kobay technology bhd circular to shareholders in …

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, banker, solicitor, accountant or other professional advisers immediately.

Bursa Malaysia Securities Berhad (“Bursa Securities”) 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.

KOBAY TECHNOLOGY BHD(Registration No. 199401022600 (308279-A))

(Incorporated in Malaysia)

CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE(I) PROPOSED ACQUISITION BY KOBAY TECHNOLOGY BHD (“KOBAY” OR “COMPANY”) OF 70% EQUITY

INTEREST IN (A) AVELON HEALTHCARE SDN BHD, (B) GALAXIS HEALTHCARE SDN BHD, (C) AVELONARISE SDN BHD, (D) GALAXIS PHARMA SDN BHD AND (E) ARISE HEALTHCARE SDN BHD(COLLECTIVELY REFERRED TO AS THE “AVELON GROUP”) FROM THE VENDORS (AS DEFINED HEREIN)FOR A TOTAL CASH CONSIDERATION OF UP TO RM47,665,676.80 (“PROPOSED 70% ACQUISITION”); AND

(II) PROPOSED GRANTING BY THE VENDORS OF A CALL OPTION FOR KOBAY TO ACQUIRE THE REMAINING30% EQUITY INTEREST IN THE AVELON GROUP AND THE GRANTING BY KOBAY OF A PUT OPTION TOTHE VENDORS TO SELL OR CAUSE TO SELL THE REMAINING 30% EQUITY INTEREST IN THE AVELONGROUP AFTER THE PROPOSED 70% ACQUISITION (“PROPOSED CALL AND PUT OPTION”)

(THE PROPOSED 70% ACQUISITION AND PROPOSED CALL AND PUT OPTION ARE COLLECTIVELYREFERRED TO AS THE “PROPOSED ACQUISITION”)

(III) PROPOSED DIVERSIFICATION OF THE EXISTING PRINCIPAL ACTIVITIES OF KOBAY AND ITSSUBSIDIARIES TO INCLUDE THE SALE AND/OR MANUFACTURING OF PHARMACEUTICAL ANDHEALTHCARE PRODUCTS (“PROPOSED DIVERSIFICATION”)

(THE PROPOSED ACQUISITION AND PROPOSED DIVERSIFICATION ARE COLLECTIVELY REFERRED TOAS THE “PROPOSALS”)

NOTICE OF EXTRAORDINARY GENERAL MEETING

Principal Adviser

AFFIN HWANG INVESTMENT BANK BERHAD (Registration No. 197301000792 (14389-U))(A Participating Organisation of Bursa Malaysia Securities Berhad)

The Extraordinary General Meeting (“EGM”) of Kobay will be conducted on a fully virtual basis via online meeting platform at www.agriteum.com.my on Thursday, 22 July 2021 at 11.00 a.m. or at any adjournment thereof. The Notice of EGM together with the Form of Proxy are enclosed herein. This Circular, Notice of EGM and Form of Proxy can be downloaded at the Company’s website at www.kobaytech.com and Bursa Securities’ website at www.bursamalaysia.com.

If you are unable to attend, participate, speak and vote at the forthcoming EGM, you may appoint a proxy or proxies to do so on your behalf by completing and depositing the enclosed Form of Proxy in accordance with the instructionstherein at the Company’s Registered Office at 3rd Floor, Wisma Kobay, No. 42-B, Jalan Rangoon, 10400 Georgetown, Penang, not less than forty-eight (48) hours before the time set for holding the EGM or at any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending, participating, speaking and voting in person at the EGM should you subsequently wish to do so.

Last date and time for lodging the Form of Proxy : Tuesday, 20 July 2021 at 11.00 a.m.

Date and time of the EGM : Thursday, 22 July 2021 at 11.00 a.m.

This Circular is dated 5 July 2021

DEFINITIONS

Except where the context otherwise requires, the following terms and abbreviations shall apply throughout this Circular:

Act : Companies Act 2016

Affin Hwang IB : Affin Hwang Investment Bank Berhad (Registration No. 197301000792 (14389-U))

Announcement : Announcement dated 28 May 2021 in relation to the Proposals

Arise Healthcare : Arise Healthcare Sdn Bhd (Registration No. 201801032641 (1294667-A))

Avelon Arise : Avelon Arise Sdn Bhd (Registration No. 201601018119 (1189054-W))

Avelon Group or Target Companies

: Avelon Healthcare, Galaxis Healthcare, Avelon Arise, Galaxis Pharma and Arise Healthcare, collectively

Avelon Healthcare : Avelon Healthcare Sdn Bhd (Registration No. 201301020687 (1050517-A))

Board : The board of directors of Kobay

Bursa Securities : Bursa Malaysia Securities Berhad (Registration No. 200301033577 (635998-W))

Circular : This circular to the shareholders of Kobay dated 5 July 2021

Completion Date : The date the Vendors’ solicitors receive the Part Purchase Price upon which the completion of the sale and purchase of the Sale Shares is to take place

COVID-19 : Coronavirus 2019

EGM : Extraordinary general meeting

EPS : Earnings per share

FYE : Financial year ended/ending, as the case may be

FPE : Financial period ended

Galaxis Healthcare : Galaxis Healthcare Sdn Bhd (Registration No. 201401030948 (1107034-K))

Galaxis Pharma : Galaxis Pharma Sdn Bhd (Registration No. 201801030613 (1292639-V))

ii iii

DEFINITIONS (CONT’D)

Proposed Acquisition : Proposed 70% Acquisition and Proposed Call and Put Option, collectively

Proposed Call and Put Option

: Proposed granting by the Vendors of a call option for Kobay to acquirethe remaining 30% equity interest in the Avelon Group and the granting by Kobay of a put option to the Vendors to sell or cause to sell the remaining 30% equity interest in the Avelon Group after the Proposed 70% Acquisition

Proposed Diversification : Proposed diversification of the existing principal activities of the Kobay Group to include the sale and/or manufacturing of pharmaceutical and healthcare products

Purchase Price : A total cash consideration of up to RM47,665,676.80 for the Proposed 70% Acquisition

Remaining Shareholders

: The Vendors, Tan Kim Fah, Tee Yee May and Chong Loon Hooi, collectively

RM and sen : Ringgit Malaysia and sen respectively

Sale Shares : 490,000 ordinary shares in Avelon Healthcare, 350,000 ordinary shares in Galaxis Healthcare, 1,050,000 ordinary shares in Avelon Arise, 70 ordinary shares in Galaxis Pharma and 70 ordinary shares in Arise Healthcare, collectively

SSA : Conditional share sale agreement dated 28 May 2021 entered into between Kobay and the Vendors in relation to the Proposed Acquisition

Target Period : The period from 1 January 2021 to 31 December 2023

Unconditional Date : The date upon which the SSA becomes unconditional, i.e. when all the conditions precedent have been fulfilled or waived

Vendors : Lim Beng Cheong and Chong Huei Shin, collectively

References to “we”, “us”, “our” and “ourselves” are to the Company, and where the context otherwise requires, the subsidiaries of the Company. All references to “you” are to the shareholders of the Company.

