bhs industries berhad - listed companynextgreenglobal.listedcompany.com/newsroom/bhs... · 2016....
TRANSCRIPT
1
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. You should rely on your own evaluation to assess the merits and risks of the proposals as set out in this Circular.
BHS INDUSTRIES BERHAD
(Company No. 719660-W) (Incorporated in Malaysia under the Companies Act, 1965)
CIRCULAR TO SHAREHOLDERS IN RELATION TO THE
PROPOSED DIVERSIFICATION OF THE EXISTING CORE BUSINESSES OF BHS INDUSTRIES BERHAD (“BHS”) AND ITS SUBSIDIARIES TO INCLUDE THE CONSTRUCTION, DEVELOPMENT AND MANAGEMENT OF GREEN TECHNOLOGY PARK AND OTHER CONSTRUCTION AND PROPERTY DEVELOPMENT ACTIVITIES
AND
NOTICE OF EXTRAORDINARY GENERAL MEETING
Principal Adviser
(Company No. 19663-P) (A Participating Organisation of Bursa Malaysia Securities Berhad)
The Notice of the Extraordinary General Meeting (“EGM”) of BHS, which has been scheduled to be held at Langkawi Room, Bukit Jalil Golf and Country Resort, Jalan Jalil Perkasa 3, Bukit Jalil, 57000 Kuala Lumpur on Tuesday, 20 December 2016, at 10.20 a.m. or immediately after the conclusion or adjournment of BHS‟s 11th Annual General Meeting (whichever is later), which will be held at the same venue on the same day at 10.00 a.m., together with the Form of Proxy are enclosed herein. A member entitled to attend and vote at the EGM is entitled to appoint a proxy or proxies to attend and to vote for on his/her behalf. Shareholders are advised to refer to the Notice of the EGM and the Form of Proxy that are enclosed. In such event, the Form of Proxy should be lodged at the Registered Office of the Company at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor not less than 48 hours before the time fixed for holding the EGM or adjourned meeting (as the case may be). The lodging of the Form of Proxy will not preclude you from attending and voting in person at the EGM, should you subsequently wish to do so. Last date and time for lodging the Form of Proxy : Sunday, 18 December 2016 at 10.20 a.m. Date and time of the EGM : Tuesday, 20 December 2016 at 10.20 a.m.
This Circular is dated 1 December 2016
3
DEFINITIONS
i
In this Circular and the accompanying appendices, the following abbreviations shall have the following meanings unless otherwise stated: “BHS” or “Company” : BHS Industries Berhad (Company No. 719660-W) “BHS Group” or “Group” : BHS and its subsidiaries “Board” : Board of Directors of BHS “Bursa Securities” : Bursa Malaysia Securities Berhad (Company No. 635998-W) “Circular” : This circular dated 1 December 2016 to the shareholders of BHS in
relation to the Proposed Diversification “Dato‟ Lim” : Dato‟ Lim Thiam Huat “Director(s)” : A natural person who holds a directorship in the Company, whether in an
executive or non-executive capacity, and shall have the meaning given in Section 4 of the Companies Act, 1965 and Section 2(1) of the Capital Markets and Services Act, 2007
“EFB” : Oil palm empty fruit bunches “EGM” : Extraordinary General Meeting “EPS” : Earnings per share “ESOS” : Employees‟ Share Option Scheme “FPE” : Financial period ended “FYE” : Financial year ended/ ending “GPT” : Green Patent Technologies Sdn Bhd (Company No. 835300-K) “GTP Pekan” : Green Technology Park in Pekan “GTP Pekan Project” : Construction, development and management of GTP Pekan and Other
Ancillary Buildings/ Facilities “Huaxing” : China Nuclear Industry Huaxing Construction Co Ltd (Company No.
91320000134756540Y) “LAT” : Loss after taxation “Land” : 375 acres of land, including 26 acres of land approved for the
development of Phase 1 in GTP Pekan as announced by BHS on 11 March 2016, located in Kg Paloh Hinai, Mukim Lepar, Daerah Pekan, Pahang Darul Makmur
“Listing Requirements” : Main Market Listing Requirements of Bursa Securities “LPD” : 14 November 2016, being the latest practicable date prior to the printing
of this Circular “MoA” : Memorandum of agreement entered into between BHS and Huaxing, a
subsidiary of China Nuclear Engineering Group Corporation, to jointly construct, develop and manage Phase 2 and Phase 3 of GTP Pekan and Other Ancillary Buildings/ Facilities
i
4
DEFINITIONS (Cont’d)
ii
“NA” : Net assets “Other Ancillary Buildings/ Facilities”
: Other ancillary buildings/ facilities in the GTP Pekan Project to be undertaken by BHS Group‟s construction and property development activities include, amongst others, the following: (i) centralised wastewater treatment plant; (ii) education and research hub; (iii) commercial units such as shoplots; (iv) residential buildings such as hostel for the local workforce; (v) installation of solar panels on rooftop of the buildings; (vi) biomass-fired power plant; (vii) biogas plant; (viii) alkali recovery plant; (ix) small scale wind energy turbine; and (x) small scale hydro energy turbine
“PRC RBMP Technology” : Pre-conditioning Refiner Chemical Recycled Bleached Mechanised Pulp
Technology, held under a master license by System Publishing House Sdn Bhd, a wholly-owned subsidiary of System Multimedia & Internet Sdn Bhd which in turn is a wholly-owned subsidiary of BHS
“PAT” : Profit after taxation “Proposed Diversification” : Proposed diversification of the existing core businesses of BHS Group to
include the construction, development and management of Green Technology Park and other construction and property development activities
“R&D” : Research and development “Renewable Paper Pulp Products”
: Renewable paper pulp products generated from EFB using the PRC RBMP Technology
“RHBIB” or “Principal Adviser”
: RHB Investment Bank Berhad (Company No. 19663-P)
“RM” and “sen” : Ringgit Malaysia and sen respectively, the lawful currency of Malaysia “USD” : United States Dollar, the lawful currency of the United States of America “Ultimate Ivory” : Ultimate Ivory Sdn Bhd (Company No. 964715-T) Words incorporating the singular shall, where applicable, include the plural and vice versa and words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Reference to persons shall include a corporation, unless otherwise specified. Any reference in this Circular to any statute is a reference to that statute as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise specified. Certain figures included in this Circular have been subject to rounding adjustments.
ii
5
TABLE OF CONTENTS
iii
Page LETTER TO THE SHAREHOLDERS OF BHS CONTAINING: 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED DIVERSIFICATION 4 3. RATIONALE FOR THE PROPOSED DIVERSIFICATION 11 4. INDUSTRY OVERVIEW AND PROSPECTS 13 5. RISK FACTORS 18 6. EFFECTS OF THE PROPOSED DIVERSIFICATION 20 7. APPROVALS REQUIRED 20 8. ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED
DIVERSIFICATION 21
9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS
CONNECTED WITH THEM 21
10 INTER-CONDITIONALITY AND CORPORATE PROPOSALS ANNOUNCED BUT
NOT YET COMPLETED 21
11. DIRECTORS‟ RECOMMENDATION 21 12. EGM 21 13. FURTHER INFORMATION 22 APPENDIX I FURTHER INFORMATION 23 NOTICE OF EGM Enclosed FORM OF PROXY Enclosed
iii
1
1
BHS INDUSTRIES BERHAD
(Company No. 719660-W) (Incorporated in Malaysia under the Companies Act, 1965)
Registered Office: 802, 8th Floor Block C, Kelana Square
17 Jalan SS7/26 47301 Petaling Jaya Selangor Darul Ehsan
1 December 2016 The Board of Directors: Dato‟ Sohaimi Bin Shahadan (Chairman, Independent Non-Executive Director) Dato‟ Lim Thiam Huat (Managing Director) Koo Thiam Yoong (Executive Director) Datuk Lee Hwa Cheng (Executive Director) Datuk Lawrence Yeo Chua Poh (Executive Director) Chew Yuit Yoo (Senior Independent Non-Executive Director) Dato‟ Dr Koe Seng Kheng (Independent Non-Executive Director) Thiang Chew Lan (Independent Non-Executive Director) To: The shareholders of BHS Industries Berhad Dear Sir/ Madam, PROPOSED DIVERSIFICATION 1. INTRODUCTION
1.1 Information on the Land
On 21 October 2016, the Board announced that Pejabat Setiausaha Kerajaan Pahang (Pahang State Government) had granted Ultimate Ivory, a wholly-owned subsidiary of BHS, the approval for the Land for the purpose of construction and development of the entire GTP Pekan Project. The total purchase consideration payable by Ultimate Ivory to Pejabat Setiausaha Kerajaan Pahang (Pahang State Government) is RM9.25 million (excluding Malaysian Goods and Services Tax).
