CIRCULAR DATED 13 JANUARY 2010
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT
YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT, TAX ADVISER OR OTHER
PROFESSIONAL ADVISER IMMEDIATELY.
If you have sold or transferred all your ordinary shares in the capital of Silverlake Axis Ltd (“Company”),
you should immediately forward this Circular, the enclosed Notice of Special General Meeting and the
accompanying Proxy Form to the purchaser or the transferee, or to the bank, stockbroker or agent
through whom the sale or the transfer was effected for onward transmission to the purchaser or the
transferee.
This Circular has been prepared by the Company and its contents have been reviewed by the Company’s
sponsor, CIMB Bank Berhad, Singapore Branch (“Sponsor”), for compliance with the relevant rules of
the Singapore Exchange Securities Trading Limited (“SGX-ST. This Circular has not been examined or
approved by the SGX-ST. The SGX-ST and the Sponsor assume no responsibility for the contents of
this Circular, including the correctness of any of the statements made, reports contained or opinions
expressed in this Circular. The contact person for the Sponsor is Mr Eric Wong, Tel: 6337 5115.
SILVERLAKE AXIS LTD
(Company Registration No. 32447)
(Incorporated in Bermuda)
CIRCULAR TO SHAREHOLDERS
in relation to
(1)
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL
OF SILVERLAKE SOLUTION LIMITED BY THE COMPANY AS AN INTERESTED PERSON
TRANSACTION;
(2)
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL
OF QR TECHNOLOGY SDN BHD BY THE COMPANY AS AN INTERESTED PERSON
TRANSACTION;
(3)
THE PROPOSED ALLOTMENT AND ISSUANCE OF UP TO 1,025,635,634 NEW SHARES IN
CONNECTION WITH THE PROPOSED ACQUISITIONS;
(4)
THE PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL OF THE COMPANY; AND
(5)
THE PROPOSED ANCILLARY TRANSACTIONS PURSUANT TO THE RESTRUCTURING
ARRANGEMENTS AS INTERESTED PERSON TRANSACTIONS.
Financial Adviser
CIMB Bank Berhad (13491-P)
Singapore Branch
(Incorporated in Malaysia)
Independent Financial Adviser to the Independent Directors
ASIAN CORPORATE ADVISORS PTE. LTD.
(Company Registration Number: 200310232R)
(Incorporated in the Republic of Singapore)
IMPORTANT DATES AND TIMES: Last date and time for lodgement of Proxy Form
Date and time of Special General Meeting
Place of Special General Meeting
:
:
:
26 January 2010 at 11.30am
28 January 2010 at 11.30am
Pan Pacific Singapore
7 Raffles Boulevard
Marina Square
Singapore 039595
CONTENTS
DEFINITIONS .......................................................................................................................................
1
LETTER TO SHAREHOLDERS ...........................................................................................................
7
1.
INTRODUCTION ........................................................................................................................
7
2.
THE SSB ACQUISITION............................................................................................................
9
3.
THE QR ACQUISITION .............................................................................................................
12
4.
THE PROPOSED ACQUISITIONS AS INTERESTED PERSON TRANSACTIONS .................
15
5.
THE PROPOSED ACQUISITIONS AS A MAJOR TRANSACTION ..........................................
17
6.
THE PROPOSED SHARE ISSUE .............................................................................................
18
7.
INFORMATION ON THE SSB GROUP .....................................................................................
18
8.
INFORMATION ON THE QR GROUP .......................................................................................
27
9.
RATIONALE FOR THE PROPOSED ACQUISITIONS ..............................................................
35
10.
FINANCIAL EFFECTS OF THE PROPOSED ACQUISITIONS .................................................
35
11.
THE PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL .................................
37
12.
THE PROPOSED ANCILLARY TRANSACTIONS AS INTERESTED PERSON
TRANSACTIONS .......................................................................................................................
37
13.
INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS ..................................
39
14.
FINANCIAL ADVISER ................................................................................................................
40
15.
OPINION OF THE INDEPENDENT FINANCIAL ADVISER.......................................................
40
16.
STATEMENT OF THE AUDIT COMMITTEE ..............................................................................
40
17.
INDEPENDENT DIRECTORS’ RECOMMENDATION ...............................................................
40
18.
SPECIAL GENERAL MEETING ................................................................................................
41
19.
ACTION TO BE TAKEN BY SHAREHOLDERS .........................................................................
41
20.
ABSTINENCE FROM VOTING ..................................................................................................
41
21.
CONSENTS ...............................................................................................................................
41
22.
FINANCIAL ADVISER’S RESPONSIBILITY STATEMENT ........................................................
41
23.
DIRECTORS’ RESPONSIBILITY STATEMENT .........................................................................
42
24.
DOCUMENTS AVAILABLE FOR INSPECTION ........................................................................
42
APPENDIX I
APPENDIX I – LETTER FROM INDEPENDENT FINANCIAL ADVISERS................................
I-1
APPENDIX II
APPENDIX II – PROFORMA FINANCIAL INFORMATION OF THE SSB GROUP
FOR FY2009 ..............................................................................................................................