Words incorporating the singular shall, where applicable, include the plural and vice versa. Words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Any reference to persons shall include a corporation, unless otherwise specified.

Any reference in this Circular to any statutes, rules, regulations or rules of the stock exchange is a reference to such statutes, rules, regulations or rules of the stock exchange currently in force and as may be amended from time to time and any re-enactment thereof.

Any reference to a time or date in this Circular shall be a reference to Malaysian time, unless otherwise stated.

Any discrepancy in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding.

Kobay or Company or Purchaser

: Kobay Technology Bhd (Registration No. 199401022600 (308279-A))

Kobay Group or Group : Kobay and its subsidiaries, collectively

Kobay Share(s) or Share(s)

: Ordinary share(s) in Kobay

LAT : Loss after taxation

LBT : Loss before taxation

Listing Requirements : Main Market Listing Requirements of Bursa Securities

LPD : 15 June 2021, being the latest practicable date prior to the printing of this Circular

LPS : Loss per share

MOU : Memorandum of understanding dated 26 February 2021 entered intobetween Kobay and the Vendors in relation to the Proposed 70% Acquisition

NA : Net assets

NL : Net liabilities

Part Purchase Price : Part of the Purchase Price of RM17,363,925.12 to be paid by Kobay to the Vendors’ solicitors on the Completion Date

PAT : Profit after taxation

PAT Target : Unconditional and irrevocable guarantee by the Vendors to Kobay that:

(i) the aggregate audited PAT in respect of the Target Companiesfor the Target Period shall be RM25,535,184.00; and

(ii) the aggregate audited PAT in respect of the Target Companiesfor each year under the Target Period shall not be less thanRM6,809,382.40.

PBT : Profit before taxation

PE Multiple(s) : Price-to-earnings multiple(s)

PPE : Property, plant and equipment

Proposals : Proposed Acquisition and Proposed Diversification, collectively

Proposed 70% Acquisition

: Proposed acquisition by Kobay of 70% equity interest in the Avelon Group from the Vendors for the Purchase Price

ii iii

Proposed Acquisition : Proposed 70% Acquisition and Proposed Call and Put Option, collectively

Proposed Call and Put Option

: Proposed granting by the Vendors of a call option for Kobay to acquirethe remaining 30% equity interest in the Avelon Group and the granting by Kobay of a put option to the Vendors to sell or cause to sell the remaining 30% equity interest in the Avelon Group after the Proposed 70% Acquisition

Proposed Diversification : Proposed diversification of the existing principal activities of the Kobay Group to include the sale and/or manufacturing of pharmaceutical and healthcare products

Purchase Price : A total cash consideration of up to RM47,665,676.80 for the Proposed 70% Acquisition

Remaining Shareholders

: The Vendors, Tan Kim Fah, Tee Yee May and Chong Loon Hooi, collectively

RM and sen : Ringgit Malaysia and sen respectively

Sale Shares : 490,000 ordinary shares in Avelon Healthcare, 350,000 ordinary shares in Galaxis Healthcare, 1,050,000 ordinary shares in Avelon Arise, 70 ordinary shares in Galaxis Pharma and 70 ordinary shares in Arise Healthcare, collectively

SSA : Conditional share sale agreement dated 28 May 2021 entered into between Kobay and the Vendors in relation to the Proposed Acquisition

Target Period : The period from 1 January 2021 to 31 December 2023

Unconditional Date : The date upon which the SSA becomes unconditional, i.e. when all the conditions precedent have been fulfilled or waived

Vendors : Lim Beng Cheong and Chong Huei Shin, collectively

References to “we”, “us”, “our” and “ourselves” are to the Company, and where the context otherwise requires, the subsidiaries of the Company. All references to “you” are to the shareholders of the Company.

Words incorporating the singular shall, where applicable, include the plural and vice versa. Words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Any reference to persons shall include a corporation, unless otherwise specified.

Any reference in this Circular to any statutes, rules, regulations or rules of the stock exchange is a reference to such statutes, rules, regulations or rules of the stock exchange currently in force and as may be amended from time to time and any re-enactment thereof.

Any reference to a time or date in this Circular shall be a reference to Malaysian time, unless otherwise stated.

Any discrepancy in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding.

Kobay or Company or Purchaser

: Kobay Technology Bhd (Registration No. 199401022600 (308279-A))

Kobay Group or Group : Kobay and its subsidiaries, collectively

Kobay Share(s) or Share(s)

: Ordinary share(s) in Kobay

LAT : Loss after taxation

LBT : Loss before taxation

Listing Requirements : Main Market Listing Requirements of Bursa Securities

LPD : 15 June 2021, being the latest practicable date prior to the printing of this Circular

LPS : Loss per share

MOU : Memorandum of understanding dated 26 February 2021 entered intobetween Kobay and the Vendors in relation to the Proposed 70% Acquisition

NA : Net assets

NL : Net liabilities

Part Purchase Price : Part of the Purchase Price of RM17,363,925.12 to be paid by Kobay to the Vendors’ solicitors on the Completion Date

PAT : Profit after taxation

PAT Target : Unconditional and irrevocable guarantee by the Vendors to Kobay that:

(i) the aggregate audited PAT in respect of the Target Companiesfor the Target Period shall be RM25,535,184.00; and

(ii) the aggregate audited PAT in respect of the Target Companiesfor each year under the Target Period shall not be less thanRM6,809,382.40.

PBT : Profit before taxation

PE Multiple(s) : Price-to-earnings multiple(s)

PPE : Property, plant and equipment

Proposals : Proposed Acquisition and Proposed Diversification, collectively

Proposed 70% Acquisition

: Proposed acquisition by Kobay of 70% equity interest in the Avelon Group from the Vendors for the Purchase Price

EXECUTIVE SUMMARY

THIS EXECUTIVE SUMMARY HIGHLIGHTS THE SALIENT INFORMATION OF THE PROPOSALS.YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS TOGETHER WITH THE APPENDICES OF THIS CIRCULAR WITHOUT RELYING SOLELY ON THIS EXECUTIVE SUMMARY BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY.

Key information SummaryReference to this Circular

Summary of theProposals

The Proposed Acquisition involves the following:

(i) proposed acquisition by Kobay of 70% equityinterest in the Avelon Group from the Vendors for atotal cash consideration of up to RM47,665,676.80;and

(ii) proposed granting by the Vendors of a call option forKobay to acquire the remaining 30% equity interestin the Avelon Group and the granting by Kobay of aput option to the Vendors to sell or cause to sell theremaining 30% equity interest in the Avelon Groupafter the Proposed 70% Acquisition.

The Vendors unconditionally and irrevocably guarantee and undertake to Kobay on the following:

(i) the aggregate audited PAT in respect of the TargetCompanies for the Target Period shall beRM25,535,184.00; and

(ii) the aggregate audited PAT in respect of the TargetCompanies for each year under the Target Periodshall not be less than RM6,809,382.40.

In conjunction with the Proposed Acquisition, Kobay proposes to undertake the proposed diversification of the existing principal activities of Kobay Group to include the sale and/or manufacturing of pharmaceutical and healthcare products.

