NOVA MSC BERHAD
04 May 2020
NOVA MSC BERHAD (NOVAMSC OR THE COMPANY) PROPOSED ESTABLISHMENT OF A SUBSIDIARY FOR ROBOTICS AND ARTIFICIAL INTELLIGENCE
(Unless otherwise specified, where applicable throughout this announcement, the exchange rate used shall be RM3.0544 : SGD1.00 based on the middle rate at 5.00 p.m. published by Bank Negara Malaysia on 30 April 2020)
The Board of Directors of Nova MSC Berhad (“NOVAMSC” or “Company”) wishes to announce that the Company had on 4 May 2020 entered into a shareholders’ agreement (“Shareholders’ Agreement”) with Mr. Loh Guan Huat Sunny (“LOH”) to establish a new company in Singapore in the form of a private company limited by shares (“NEWCO”) to focus on the development and marketing of artificial intelligence related products and services in the robotics industry (“Proposed Investment”).
2. SALIENT TERMS OF THE PROPOSED INVESTMENT
2.1 Capital Structure
The initial paid up capital of the NEWCO shall be SGD100,000.00 divided into 100,000 ordinary shares (“NEWCO Shares”). The NEWCO Shares shall be held in the proportion of 60% by NOVAMSC and 40% by LOH.
Accordingly, NOVAMSC’s equity investment in the NEWCO shall be SGD60,000.00 (“NOVA Investment Equity”). Upon completion of the Proposed Investment, NEWCO will be a 60%-owned subsidiary of NOVAMSC.
In order to finance the NEWCO’s general corporate and working capital requirement for the first twelve (12) months from its date of incorporation (“Startup Period”), shareholder’s loans in cash or in-kind of up to SGD1,500,000.00 (“Shareholder Loan”) will, from time to time, be provided to the NEWCO by NOVAMSC and/or its subsidiaries at an interest rate to be determined later and will be unsecured.
2.3 Source of funding
The NOVA Investment Equity and Shareholder Loan will be funded by internally generated funds of NOVAMSC.
2.4 Pre-emptive Rights
Except where a transfer is to be made by a Shareholder to a related corporation within the meaning of Section 6 of the Singapore Companies Act (Chap 50), or to an immediate family member of a Shareholder, no NEWCO Shares can be transferred to any other persons unless the pre-emptive rights accorded in the Shareholders Agreement is fulfilled.
2.5 Board of Directors
The Board of Directors of the NEWCO shall consist of 3 members, 2 members of whom shall be nominated by NOVAMSC and 1 member shall be nominated by LOH.
The Chairman shall be appointed by LOH. The Chairman of the NEWCO shall have a casting vote.
The Chief Executive Officer and Chief Financial Officer of the NEWCO shall be appointed by NOVAMSC.
3. INFORMATION ON LOH
LOH is a businessman who has extensive experience and network of business contacts in Asia Pacific region. He is also a deemed substantial shareholder of NOVAMSC by virtue of his sole directorship and 100% equity interest in Stone Villa Limited, a substantial shareholder of the Company holding: (i) 6.0% equity interest in NOVAMSC, and (ii) 38.7% of the Irredeemable Convertible Preference Shares of NOVAMSC.
4. RATIONALE FOR THE PROPOSED INVESTMENT
The Proposed Investment is part of the Company’s strategy to continuously improve its product offering and will enable the Company to obtain key artificial intelligence and robotics capabilities through firsthand access to the relevant talents and technologies. The Proposed Investment will be the first step for NOVAMSC to partner with LOH in order to tap on his extensive experience and network of business contacts in Asia Pacific which will enable the NEWCO to attract key experts and develop the customer base. Barring any unforeseen circumstances and subject to the risk factors as set out in Section 5 of this announcement, the Proposed Investment is expected to benefit NOVAMSC.
5. RISK FACTORS
The Proposed Investment is subject to certain business risks inherent in the industry. These risks include, but not limited to market fluctuations caused by economic cycles, political and regulatory conditions such as changes in government policies and administrative, interest rates, taxes and competition from other industry players.
The management of NOVAMSC seeks to limit these risks through, amongst others, continuous review of operations to improve efficiency, careful planning and identification of changes to political and regulatory conditions as well as competition from other industry players.
6. FINANCIAL EFFECTS OF THE PROPOSED INVESTMENT
6.1 Share Capital
The Proposed Investment will not have any effect on the issued and paid-up share capital of the Company as the Proposed Investment does not involve issuance of new NOVAMSC’s shares.
6.2 Substantial Shareholders’ Shareholding
The Proposed Investment will not have any effect on the substantial shareholders’ shareholdings in the Company as the Proposed Investment does not involve issuance of new NOVAMSC’s shares.
6.3 Net Asset and Gearing
The Proposed Investment will not have any material effect on the net assets and gearing of the Company as the entire NOVA Investment Equity and Shareholder Loan will be funded vide internally generated funds.
6.4 Earnings and earnings per Share (“EPS”)
The Proposed Investment will not have any material effect on the consolidated earnings and EPS of the Company for the financial year ending 31 March 2021.
However, barring any unforeseen circumstance, the Proposed Investment is expected to contribute positively to NOVAMSC’s consolidated earnings and EPS in the future, when the NEWCO commence operations and records profit after tax.
7. HIGHEST PERCENTAGE RATIO APPLICABLE
Based on NOVAMSC Group’s Audited Financial Statements for the financial year ended 31 March 2019, the highest percentage ratio applicable to the Proposed Investment pursuant to the Rule 10.02(g) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad is 8.65%.
For avoidance of doubt, the Proposed Investment is not a related party transaction as LOH is neither a major shareholder or director of NOVAMSC and its subsidiaries.
8. APPROVALS REQUIRED AND INTER-CONDITIONALITY
The Proposed Investment does not require approval from the shareholders of NOVAMSC and is not subjected to any other approvals being obtained and is not conditional upon any other proposals undertaken or to be undertaken by NOVAMSC.
9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM
None of the Directors, major shareholders and/or persons connected to them have any interest, direct and/or indirect, in the Proposed Investment.
10. DIRECTORS’ STATEMENT
The Board having considered all aspects of the Proposed Investment, including but not limited to the rationale, prospects and financial effects of the Proposed Investment, is of the opinion that the Proposed Investment is in the best interest of the Company.
11. ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances, the Board expects the establishment of the NEWCO to be completed within 30 days from the date of this announcement.
12. DOCUMENTS FOR INSPECTION
A copy of the Shareholders Agreement is available for inspection at the registered office of NOVAMSC at No. 5-1, Jalan Radin Bagus 9, Bandar Baru Sri Petaling, 57000 Kuala Lumpur, Wilayah Persekutuan during normal business hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement.
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