II-1
APPENDIX III
APPENDIX III – UNAUDITED MANAGEMENT ACCOUNTS OF THE QR GROUP
FOR THE TWELVE MONTHS ENDED 30 JUNE 2009 .............................................................
III-1
NOTICE OF SPECIAL GENERAL MEETING
DEFINITIONS
Unless otherwise stated, the following definitions will apply throughout this Circular:
SAL Group Companies
“Company”
:
Silverlake Axis Ltd
“SAL Group”
:
Silverlake Axis Ltd and its subsidiaries collectively
“SSB HoldCo”
:
Silverlake Solutions Limited
“SSB Singapore”
:
Silverlakegroup Pte Ltd
“SSB Indonesia”
:
P.T. Structured Services
“SSB Malaysia”
:
Silverlake Structured Services Sdn. Bhd.
“SSB Philippines”
:
Silverlakegroup Pte Ltd (Philippines branch)
“SSB Thailand”
:
Silverlake Structured Services Ltd.
“SSB Group”
:
SSB HoldCo and its subsidiaries collectively and “SSB Group
Company” means any one of them
“QR HoldCo”
:
QR Technology Sdn. Bhd.
“QR Malaysia”
:
QR Retail Automation (Asia) Sdn. Bhd.
SSB Group Companies
QR Group Companies
“QR Singapore”
“QR Group”
QR Retail Automation (S) Pte Ltd
:
QR HoldCo and its subsidiaries collectively and “QR Group
Company” means any one of them
“ACRA”
:
The Accounting and Corporate Regulatory Authority of
Singapore
“CDP”
:
The Central Depository (Pte) Limited
“SGX-ST”
:
Singapore Exchange Securities Trading Limited
:
The Companies Act 1981 of Bermuda, as modified from time to
time
Other Corporations or Agencies
General
“Act”
1
DEFINITIONS
“Announcement”
:
The announcement released by the Company on 6 January
2010 in relation to the Proposed Acquisitions and the Proposed
Ancillary Transactions
“Audit Committee”
:
The audit committee of the Company
“Board”
:
The board of Directors of the Company
“Business Day”
:
Any day on which commercial banks are open for business in
Singapore (other than Saturdays, Sundays and days which are
gazetted in Singapore as public holidays)
“Catalist”
:
The SGX-ST sponsor-supervised listing platform
“Circular”
:
This circular dated 13 January 2010
“Controlling Shareholder”
:
A person who, as defined in the Rules of Catalist, holds directly
or indirectly 15% or more of the nominal amount of all voting
shares in the Company, or, in fact, exercises control over the
Company
“Depositor”
:
A person being a Depository Agent or a holder of a securities
account maintained with CDP but does not include the holder
of a sub-account maintained with a Depository Agent
“Depository Agent”
:
An entity registered as a depository agent with CDP for the
purpose of maintaining securities sub-accounts for its own
account and for the account of others
“Directors”
:
The directors of the Company as at the Latest Practicable
Date, and “Director” means any of them
“EPS”
:
Earnings per Share
“Financial Adviser” or “Sponsor”
:
CIMB Bank Berhad, Singapore Branch
“FY”
:
Financial year ended 30 June
“Independent Directors”
:
The independent Directors of the Company, comprising Ong
Kian Min, Tan Sri Dato’ Dr. Lin See-Yan, Lim Kok Min and
Dr. Kwong Yong Sin
“IFA” or “Independent Financial
Adviser”
:
Asian Corporate Advisors Pte Ltd, the independent financial
adviser appointed to advise the Independent Directors on the
Proposed Acquisitions and the Proposed Ancillary Transactions
“Latest Practicable Date”
:
5 January 2010, being the latest practicable date prior to the
printing of this Circular
“Market Day”
:
A day on which the SGX-ST is open for securities trading
2
DEFINITIONS
“MOU”
:
The Memorandum of Understanding, dated 4 September 2009,
entered into between the Company and Mr. Goh relating to
the Proposed Acquisitions and the supplemental agreement,
dated 2 December 2009, entered into between the Company
and Mr. Goh for the extension of time for entering into definitive
agreements
“Mr. Goh” or “SSB Vendor”
:
Mr. Goh Peng Ooi
“NTA”
:
Net tangible asset
“Overall Consideration Shares”
:
Such number of new Shares to be issued by the Company
pursuant to the Proposed Acquisitions, which shall not exceed
1,045,000,000 Shares
“PBT”
:
Profit before tax
“QR Proforma FY2009 Accounts”
:
The unaudited management accounts of the QR Group for the
twelve months ended 30 June 2009
“Proposed Acquisitions”
:
The SSB Acquisition and the QR Acquisition collectively
“Proposed Ancillary Transactions” :
The various continuing transactions between the Silverlake
Private Entities and/or the SIP Group and the SSB Group
Companies pursuant to and in accordance with the terms of
the Restructuring Arrangements, as further referred to in
Sections 1.5 and 12.2 of this Circular
“QRFY”
:
The financial year of QR HoldCo, ending 31 March
“QR Acquisition”
:
The proposed acquisition by the Company of the entire issued
and paid-up share capital of QR HoldCo from the QR Vendors
on the terms and conditions of the QR Sale & Purchase
Agreement
“QR Business”
:
The business of the QR Group relating to the provision of
customized software solutions to customers in the retail
industry who utilise the QR Group’s flagship proprietary
software ‘PROFIT’
“QR Completion Date”
“QR Purchase Consideration”
The date falling five (5) days from the date of fulfilment of the
conditions precedent in the QR Sale & Purchase Agreement
or such other date as the Company and the QR Vendors may
mutually agree in writing
:
The purchase consideration payable by the Company for the
QR Acquisition
“QR Sale & Purchase Agreement” :
The conditional sale & purchase agreement entered into