Section 2

Basis and justification forarriving at the Purchase Price andthe exercise pricesof the Proposed Call and Put Option

The Purchase Price and the exercise prices of the Proposed Call and Put Option were determined on a willing-buyer-willing-seller basis after taking into consideration, amongst others, the following:

(i) the aggregate pro forma PAT of the TargetCompanies for FYE 31 December 2020 ofRM8,511,728.00;

(ii) the PAT Target provided by the Vendors;

(iii) the rationale and benefits of the Proposals as set outin Section 3 of this Circular; and

(iv) the prospects of the Avelon Group and the enlargedKobay Group as set out in Section 4.6 of thisCircular.

Section 2.1.5

TABLE OF CONTENTS

PAGE EXECUTIVE SUMMARY v LETTER TO THE SHAREHOLDERS OF KOBAY IN RELATION TO THE PROPOSALS

1. INTRODUCTION 1 2. DETAILS OF THE PROPOSALS 2

3. RATIONALE AND BENEFITS OF THE PROPOSALS 15

4. INDUSTRY OVERVIEW, OUTLOOK AND PROSPECTS 16

5. RISK FACTORS IN RELATION TO THE PROPOSALS 23

6. EFFECTS OF THE PROPOSALS 25

7. APPROVALS REQUIRED 27

8. HIGHEST PERCENTAGE RATIO 27

9. CONDITIONALITY 27

10. CORPORATE EXERCISE ANNOUNCED BUT PENDING COMPLETION 27

11. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR

PERSONS CONNECTED WITH THEM 27

12. DIRECTORS’ STATEMENT AND RECOMMENDATION 27

13. TENTATIVE TIMEFRAME FOR IMPLEMENTATION 28

14. EGM 28

15. FURTHER INFORMATION 28 APPENDICES I SALIENT TERMS OF THE SSA 29 II (A) INFORMATION ON AVELON HEALTHCARE 38 (B) INFORMATION ON GALAXIS HEALTHCARE 74 (C) INFORMATION ON AVELON ARISE 106 (D) INFORMATION ON GALAXIS PHARMA 146 (E) INFORMATION ON ARISE HEALTHCARE 183 III FURTHER INFORMATION 222 NOTICE OF EGM ENCLOSED FORM OF PROXY ENCLOSED

EXECUTIVE SUMMARY

THIS EXECUTIVE SUMMARY HIGHLIGHTS THE SALIENT INFORMATION OF THE PROPOSALS.YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS TOGETHER WITH THE APPENDICES OF THIS CIRCULAR WITHOUT RELYING SOLELY ON THIS EXECUTIVE SUMMARY BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY.

Summary of theProposals

The Proposed Acquisition involves the following:

(i) proposed acquisition by Kobay of 70% equityinterest in the Avelon Group from the Vendors for atotal cash consideration of up to RM47,665,676.80;and

(ii) proposed granting by the Vendors of a call option forKobay to acquire the remaining 30% equity interestin the Avelon Group and the granting by Kobay of aput option to the Vendors to sell or cause to sell theremaining 30% equity interest in the Avelon Groupafter the Proposed 70% Acquisition.

The Vendors unconditionally and irrevocably guarantee and undertake to Kobay on the following:

(i) the aggregate audited PAT in respect of the TargetCompanies for the Target Period shall beRM25,535,184.00; and

(ii) the aggregate audited PAT in respect of the TargetCompanies for each year under the Target Periodshall not be less than RM6,809,382.40.

In conjunction with the Proposed Acquisition, Kobay proposes to undertake the proposed diversification of the existing principal activities of Kobay Group to include the sale and/or manufacturing of pharmaceutical and healthcare products.

Section 2

Basis and justification forarriving at the Purchase Price andthe exercise pricesof the Proposed Call and Put Option

The Purchase Price and the exercise prices of the Proposed Call and Put Option were determined on a willing-buyer-willing-seller basis after taking into consideration, amongst others, the following:

(i) the aggregate pro forma PAT of the TargetCompanies for FYE 31 December 2020 ofRM8,511,728.00;

(iii) the rationale and benefits of the Proposals as set outin Section 3 of this Circular; and

(iv) the prospects of the Avelon Group and the enlargedKobay Group as set out in Section 4.6 of thisCircular.

Section 2.1.5

TABLE OF CONTENTS

PAGE EXECUTIVE SUMMARY v LETTER TO THE SHAREHOLDERS OF KOBAY IN RELATION TO THE PROPOSALS

1. INTRODUCTION 1 2. DETAILS OF THE PROPOSALS 2

3. RATIONALE AND BENEFITS OF THE PROPOSALS 15

4. INDUSTRY OVERVIEW, OUTLOOK AND PROSPECTS 16

5. RISK FACTORS IN RELATION TO THE PROPOSALS 23

6. EFFECTS OF THE PROPOSALS 25

7. APPROVALS REQUIRED 27

8. HIGHEST PERCENTAGE RATIO 27

9. CONDITIONALITY 27

10. CORPORATE EXERCISE ANNOUNCED BUT PENDING COMPLETION 27

11. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR

PERSONS CONNECTED WITH THEM 27

12. DIRECTORS’ STATEMENT AND RECOMMENDATION 27

13. TENTATIVE TIMEFRAME FOR IMPLEMENTATION 28

14. EGM 28

15. FURTHER INFORMATION 28 APPENDICES I SALIENT TERMS OF THE SSA 29 II (A) INFORMATION ON AVELON HEALTHCARE 38 (B) INFORMATION ON GALAXIS HEALTHCARE 74 (C) INFORMATION ON AVELON ARISE 106 (D) INFORMATION ON GALAXIS PHARMA 146 (E) INFORMATION ON ARISE HEALTHCARE 183 III FURTHER INFORMATION 222 NOTICE OF EGM ENCLOSED FORM OF PROXY ENCLOSED

vi vii

EXECUTIVE SUMMARY (CONT’D)

Effects of the Proposals

The Proposed Diversification will not have any effect on the issued share capital and substantial shareholders’ shareholdings of Kobay as well as the NA, NA per Share, gearing, earnings and EPS of the Kobay Group. Notwithstanding that, the Proposed Diversification is expected to contribute positively to the future earnings and EPS of the Kobay Group.

The effects of the Proposed Acquisition are as follows:

(i) The Proposed Acquisition will not have any effect onthe issued share capital and substantialshareholders’ shareholdings of Kobay as it does notinvolve any issuance of new Kobay Shares;

(ii) NA per Share of the Group will decrease fromRM0.61 (after adjusting for the subsequent events)to RM0.60 (after taking into account the estimatedexpenses for the Proposals) and the Group’sgearing ratio will increase from 0.23 times (afteradjusting for the subsequent events) to 0.24 times(after consolidating the total borrowings of theAvelon Group); and

(iii) the Proposed Acquisition is expected to contributepositively to the future earnings and EPS of theKobay Group.

Section 6

Interests of thedirectors, major shareholdersand/or persons connected with them

None of the directors, major shareholders of the Company and/or persons connected with them have any interest, directly or indirectly, in the Proposals.

Section 11

Directors’ statement and recommendation

The Board, having considered all aspects of the Proposals, including but not limited to the rationale, salient terms of the SSA, effects of the Proposals as well as the prospects of the Avelon Group and the risks involved, is of the opinion that the Proposals are in the best interests of the Company.