2
2
The details of the Land to be developed by BHS for the GTP Pekan Project are set out below:
Mukim/ District/ State : Mukim Lepar/ Daerah Pekan/ Pahang Darul Makmur Land area : 375 acres Existing use : The subject property is currently vacant, save for infrastructural
work being carried out on 26 acres of land approved for the development of Phase 1 in GTP Pekan as announced by BHS on 11 March 2016
Tenure : Leasehold of 99 years commencing from the date of issuance of
the title
Registered owner : The Land is currently registered under Pejabat Setiausaha
Kerajaan Pahang as it is still pending the issuance of land title from Pejabat Tanah & Galian Kuantan
Category of land use : 275 acres for industrial land
100 acres for mixed development Encumbrances : None
Note:
The lot no./ title no. of the Land is not available as it is pending issuance of land title from Pejabat Tanah & Galian Kuantan.
The salient terms of the land approval granted by Pejabat Setiausaha Kerajaan Pahang (Pahang State Government) include inter alia, the following:
(i) to comply with the conditions set by the technical departments such as department
of irrigation and drainage, department of environment, Pengurusan Air Pahang Berhad, district and land office, local authority and other technical departments before, during and after the course of the GTP Pekan Project;
(ii) to carry out survey work and submit the relevant plans to Perbadanan Setiausaha
Kerajaan. Ultimate Ivory is required to bear all applicable costs such as Land‟s surveying costs, Land‟s clearing costs and cost for the preparation of development plans. Ultimate Ivory is not allowed to claim any form of payment from Perbadanan Setiausaha Kerajaan in respect of the costs incurred;
(iii) to commence the development of the project within 3 months from the date of
approval and complete the GTP Pekan Project within a period not exceeding 2 years from the commencement date;
(iv) to submit a project implementation status report to Perbadanan Setiausaha
Kerajaan every 3 months; and
(v) failure to comply with the terms set out in the land approval letter or any activities contrary to the interests of the government and public will result in the land approval letter being withdrawn and cancelled without having reference to any agreements.
3
3
1.2 Information on the MoA
On 1 November 2016, the Board announced that BHS had entered into the MoA, which aims to set out the cooperation intention of BHS and Huaxing before signing the cooperation/ joint venture agreement. Rights and obligations of both parties shall be defined in the cooperation/ joint venture agreement to be entered into. Should BHS enter into such arrangements, the Board will ensure that all relevant regulatory and disclosure requirements, including the Listing Requirements, will be complied with and the approval of the Company‟s shareholders will be sought, where relevant. BHS will immediately make the necessary announcement(s) to Bursa Securities upon entering into such arrangements.
Pursuant to the MoA and subject to finalisation of the cooperation/ joint venture agreement to be entered into, the scope of work that BHS Group is expected to be involved in include, amongst others, to provide the patents and technologies necessary for the project‟s operations, and to obtain all approvals and consents required for the construction, development and management of the GTP Pekan Project. In addition, BHS is to participate in the operations and management of the GTP Pekan Project.
The Board expects that the involvement in the GTP Pekan Project and other construction and property development activities will result in the diversion of more than 25% of the NA of BHS Group, and the net profits to be generated therefrom is expected to contribute to more than 25% of the net profits of BHS Group. As such, the Board proposes to seek the prior approval from the shareholders of the Company at the EGM to be convened for the Proposed Diversification. 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:
(i) the diversion of 25% or more of the NA of the listed issuer to an operation which differs
widely from those operations previously carried on by the listed issuer; or
(ii) the contribution from such an operation of 25% or more of the net profits of the listed issuer.
On 4 November 2016, RHBIB had, on behalf of the Board, announced that BHS proposed to undertake the Proposed Diversification.
Further details on the Proposed Diversification are set out in the ensuing sections of this Circular.
THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE THE SHAREHOLDERS OF BHS WITH THE RELEVANT INFORMATION ON THE PROPOSED DIVERSIFICATION AS WELL AS TO SEEK THE APPROVAL FROM THE SHAREHOLDERS OF BHS FOR THE ORDINARY RESOLUTION PERTAINING TO THE PROPOSED DIVERSIFICATION TO BE TABLED AT THE EGM TO BE CONVENED BY THE COMPANY. THE NOTICE OF THE EGM TO BE CONVENED AND THE FORM OF PROXY ARE ENCLOSED TOGETHER WITH THIS CIRCULAR.
SHAREHOLDERS OF BHS ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDIX CONTAINED HEREIN BEFORE VOTING ON THE ORDINARY RESOLUTION PERTAINING TO THE PROPOSED DIVERSIFICATION TO BE TABLED AT THE EGM TO BE CONVENED.
4
4
2. DETAILS OF THE PROPOSED DIVERSIFICATION
2.1 Information on the GTP Pekan Project
BHS Group is principally involved in printing of books and magazines, publishing of books and the utilisation and sub-licensing of paper pulp making technology, manufacturing of Renewable Paper Pulp Products, and other related activities including, amongst others, the following:
(i) design, supply and fabrication of equipment, and construction of facilities for the
manufacturing of Renewable Paper Pulp Products;
(ii) trading of Renewable Paper Pulp Products and its manufactured by-products/ recycled wastes; and
(iii) provision of consultancy and services in relation to the usage of the PRC RBMP
Technology.
GTP Pekan, located approximately 75 kilometres from the Kuantan port, is conceptualised based on the concept of zero waste by using green technology and biotechnology and integrating renewable energy, as set out below:
EFB will be used to replace wood as the raw material in the production of paper,
hence it can reduce the effects of deforestation. The EFB can be converted into paper pulp through the use of the PRC RBMP Technology. The paper pulp can then be used to produce wood-free paper, tissue paper, corrugated paper and box liner paper, which can be used for the packaging and printing industries.
Renewable Paper Pulp Products will be generated from EFB using the PRC RBMP
Technology, wastewater discharged from the paper mill factories will be treated to meet industrial and domestic water discharge standard and subsequently be supplied to GTP Pekan for production and operation.
Waste water discharged from GTP Pekan‟s manufacturing processes will be
channeled into the centralised wastewater treatment plant. After the wastewater is being processed, it will be channeled into the wetlands of GTP Pekan. The wetlands in GTP Pekan are interconnected via small streams, and lead to a recreational lake.
Electricity power will be generated and supplied via self-supply power system, which
integrates the biomass-fired power plant by utilising solid waste from the pulp and paper production process and converting it into energy pellets.
The wet waste such as palm oil mill effluents and sludge from the wastewater
treatment plant will be converted into electricity power through anaerobic digestion in the biogas plant.
Chemical used in the pulping process are recycled and reused, and the heat
emitted from the process will be used to generate additional electricity in the alkali recovery treatment plant. The resulting electricity power generated will then be used to supplement the energy requirements within GTP Pekan.
The waste materials, water and gas will be processed and recycled, and the residue
shall not be discharged until it meets environmental regulatory standard. Carbon emission from GTP Pekan is expected to be in line with the emission standard of Malaysia.
In addition, GTP Pekan will also include renewable energy generation method,
namely solar power (via solar panels on rooftop), small scale hydro energy turbine and small scale wind energy turbine.
There will be an education and R&D hub in collaboration with local and foreign
universities to continue research on the development or enhancement of sustainable technology and renewable energy, and other downstream products for the palm oil industry.
5
5 T
he G
TP
Pek
an P
roje
ct w
ill c
ompr
ise
of in
tegr
ate
d p
ulp
and
pap
er m
ills,
fee
d m
ill,
fert
ilise
r pl
ant,
ligh
t in
dus
trie
s, c
entr
alis
ed
was
tew
ate
r tr
eatm
ent
plan
t, w
etla
nds,
re
crea
tion
lake
, al
kali
reco
very
tre
atm
ent
plan
t, co
mm
erci
al a
rea,
bio
mas
s-fir
ed p
ower
pla
nt,
bio
gas
pla
nt,
resi
dent
ial a
rea
for
wor
kers
, an
d ed
ucat
ion
and
R&
D h
ub,
as
illu
stra
ted
bel
ow
: D
iscl
aim
er:
The
abo
ve p
icto
rial
repr
esen
tatio
n is
art
ist’s
im
pres
sion
whi
ch p
rovi
des
an i
mpr
essi
on o
f th
e ap
pear
ance
of
the
inte
nded
com
plet
ed d
evel
opm
ent
of th
e G
TP
Pek
an P
roje
ct.