between the Company and the QR Vendors, on 6 January
2010, in connection with the QR Acquisition, as may be varied
or amended from time to time
3
DEFINITIONS
“QR Sale Shares”
:
The total issued and paid-up share capital of QR HoldCo,
comprising 1,170,000 ordinary shares
“QR Vendors”
:
Mr. Goh and Mr. See Chuang Thuan
“Relevant Parties”
:
Mr. Goh and his concert parties, if any
“Restructuring Agreements”
:
The written agreements variously entered into between the
Silverlake Private Entities and the SSB Group Companies in
connection with the Restructuring Exercise, as referred to in
the SSB Sale and Purchase Agreement
“Restructuring Arrangements”
:
The Restructuring Agreements and the Services Agreement
collectively
“Restructuring Exercise”
:
The various steps taken to effect the following:
(i)
the transfer of the Structured Services Business from the
Silverlake Private Entities to the SSB Group pursuant to
and in accordance with the terms and conditions of the
Restructuring Agreements; and
(ii)
the cessation of the provision of support services in
relation to the Structured Services Business by Silverlake
System Sdn Bhd to the SIP Group and the transfer of
the Structured Services Business being undertaken by
the SIP Group to the SSB Group as evidenced by the
terms and conditions of the Services Agreement
“Rules of Catalist”
:
The Listing Manual, Section B: Rules of Catalist of the SGX-ST,
as may be amended or supplemented from time to time
“Securities Account”
:
A securities account maintained by a Depositor with CDP
“Services Agreement”
:
The written agreement entered into between the SIP Group
and SSB Malaysia, on 1 November 2009, in connection with
the Restructuring Exercise, as referred to in the SSB Sale and
Purchase Agreement
“Shares”
:
Ordinary shares of par value US$0.02 each in the share capital
of the Company and “Share” means any of them
“Shareholders”
:
Registered holders of Shares, except that, where the registered
holder is CDP, the term “Shareholders” shall, where the context
admits, mean the Depositors whose Securities Accounts are
credited with the Shares
“SGM”
:
The special general meeting of the Company to be held on
28 January 2010, notice of which is set out in this Circular (or
any adjournment thereof)
4
DEFINITIONS
“SIBS Software”
:
The SAL Group’s proprietary banking solution software for
use by the banking industry, called ‘Silverlake Axis Integrated
Banking Solution’
“Silverlake Private Entities”
:
The various companies which are either wholly owned by
the Vendor or in which the Vendor holds and/or controls a
majority interest, which are transferring the Structured Services
Business to the SSB Group pursuant to the terms of the
Restructuring Arrangements
“SIP”
:
Silverlake Innovation Partners Sdn. Bhd (formerly known as
Global Integration Management PACT Sdn Bhd), in which the
SSB Vendor holds and/or controls a majority interest
“SIP Group”
:
SIP and its subsidiary, GI Solutions Gateway Sdn Bhd, and
“SIP Group Company” means any one of them, which are
transferring the Structured Services Business to the SSB
Group pursuant to the terms of the Services Agreement
“Sponsor”
:
CIMB Bank Berhad, Singapore Branch
“SSB Acquisition”
:
The proposed acquisition by the Company of the entire issued
and paid-up share capital of SSB HoldCo from the SSB Vendor
on the terms and conditions of the SSB Sale & Purchase
Agreement
“SSB Completion Date”
:
The date falling five (5) days from the date of fulfilment of the
conditions precedent in the SSB Sale & Purchase Agreement
or such other date as the Company and the SSB Vendor may
mutually agree in writing
“SSB Contracts”
:
The various contracts, purchase orders and/or statements
of work relating to the Structured Services Business which
have been novated from and/or the benefit of which has been
assigned or is being held on trust by the Silverlake Private
Entities and/or the SIP Group to and/or in favour of the SSB
Group under and/or in accordance with the terms of the
Restructuring Arrangements
“SSB Employees”
:
The employees of the Silverlake Private Entities and SIP Group
who are to be transferred from the Silverlake Private Entities
and SIP Group to the SSB Group under and/or in accordance
with the terms of the Restructuring Agreements
“SSB Purchase Consideration”
:
The purchase consideration payable by the Company to the
SSB Vendor for the SSB Acquisition
“SSB Sale & Purchase Agreement” :
The conditional sale & purchase agreement entered into
between the Company and the SSB Vendor, on 6 January
2010, in connection with the SSB Acquisition, as may be varied
or amended from time to time
5
DEFINITIONS
“SSB Sale Shares”
:
The total issued and paid-up share capital of SSB HoldCo,
comprising 160 ordinary shares
“Structured Services Business”
:
The business of providing maintenance, application
management and program change request services to
customers who have licensed and are using the SIBS Software
“Substantial Shareholder”
:
A person who has an interest or interests in one or more voting
Shares and the total votes attached to such Share(s) represent
not less than 5% of the total votes attached to all the voting
Shares of the Company
Currencies, Units and Others
“S$” and “cents”
:
Singapore dollars and cents respectively
“RM” and “sen”
:
Malaysian Ringgit and sen respectively
“USD”
:
US dollars
“%” or “per cent.”
