) (“Disposal Consideration”) was arrived on a negotiated basis on a “willing-buyer willing-seller basis” after taking into consideration of the 51% of the net assets of Primus Tech Group of approximately RM4.4 million for the unaudited FYE 2018.
In addition, NOVAMSC has also taken into consideration the following:
(i) The loss making position of PrimusTech Group for the unaudited FYE 2018;
(ii) The Proposed Disposal represents an opportunity for NOVAMSC to crystalise its investment in PrimusTech; and
(iii) The prospect of PrimusTech Group which operates in a highly competitive market in Singapore.
In addition, the Company has decided to concentrate on the e-Government and healthcare application segment which have a high growth potential. Further details on the rationale of the Proposed Disposal are set out in Section 3 of this announcement.
2.4 Utilisation of proceeds
The Proposed Disposal Consideration will be utilised for general working capital requirement in respect of for NOVAMSC and its subsidiaries (“NOVAMSC Group”) day-to-day operations to support its existing business, which shall include, amongst others, defrayment of operations and administrative expenses such as utilities charges, rentals, purchase of inventories and other miscellaneous items. The actual breakdown of these expenses and the timeframe cannot be determined at this juncture as it will depend on the actual working capital requirements of the NOVAMSC Group at the relevant time.
2.5 Liabilities to be assumed
There will be no liabilities, including contingent liabilities and guarantees to be assumed by the Purchaser in relation to the Proposed Disposal.
2.6 Original Cost of Investment
The original cost of investment of NOVAMSC in PrimusTech are as follows:
| Date of investment | Number of shares acquired | Cost of investment
RM |
| 30 November 2015 | 12,500 | 6,090,000 |
| 7 April 2016 | 19,375 | 5,000,000*1 |
Note:
*1 In accordance with the share sale agreement entered into between NOVAMSC and Stone Villa Limited on 18 January 2016, the purchase consideration for the 19,375 ordinary shares in PrimusTech was for up to RM10,000,000. NOVAMSC had issued 45,454,545 new ordinary shares in NOVAMSC (“NOVAMSC Shares”) to satisfy the RM5,000,000 of the purchase consideration whereas the remaining RM5,000,000 was to be paid after certain performance targets was to be met on FYE 2017 and FYE 2018. However, the performance targets were not achieved and NOVAMSC is not obligated to pay for the remaining RM5,000,000.
2.7 Salient terms of the SSA
2.7.1 Disposal of PrimusTech
The Company shall, in accordance with the terms and conditions of the SSA, on completion of the sales and purchase of the Sale Shares by Purchaser and Company (”Completion”), sell to the Purchaser the Sale Shares, and the Purchaser shall purchase the Sale Shares free from all encumbrances and with the benefit of all rights, benefits and entitlements attaching to the Sale Shares as at the Completion and thereafter (including the right to any dividends or other distributions declared and payable thereon on or after the Completion).
2.7.2 Disposal Consideration
The disposal consideration of SGD3,000,000 (equivalent to RM8.9 million), which shall be paid by the Purchaser to the Company or as it may direct on Completion of the Sale Shares.
2.7.3 Payment of Disposal Consideration
All payments to be made under the SSA shall be made by way of cashier’s order or banker’s draft in favour of the Company or as it may direct or by bank transfer to such bank account in Singapore as the Company shall notify the Purchaser in writing no later than 10 Business Days before the date of Completion (“Completion Date”) or in such other manner as may be agreed in writing between the Company and the Purchaser.