Accordingly, the Board recommends that you VOTE IN FAVOUR of the resolutions pertaining to the Proposals tobe tabled at the forthcoming EGM of the Company.

Section 12

Basis and justification forarriving at the Purchase Price andthe exercise pricesof the Proposed Call and Put Option (Cont’d)

The Purchase Price of up to RM47,665,676.80 was determined and agreed upon based on 70% of the aggregate pro forma PAT of the Target Companies for FYE 31 December 2020 of RM5,958,209.60 multiplied by a PE Multiple of 8.00 times. In the event the PAT Target is not met, the Purchase Price shall be adjusted to 70% of the simple average of audited PAT of the FYEs 31 December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 multiplied by a PE Multiple of 7.00 times.

The PE Multiples of 7.00 times and 8.00 times are:

lower than the adjusted PE Multiple range of all the Comparable Companies (as defined herein) which range between 9.46 times to 26.14 times, after adjusting for a 30% discount for a lack of marketability and liquidity of equity interest in the Avelon Group, being private companies which arenot listed; and

lower than the median and average of the adjusted PE Multiple of the Comparable Companies of 14.40times and 16.10 times respectively.

Rationale and benefits of the Proposals

(i) The Proposals will enable the Group to tap into a new market segment i.e. sale and/or manufacturing of pharmaceutical and healthcare products.

(ii) The expansion of the Group’s business into the pharmaceutical and healthcare industries is part of the Group’s long term strategy of diversifying into other industries with growth prospects and reducing the Group’s reliance on its existing business.

(iii) The Proposals will provide the Group with additional income stream and profit avenue, thus providing earnings growth to the Group in the future.

Section 3

Risk factors There are certain risks factors specifically associated withthe Proposals, as follows:

(i) Non-completion risk;

(ii) Acquisition risk;

(iii) Business diversification risk;

(iv) No prior experience in the pharmaceutical and healthcare industries;

(v) Goodwill and impairment risk; and

(vi) Dependence on the experience and capability of key management personnel who are also the Vendors.

Section 5

vi vii

Effects of the Proposals

The effects of the Proposed Acquisition are as follows:

(i) The Proposed Acquisition will not have any effect onthe issued share capital and substantialshareholders’ shareholdings of Kobay as it does notinvolve any issuance of new Kobay Shares;

(ii) NA per Share of the Group will decrease fromRM0.61 (after adjusting for the subsequent events)to RM0.60 (after taking into account the estimatedexpenses for the Proposals) and the Group’sgearing ratio will increase from 0.23 times (afteradjusting for the subsequent events) to 0.24 times(after consolidating the total borrowings of theAvelon Group); and

(iii) the Proposed Acquisition is expected to contributepositively to the future earnings and EPS of theKobay Group.

Section 6

Interests of thedirectors, major shareholdersand/or persons connected with them

Section 11

Directors’ statement and recommendation

Accordingly, the Board recommends that you VOTE IN FAVOUR of the resolutions pertaining to the Proposals tobe tabled at the forthcoming EGM of the Company.

Section 12

Basis and justification forarriving at the Purchase Price andthe exercise pricesof the Proposed Call and Put Option (Cont’d)

The Purchase Price of up to RM47,665,676.80 was determined and agreed upon based on 70% of the aggregate pro forma PAT of the Target Companies for FYE 31 December 2020 of RM5,958,209.60 multiplied by a PE Multiple of 8.00 times. In the event the PAT Target is not met, the Purchase Price shall be adjusted to 70% of the simple average of audited PAT of the FYEs 31 December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 multiplied by a PE Multiple of 7.00 times.

lower than the adjusted PE Multiple range of all the Comparable Companies (as defined herein) which range between 9.46 times to 26.14 times, after adjusting for a 30% discount for a lack of marketability and liquidity of equity interest in the Avelon Group, being private companies which arenot listed; and

lower than the median and average of the adjusted PE Multiple of the Comparable Companies of 14.40times and 16.10 times respectively.

Rationale and benefits of the Proposals

(i) The Proposals will enable the Group to tap into a new market segment i.e. sale and/or manufacturing of pharmaceutical and healthcare products.

(ii) The expansion of the Group’s business into the pharmaceutical and healthcare industries is part of the Group’s long term strategy of diversifying into other industries with growth prospects and reducing the Group’s reliance on its existing business.

(iii) The Proposals will provide the Group with additional income stream and profit avenue, thus providing earnings growth to the Group in the future.

Section 3

Risk factors There are certain risks factors specifically associated withthe Proposals, as follows:

(i) Non-completion risk;

(ii) Acquisition risk;

(iii) Business diversification risk;

(iv) No prior experience in the pharmaceutical and healthcare industries;

(v) Goodwill and impairment risk; and

(vi) Dependence on the experience and capability of key management personnel who are also the Vendors.

Section 5

YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS TOGETHER WITH THE APPENDICES OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTIONSPERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY.

2. DETAILS OF THE PROPOSALS

2.1 Details of the Proposed Acquisition

2.1.1 Details of the Proposed 70% Acquisition

The Proposed 70% Acquisition entails the acquisition by Kobay of 70% equity interest in the Avelon Group from the Vendors for the Purchase Price, subject to the terms and conditions of the SSA. For avoidance of doubt, the Purchase Price is subject to adjustment as set out in Section 3(f) of Appendix I of this Circular.

The Proposed 70% Acquisition comprises the following:

Name of VendorsNo. of

shares Equity interest

Cash consideration

RMAvelon HealthcareLim Beng Cheong 245,000 35.00 15,984,550.40 Chong Huei Shin 245,000 35.00 15,984,550.40

490,000 70.00 31,969,100.80

Galaxis HealthcareLim Beng Cheong 175,000 35.00 4,143,812.40Chong Huei Shin 175,000 35.00 4,143,812.40

350,000 70.00 8,287,624.80

Avelon AriseLim Beng Cheong 525,000 35.00 1,431,698.80Chong Huei Shin 525,000 35.00 1,431,698.80

1,050,000 70.00 2,863,397.60

Galaxis PharmaLim Beng Cheong 35 35.00 1,214,572.80Chong Huei Shin 35 35.00 1,214,572.80

70 70.00 2,429,145.60

Arise HealthcareLim Beng Cheong 35 35.00 1,058,204.00Chong Huei Shin 35 35.00 1,058,204.00

70 70.00 2,116,408.00

Total 47,665,676.80

The Sale Shares to be acquired by Kobay shall be free from all mortgage, charge (whether fixed or floating), pledge, lien, encumbrance, hypothecation, security interest, title retention or other security arrangement of any kind or any other encumbrance of any nature whatever and with all attached or accrued rights as at the Completion Date. The salient terms of the SSA are set out in Appendix I of this Circular.