(S
ourc
e: T
he m
anag
emen
t of B
HS
)
6
6
The development of the GTP Pekan Project can be divided into 5 phases:
Phases:
Expected commencement and completion (Calendar year)
Development involves:
Phase 1 2016 to 2017 It involves the construction of pulp and paper mill with production capacity of 10,000 metric tons of wood free paper (“10,000 MT Pulp and Paper Mill”), which is an on-going development. The production line is expected to be on-stream for production by the 1st half of calendar year 2017. Pursuant to the diversification of the businesses of BHS Group to include the utilisation and sub-licensing of paper pulp making technology, manufacturing of renewable paper pulp products generated from EFB using the PRC RBMP Technology, and other related activities which was approved by the shareholders of BHS at the EGM held on 14 August 2015, Nextgreen Pulp & Paper Sdn Bhd, a wholly-owned subsidiary of BHS, is currently in the process of constructing the 10,000 MT Pulp and Paper Mill.
The total costs to be incurred for the acquisition of land, purchase of machineries and equipment, and construction of factory for the 10,000 MT Pulp and Paper Mill are estimated at RM55.00 million, which is partially funded by the proceeds raised from the rights issue undertaken by BHS and was completed on 22 October 2015, and internally generated funds. Currently, preliminary site clearance on the Land is being undertaken and prior to the commencement of development of the Land, the application for full planning approval (Kebenaran Merancang) and building plans are required to be submitted by BHS Group to the relevant authorities for its approvals. As at the LPD, BHS Group had received the support/ clearance letters from Telekom Malaysia Berhad for the installation of infrastructure for the communication systems, and Tenaga Nasional Berhad for the installation of infrastructure for the supply of electricity.
The remaining construction and development planned under Phase 1 is the pulp and paper mill with production capacity of 5,000 metric tons of tissue paper using the PRC RBMP Technology, with an estimated cost of investment of approximately RM25.00 million. As at the LPD, this phase of development has yet to be finalised as BHS is still in the midst of identifying/ negotiating with potential strategic investor(s) on the construction and development of this pulp and paper mill. As a result, the details of the development plans have not been finalised at this juncture.
Upon completion of Phase 1 of the GTP Pekan Project, the production capacity of BHS Group is expected to be 10,000 metric tons of wood free paper and 5,000 metric tons of tissue paper.
Phase 2 2017 to 2019 Phase 2 involves the construction and development of the below:
(i) pulp and paper mill with production capacity of 100,000 metric tons of box liner paper using the PRC RBMP Technology; and
(ii) pulp and paper mill with production capacity of 120,000 metric tons of corrugated paper using the PRC RBMP Technology.
Phase 3 2019 to 2020 Phase 3 involves the construction and development of pulp and paper mill with production capacity of 65,000 metric tons of tissue paper using the PRC RBMP Technology.
Phase 4 2018 to 2020 Phase 4 involves the construction and development of the below:
(i) feed mill with production capacity of 30,000 metric tons of agro-feed using the microbial fermentation technology; and
(ii) fertiliser plant with production capacity of 50,000 metric tons of fertiliser using the by-products produced from the biogas plant.
Phase 5 2019 to 2020 Phase 5, which has been earmarked for light industries, involves the construction and development of packaging and printing factories. The Renewable Paper Pulp Products produced in GTP Pekan such as wood free paper, tissue paper, corrugated paper and box liner paper can be used for the packaging and printing industries.
7
7
Other Ancillary Buildings/ Facilities will be constructed along with the construction and development of the GTP Pekan Project:
(i) centralised wastewater treatment plant; (ii) education and research hub; (iii) commercial units such as shoplots; (iv) residential buildings such as hostel for the local workforce; (v) installation of solar panels on rooftop of the buildings; (vi) biomass-fired power plant; (vii) biogas plant; (viii) alkali recovery plant; (ix) small scale wind energy turbine; and (x) small scale hydro energy turbine.
As at the LPD, the expected gross development value, gross development cost and expected profit for the entire GTP Pekan Project is not available as it is still at the preliminary stage of planning and is subject to the finalisation of the cooperation/ joint venture agreement to be entered into. The details of the development plans have not been finalised at this juncture and BHS Group will submit the relevant applications to the authorities prior to the commencement of development of the phases.
BHS Group intends to fund the GTP Pekan Project via a combination of internally-generated funds and/or bank borrowings, the composition of which will be determined at a later stage after taking into consideration, amongst others, the project costs, cost of funding, the eventual amount of bank borrowings to be procured by BHS Group, if required, and cash requirements of BHS Group‟s existing business operations.
The estimated total annual production capacity of 300,000 metric tons of Renewable Paper Pulp Products generated from GTP Pekan are summarised as follows:
10,000 metric tons of wood free paper; 70,000 metric tons of tissue paper; 100,000 metric tons of box liner paper; and 120,000 metric tons of corrugated paper.
Barring any unforeseen circumstances, the entire GTP Pekan Project is expected to be completed by the calendar year 2020.
2.2 Key management personnel of BHS Group
The Board believes that BHS Group has the capability to diversify into the business of construction, development and management of Green Technology Park and other construction and property development activities by leveraging on the competency and experience of Dato‟ Lim, the Managing Director of BHS, who will spearhead the Proposed Diversification. Dato‟ Lim has vast experience in managing construction and development projects which spans for more than 29 years. The projects that have been undertaken by Dato‟ Lim ranges from commercial high-rise office cum shopping complexes, industrial buildings, factories, housing projects, hotels/ resorts/ hospitals, apartments to infrastructures such as highway and airport construction.
8
8
The
tabl
e be
low
det
ails
the
proj
ects
, am
ongs
t oth
ers,
that
hav
e be
en u
nder
take
n by
Dat
o‟ L
im:
Proj
ect
Type
of p
roje
cts
Rol
es/ r
espo
nsib
ilitie
s C
ontr
act v
alue
C
ompl
etio
n C
onst
ruct
ion
of 6
-sto
rey
Pla
za P
elan
gi, 1
6-st
orey
M
enar
a Pe
lang
i, C
ount
ry
Clu
b H
ouse
, an
d
28-s
tore
y an
d 31
-sto
rey
with
3 b
asem
ents
, Gra
nd
Cen
tral H
otel
at J
ohor
Bah
ru
Com
mer
cial
and
hig
h ris
e bu
ildin
gs
Man
agin
g th
e co
nstru
ctio
n ac
tiviti
es.
Appr
oxim
atel
y R
M80
milli
on
1995
Con
stru
ctio
n of
Sam
sung
Cor
ning
at
Kaw
asan
Pe
rindu
stria
n Tu
anku
Jaa
far,
Sere
mba
n, N
eger
i Se
mbi
lan
Indu
stria
l fac
tory
C
onst
ruct
ion
of
build
ing
and
infra
stru
ctur
e fa
cilit
ies
incl
udin
g,
utilit
y bu
ildin
g an
d m
ain
war
ehou
se.
Appr
oxim
atel
y R
M60
milli
on
1995
Con
stru
ctio
n of
the
Kua
la L
umpu
r In
tern
atio
nal
Airp
ort
(KLI
A) p
roje
ct in
Sep
ang,
Sel
ango
r D
arul
Eh
san
Civ
il w
ork
for m
ain
term
inal
M
anag
ing
the
oper
atio
ns
of
the
cons
truct
ion
activ
ities
. Ap
prox
imat
ely
RM
80 m
illion
19
96
Con
stru
ctio
n of
82
units
of
doub
le-s
tore
y an
d
29 u
nits
sin
gle
stor
ey t
erra
ce h
ouse
s at
Tam
an
Dat
o‟
Che
llam
, M
ukim
Te
brau
, D
aera
h Jo
hor
Bahr
u, J
ohor
Res
iden
tial –
land
ed
prop
ertie
s M
anag
ing
the
cons
truct
ion
activ
ities
. Ap
prox
imat
ely
RM
25 m
illion
20
02
Con
stru
ctio
n of
H
ospi
tal
Sung
ai
Bulo
h,
with
62
0 be
ds,
in
Sun
gai
Bul
oh,
Sel
ango
r D
arul
Eh
san
Civ
il w
ork
for t
he h
ospi
tal
build
ing
Proj
ect
dire
ctor
, in
clud
ing
man
agin
g th
e co
nstru
ctio
n ac
tiviti
es.