:
Per centum or percentage
Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders.
References to persons shall, where applicable, include corporations.
Any reference in this Circular to any enactment is a reference to that enactment for the time being
amended or re enacted. Any word defined under the Act or the Rules of Catalist or any statutory
modification thereof and used in this Circular shall, where applicable, have the meaning ascribed to it
under the Act or Rules of Catalist or any statutory modification as the case may be.
Any reference to a time of day in this Circular shall be a reference to Singapore time unless otherwise
stated. All discrepancies in the tables included herein between the listed amounts and totals thereof are
due to rounding.
The share price and exchange rate used in this Circular were extracted from Bloomberg L.P. as at the
Latest Practicable Date. Bloomberg L.P. has not consented to the inclusion of the exchange rate quoted in
this Circular and is thereby not liable for these statements. The Company has included the exchange rate
in the proper form and context of this Circular and has not verified the accuracy of these statements.
6
LETTER TO SHAREHOLDERS
SILVERLAKE AXIS LTD
(Incorporated in Bermuda)
(Company Registration No. 32447)
Board of Directors:
Registered Office:
Goh Peng Ooi (Executive Chairman)
Dr. Kwong Yong Sin (Managing Director)
Datuk Sulaiman bin Daud (Director)
Ong Kian Min (Independent Director)
Tan Sri Dato’ Dr. Lin See-Yan (Independent Director)
Lim Kok Min (Independent Director)
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
13 January 2010
To:
The Shareholders of Silverlake Axis Ltd
Dear Sir/Madam
(1)
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL
OF SILVERLAKE SOLUTION LIMITED BY THE COMPANY AS AN INTERESTED PERSON
TRANSACTION;
(2)
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL
OF QR TECHNOLOGY SDN BHD BY THE COMPANY AS AN INTERESTED PERSON
TRANSACTION;
(3)
THE PROPOSED ALLOTMENT AND ISSUANCE OF UP TO 1,025,635,634 NEW SHARES IN
CONNECTION WITH THE PROPOSED ACQUISITIONS;
(4)
THE PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL OF THE COMPANY; AND
(5)
THE PROPOSED ANCILLARY TRANSACTIONS PURSUANT TO THE RESTRUCTURING
ARRANGEMENTS AS INTERESTED PERSON TRANSACTIONS.
1.
INTRODUCTION
1.1
Proposed Acquisition of Silverlake Solution Limited (“SSB HoldCo”)
On 6 January 2010, the Directors announced, inter alia, that the Company had entered into the
SSB Sale and Purchase Agreement with the SSB Vendor for the acquisition of the SSB Sale
Shares, representing the entire issued and paid-up share capital of SSB HoldCo.
The SSB Group is involved in the business of providing maintenance services, application
management services (“AMS”) and/or program change request (“PCR”) services (collectively
“Structured Services Business”) to customers who have licensed and are using the SIBS
Software.
For further information on the SSB Acquisition, please refer to Section 2 of this Circular.
Mr. Goh is a director and Controlling Shareholder of the Company. He is also the SSB Vendor,
holding 100% of the issued and paid-up share capital of SSB HoldCo. The proposed acquisition by
the Company of the SSB Sale Shares from Mr. Goh will amount to an interested person transaction
requiring the approval of Shareholders’ under Chapter 9 of the Rules of Catalist.
7
LETTER TO SHAREHOLDERS
1.2
Proposed Acquisition of QR Technology Sdn. Bhd. (“QR HoldCo”)
On 6 January 2010, the Directors also announced, inter alia, that the Company had entered into
the QR Sale and Purchase Agreement with the QR Vendors for the acquisition of the QR Sale
Shares, representing the entire issued and paid-up share capital of QR HoldCo.
The QR Group is involved in the business of providing customized software solutions to customers
in the retail industry who utilise its proprietary retail management software called ‘PROFIT’.
For further information on the QR Acquisition, please refer to Section 3 of this Circular.
Mr. Goh is a director and Controlling Shareholder of the Company. He is also one of the QR
Vendors holding 77.55% of the issued and paid-up share capital of QR HoldCo. The proposed
acquisition by the Company of Mr. Goh’s portion of the QR Sale Shares will amount to an interested
person transaction requiring Shareholders’ approval under Chapter 9 of the Rules of Catalist.
1.3
Proposed Acquisitions as a Major Transaction
The Proposed Acquisitions will constitute a major transaction requiring Shareholders’ approval
under Chapter 10 of the Rules of Catalist. Please refer to Section 5 of this Circular for the relative
figures of the Proposed Acquisitions computed on the relevant bases set out in Rule 1006(a) to (d)
of the Rules of Catalist.