Registered Office

3rd Floor, Wisma Kobay No. 42-B, Jalan Rangoon10400 Georgetown Penang

5 July 2021

Board of Directors:

Sharifah Faridah Binti Syed Mahadzar Jamalullil (Chairman/Independent and Non-Executive Director)Dato’ Seri Koay Hean Eng (Managing Director/Chief Executive Officer)Koay Cheng Lye (Executive Director/Chief Administrative Officer)Koay Ah Bah @ Koay Cheng Hock (Non-Independent and Non-Executive Director)Khaw Eng Peng (Senior Independent and Non-Executive Director)

To: The shareholders of the Company

Dear Sir/Madam,

(I) PROPOSED ACQUISITION; AND

(II) PROPOSED DIVERSIFICATION

(COLLECTIVELY REFERRED TO AS THE “PROPOSALS”)

1. INTRODUCTION

On 26 February 2021, Affin Hwang IB had, on behalf of the Board, announced that the Companyhad, on even date, entered into the MOU with the Vendors to set out the understanding andintention in relation to the Proposed 70% Acquisition.

On 28 May 2021, Affin Hwang IB had, on behalf of the Board, announced that the Company had,on the even date, entered into the SSA with the Vendors in relation to the Proposed Acquisition.

In conjunction with the Proposed Acquisition, Affin Hwang IB had also announced that Kobayproposes to undertake the Proposed Diversification.

The details of the Proposals are set out in the ensuing sections of this Circular.

THE PURPOSE OF THIS CIRCULAR TOGETHER WITH THE APPENDICES IS TO PROVIDEYOU WITH THE DETAILS OF THE PROPOSALS TOGETHER WITH THERECOMMENDATION OF THE BOARD AND TO SEEK YOUR APPROVAL FOR THERESOLUTIONS PERTAINING TO THE PROPOSALS AT THE FORTHCOMING EGM OF THECOMPANY. THE NOTICE OF EGM TOGETHER WITH THE FORM OF PROXY ARE SET OUTIN THIS CIRCULAR.

YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS TOGETHER WITH THE APPENDICES OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTIONSPERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY.

2. DETAILS OF THE PROPOSALS

2.1 Details of the Proposed Acquisition

2.1.1 Details of the Proposed 70% Acquisition

The Proposed 70% Acquisition entails the acquisition by Kobay of 70% equity interest in the Avelon Group from the Vendors for the Purchase Price, subject to the terms and conditions of the SSA. For avoidance of doubt, the Purchase Price is subject to adjustment as set out in Section 3(f) of Appendix I of this Circular.

The Proposed 70% Acquisition comprises the following:

Name of VendorsNo. of

shares Equity interest

Cash consideration

RMAvelon HealthcareLim Beng Cheong 245,000 35.00 15,984,550.40 Chong Huei Shin 245,000 35.00 15,984,550.40

490,000 70.00 31,969,100.80

Galaxis HealthcareLim Beng Cheong 175,000 35.00 4,143,812.40Chong Huei Shin 175,000 35.00 4,143,812.40

350,000 70.00 8,287,624.80

Avelon AriseLim Beng Cheong 525,000 35.00 1,431,698.80Chong Huei Shin 525,000 35.00 1,431,698.80

1,050,000 70.00 2,863,397.60

Galaxis PharmaLim Beng Cheong 35 35.00 1,214,572.80Chong Huei Shin 35 35.00 1,214,572.80

70 70.00 2,429,145.60

Arise HealthcareLim Beng Cheong 35 35.00 1,058,204.00Chong Huei Shin 35 35.00 1,058,204.00

70 70.00 2,116,408.00

Total 47,665,676.80

The Sale Shares to be acquired by Kobay shall be free from all mortgage, charge (whether fixed or floating), pledge, lien, encumbrance, hypothecation, security interest, title retention or other security arrangement of any kind or any other encumbrance of any nature whatever and with all attached or accrued rights as at the Completion Date. The salient terms of the SSA are set out in Appendix I of this Circular.

Registered Office

3rd Floor, Wisma Kobay No. 42-B, Jalan Rangoon10400 Georgetown Penang

5 July 2021

Board of Directors:

Sharifah Faridah Binti Syed Mahadzar Jamalullil (Chairman/Independent and Non-Executive Director)Dato’ Seri Koay Hean Eng (Managing Director/Chief Executive Officer)Koay Cheng Lye (Executive Director/Chief Administrative Officer)Koay Ah Bah @ Koay Cheng Hock (Non-Independent and Non-Executive Director)Khaw Eng Peng (Senior Independent and Non-Executive Director)

To: The shareholders of the Company

Dear Sir/Madam,

(I) PROPOSED ACQUISITION; AND

(II) PROPOSED DIVERSIFICATION

(COLLECTIVELY REFERRED TO AS THE “PROPOSALS”)

1. INTRODUCTION

On 26 February 2021, Affin Hwang IB had, on behalf of the Board, announced that the Companyhad, on even date, entered into the MOU with the Vendors to set out the understanding andintention in relation to the Proposed 70% Acquisition.

On 28 May 2021, Affin Hwang IB had, on behalf of the Board, announced that the Company had,on the even date, entered into the SSA with the Vendors in relation to the Proposed Acquisition.

In conjunction with the Proposed Acquisition, Affin Hwang IB had also announced that Kobayproposes to undertake the Proposed Diversification.

The details of the Proposals are set out in the ensuing sections of this Circular.

THE PURPOSE OF THIS CIRCULAR TOGETHER WITH THE APPENDICES IS TO PROVIDEYOU WITH THE DETAILS OF THE PROPOSALS TOGETHER WITH THERECOMMENDATION OF THE BOARD AND TO SEEK YOUR APPROVAL FOR THERESOLUTIONS PERTAINING TO THE PROPOSALS AT THE FORTHCOMING EGM OF THECOMPANY. THE NOTICE OF EGM TOGETHER WITH THE FORM OF PROXY ARE SET OUTIN THIS CIRCULAR.

(b) the favourable outlook of pharmaceutical and healthcare industries as set out in Sections 4.3 and 4.4 of this Circular, respectively; and

(c) the prospects of the Avelon Group and the potential benefits to be derived from the Proposed Acquisition as set out in Section 4.6 of this Circular.

In the event the PAT Target is not met, the Purchase Price shall be adjusted to 70% of seven (7) times of the simple average of audited PAT of the FYEs 31December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 (“Adjusted Purchase Price”). For avoidance of doubt, there is no other recourse available to the Group other than for the Adjusted Purchase Price, in the event the PAT Target is not met.

If there is any Remaining Purchase Price*, the Purchaser shall release the Remaining Purchase Price to the Vendors equally within fourteen (14) business days upon the audited financial statements of the Avelon Group for the 2nd Half PAT 2023 (as defined in Section 3(f) of Appendix I of this Circular) are made available to the Purchaser.

If there is any Surplus*, the Vendors undertake to refund the Surplus to the Purchaser within fourteen (14) business days upon the audited financial statements of the Avelon Group for the 2nd Half PAT 2023 are made available to the Vendors.

* The computation is as follows:

Initial Payment = Deposit + Part Purchase Price + Amount released from Security Amount

Remaining Purchase Price = Adjusted Purchase Price - Initial Payment

Surplus = Initial Payment - Adjusted Purchase Price

Further details of the mechanism governing the Purchase Price and release of the Security Amount as well as the PAT Target are set out in Sections 3 and 4 of Appendix I of this Circular.