Appr
oxim
atel
y R
M13
1 m
illion
20
06
Con
verti
ng
a 7-
stor
ey
host
el
build
ing
in
Sect
ion
13,
Sha
h A
lam
for
Maj
lis S
ukan
Neg
eri
Sela
ngor
into
a h
otel
(C
arlto
n H
olid
ay H
otel
and
Su
ites)
Hot
el
Con
stru
ctio
n,
refu
rbis
hmen
t, re
nova
tion
and
man
agem
ent
of t
he
hote
l ope
ratio
ns.
Appr
oxim
atel
y R
M20
milli
on
2006
Con
stru
ctio
n of
Kol
ej U
nive
rsiti
Kej
urut
eraa
n &
Te
knol
ogi M
alay
sia
(KU
KTEM
) in
Pek
an, P
ahan
g D
arul
Mak
mur
Civ
il w
ork
Proj
ect
dire
ctor
, in
clud
ing
plan
ning
, bu
dget
ing
and
impl
emen
tatio
n of
the
proj
ect.
Appr
oxim
atel
y R
M20
0 m
illion
20
07
Sung
ai
Bul
oh
– Su
bang
Ai
rpor
t Te
rmin
al
3 hi
ghw
ay p
roje
ct
Infra
stru
ctur
e Tu
rnke
y,
desi
gn
and
build
of
th
e pr
ojec
t. Ap
prox
imat
ely
RM
260
milli
on
2008
Pala
u R
ose
Gar
den
Res
ort
at
Koro
r St
ate,
R
epub
lic o
f Pal
au
Prop
erty
dev
elop
men
t D
esig
n,
build
an
d m
anag
e th
e pr
ojec
t. Ap
prox
imat
ely
USD
1.7
milli
on
2008
Con
stru
ctio
n of
Affo
rdab
le H
ousi
ng a
t Aira
i Sta
te,
Rep
ublic
of P
alau
Pr
oper
ty d
evel
opm
ent
Con
stru
ctio
n,
deve
lopm
ent
and
hand
-ove
r of p
roje
ct.
Appr
oxim
atel
y U
SD2.
5 m
illion
20
08
9
10
10
(Cont’d)
Key management personnel Background
Mohd Sabri Idris Mohd Sabri Idris is the General Manager for the GTP Pekan Project and has joined BHS in 2015. He has 20 years working experience focused on construction and project management. He started his career in 1994 as Supervisor of Filter Power, he is involved in mix development and construction in Pahang till he joined Mosaid Enterprise as Manager and Site Safety Manager. His experiences include the Pahang State Project Development and National Catalyst Project Development. He was also with Yaghani Global (M) Sdn Bhd where he managed industrial and residential project developments throughout Pahang.
Nazri Nayan Nazri Nayan is the Project and Facility Manager for the GTP Pekan Project and has joined BHS in 2015. He has 14 years working experience in information technology and multimedia industry. His roles mainly involves overseeing all information technology aspects of the projects. His previous experiences include, amongst others, Regional Engineer for Hewlett Packard and Senior Information Technology Manager at Pharmaniaga Berhad. He is skilled in information technology and business transformation and has assisted various government linked companies in corporate moves and planning.
Mohd Razif Fariq Bin Mohd Radzi
Mohd Razif Fariq Bin Mohd Radzi is a quantity surveyor for the GTP Pekan Project and has recently joined BHS. He has over 16 years of working experience in quantity surveying experience. His experience comprise of the full range of quantity surveying services. His past projects includes, amongst others, Precint 18 Parcel, R4 and R11 in Putrajaya, Kesihatan Johor College, development of Bandar Tun Hussein Onn, University Technology MARA Library in Shah Alam and residential properties such as apartments, shop offices, boutique outlets and terrace houses.
THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
11
11
3. RATIONALE FOR THE PROPOSED DIVERSIFICATION
The Proposed Diversification will reduce BHS Group‟s risk of dependency on its existing printing business. BHS Group‟s printing business is facing a slide in profitability due to the lower print orders received. Premised on BHS having been granted the master license for the PRC RBMP Technology and its involvement in the manufacturing of Renewable Paper Pulp Products which forms part of Phase 1 of the GTP Pekan Project, the Board believes that the Proposed Diversification will augur well in the future businesses of BHS Group.
In line with BHS Group‟s efforts to enhance its revenue and profitability, the management of BHS Group is of the opinion that the expansion of BHS Group to include the construction, development and management of Green Technology Park and other construction and property development activities will broaden BHS Group‟s revenue and earnings base. The Board, in view of the positive prospects of the Proposed Diversification, the Land and the GTP Pekan Project as set out in Sections 4.6 and 4.7 of this Circular, believes that the Proposed Diversification would further enhance BHS Group‟s future prospects upon the GTP Pekan Project becoming on-stream and would provide BHS Group with an additional stream of income.
With the environmental threats that are driving new requirements for growth with lower carbon footprint, the Board believes that the consolidation of green technologies for the conversion of wastes from palm oil mills into usable and saleable commodities, using and applying the PRC RBMP Technology, into the Green Technology Park operating model will bode well for BHS Group. The revenue to be generated from, amongst others, the trading of Renewable Paper Pulp Products, the sale of land and/or mills in GTP Pekan, and the sale of commercial/ residential properties arising from other construction and property development activities to be undertaken by BHS Group, are expected to boost the revenue of BHS Group. Notwithstanding that there are no precedence of projects similar to the GTP Pekan Project, the Board is of the view that the concept of Green Technology Park is a viable project given that similar green and sustainable business models are being developed globally, such as green technology park in Leyland, United Kingdom, green technology park in Vietnam, eco-efficient industrial parks in China, green energy technology park in Taiwan, and the Korean Eco-Industrial Park Program.
Notwithstanding the above, the Board intends to continue with BHS Group‟s existing core businesses in the same manner.
The summary of the financial information of BHS Group for the past 3 FYEs 30 June 2014 to 2016 as well as the 3-month FPE 30 September 2016 are as follows:
<-------------- Audited -----------> Unaudited for the 3-month
FPE 30 September 2016 FYE 30 June 2014 2015 2016 Revenue (RM’000) 65,556 31,674 28,315 6,676 PAT/ (LAT) (RM’000) 11,131 2,787 (3,170) (2,370)
FYE 30 June 2014
BHS Group was able to maintain its revenue of RM65.56 million for the current year and has enabled the Group to achieve a PAT of RM11.13 million as compared to RM7.25 million in the previous financial year. The increase of PAT was mainly attributed to, amongst others, better profit margins achieved from overseas sales whereby overseas sales contributed approximately 68% of the total turnover. In addition, there was an overprovision of tax due to an incentive claim. The efforts to diversify into overseas market had borne fruit and the Board and the management of BHS have been continuously putting efforts into expanding the overseas market to maintain BHS Group‟s leadership in the printing industry and at the same time to sustain the profit margins. The other major contributing factor for the increase of PAT was the ability of the Group to capitalise on the purchase of cheaper paper through bulk purchases direct from the paper suppliers.
12
12
FYE 30 June 2015
There were unforeseeable events that had affected BHS Group‟s financial performance in the FYE 30 June 2015. The Group‟s overseas customers in Africa were plagued with a series of economic issues triggered by the Ebola outbreak, depressed oil prices and a stronger United States currency. Their inability to cope with these factors had substantially reduced the print orders placed and these were reflected in the lower than expected financial performance of BHS Group. There were also changes in the domestic market as the local customers were adjusting to the introduction of Malaysian Goods and Services Tax and the depreciation of the local currency. The overall market circumstances, which gave rise to the uncertainties in the economy had caused BHS Group‟s revenue to drop from RM65.56 million in the FYE 30 June 2014 to RM31.67 million in the FYE 30 June 2015 as the customers struggled to cope with their own respective situations. BHS Group‟s PAT in the FYE 30 June 2015 has declined to RM2.79 million as compared to RM11.13 million in the FYE 30 June 2014 as higher overheads have squeezed the profit margins due to the lower sales volume.
FYE 30 June 2016
The depressed oil prices and a strong United States currency have continued to affect BHS Group‟s export markets in 2016. The revenue has dropped from RM31.67 million in the FYE 30 June 2015 to RM28.32 million in the FYE 30 June 2016, representing a decrease of RM3.35 million. The lower revenue and increase in operating and administrative expenses during the financial year under review have contributed to a LAT of RM3.17 million as compared to PAT of RM2.79 million in the previous financial year. The expenses for undertaking BHS Group‟s corporate proposals of RM0.91 million were charged to profit and loss account as an expense. In addition, the pre-operating expenses of RM0.75 million for the new business activities such as the utilisation and sub-licensing of paper pulp making technology, manufacturing of Renewable Paper Pulp Products, and other related activities, had also been incurred and charged to profit and loss account.