2.7.4 Conditions Precedent
Completion of the sale and purchase of the Sale Shares is conditional upon the following conditions:
(i) The approval of the Board and/or if required, the shareholders of the Company in general meeting, having been obtained in respect of the transfer of the Sale Shares to the Purchaser on terms set out in the SSA;
(ii) There being no claim, legal action, proceeding, suit, litigation, prosecution, investigation, enquiry or arbitration against any of the companies in PrimusTech Group;
(iii) There not having been at any time after the signing of the SSA any material adverse change to PrimusTech Group (being any event which may affect the profit after taxation of the PrimusTech Group by more than SGD1.00 million);
(iv) All the warranties by the Company being true, accurate and not misleading as at the Completion Date;
(v) All covenants and undertakings of the Company under the SSA having been complied with as at the Completion Date;
(vi) The disposal and transfer of the Sale Shares upon the terms and conditions of the SSA not being prohibited or restricted by any statute, order, rule, regulation, directive, guideline or request (whether or not having the force of law) promulgated by any legislative, executive or regulatory body or other authority of Singapore and any other relevant jurisdictions;
(vii) All approvals, consents, licences, permits, waivers and exemptions (collectively, “Approvals”) for the sale and purchase of the Sale Shares and its Completion and the transactions contemplated under the SSA being granted by third parties including any third party consents and all legislative, executive, regulatory, judicial or other authorities in Singapore or any other jurisdiction to the Purchaser and/or PrimusTech Group (as the case may be) and where any such Approval is subject to conditions, such conditions being acceptable to the Purchaser, and if such conditions are required to be fulfilled before the Completion, such conditions being fulfilled before Completion and such Approvals remaining in full force and effect; and
(viii) Shareholders’ agreement being duly executed between Ong Liang Huat Michael, CNA Investment Pte Ltd, Shen Meei Jiuan and PrimusTech.
In the event that any of the conditions precedents mentioned above is not fulfilled or waived (as the case may be) on or before 31 July 2018 or such other date as the Company and the Purchaser may mutually agree in writing, the SSA (other than any surviving provisions) shall lapse and cease to have further effect and all obligations and liabilities of the parties under the SSA shall cease and no party shall have any claim against the other party, save in respect of any breaches in the SSA.
2.7.5 Claim for Taxation
(i) The Company agrees and undertakes to the Purchaser to pay to the Purchaser or the relevant companies in PrimusTech Group, at the Purchasers’ discretion , on the due date for payment an amount equal to 51% (being the percentage shareholding of NOVAMSC in PrimusTech) of any tax liabilities or claim from the tax authorities other than when:- :
(a) Such claim for taxation had being fully provided or reserved specifically in respect thereof was made in the financial statements of PrimusTech Group;
(b) In respect of taxation arising out of the ordinary course of the normal trading of the relevant companies in PrimusTech Group since the financial statements for the financial year ended 31 March 2017;
(c) To the extent that such claim arises as a result only of any provision or reserve in respect thereof being insufficient by reason of any increase in rates of taxation made after the Completion Date with retrospective effect.
2.7.6 Completion
Completion shall take place 3 business days after the condition (i), (vii) and (viii) of Section 2.7.4 of this announcement are fulfilled or at such time and date as the Company and the Purchaser may mutually agree in writing.
3. RATIONALE FOR THE PROPOSED DISPOSAL
The principal business of PrimusTech Group are those relating to the provision, design and implementation of integrated control and automation systems and information technology solutions for buildings and facilities and the provision of engineering maintenance services.
Since becoming a subsidiary of NOVAMSC, PrimusTech had performed below the expectation of the management of NOVAMSC which was mainly due to PrimusTech operating within a highly competitive market in Singapore. In addition, the synergistic benefit, which includes having the NOVAMSC Group working together with PrimusTech Group to provide a one-stop solution for the implementation of smart hospital and smart building, would required a longer than expected gestation period.
The Proposed Disposal will allow for NOVAMSC to focus its resources on the e-Government and healthcare application solution segments which, in the opinion of the management of NOVAMSC, would have a good prospect and high growth potential as NOVAMSC has secured book order of approximately RM117 million.
4. RISK FACTORS
The Proposed Disposal will not have any additional risk to the Company.
5. FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL
5.1 Share Capital
The Proposed Disposal will not have any effect on the issued and paid-up share capital of NOVAMSC as the Proposed Disposal does not involve issuance of new NOVAMSC Shares.
