NOVA MSC BERHAD
22 Nov 2013

Type Reply to query
Reply to Bursa Malaysia’s Query Letter – Reference ID NM-131121-35398
Subject OTHERS
Description NOVA WON SAR 8.3MILLION (RM7.1 MILLION) CONTRACT TO PROVIDE FORNAX LICENSE AND SERVICES FOR HOLY MAKKAH MUNICIPALITY, KINGDOM OF SAUDI ARABIA
Query Letter Contents We refer to your Company’s announcement dated 19 November 2013.

In this connection, kindly furnish Bursa Malaysia Securities Berhad (“Bursa
Securities”) with the following additional information for public release:-

1. The date on which the Contract was awarded.
2. Whether the Contract is renewable. If so, for how many years.
3. The risks in relation to the Contract.

Please furnish Bursa Securities with your reply via an announcement within one
(1) market day from the date hereof.
Yours faithfully

TAN YEW ENG
Head, Issuers
Listing Division
Regulation

TYE /NMA
c.c.General Manager & Head Market Surveillance Department, Market Oversight
Division,Securities Commission (via fax)

We refer to the announcement dated 19 November 2013 and the query from Bursa Malaysia Securities Berhad (“Bursa Securities”) via its facsimile dated 21 November 2013 in relation to the above-mentioned subject.Nova MSC Berhad (the “Group”) wishes to announce the following additional information as required by Bursa Securities pursuant to the above-mentioned subject:-

1. The date on which the Contract was awarded

The Contracts were received by the Group on 18 November 2013, and was signed and accepted by the Group on 19 November 2013.

2. Whether the Contract is renewable. If so, for how many years.

The Contracts are not renewable.

3. The Risks in relation to the Contract.

The Contracts are subjected to the following risks:-

Project Risk

The Contracts are entered on a project basis. Due to the complexity of the Contracts, the Group may face the following factors:-

  • Delay or cancellation of Contract. Client may delay or cancel the project due to unforeseen circumstances. Delays may arise from incomplete specifications or unanticipated difficulties in developing the solutions. Project delays will affect profit margins and additional cost may be also incurred as a result.
  • Failure to implement the Contract that fully satisfied the requirements and expectation of the Client. This may leads to claims being made against the Group, adversely affecting profits and reputation.
  • Invoices issued may face difficulties in collecting or becoming bad debts. Additional cost such as debt recovery fee and other related cost may be incurred and in the event that the debt becomes bad, it adversely affects profits.

Foreign Exchange Risk

We are also subjected to foreign exchange risk. Our sale is denominated in Saudi Arabia Riyal while our costs are mainly denominated in Singapore Dollars and Ringgit Malaysia. As we currently do not have a policy for the using derivative instruments for hedging purposes, we may be exposed to fluctuation in foreign exchange rate. This may affect our profitability.

Country Risk

We are also dependent on the political, economic, regulatory and social condition in the Kingdom of Saudi Arabia. Any changes in policies implemented , exchange controls and changes in duties and taxation or general changes in the economic and social environment that are detrimental to our business may materially and adversely affect our performance and financial result thereof.

The Group had already taken certain steps to mitigate such exposures including (1) having a pool of experienced staff, (2) conducted detailed studies of the complexity and specification of the project needs, (3) engaged a professional firm in Saudi Arabia to advise on the tax regime in the Kingdom of Saudi Arabia. The Group will regularly monitor the abovementioned risk exposure.

This announcement is dated 22 November 2013.