2.1.2 Details of the Proposed Call and Put Option

In accordance with the terms and conditions of the SSA, the Vendors shall grant a call option to the Purchaser to acquire the remaining 30% equity interest in the Avelon Group and the Purchaser shall grant a put option to the Vendors to sell or cause to sell the remaining 30% equity interest in the Avelon Group.

For the call option, the Vendors shall grant a call option to the Purchaser to purchase the remaining equity interest in the Avelon Group within six (6) months after expiry of the Target Period at the purchase consideration of seven (7) times of the simple average of audited PAT of the Avelon Group for FYEs 31 December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 based on their respective equity interest in the event of the following:

(i) PAT Target is not met; and

(ii) the Avelon Group is not undergoing any initial public offering exercise.

Upon completion of the Proposed 70% Acquisition, the companies in the Avelon Group will become 70%-owned subsidiaries of Kobay, while the Remaining Shareholders will collectively hold the remaining 30% equity interest in the Avelon Group.

In consideration of the Company agreeing to acquire the Sale Shares, the Vendors have provided the PAT Target to Kobay. Further details of the PAT Target are set out in Section 2.1.1.2 of this Circular.

2.1.1.1 Purchase Price and Payment

In accordance with the terms and conditions of the SSA, the Purchase Price shall be paid by Kobay in the following manner:

Payment terms Timing of paymentAmount

RMDeposit(i) Paid to the Vendors’ solicitors to hold as a

stakeholder upon the execution of the SSA 4,766,567.68

Part Purchase Price

Within one (1) month from the Unconditional Date

17,363,925.12

Security Amount(ii) Both parties agree that the Purchaser shall retain part of the Purchase Price as security amount (“Security Amount”) and progressively release to the Vendors as detailed in Section 3of Appendix I of this Circular

25,535,184.00

Total (iii)47,665,676.80

Notes:

(i) Inclusive of the earnest deposit of RM476,000.00, which has been paid by Kobay tothe Vendors’ solicitors to hold as a stakeholder prior to the execution of the SSA.For avoidance of doubt, the earnest deposit is refundable in the event of terminationof the SSA under Section 8(i) and (ii) of Appendix I of this Circular.

(ii) Being the security for possible adjustment to the Purchase Price depending on thefulfilment of the PAT Target for the Target Period.

(iii) Subject to adjustment as set out in Section 3(f) of Appendix I of this Circular.

2.1.1.2 PAT Target

The Vendors unconditionally and irrevocably guarantee and undertake to Kobay on the following PAT Target:

(i) the aggregate audited PAT in respect of the Target Companies for theTarget Period shall be RM25,535,184.00; and

(ii) the aggregate audited PAT in respect of the Target Companies for eachyear under the Target Period shall not be less than RM6,809,382.40.

The Board is of the opinion that the Profit Target is reasonable and realistic after taking into consideration, amongst others, the following:

(a) the historical financial performances of the Target Companies as set out inSection 6 in Appendices II(A) to II(E) of this Circular respectively, wherebythe aggregate pro forma PAT of the Target Companies for FYE 31December 2020 was RM8,511,728.00. The PAT Target ofRM25,535,184.00 represents the aggregate PAT over the three (3) FYEs31 December 2021 to 31 December 2023 which amounts to a simpleaverage PAT of RM8,511,728.00 per year over the Target Period;

(b) the favourable outlook of pharmaceutical and healthcare industries as set out in Sections 4.3 and 4.4 of this Circular, respectively; and

(c) the prospects of the Avelon Group and the potential benefits to be derived from the Proposed Acquisition as set out in Section 4.6 of this Circular.

In the event the PAT Target is not met, the Purchase Price shall be adjusted to 70% of seven (7) times of the simple average of audited PAT of the FYEs 31December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 (“Adjusted Purchase Price”). For avoidance of doubt, there is no other recourse available to the Group other than for the Adjusted Purchase Price, in the event the PAT Target is not met.

If there is any Remaining Purchase Price*, the Purchaser shall release the Remaining Purchase Price to the Vendors equally within fourteen (14) business days upon the audited financial statements of the Avelon Group for the 2nd Half PAT 2023 (as defined in Section 3(f) of Appendix I of this Circular) are made available to the Purchaser.

If there is any Surplus*, the Vendors undertake to refund the Surplus to the Purchaser within fourteen (14) business days upon the audited financial statements of the Avelon Group for the 2nd Half PAT 2023 are made available to the Vendors.

* The computation is as follows:

Initial Payment = Deposit + Part Purchase Price + Amount released from Security Amount

Remaining Purchase Price = Adjusted Purchase Price - Initial Payment

Surplus = Initial Payment - Adjusted Purchase Price

Further details of the mechanism governing the Purchase Price and release of the Security Amount as well as the PAT Target are set out in Sections 3 and 4 of Appendix I of this Circular.

2.1.2 Details of the Proposed Call and Put Option

In accordance with the terms and conditions of the SSA, the Vendors shall grant a call option to the Purchaser to acquire the remaining 30% equity interest in the Avelon Group and the Purchaser shall grant a put option to the Vendors to sell or cause to sell the remaining 30% equity interest in the Avelon Group.

For the call option, the Vendors shall grant a call option to the Purchaser to purchase the remaining equity interest in the Avelon Group within six (6) months after expiry of the Target Period at the purchase consideration of seven (7) times of the simple average of audited PAT of the Avelon Group for FYEs 31 December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 based on their respective equity interest in the event of the following:

(i) PAT Target is not met; and

(ii) the Avelon Group is not undergoing any initial public offering exercise.

Upon completion of the Proposed 70% Acquisition, the companies in the Avelon Group will become 70%-owned subsidiaries of Kobay, while the Remaining Shareholders will collectively hold the remaining 30% equity interest in the Avelon Group.

In consideration of the Company agreeing to acquire the Sale Shares, the Vendors have provided the PAT Target to Kobay. Further details of the PAT Target are set out in Section 2.1.1.2 of this Circular.

2.1.1.1 Purchase Price and Payment

In accordance with the terms and conditions of the SSA, the Purchase Price shall be paid by Kobay in the following manner:

Payment terms Timing of paymentAmount

RMDeposit(i) Paid to the Vendors’ solicitors to hold as a

stakeholder upon the execution of the SSA 4,766,567.68

Part Purchase Price

Within one (1) month from the Unconditional Date

17,363,925.12

Security Amount(ii) Both parties agree that the Purchaser shall retain part of the Purchase Price as security amount (“Security Amount”) and progressively release to the Vendors as detailed in Section 3of Appendix I of this Circular

25,535,184.00

Total (iii)47,665,676.80

Notes:

(i) Inclusive of the earnest deposit of RM476,000.00, which has been paid by Kobay tothe Vendors’ solicitors to hold as a stakeholder prior to the execution of the SSA.For avoidance of doubt, the earnest deposit is refundable in the event of terminationof the SSA under Section 8(i) and (ii) of Appendix I of this Circular.

(ii) Being the security for possible adjustment to the Purchase Price depending on thefulfilment of the PAT Target for the Target Period.

(iii) Subject to adjustment as set out in Section 3(f) of Appendix I of this Circular.