1.4
The Proposed Increase in the Authorised Share Capital of the Company
In connection with the Proposed Acquisitions, the Directors propose to increase the authorised
share capital of the Company from US$40,000,000, comprising 2 billion Shares, to US$80,000,000,
comprising 4 billion Shares, by the creation of 2 billion new Shares in order to accommodate
the allotment and issue of the Consideration Shares and any future issues of new Shares by
the Company. The listing and quotation of the Consideration Shares on Catalist is subject to the
approval of the SGX-ST.
1.5
The Proposed Ancillary Transactions
Pursuant to the Restructuring Arrangements, the Silverlake Private Entities and/or the SIP Group
are required to take steps, as far as possible, to procure the novation of the SSB Contracts to
the SSB Group or, where a novation cannot be achieved for any reason, to procure the legal
assignment of the benefits of the applicable SSB Contracts to the SSB Group.
Pending such novation and/or assignment, the Silverlake Private Entities and the SIP Group
are required to hold all monies and benefits arising under the applicable SSB Contracts as bare
trustees for the SSB Group and to remit such monies and benefits to the SSB Group in accordance
with the terms of the Restructuring Arrangements.
Where a Silverlake Private Entity and/or SIP Group Company had previously furnished a
performance bond to a customer in connection with an SSB Contract that has not yet been novated
to the SSB Group, the applicable Silverlake Private Entity and/or SIP Group Company shall
continue to maintain such performance bond subject to the corresponding SSB Group Company
bearing any bank charges or commission payable in connection with the issuance and maintenance
of such performance bond.
The Restructuring Arrangements also allow the Silverlake Private Entities and/or the SIP Group
to continue as a counter-party to and/or to enter into new SSB Contracts (subject to the other
provisions of the Restructuring Arrangements) in the following situations:
(a)
where negotiations with the customer on the applicable contracts were on-going as at the
date of the Restructuring Arrangements and provided the execution of such contracts takes
place prior to 30 April 2010;
(b)
where the contract relates to the provision of maintenance services under an existing
maintenance agreement that is due for renewal prior to 30 April 2010; and
8
LETTER TO SHAREHOLDERS
(c)
where the SSB Contracts relate to projects which are still in the process of being
implemented by the Silverlake Private Entities or SIP Group on behalf of a customer and will
only come into effect upon the completion of such implementation works.
Upon completion of the SSB Acquisition, the aforesaid on-going transactions (collectively referred
to as the “Proposed Ancillary Transactions”) will amount to interested person transactions for
which the Company shall be seeking shareholders’ approval in accordance with Chapter 9 of the
Rules of Catalist.
For more details on the Proposed Ancillary Transactions, please refer to Section 12 of this Circular.
1.6
Purpose of this Circular
The Directors are convening a SGM to seek Shareholders’ approval for:
(a)
the Proposed Acquisitions;
(b)
the proposed allotment and issuance of up to 1,025,635,634 new Shares in connection with
the Proposed Acquisitions (the “Proposed Share Issue”);
(c)
the proposed increase in the authorised share capital of the Company; and
(d)
the Proposed Ancillary Transactions;
all of which are inter-conditional upon each other.
The purpose of this Circular is to provide Shareholders with relevant information pertaining to the
above proposals and to seek Shareholders’ approval for the resolutions in respect thereof to be
tabled at the SGM, notice of which is set out in this Circular.
1.7
Independent Financial Adviser
Asian Corporate Advisors Pte Ltd has been appointed as the IFA to advise the Independent
Directors as to whether the Proposed Acquisitions and the Proposed Ancillary Transactions are on
normal commercial terms and are not prejudicial to the interests of the Company and the minority
Shareholders.
Please refer to Appendix I of this Circular for the IFA’s letter to the Independent Directors.
2.
THE SSB ACQUISITION
2.1
SSB Sale Shares
Pursuant to the terms and conditions of the SSB Sale & Purchase Agreement, the Company will
acquire the SSB Sale Shares, representing 100% of the issued and paid-up share capital of SSB
HoldCo from the SSB Vendor, who holds all of the SSB Sale Shares.
2.2
Purchase Consideration for the SSB Acquisition
The SSB Purchase Consideration will be satisfied by way of an issue to the SSB Vendor and/or
his nominee(s) of new Shares in the capital of the Company (“SSB Consideration Shares”) to be
calculated in the manner as set out below:
2.2.1 Formula for calculation
Subject to the provisions set out in subsection 2.2.2 below, the number of SSB Consideration
Shares shall be calculated using the following formula (fractional entitlements to be
disregarded):
9
LETTER TO SHAREHOLDERS
C1 = B1/A x E
Where:
A=
Average PBT of the SAL Group for FY2007, FY2008 and FY2009 based on the
audited accounts of the SAL Group for FY2007, FY2008 and FY2009
B1 = Proforma PBT of the SSB Group for FY2009
C1 = Number of SSB Consideration Shares (fractional entitlements to be disregarded)
E=
Total number of Shares in the capital of the Company prior to Completion
(excluding treasury shares)
2.2.2 Adjustment
If any of the SSB Contracts that were used to calculate `B1’ above are terminated by the
relevant customer as a result of the Restructuring Exercise or otherwise due to any act or
omission on the part of the Silverlake Private Entities and/or the SIP Group on or before
30 April 2010 (“Terminated SSB Contracts”), the Parties agree that `B1’ shall be revised to
remove the profit before tax attributable to such Terminated SSB Contract(s) and `C1’ shall be
recalculated applying the revised `B1’ and correspondingly reduced up to a maximum of 30%
of the original number.