5.2 Substantial Shareholders’ Shareholding
The Proposed Disposal will not have any effect on the substantial shareholdings in NOVAMSC the Proposed Disposal does not involve issuance of new NOVAMSC Shares.
5.3 Net Asset and Gearing
The pro forma effect of the Proposed Disposal on the net assets (“NA”), NA per share and gearing of the NOVAMSC Group based on its audited consolidated financial statements as at 31 March 2017 are as follows:
| Audited as at 31 March 2017 | Subsequent events*1 | After the Proposed Disposal | |
| RM | RM | RM | |
| Share capital | 80,786,615 | 87,619,015 | 87,619,015 |
| Share option reserves | 279,450 | 279,450 | 279,450 |
| Foreign currency translation | 12,459,780 | 12,459,780 | 12,459,780 |
| Accumulated losses | (49,488,483) | (49,638,483)*2 | (45,878,483) *3 |
| Shareholders’ funds/ NA | 44,037,362 | 50,719,762 | 54,479,762 |
| No. of NOVAMSC Shares | 683,240,905 | 751,564,905 | 751,564,905 |
| NA per shares | 0.06 | 0.07 | 0.07 |
| Borrowing | 1,937,507 | 1,937,507 | 1,937,507 |
| Gearing (times) | 0.04 | 0.04 | 0.04 |
Notes:
*1 On 22 June 2018, NOVAMSC had completed the private placement of 68,324,000 new NOVAMSC Shares at an issue price of RM0.10 per NOVAMSC Share.
*2 After deducting the estimated expenses for the Private Placement of approximately RM150,000.
*3 After taking into consideration the gain on disposal of approximately RM4,360,000 and deducting the estimated expenses for the Proposed Disposal of RM600,000.
5.4 Earnings and earnings per Share (“EPS”)
For illustrative purposes, assuming the Proposed Disposal had been completed on 1 April 2016, being the beginning of FYE 2017, the pro forma effect of the Proposed Disposal on the Company’s earnings and EPS would be as follows:
| Audited as at 31 March 2017 | After the Proposed Disposal | |
| RM | RM | |
| Loss attributable to the owners of the company | (20,425,642) | (20,425,642) |
| Gain on disposal | – | 4,360,000 |
| Estimated expenses | – | (600,000) |
| Pro forma loss attributable to the owners of the company | (20,425,642) | (16,665,642) |
| No. of NOVAMSC Shares | 683,240,905 | 751,564,905*1 |
| EPS (sen) *2 | (2.99) | (2.22) |
Notes:
*1 On 22 June 2018, NOVAMSC had completed the private placement of 68,324,000 new NOVAMSC Shares at an issue price of RM0.10 per NOVAMSC Share.
*2 Based on number of NOVAMSC Shares
6. HIGHEST PERCENTAGE RATIO APPLICABLE
The highest percentage ratio applicable to the Proposed Disposal pursuant to the Rule 10.02 (g) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad is 22.82%.
7. APPROVALS REQUIRED AND INTER-CONDITIONALITY
The Proposed Disposal is not subjected to any other approvals being obtained and is not conditional upon any other proposals undertaken or to be undertaken by NOVAMSC.
8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONSCONNECTED WITH THEM
None of the other directors and/or major shareholders of the Company or persons connected to the directors and/or major shareholders of the Company have any interest, direct or indirect in the Proposed Disposal.
9. DIRECTORS’ RECOMMENDATION
The Board, after having considered all aspects of the Proposed Disposal, including the basis and justification in arriving at the Disposal Consideration, rationale, and financial effects, is of the opinion that the Proposed Disposal is in the best interest of the Company.
10. DOCUMENTS FOR INSPECTION
A copy of the SSA will be made available for inspection at the registered office of NOVAMSC at No. 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur during normal business 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 12 July 2018.
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