3-month unaudited FPE 30 September 2016
BHS has recorded revenue of RM6.68 million in the FPE 30 September 2016. The depressed oil prices coupled with a strong USD had further reduced the print orders received from BHS Group‟s main export markets. In view of the low level of revenue and high fixed costs of production, the Company did not manage to operate efficiently and resulted in LAT of RM2.37 million in the FPE 30 September 2016. The LAT was partly attributed to the pre-operating expenses in relation to the new business activities such as the utilisation and sub-licensing of paper pulp making technology, manufacturing of Renewable Paper Pulp Products, and other related activities amounting to RM0.7 million. In addition, BHS had also incurred additional costs amounting to RM0.4 million for the relocation to a new business premise.
(Source: The management of BHS)
THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
13
13
4. INDUSTRY OVERVIEW AND PROSPECTS
4.1 Overview and prospects of the Malaysian economy
The Malaysian economy registered a growth of 4.0% in the second quarter of 2016 (1Q 2016: 4.2%). Despite the stronger expansion in domestic demand, growth was weighed down by the continued decline in net exports and a significant drawdown in stocks. On the supply side, growth continued to be driven by the major economic sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy recorded a growth of 0.7% (1Q 2016: 1.0%).
Private sector activity remained the key driver of growth, expanding at a faster pace of 6.1% in the second quarter (1Q 2016: 4.5%). Private consumption grew by 6.3% (1Q 2016: 5.3%), supported by continued wage and employment growth as well as the additional disposable income from government measures. Private investment grew at a faster pace of 5.6% (1Q 2016: 2.2%), driven mainly by continued capital spending in the services and manufacturing sectors. Public investment growth turned around to register a positive growth of 7.5% (1Q 2016: -4.5%), on account of higher spending on fixed assets by both the Federal Government and public corporations. Growth of public consumption also improved in the second quarter to 6.5% (1Q 2016: 3.8%), due mainly to higher spending on supplies and services.
On the supply side, all economic sectors continued to expand, with the exception of the agriculture sector. The higher growth in the services sector was underpinned primarily by stronger household spending while the manufacturing sector was supported by the electronics and electrical cluster. Growth in the construction sector was stronger, dominated by the civil engineering subsector. The performance of the mining sector improved, due mainly to higher crude oil and natural gas production during the quarter. Growth in the agriculture sector declined, due to the lagged impact of El Niño on crude palm oil production.
Growth of the Malaysian economy is expected to be 4-4.5%. Domestic demand will continue to be the main driver of growth, supported primarily by private sector spending. Private consumption is projected to expand further, underpinned by continued growth in wages and employment, as well as additional disposable income from government measures. While the growth in private investment has moderated due to lower capital expenditures in the oil and gas sector, overall investment will remain supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors. Exports are projected to remain weak given the subdued global demand. Overall, while domestic conditions remain resilient, uncertainties in the external environment may pose downside risks to Malaysia‟s growth prospects.
(Source: Economic and Financial Developments in Malaysia in the Second Quarter of 2016, Bank Negara Malaysia)
4.2 Overview and prospects of the Malaysian oil palm biomass industry
The year 2015 saw mixed performance of the Malaysian oil palm industry. Oil palm planted area, crude palm oil (CPO) production, import, export and closing stocks increased, while that of prices and export revenue declined.
Oil palm planted area in 2015 reached 5.64 million hectares, an increase of 4.6% as against 5.39 million hectares recorded in the previous year. This was mainly due to the increase in new planted areas especially in Sarawak, which recorded an increase of 13.9%. Sabah is still the largest oil palm planted state, with 1.54 million hectares or 27% of the total oil palm planted area, followed by Sarawak with 1.44 million hectares or 26%, while Peninsular Malaysia accounted for 2.66 million hectares or 47%.
(Source: Overview of the Malaysian Oil Palm Industry, February 2016, Economics & Industry Development Division, Malaysia Palm Oil Board)
14
14
Six types of oil palm biomass are produced as by-products of the palm oil industry: oil palm fronds, oil palm trunks, EFB, palm kernel shells, mesocarp fibre and palm oil mill effluent. Malaysia could benefit from an additional RM30 billion contribution to gross national income and 66,000 incremental jobs by utilising biomass from the oil palm industry for higher value-added downstream activities.
In the palm biomass products sub-sector, 15 projects with investments of RM397.2 million were approved in 2015 compared with 12 projects with investments of RM82.9 million in 2014. Domestic investments amounted to RM249.3 million while foreign investments amounted to RM147.9 million. The approved projects were for utilisation of EFB and oil palm trunk to produce pellet, pulp and briquette.
Refining and crushing activities have reached maturity levels in the country and are no longer promoted as growth areas. Significant opportunities, however, exist in downstream activities that generate high value-added products and in the palm biomass sub-sector.
(Source: Malaysia Investment Performance Report 2015, Malaysian Investment Development Authority)
4.3 Overview and prospects of the construction sector
Value-added of the construction sector recorded a strong growth of 8.4% during the first half of 2016 (January – June 2015: 7.6%). The acceleration of civil engineering works and sustained expansion in residential activities outweighed the tapering growth in the non-residential subsector. Overall, these three property subsectors contributed the highest share (more than 80%) of all construction activities. Total value of construction works completed during the first half of 2016 expanded 11.4% to RM62 billion which 11,881 projects (January – June 2015: 11.6%; RM56 billion; 12,158 projects). The civil engineering subsector contributed 33.2% to the total value of construction works, followed by non-residential (32.1%), residential (29.8%) and specialised construction activities (4.9%) subsectors. The private sector continued to dominate the first half of 2016. For the year, the construction sector is expected to expand 8.7% (2015: 8.2%).
The civil engineering subsector recorded a double-digit growth of 21.4%, supported by investment in petrochemical industries and ongoing infrastructure works (January – June 2015: 2.9%). These include the construction of Refinery and Petrochemical Integrated Development (RAPID); Independent Deepwater Petroleum Terminal Phase 2 Pengerang; and Petronas LNG Complex Bintulu. The upgrading of Klang Valley Double Track Rawang-Salak Selatan Line; construction of new Deep Water Terminal at Kuantan Port, Pan Borneo Highway Phase I and Water Supply Scheme Kuala Terengganu North; as well as road upgrading works, especially in Selangor, Pahang and Johor are expected to further augment the growth of this subsector.
The residential subsector grew 10.4% supported by steady growth in incoming supply at 13.1% to 816,174 units (January – June 2015: 13.5%; 10.3%; 721,730 units). Klang Valley, accounting for 26.2%, continued to contribute the most of the incoming supply mainly due to increasing affordable housing schemes (January – June 2015: 25.6%). However, during the period, new approvals declined significantly by 32% to 44,389 units as developers are clearing unsold properties, while buyers are more cautious amid increasing uncertainties in the global environment (January – June 2015: -2.1%; 65,231 units). Likewise, housing starts declined 16.8% to 60,378 units (January – June 2015: 15%; 72,545 units). Of which, terrace houses and condominiums/ apartments accounted for 43.6% (26,324 units) and 25.9% (18,070 units), respectively, while low-end houses 11% (6,617 units). The take-up rate for residential units was lower at 25.6% in the first half of 2016 largely reflecting softer demand for high-end units (January – June 2015: 29.8%).
15
15
Construction activity in the non-residential subsector grew at a moderate pace of 3% (January – June 2015: 19.8%). This was mainly due to a further decline in construction starts, particularly in the industrial (-77.1%), shopping complexes (-43.6%) and shops (-36.5%) segments (January – June 2015: -21.5%; 618.7%; 156.7%). The Purpose-Built Office (PBO) segment improved with the incoming supply rebounding 28.4% to 2 million square metres (sm), while planned supply increased sharply by 56% to 1 million sm (January – June 2015: -15.9%; 1.6 million sm; 36.6%; 0.7 million sm).
(Source: Economic Report 2016/2017, Ministry of Finance Malaysia)
Premised on the above, despite the sharp decline in construction activity in the non-residential subsector, the management of BHS Group is of the view that it is not expected to have any material impact on the prospects of the GTP Pekan Project given its focus is on the construction, development and management of a Green Technology Park as opposed to the conventional construction and property development project. In addition, the GTP Pekan Project augurs well for BHS Group as it is in line with Malaysia‟s vision to focus more on green technology industries.