If there is any dispute between the Company and the SSB Vendor on the appropriate
deduction to be made pursuant to the above, both the Company and the SSB Vendor agree
to refer the matter to the Reporting Accountant (as defined in the SSB Sale and Purchase
Agreement) for final determination and to equally bear the costs of such exercise.
2.2.3 Allotment and issuance
To facilitate the provisions of subsection 2.2.2 above, both the Company and the SSB Vendor
agree that the SSB Consideration Shares shall be alloted and issued to the SSB Vendor and/
or his nominee(s) in two tranches as follows:
(a)
70% upon the SSB Completion Date in accordance with the provisions of the SSB
Sale and Purchase Agreement (“1st Tranche SSB Consideration Shares”);
(b)
the balance 30% by 14 May 2010 in the event that there is no adjustment pursuant to
the above; and
(c)
in the event there is any adjustment pursuant to the above, the balance 30%, as
adjusted, will be alloted and issued within 14 days after determination of the amount
of adjustment.
The SSB Consideration Shares when allotted and issued to the SSB Vendor will rank pari passu in
all respect with the existing issued ordinary Shares.
Notwithstanding this Section 2.2 and Section 3.2 below, the Overall Consideration Shares to be
issued pursuant to the Proposed Acquisitions shall not exceed 1,045,000,000 Shares. In the event
the total number of Shares to be issued by the Company pursuant to the Proposed Acquisitions
would otherwise exceed the Overall Consideration Shares, the excess amount will be deducted
from the Shares to be issued in respect of each of the SSB Acquisition and the QR Acquisition on
a pro-rata basis.
2.3
Basis for Payment
The SSB Purchase Consideration was arrived at on a willing-buyer and willing-seller basis taking
into account the proforma PBT of the SSB Group for FY2009, of approximately RM60.79 million.
For further details on the financial information of the SSB Group, please refer to Section 7.8 of this
Circular.
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LETTER TO SHAREHOLDERS
2.4
Conditions Precedent
Completion of the SSB Acquisition is conditional, inter alia, upon the fulfilment of the following
conditions on or before the SSB Completion Date:
2.5
(a)
the approval of the Shareholders in respect of the Proposed Acquisitions, the proposed
allotment and issuance of new Shares in connection with the Proposed Acquisitions and
the proposed increase in the authorized share capital of the Company being obtained at the
SGM;
(b)
the approval and/or clearance of the SGX-ST, the Sponsor and/or any other third
party or governmental, regulatory or competent authority having jurisdiction over the
proposed transactions contemplated herein, including the listing and quotation of the
SSB Consideration Shares, having been obtained and such approval not having been
withdrawn or revoked and, if such approval is subject to the imposition of any condition(s) or
restrictions(s), such condition(s) or restriction(s) (i) being reasonably acceptable to the SSB
Vendor and the Company; and (ii) where applicable and so required, being duly fulfilled or
complied with;
(c)
the results of the financial, legal and business due diligence to be conducted by the
Company and/or its professional advisers on the SSB Group, including investigations as
to title to assets, the due transfer of employees and/or the due and effective novation or
assignment of rights under the SSB Contracts, and/or the contents of the Disclosure Letter
(as defined in the SSB Sale and Purchase Agreement) being satisfactory to the Company;
(d)
the receipt by the Company and the SSB Vendor of written confirmation from the reporting
accountant as to the proforma PBT of the SSB Group for FY2009;
(e)
the business of each company within the SSB Group having been conducted only in the
ordinary course from the date of its incorporation up to the SSB Completion Date and there
having been no material adverse change (as determined by the Company in its sole and
absolute discretion) affecting the prospects, operations or financial condition of any of the
SSB Group companies on or prior to the SSB Completion Date;
(f)
the Restructuring Agreements and the Services Agreement having been duly executed
between the relevant parties and being legal, valid, binding and enforceable on the relevant
parties thereto and there being no breach of any of the terms and conditions of the
Restructuring Agreements and/or the Services Agreement by any of the parties thereto;
(g)
all the SSB Vendor’s warranties under the SSB Sale & Purchase Agreement being true
and accurate and not misleading and there being no breach of any of the SSB Vendor’s
covenants and undertakings under the SSB Sale & Purchase Agreement; and
(h)
the execution and performance of the SSB Sale & Purchase Agreement by the Company and
the SSB Vendor not being prohibited, restricted, curtailed, hindered, impaired or otherwise
adversely affected by any relevant statute, order, rule, directive or regulation promulgated by
any legislative, executive or regulatory body or other authority of competent jurisdiction.