2.1.1.2 PAT Target

The Vendors unconditionally and irrevocably guarantee and undertake to Kobay on the following PAT Target:

(i) the aggregate audited PAT in respect of the Target Companies for theTarget Period shall be RM25,535,184.00; and

(ii) the aggregate audited PAT in respect of the Target Companies for eachyear under the Target Period shall not be less than RM6,809,382.40.

The Board is of the opinion that the Profit Target is reasonable and realistic after taking into consideration, amongst others, the following:

(a) the historical financial performances of the Target Companies as set out inSection 6 in Appendices II(A) to II(E) of this Circular respectively, wherebythe aggregate pro forma PAT of the Target Companies for FYE 31December 2020 was RM8,511,728.00. The PAT Target ofRM25,535,184.00 represents the aggregate PAT over the three (3) FYEs31 December 2021 to 31 December 2023 which amounts to a simpleaverage PAT of RM8,511,728.00 per year over the Target Period;

Name of the Remaining Shareholders No. of shares Equity interest (%)Arise HealthcareLim Beng Cheong 5 5.00Chong Huei Shin 10 10.00Tee Yee May 10 10.00Chong Loon Hooi 5 5.00

30 30.00

Further details of the Proposed Call and Put Option are set out in Section 5 of Appendix Iof this Circular.

In determining whether to exercise the call option, the Board will take into consideration, amongst others, the following factors:

(i) the financial performance and profitability of the Avelon Group post acquisition;

(ii) the prospects and outlook of the pharmaceutical and healthcare industries, takinginto consideration the supply and demand conditions of the pharmaceutical andhealthcare products at the relevant point of time;

(iii) the Group’s strategic direction whether to increase allocation of its resourcestowards expansion of the pharmaceutical and healthcare business; and

(iv) availability of any other suitable investment opportunities that may arise for theGroup.

In the event the Proposed Call and Put Option are exercised, the companies in the Avelon Group will become wholly-owned subsidiaries of Kobay. Kobay will make an immediate announcement upon the exercise of the Proposed Call and Put Option to provide the relevant details of the transactions.

2.1.3 Information on the Avelon Group

2.1.3.1 Avelon Healthcare

Avelon Healthcare was incorporated in Malaysia on 18 June 2013 as a private limited company under the Companies Act 1965.

Avelon Healthcare is principally involved in the wholesale and retail sale of pharmaceutical and all kinds of healthcare products. On 11 October 2014, Avelon Healthcare commenced its business operations with the opening of its first pharmacy in Taman Sri Bintang, Kuala Lumpur. As at the LPD, Avelon Healthcare operates one (1) pharmacy and one (1) warehouse store in Malaysia under the “Park@City” brand name.

As at the LPD, the issued share capital of Avelon Healthcare is as follows:

No. of shares RM

Issued share capital 700,000 700,000.00

Further information on Avelon Healthcare is set out in Appendix II(A) of this Circular.

For illustration purposes only, in the event the PAT Target is not met and Kobay chooses to exercise the call option and assuming that the simple average of the audited PAT of the Avelon Group for FYEs 31 December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 is RM8.00 million, the theoretical purchase consideration for the remaining 30% equity interest in the Avelon Group would be RM16.80 million.

For the put option, the Purchaser shall grant a put option to the Vendors to sell the remaining equity interest in the Avelon Group within six (6) months after expiry of the Target Period at the purchase consideration of eight (8) times of the audited PAT of the Avelon Group for the 12-month FYE 31 December 2023 based on their respective equity interest in the event of the following:

(a) PAT Target is met; and

(b) the Avelon Group is not undergoing any initial public offering exercise.

For illustration purposes only, in the event the PAT Target is met and that the Vendorschoose to exercise the put option and assuming that the audited PAT of the Avelon Group for the 12-month FYE 31 December 2023 is RM8.00 million, the theoretical purchase consideration for the remaining 30% equity interest in the Avelon Group would be RM19.20 million.

For the avoidance of doubt, both the Company/Vendors will not be able to exercise the Proposed Call and Put Option in the event the Avelon Group is undergoing or proposes to undergo an initial public offering exercise.

In addition, Tan Kim Fah has irrevocably and unconditionally undertaken to sell his equity interest of 10% in Avelon Arise if the obligation of the Vendors for the sale of their remaining equity interest in Avelon Arise to Kobay arises in accordance to the terms and conditions of the SSA.

Tee Yee May and Chong Loon Hooi have also irrevocably and unconditionally undertakento sell their equity interest of 10% and 5% respectively in Arise Healthcare if the obligation of the Vendors for the sale of their remaining equity interest in Arise Healthcare to Kobay arises in accordance to the terms and conditions of the SSA.

The Proposed Call and Put Option comprises the following:

Name of the Remaining Shareholders No. of shares Equity interest (%)Avelon HealthcareLim Beng Cheong 105,000 15.00Chong Huei Shin 105,000 15.00

210,000 30.00

Galaxis HealthcareLim Beng Cheong 75,000 15.00Chong Huei Shin 75,000 15.00

150,000 30.00

Avelon AriseLim Beng Cheong 150,000 10.00Chong Huei Shin 150,000 10.00Tan Kim Fah 150,000 10.00

450,000 30.00

Galaxis PharmaLim Beng Cheong 15 15.00Chong Huei Shin 15 15.00

30 30.00

Name of the Remaining Shareholders No. of shares Equity interest (%)Arise HealthcareLim Beng Cheong 5 5.00Chong Huei Shin 10 10.00Tee Yee May 10 10.00Chong Loon Hooi 5 5.00

30 30.00

Further details of the Proposed Call and Put Option are set out in Section 5 of Appendix Iof this Circular.

In determining whether to exercise the call option, the Board will take into consideration, amongst others, the following factors:

(i) the financial performance and profitability of the Avelon Group post acquisition;

(ii) the prospects and outlook of the pharmaceutical and healthcare industries, takinginto consideration the supply and demand conditions of the pharmaceutical andhealthcare products at the relevant point of time;

(iii) the Group’s strategic direction whether to increase allocation of its resourcestowards expansion of the pharmaceutical and healthcare business; and

(iv) availability of any other suitable investment opportunities that may arise for theGroup.

In the event the Proposed Call and Put Option are exercised, the companies in the Avelon Group will become wholly-owned subsidiaries of Kobay. Kobay will make an immediate announcement upon the exercise of the Proposed Call and Put Option to provide the relevant details of the transactions.

2.1.3 Information on the Avelon Group

2.1.3.1 Avelon Healthcare

Avelon Healthcare was incorporated in Malaysia on 18 June 2013 as a private limited company under the Companies Act 1965.

Avelon Healthcare is principally involved in the wholesale and retail sale of pharmaceutical and all kinds of healthcare products. On 11 October 2014, Avelon Healthcare commenced its business operations with the opening of its first pharmacy in Taman Sri Bintang, Kuala Lumpur. As at the LPD, Avelon Healthcare operates one (1) pharmacy and one (1) warehouse store in Malaysia under the “Park@City” brand name.

No. of shares RM

Issued share capital 700,000 700,000.00

Further information on Avelon Healthcare is set out in Appendix II(A) of this Circular.