(Source: The management of BHS)
4.4 Overview and prospects of the property development sector
Malaysia House Price Index (“MHPI”) continues to moderate reflecting implementation of various measures to contain spiraling prices. The MHPI stood at 235.4 points (at base year 2000) during the second quarter of 2016, increasing 5.3%, the lowest since the fourth quarter of 2009 (Q2 2015: 223.5 points; 7.5%). All states recorded a positive growth except Kelantan (-0.2%) and Sabah (-0.6%). Johor registered the highest increase of 7%, followed by Kuala Lumpur (6.9%), Selangor (6.6%), Kedah (6.5%) and Negeri Sembilan (6.2%). The average all-house price increased to RM326,241 in the second quarter of 2016 relative to RM309,705 for the corresponding period in 2015, with detached houses recording the highest increase at 6.5%, followed by high rise units (6%) and terrace houses (5.7%).
Shop segment recorded 6,513 transactions worth RM4.7 billion during the first half of 2016, constituting 56% of total commercial property transactions (January – June 2015: 10,045 transactions; RM7.9 billion). Johor contributed the highest market volume of 17.5% followed by Selangor (16.1%). The shop overhang increased 22.6% to 5,024 units valued at RM2.5 billion during the period following a more cautious sentiment among businesses (January – June 2015: -14.8%; 4,097 units; RM1.7 billion). However, demand for commercial buildings remained favourable with the average occupancy rate of retail space at 82.2% and office (83.5%), reflecting sustained demand for commercial space in prime areas. As at end-June 2016, the existing stock of shopping complexes and industrial segment stood at 14.2 million sm and 106,453 units, respectively (end-June 2015: 13.4 million sm; 103,103 units). The Purpose-Built Office Rent Index Wilayah Persekutuan Kuala Lumpur increased 4% to 128.7 points in the second quarter of 2016 (Q2 2015: 3.5%; 123.7 points). Kuala Lumpur City Center recorded the highest rental increase of 4.2% to RM4.73 per square feet (psf), surpassing the average rate of RM4.62 psf in Wilayah Persekutuan Kuala Lumpur.
(Source: Economic Report 2016/2017, Ministry of Finance Malaysia)
16
16
4.5 Overview and prospects of the industrial properties in Pahang
GTP Pekan is located in the East Coast Economic Region (“ECER”). The ECER covers Kelantan, Terengganu, Pahang and the district of Mersing in Johor. It occupies an area of 66,000 square kilometres or 51% of the total area of Peninsular Malaysia.
Five key economic clusters, namely manufacturing, oil, gas and petrochemicals, tourism, agriculture and human capital development will drive the development of ECER in line with the Government Transformation Programme and Economic Transformation Programme.
The ECER Master Plan, approved by the government in 2008, was formulated as a basis to guide the development of ECER until 2020. It identifies projects and programmes to reduce regional socio-economic disparities, eradicate poverty and improve income and wealth distribution in a sustainable manner.
(Source: http://www.ecerdc.com.my)
Industrial parks such as the Malaysia-China Kuantan Industrial Park (“MCKIP”), Pekan Automotive Park, Kertih Biopolymer Park, Kuantan Integrated Biopark, Gambang Halal Park and Pasir Mas Halal Park continued to attract investors with their strategic advantages and competitiveness. Cumulatively, they have attracted RM19.54 billion in investments to date, that will create 22,377 new jobs. Pahang specifically has attracted a total of RM41.6 billion with 43,370 jobs created.
(Source: ECER attracts RM84 billion in investments as at November 2015, creates 92,313 job opportunities for the people, dated 26 November 2016, www.ecerdc.com.my)
The MCKIP, has secured additional investments worth RM1.58 billion from China and Malaysia. ECER Development Council chief executive officer Datuk Seri Jebasingam Isaace John said: “We believe our continuous investments into the development of MCKIP and its twin sister park, China-Malaysia Qinzhou Industrial Park, a key component of China‟s „One Belt, One Road‟ policy, will further drive bilateral trade between Malaysia and China. Importantly, the strong economic ties between the two countries will help attract more investors, particularly from China, which in turn will boost the socio-economic landscape for local communities in the ECER Special Economic Zone”.
(Source: New Straits Times’ news ‘MCKIP secures RM1.58b additional ventures’ dated 1 June 2016)
Pahang Technology Park (“PTP”) is identified as the information and communication technology centre consisting of initiatives such as Gambang Cybertech City and Gambang Science Park to lead development of the information and communication technology industry in the region and ECER Special Economic Zone (The ECER Special Economic Zone of Greater Kuantan stretches from the district of Kertih, Terengganu in the north to the district of Pekan, Pahang in the south) specifically. With Kuala Lumpur just a two-hour drive away, PTP‟s strategic location can potentially be the digital gateway to Asia Pacific. The first high-tech cyber city in ECER will be focused in Gambang with the development of a technology park that includes components such as a Halal food park, biotechnology, information and communication technology centre and an agritech centre. The University Malaysia Pahang campus, also located in the park, will provide human capital and research and development capabilities while investors can take advantage of resources and raw materials available in the zone.
Prime Minister of Malaysia Dato‟ Sri Mohd Najib bin Tun Abdul Razak said: “The ECER of Malaysia is now well-positioned to receive more investments, both from international and domestic investors and the Malaysian Government is committed to ensuring that the projects and programmes in the region will be implemented as planned.”
(Source: Pahang Technology Park, East Coast Economic Region Development Council)
17
17
4.6 Prospects of the Proposed Diversification
The management of BHS expects that the GTP Pekan Project can save up to 5.1 million trees per year and the annual consumption of approximately 1.1 million metric tons of EFB will be required for the production of 300,000 metric tons of pulp and paper. Based on the knowledge of BHS, there is an estimated 440 palm oil mills in Malaysia generating 20 million tons of EFB per annum, and are facing major challenges to dispose of its EFB wastes. The pulp and paper industry is utilising wood from trees, which is a dwindling resource, as its raw material. BHS, therefore, aims to bridge the gap between the palm oil industry and pulp and paper industry, by creating an alternative raw material source for the pulp and paper industry while transforming EFB into a value added and saleable commodity for the palm oil industry.
Furthermore, palm oil production has increased tenfold since 1980 with estimates that production will increase 50% by 2050. Indonesia is the largest producer of palm oil, followed by Malaysia – both countries account for 84% of the world‟s palm production. Top palm oil producing nations from January to December 2015 include Indonesia (33.4 million tonnes of palm oil) and Malaysia (19.9 million tonnes of palm oil). Demand for edible vegetable oils has grown strongly in recent decades and palm oil plantations have expanded rapidly in number and size to meet the global demand (Source: Where is palm oil grown? www.greenpalm.org).
Consequently, there is abundant supply of EFB waste produced from the palm oil mills and can be utilised for the purpose of the Proposed Diversification. Through the application of the PRC RBMP Technology, BHS envisions Malaysia to be able to become self-sufficient with regards to pulp and paper production and ultimately become a net exporter in the future. By focusing on green and sustainable business practices, the management of BHS is of the view that the Proposed Diversification will provide BHS Group with a long-term and recurring revenue stream which will be generated from the construction, development and management of Green Technology Park and other construction and property development activities to be undertaken in the future.
(Source: The management of BHS)
4.7 Prospects of the Land and the GTP Pekan Project
The Land is strategically located in the District of Pekan and State of Pahang, and is approximately 75 kilometres from the Kuantan port. There are development of various industrial parks which is situated within the State of Pahang, namely, Pahang Technology Park and Gambang Halal Park at approximately 28 kilometres away, Pekan Automotive Park at approximately 45 kilometres away, MCKIP at approximately 70 kilometres away, and Kuantan Integrated Park at approximately 80 kilometres away.
GTP Pekan will be able to have access to EFB wastes from the oil palm processing operations within Pahang and its neighbouring states. Pahang is situated north of Johore, both of which represents the 2 largest oil palm planted area in Peninsular Malaysia, as set out in the table below:
Oil palm planted area by state as at December 2015 (Hectares)
Total % Sabah and Sarawak 2,983,582 52.9 Johore 739,583 13.1 Pahang 725,239 12.9 Perak 398,314 7.1 Negeri Sembilan 177,741 3.1 Terengganu 172,587 3.1 Kelantan 151,973 2.7 Selangor 137,336 2.4 Kedah 87,244 1.5 Malacca 54,603 1.0 Penang 14,447 0.3 Perlis 294 0.0 (Source: Economics & Industry Development Division, Malaysian Palm Oil Board | Area 2015)
18
18
In addition, under the 11th Malaysian Plan, the government has set aside RM2.3 billion to be utilised for green technology based projects. The GTP Pekan Project will help to boost the economy and create job opportunities for the people living in the vicinity. (Source: New Strait Times’ news ‘Malaysia is on track to hit carbon emission reduction target: Prime Minister Najib’ dated 19 March 2016). GTP Pekan is expected to bring about a number of socio-economic benefits including, amongst others, creation of new jobs in the surrounding areas and across the state, and increased economic development especially amongst rural communities which will subsequently improve the standard of living.