Restrictions on the SSB Vendor
2.5.1 Pursuant to the SSB Sale & Purchase Agreement and subject to subsection 2.5.2 below, the
SSB Vendor has covenanted, inter alia, and undertakes with the Company that, save for the
benefit of the SAL Group and with the prior written consent of the Company, he will not and
he will procure that each of the Silverlake Private Entities, the SIP Group Companies and/or
any other company outside of the SAL Group that the SSB Vendor controls (“Vendor-related
Entities”), will not, with effect from the SSB Completion Date and for so long as the SSB
Vendor remains a Controlling Shareholder and/or director of the Company, either on its own
account or in conjunction with or on behalf of any other person, firm or company:
11
LETTER TO SHAREHOLDERS
(a)
engage or be engaged, concerned or interested, directly or indirectly, in operating,
performing and/or carrying on activities equivalent or similar to the Structured Services
Business (“SSB Competing Business”);
(b)
acquire or hold any interest in any company which is engaged in any SSB Competing
Business or which is directly or indirectly controlled by a person engaged in any
Competing Business;
(c)
solicit or endeavour to entice away from dealing with the SSB Group or the Company,
any person who was, at any time, a customer or supplier of any SSB Group Company;
and
(d)
hire, employ or endeavour to entice away from being employed or hired by the SSB
Group or the Company, any employee(s) of any SSB Group Company.
2.5.2 Notwithstanding sub-section 2.5.1, the SSB Vendor undertakes that, if there should be any
business opportunity offered to the SSB Vendor and/or any Vendor-related Entities after
the date of the SSB Sale and Purchase Agreement which relates to the SSB Competing
Business (“New SSB Opportunities”), the SSB Vendor shall and/or shall procure that the
Vendor-related Entities shall comply with the following procedure:
(a)
New SSB Opportunities arising from time to time in which the SSB Vendor and/or the
Vendor-related Entities are offered a chance to participate must forthwith be referred
to the SAL Group together with the provision of information pertinent (such information
shall include documents and records reasonably necessary for the SAL Group to
make an informed assessment) for the consideration and assessment of the New
Opportunity by the SAL Group (“Notice”);
(b)
Subject to sub-section 2.5.2 (c), in the event that the SAL Group decides not to pursue
the New SSB Opportunity, the SAL Group shall grant a right of first refusal for such
New SSB Opportunity to the Vendor and/or the Vendor-related Entities within 15
Business Days (or such other duration as may reasonably be required);
(c)
The Vendor and/or the Vendor-related Entities acknowledge that, in the event the SAL
Group, for whatsoever reason, does not wish to pursue such New SSB Opportunity,
the SAL Group will have to seek the approval of its board of Directors to reject the
New SSB Opportunity and to grant its consent to the Vendor and/or the Vendor-related
Entity to pursue the same.
2.5.3 For the avoidance of doubt, nothing above shall restrict the Silverlake Private Entities
and/or the SIP Group Companies from continuing to act as a counterparty to and/or from
entering into new contracts relating to the Structured Services Business, as the case may
be, and from providing ancillary support services to the SSB Group Companies in relation
thereto in so far as the Silverlake Private Entities and/or the SIP Group Companies are
expressly authorised and/or required to do so under and/or in accordance with the terms and
conditions of the Restructuring Arrangements.
3.
THE QR ACQUISITION
3.1
QR Sale Shares
Pursuant to the terms and conditions of the QR Sale & Purchase Agreement, the Company will
acquire the QR Sale Shares, representing 100% of the issued and paid-up share capital of QR
HoldCo from the QR Vendors, each of whom hold such number and/or portion of the QR Sale
Shares as set out against their respective names in the table below.
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LETTER TO SHAREHOLDERS
No. of shares as at the date of the
QR Sale & Purchase Agreement
Percentage
shareholding %
Mr. Goh
907,382
77.55
Mr. See Chuang Thuan
262,618
22.45
1,170,000
100%
QR Vendors
TOTAL
3.2
Purchase Consideration for the QR Acquisition
The QR Purchase Consideration will be satisfied by way of an issue to the QR Vendors and/or
their nominee(s) of new Shares in the capital of the Company (“QR Consideration Shares”) to be
calculated based on the following formula:
C2 = B2/A x E
Where:
A=
Average PBT of the SAL Group for FY2007, FY2008 and FY2009 based on the
audited accounts of the SAL Group for FY2007, FY2008 and FY2009
B2 =
PBT of the QR Group based on the QR Proforma FY2009 Accounts
C2 =
Number of QR Consideration Shares to be issued to the QR Vendors (in proportion to
their respective shareholdings)
E=
Total number of Shares in the capital of the Company prior to the QR Completion Date
(excluding treasury shares)
The QR Consideration Shares shall be allotted and issued to the QR Vendors and/or their
nominee(s) in proportion to their respective shareholdings in QR HoldCo immediately preceding
the QR Completion Date and, when allotted and issued, will rank pari passu in all respects with the
existing issued ordinary Shares.
Notwithstanding this Section 3.2 and Section 2.2 above, the Overall Consideration Shares to be
issued pursuant to the Proposed Acquisitions shall not exceed 1,045,000,000 Shares. In the event
the total number of Shares to be issued by the Company pursuant to the Proposed Acquisitions
would otherwise exceed the Overall Consideration Shares, the excess amount will be deducted
from the Shares to be issued in respect of each of the SSB Acquisition and the QR Acquisition on
a pro-rata basis.