For illustration purposes only, in the event the PAT Target is not met and Kobay chooses to exercise the call option and assuming that the simple average of the audited PAT of the Avelon Group for FYEs 31 December 2020, 31 December 2021, 31 December 2022 and 31 December 2023 is RM8.00 million, the theoretical purchase consideration for the remaining 30% equity interest in the Avelon Group would be RM16.80 million.

For the put option, the Purchaser shall grant a put option to the Vendors to sell the remaining equity interest in the Avelon Group within six (6) months after expiry of the Target Period at the purchase consideration of eight (8) times of the audited PAT of the Avelon Group for the 12-month FYE 31 December 2023 based on their respective equity interest in the event of the following:

For illustration purposes only, in the event the PAT Target is met and that the Vendorschoose to exercise the put option and assuming that the audited PAT of the Avelon Group for the 12-month FYE 31 December 2023 is RM8.00 million, the theoretical purchase consideration for the remaining 30% equity interest in the Avelon Group would be RM19.20 million.

For the avoidance of doubt, both the Company/Vendors will not be able to exercise the Proposed Call and Put Option in the event the Avelon Group is undergoing or proposes to undergo an initial public offering exercise.

In addition, Tan Kim Fah has irrevocably and unconditionally undertaken to sell his equity interest of 10% in Avelon Arise if the obligation of the Vendors for the sale of their remaining equity interest in Avelon Arise to Kobay arises in accordance to the terms and conditions of the SSA.

Tee Yee May and Chong Loon Hooi have also irrevocably and unconditionally undertakento sell their equity interest of 10% and 5% respectively in Arise Healthcare if the obligation of the Vendors for the sale of their remaining equity interest in Arise Healthcare to Kobay arises in accordance to the terms and conditions of the SSA.

The Proposed Call and Put Option comprises the following:

Name of the Remaining Shareholders No. of shares Equity interest (%)Avelon HealthcareLim Beng Cheong 105,000 15.00Chong Huei Shin 105,000 15.00

210,000 30.00

Galaxis HealthcareLim Beng Cheong 75,000 15.00Chong Huei Shin 75,000 15.00

150,000 30.00

Avelon AriseLim Beng Cheong 150,000 10.00Chong Huei Shin 150,000 10.00Tan Kim Fah 150,000 10.00

450,000 30.00

Galaxis PharmaLim Beng Cheong 15 15.00Chong Huei Shin 15 15.00

30 30.00

2.1.3.5 Arise Healthcare

Arise Healthcare was incorporated in Malaysia on 7 September 2018 as a private limited company under the Act.

Arise Healthcare is principally involved in the retail sale of pharmaceutical and all kinds of healthcare products. On 1 March 2019, Arise Healthcare commenced its business operations and opened its first pharmacy in Damansara Utama, Kuala Lumpur in the same year. As at the LPD, Arise Healthcare operates one (1) pharmacy in Malaysia under the “Park@City” brand name.

As at the LPD, the issued share capital of Arise Healthcare is as follows:

No. of shares RMIssued share capital 100 100.00

Further information on Arise Healthcare is set out in Appendix II(E) of this Circular.

2.1.4 Information on the Vendors, Tan Kim Fah, Tee Yee May and Chong Loon Hooi

The information on the Vendors, Tan Kim Fah, Tee Yee May and Chong Loon Hooi is as follows:

(i) Lim Beng Cheong, aged 44, is a Malaysian. He is a director and shareholder ofthe Target Companies. He has approximately twenty (20) years of experience inmedical and healthcare services industries.

He graduated from Universiti Putra Malaysia with a Bachelor of Science in FoodStudies in 2001. After graduation, he worked in the medical line of healthcare andrehab supports covering hospitals, clinics and pharmacies.

In 2006, he co-founded Armanee Pharmacy Sdn Bhd (“Armanee Pharmacy”).Over the years, he helped to expand the group to four (4) retail pharmacy outletsand a wholesale of pharmaceutical and all kinds of healthcare products. Thesebusiness activities were carried out in Avelon Healthcare since 2013, GalaxisHealthcare since 2014, Avelon Arise since 2016, Galaxis Pharma since 2018 andArise Healthcare since 2019. Upon incorporation of Galaxis Pharma, GalaxisPharma took over the business of Armanee Pharmacy and since January 2020,Armanee Pharmacy had ceased its business operations.

Currently, Lim Beng Cheong is responsible for the operations of the AvelonGroup’s wholesale division.

As at the LPD, Lim Beng Cheong does not have any direct or indirectshareholdings in Kobay. He is also not a person connected with the Directors andsubstantial shareholders of Kobay.

Lim Beng Cheong is the spouse of Chong Huei Shin and brother-in-law of ChongLoon Hooi.

(ii) Chong Huei Shin, aged 41, is a Malaysian. She is a director and shareholder ofthe Target Companies. She has approximately eighteen (18) years of experiencein the pharmaceutical and healthcare services industries.

She completed her studies at the International Medical University, Malaysia in2002. She furthered her studies in the United Kingdom and graduated fromStrathclyde University, Glasgow, United Kingdom with First Class Honours inMPharm Degree in Pharmacy in 2003.

2.1.3.2 Galaxis Healthcare

Galaxis Healthcare was incorporated in Malaysia on 29 August 2014 as a private limited company under the Companies Act 1965.

Galaxis Healthcare is principally involved in the sale of all kinds of healthcare products under the “Biobay” brand name. On 1 September 2014, Galaxis Healthcare commenced its business operations with the opening of its first store in Taman Sri Bintang, Kuala Lumpur. As at the LPD, Galaxis Healthcare operates one (1) store in Malaysia.

As at the LPD, the issued share capital of Galaxis Healthcare is as follows:

No. of shares RMIssued share capital 500,000 500,000.00

Further information on Galaxis Healthcare is set out in Appendix II(B) of this Circular.

2.1.3.3 Avelon Arise

Avelon Arise was incorporated in Malaysia on 26 May 2016 as a private limited company under the Act.

Avelon Arise is principally involved in the retail sale of pharmaceutical and all kinds of healthcare products. On 26 July 2016, Avelon Arise commenced its business operations with the opening of its first pharmacy in Bangsar, Kuala Lumpur. As at the LPD, Avelon Arise operates one (1) pharmacy in Malaysia under the “Park@City” brand name.

As at the LPD, the issued share capital of Avelon Arise is as follows:

No. of shares RMIssued share capital 1,500,000 1,500,000.00

Further information on Avelon Arise is set out in Appendix II(C) of this Circular.

2.1.3.4 Galaxis Pharma

Galaxis Pharma was incorporated in Malaysia on 24 August 2018 as a private limited company under the Act.

Galaxis Pharma is principally operating as a retail pharmacy selling pharmaceutical and all kinds of healthcare products. On 1 January 2020, Galaxis Pharma commenced its business operations as retail pharmacy in Kepong, Kuala Lumpur. As at the LPD, Galaxis Pharma operates one (1) pharmacy in Malaysia under the “Park@City” brand name.

As at the LPD, the issued share capital of Galaxis Pharma is as follows:

Further information on Galaxis Pharma is set out in Appendix II(D) of this Circular.