(Source: The management of BHS)
4.8 Future plans of BHS Group
Moving forward, upon completion of the construction and development of the GTP Pekan Project, BHS Group intends to operate and manage GTP Pekan and the Other Ancillary Buildings/ Facilities along with Huaxing and/or other strategic partner(s), if any, and to sell the land and/or mills in GTP Pekan to potential investors or commercial/ residential units arising from other construction and property development activities to be undertaken by BHS Group.
Should the GTP Pekan Project be successfully implemented, BHS Group will be able to build on its experience and replicate the success of GTP Pekan for future Green Technology Park projects in other states within the country. In the event opportunities of other construction and property development activities emerge and subject to the capacity and availability of resources of BHS Group, the Board will strive to increase BHS Group‟s revenue from these activities by bidding for opportunities in these sectors.
Notwithstanding the above, the Board intends to continue with BHS Group‟s existing core businesses in the same manner, whereby the Renewable Paper Pulp Products produced from GTP Pekan will be utilised as the paper material for the printing business of BHS Group to ensure long term security and undisrupted supply of paper at a lower price given the cost of paper forms substantially the entire printing costs. In addition, BHS Group envisages to market the PRC RBMP Technology to palm oil mills or third parties in other regions and to become a major player in the paper production market should such opportunities arise. BHS also intends to collaborate with the potential strategic investor(s) to leverage on continuous access to EFB wastes from its oil palm processing operation.
(Source: The management of BHS)
5. RISK FACTORS
The following sets out the risk factors that may arise from or associated with the Proposed Diversification. Whilst the Company seeks to limit the impact of such risks, there can be no assurance that these factors will not have an adverse effect on its business and operations of BHS Group.
5.1 Business diversification risk
BHS Group is principally involved in printing of books and magazines, publishing of books and the utilisation and sub-licensing of paper pulp making technology, manufacturing of renewable paper pulp products. The Proposed Diversification will result in BHS Group‟s core business to include the construction, development and management of Green Technology Park and other construction and property development activities. BHS Group will then be subjected to new challenges and risks arising from the construction, development and management of Green Technology Park and other construction and property development activities which BHS had not been exposed to in the past.
19
20
20
5.5 Risks of unforeseen delays in the completion of a project
The timely completion of the GTP Pekan Project is dependent on various external factors, which include, inter alia, the timely receipt of requisite licenses, permits or regulatory approvals, the work performance of the appointed building contractors, sub-contractors and consultants, commitment of the development parties, availability of financing and availability of building materials, equipment and labour. Unreasonable weather conditions may also delay the timely completion of the GTP Pekan Project.
Any adverse developments may lead to interruptions or delays in the completion of the GTP Pekan Project, which may consequently result in cost overruns that affect BHS Group‟s profitability and cash flow. BHS Group seeks to mitigate this risk by careful planning, selecting of project partner(s), close monitoring of project progress and endeavoring prompt actions to ensure the overall positive progress of the GTP Pekan Project.
6. EFFECTS OF THE PROPOSED DIVERSIFICATION
6.1 Issued and paid-up share capital and substantial shareholders’ shareholdings
The Proposed Diversification will not have any effect on the issued and paid-up share capital and substantial shareholders‟ shareholdings of the Company, as the Proposed Diversification does not involve the issuance of new ordinary shares in BHS.
6.2 NA per share and gearing
The NA of BHS Group would increase in accordance with the earnings contribution from the Proposed Diversification. The Proposed Diversification will not have any effect on the gearing of BHS Group based on the audited consolidated financial statements of BHS as at 30 June 2016. There would be no immediate effect on the gearing of BHS Group as the composition of internally-generated funds and/or bank borrowings for the GTP Pekan Project has yet to be determined at this juncture, the composition of which will be determined at a later stage and subject to the finalisation of the cooperation/ joint venture agreement to be entered into.
6.3 Earnings and EPS
The Proposed Diversification is expected to contribute positively to the earnings and EPS of BHS Group for the FYE 30 June 2017 and in the future financial years if and when the GTP Pekan Project is successfully developed.
6.4 Convertible securities
Save for the outstanding 198,290,398 warrants 2015/2020 and the options which may be granted pursuant to the Company‟s existing ESOS to be implemented, the Company does not have any other existing convertible securities as at the LPD.
The Proposed Diversification will not give rise to any adjustments in relation to the exercise price and the outstanding number of warrants, in accordance with the deed poll dated 21 August 2015.
7. APPROVALS REQUIRED
The Proposed Diversification is subject to the following approvals being obtained:
(i) the shareholders of BHS for the Proposed Diversification at the EGM to be convened; and
(ii) the approval of any other relevant authorities, if required.
21
21
8. ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED DIVERSIFICATION
Barring any unforeseen circumstances, the Proposed Diversification will take immediate effect upon obtaining the shareholders‟ approval at the EGM to be convened.
9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED
WITH THEM
None of the Directors, major shareholders of BHS and/or persons connected with them, as defined in the Listing Requirements, have any interest, whether direct or indirect, in relation to the Proposed Diversification.
10. INTER-CONDITIONALITY AND CORPORATE PROPOSALS ANNOUNCED BUT NOT YET
COMPLETED
The Proposed Diversification is not conditional upon any other corporate proposals of the Company.
Save as disclosed below, there are no outstanding proposals that have been announced by BHS which are not yet completed as at the LPD:
(i) the Company‟s ESOS to be implemented; and
(ii) the acquisition of land in Kg Paloh Hinai, Mukim Lepar, Daerah Pekan, Pahang Darul
Makmur by Ultimate Ivory, a wholly-owned subsidiary of BHS, from Pejabat Setiausaha Kerajaan Pahang (Pahang State Government).
11. DIRECTORS’ RECOMMENDATION
The Board, having considered all aspects of the Proposed Diversification (including but not limited to the rationale and effects in respect of the Proposed Diversification as set out in Sections 3 and 6 of this Circular, respectively) and after due deliberation, the Board is of the opinion that the Proposed Diversification is in the best interest of BHS. Accordingly, the Board recommends that you vote in favour of the ordinary resolution pertaining to the Proposed Diversification to be held at the EGM to be convened by the Company.
12. EGM
An EGM, the notice of which is set out in this Circular, will be held at Langkawi Room, Bukit Jalil Golf and Country Resort, Jalan Jalil Perkasa 3, Bukit Jalil, 57000 Kuala Lumpur on Tuesday, 20 December 2016, at 10.20 a.m. or immediately after the conclusion or adjournment of BHS‟s 11th Annual General Meeting (whichever is later), which will be held at the same venue on the same day at 10.00 a.m., for the purpose of considering and, if thought fit, passing the ordinary resolution to give effect to the Proposed Diversification.
If you are unable to attend and vote in person at the EGM, you are requested to complete, sign and return the enclosed Form of Proxy in accordance with the instruction provided thereon so as to arrive at the Registered Office of the Company not less than 48 hours before the time fixed for holding the EGM or adjourned meeting (as the case may be). The lodging of the Form of Proxy does not preclude you from attending and voting in person at the EGM should you subsequently wish to do so.
22
22
13. FURTHER INFORMATION
Shareholders are advised to refer to the appendix set out in this Circular for further information. Yours faithfully, For and on behalf of the Board of BHS INDUSTRIES BERHAD Dato’ Lim Thiam Huat Managing Director
23
APPENDIX I FURTHER INFORMATION
23
1. DIRECTORS’ RESPONSIBILITY STATEMENT
The Board has seen and approved the contents of this Circular and they individually and collectively, accept full responsibility for the accuracy of the information contained in this Circular. The Board confirms that, after making all reasonable enquiries and to the best of their knowledge and belief, there is no other fact, the omission of which would make any information or statement in this Circular and/or any information provided herein false or misleading or inaccurate.
2. CONSENTS
2.1 Principal Adviser
RHBIB, being the Principal Adviser for the Proposed Diversification, has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereto in the form and context in which they appear in this Circular.
2.2 Due diligence solicitors
Messrs Maylee Gan & Tai, being the due diligence solicitors for the Proposed Diversification, has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereto in the form and context in which they appear in this Circular.
3. DECLARATIONS OF CONFLICT OF INTERESTS
3.1 Principal Adviser
RHBIB, its subsidiaries and associated companies as well as its holding company, RHB Bank Berhad (upon completion of the internal reorganisation on 14 April 2016 within RHB Capital Berhad and its group of companies) and the subsidiaries and associated companies of its holding companies (“RHB Group”), form a diversified financial group and are engaged in a wide range of investment and commercial banking, brokerage, securities trading, assets and fund management and credit transaction services businesses. RHB Group has engaged and may in the future, engage in transactions with and perform services for the Company and/or its affiliates, in addition to the role set out in this Circular.
In addition, in the ordinary course of business, any member of RHB Group may at any time offer or provide its services to or engage in any transaction (on its own account or otherwise) with any member of the Company and/or its affiliates and/or any other entity or person, hold long or short positions in securities issued by the Company and/or its affiliates, make investment recommendations and/or publish or express independent research views on such securities and may trade or otherwise effect transactions for its own account or the account of its other customers in debt or equity securities or senior loans of the Company and/or its affiliates.
This is a result of the businesses of RHB Group generally acting independently of each other, and accordingly, there may be situations where parts of RHB Group and/or its customers now have or in the future, may have interest or take actions that may conflict with the said interest. Nonetheless, RHB Group is required to comply with applicable laws and regulations issued by the relevant authorities governing its advisory business, which require, amongst others, segregation between dealing and advisory activities and Chinese wall between different business divisions.
RHBIB, as part of RHB Group, confirms that there is no situation of conflict of interests that exists or is likely to exist in relation to its role as the Principal Adviser to the Company for the Proposed Diversification.
24
APPENDIX I FURTHER INFORMATION (Cont’d)
24
3.2 Due diligence solicitors
Messrs Maylee Gan & Tai, being the due diligence solicitor for the Proposed Diversification, confirms that there is no situation of conflict of interests that exists or is likely to exist in relation to its role as the due diligence solicitors to the Company for the Proposed Diversification.
4. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES
4.1 Material commitments
Save as disclosed below, as at the LPD, the Board, after making all reasonable enquiries, is not aware of any material commitments incurred or known to be incurred by the Group, which upon becoming enforceable, may have a material impact on the financial results/ position of BHS Group:
RM’000 Property, plant and equipment - Authorised and contracted for 19,779
4.2 Contingent liabilities
As at the LPD, the Board, after making all reasonable enquiries, is not aware of any contingent liabilities incurred or known to be incurred by the Group, which upon becoming enforceable, may have a material impact on the financial results/ position of BHS Group.
5. DOCUMENTS AVAILABLE FOR INSPECTION
The following documents are available for inspection at the Registered Office of BHS at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor during normal business hours (i.e. between 8.30 a.m. to 5.30 p.m.) from Monday to Friday (except public holidays) from the date of this Circular up to and including the date of the EGM to be convened, or at any adjournment thereof:
(a) MoA;
(b) approval letter dated 13 October 2016 from Pejabat Setiausaha Kerajaan Pahang
(Pahang State Government) for the Land;
(c) Memorandum and Articles of Association of BHS;
(d) audited consolidated financial statements of BHS for the past 2 FYEs 30 June 2015 and 30 June 2016 and the latest unaudited quarterly results for the FPE 30 September 2016;
(e) the letters of consent referred to in Section 2 of Appendix I; and
(f) the declarations of conflict of interests referred to in Section 3 of Appendix I.
25
BHS INDUSTRIES BERHAD
(Company No. 719660-W) (Incorporated in Malaysia under the Companies Act, 1965)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Extraordinary General Meeting of BHS Industries Berhad (“BHS” or the “Company”) will be held at Langkawi Room, Bukit Jalil Golf and Country Resort, Jalan Jalil Perkasa 3, Bukit Jalil, 57000 Kuala Lumpur on Tuesday, 20 December 2016, at 10.20 a.m. or immediately after the conclusion or adjournment of BHS‟s 11th Annual General Meeting (whichever is later), which will be held at the same venue on the same day at 10.00 a.m. for the purpose of considering and if thought fit, passing the following ordinary resolution, with or without modification: ORDINARY RESOLUTION PROPOSED DIVERSIFICATION OF THE EXISTING CORE BUSINESSES OF BHS AND ITS SUBSIDIARIES TO INCLUDE THE CONSTRUCTION, DEVELOPMENT AND MANAGEMENT OF GREEN TECHNOLOGY PARK AND OTHER CONSTRUCTION AND PROPERTY DEVELOPMENT ACTIVITIES “THAT subject to all approvals being obtained from the relevant regulatory authorities, approval be and is hereby given to the Board of Directors of the Company (“Board”) to diversify the core businesses of the Company and its subsidiaries to include the construction, development and management of Green Technology Park and other construction and property development activities (“Proposed Diversification”). AND THAT the Board be and is hereby authorised to sign and empowered to give full effect to the aforesaid Proposed Diversification with full power to assent to and accept any conditions, variations, arrangements and/or amendments in any manner as may be required or permitted by any relevant authorities or deemed necessary by the Board and to sign, execute and deliver on behalf of the Company, all such other documents with any party or parties and to take all such steps and to do all such acts, things and matters as it may deem fit, necessary and/or expedient in order to implement, finalise and give full effect to the Proposed Diversification.” By Order of the Board BHS INDUSTRIES BERHAD Kang Shew Meng Seow Fei San Company Secretaries Petaling Jaya 1 December 2016 Notes: 1. Only depositors whose names appear in the Record of Depositors as at 13 December 2016 shall be regarded as members and
entitled to attend, speak and vote at the meeting. 2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need
not be a Member of the Company and a member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
3. A member shall be entitled to appoint not more than 2 proxies to attend and vote at the Extraordinary General Meeting. Where a member appoints 2 proxies, the appointment shall be invalid unless the member specifies the proportions of his holding to be represented by each proxy.
4. Where a member of the Company is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.
5. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account known as an omnibus account, there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds.
6. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a corporation, either under its Common Seal or under the hand of its officer or attorney duly authorised.
7. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan at least 48 hours before the time for holding the meeting or any adjournment thereof.
26
BHS INDUSTRIES BERHAD (719660-W)
(Incorporated in Malaysia under the Companies Act, 1965) FORM OF PROXY Number of shares held CDS No. I/We
(FULL NAME IN CAPITAL LETTERS AND I/C NO.)
of (ADDRESS)
being a member/members of BHS INDUSTRIES BERHAD (the “Company”) hereby appoint
of (FULL NAME IN CAPITAL LETTERS AND I/C NO.)
(ADDRESS)
or failing him/her, (FULL NAME IN CAPITAL LETTERS AND I/C NO.)
of (ADDRESS)
or failing him/her, the CHAIRMAN OF THE MEETING as *my/our proxy, to vote for *me/us and on *my/our behalf at the Extraordinary General Meeting of the Company to be held at Langkawi Room, Bukit Jalil Golf and Country Resort, Jalan Jalil Perkasa 3, Bukit Jalil, 57000 Kuala Lumpur on Tuesday, 20 December 2016, at 10.20 a.m. or immediately after the conclusion or adjournment of BHS‟s 11th Annual General Meeting (whichever is later), which will be held at the same venue on the same day at 10.00 a.m. and to vote as indicated below: FOR AGAINST Ordinary Resolution Proposed Diversification
Please indicate with an “X” in the space provided above how you wish your votes to be cast on the resolution specified. If no specific direction as to the voting is given, the Proxy will vote or abstain at his/her discretion. Dated this …………… day of ……………….., 2016.
Signature of Shareholder/ Common Seal Notes: 1. Only depositors whose names appear in the Record of Depositors as at 13 December 2016 shall be regarded as members and
entitled to attend, speak and vote at the meeting. 2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be
a Member of the Company and a member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
3. A member shall be entitled to appoint not more than 2 proxies to attend and vote at the Extraordinary General Meeting. Where a member appoints 2 proxies, the appointment shall be invalid unless the member specifies the proportions of his holding to be represented by each proxy.
4. Where a member of the Company is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.
5. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account known as an omnibus account, there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds.
6. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a corporation, either under its Common Seal or under the hand of its officer or attorney duly authorised.
7. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan at least 48 hours before the time for holding the meeting or any adjournment thereof.
27
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Lastly, fold this flap for sealing - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Fold along this line - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --
The Company Secretaries BHS INDUSTRIES BERHAD (719660-W) 802, 8th Floor Block C, Kelana Square 17 Jalan SS7/26 47301 Petaling Jaya Selangor Darul Ehsan Malaysia
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Fold along this line - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --
AFFIX
STAMP