3.3
Basis for Payment
The QR Purchase Consideration was arrived at on a willing-buyer and willing-seller basis taking
into account the PBT of the QR Group, of approximately RM10.11 million, based on the QR
Proforma FY2009 Accounts. The QR Proforma FY2009 Accounts are set out in Appendix III of this
Circular.
3.4
Conditions Precedent
Completion of the QR Acquisition is conditional, inter alia, upon the fulfilment of the following
conditions on or before the QR Completion Date:
(a)
a service agreement being duly executed between Mr. See Chuang Thuan and the QR
Group, pursuant to which Mr. See Chuang Thuan shall undertake to continue to manage the
QR Business for at least three (3) years, in accordance with the QR Group’s relevant policies
and guidelines;
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LETTER TO SHAREHOLDERS
3.5
(b)
the approval of the Shareholders in respect of the Proposed Acquisitions, the proposed
allotment and issuance of new Shares in connection with the Proposed Acquisitions and
the proposed increase in the authorized share capital of the Company being obtained at the
SGM;
(c)
the approval and/or clearance of the SGX-ST, the Sponsor and/or any other third party or
governmental, regulatory or competent authority having jurisdiction over the proposed
transactions contemplated herein, including the listing and quotation of the QR Consideration
Shares, having been obtained and such approval not having been withdrawn or revoked
and, if such approval is subject to the imposition of any condition(s) or restrictions(s), such
condition(s) or restriction(s) (i) being reasonably acceptable to the QR Vendors and the
Company; and (ii) where applicable and so required, being duly fulfilled or complied with;
(d)
the results of the financial, legal and business due diligence to be conducted by the
Company and/or its professional advisers on the QR Group, and/or the contents of the
Disclosure Letter (as defined in the QR Sale and Purchase Agreement) being satisfactory to
the Company;
(e)
the receipt by the Company and the QR Vendors of written confirmation from the auditor and/
or reporting accountant as to the PBT of the QR Group based on the QR Proforma FY2009
Accounts;
(f)
the business of each company within the QR Group having been conducted only in the
ordinary course from the date of the MOU up to the QR Completion Date and there having
been no material adverse change (as determined by the Company in its sole and absolute
discretion) affecting the prospects, operations or financial condition of any of the QR Group
companies on or prior to the QR Completion Date;
(g)
all the QR Vendors’ warranties under the QR Sale & Purchase Agreement being true and
accurate and not misleading and there being no breach of any of the QR Vendors’ covenants
and undertakings under the QR Sale & Purchase Agreement; and
(h)
the execution and performance of the QR Sale & Purchase Agreement by the Company and
the QR Vendors not being prohibited, restricted, curtailed, hindered, impaired or otherwise
adversely affected by any relevant statute, order, rule, directive or regulation promulgated by
any legislative, executive or regulatory body or other authority of competent jurisdiction.
Restrictions on the QR Vendors
3.5.1 Pursuant to the QR Sale & Purchase Agreement, the QR Vendors have covenanted, inter
alia, and undertake with the Company that, save for the benefit of the SAL Group and with
the prior written consent of the Company, they will not, with effect from the QR Completion
Date and for so long as any of them remains a controlling and/or substantial shareholder
and/or director of the Company and/or its subsidiaries, either on their own account or in
conjunction with or on behalf of any other person, firm or company:
(a)
engage or be engaged, concerned or interested, directly or indirectly, in operating,
performing and/or carrying on activities similar to the QR Business (“QR Competing
Business”);
(b)
acquire or hold any interest in any company which is engaged in any QR Competing
Business or which is directly or indirectly controlled by a person engaged in any
Competing Business;
(c)
solicit or endeavour to entice away from dealing with the QR Group or the Company,
any person who was, at any time, a customer or supplier of any QR Group Company;
and
(d)
hire, employ or endeavour to entice away from being employed or hired by the QR
Group or the Company, any employee(s) of any QR Group Company.
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LETTER TO SHAREHOLDERS
3.5.2 Notwithstanding sub-section 3.5.1 above, Mr. Goh undertakes that, if there should be any
business opportunity offered to Mr. Goh and/or any Vendor-related Entities, as the case
may be, after the date of the QR Sale and Purchase Agreement, which relates to the QR
Competing Business (“New QR Opportunities”), Mr. Goh shall and shall procure that the
Vendor-related Entities shall comply with the following procedure:
(a)
New QR Opportunities arising from time to time in which Mr. Goh and/or the Vendorrelated Entities are offered a chance to participate, must forthwith be referred to the
SAL Group together with the provision of information pertinent (such information
shall include documents and records reasonably necessary for the SAL Group to
make an informed assessment) for the consideration and assessment of the New QR
Opportunity by the SAL Group (“Notice”);
(b)
Subject to sub-section 3.5.2 (c), in the event that the SAL Group decides not to pursue
the New QR Opportunity, the SAL Group shall grant a right of first refusal for such
New QR Opportunity to Mr.Goh and/or the Vendor-related Entities within 15 Business
Days (or such other duration as may reasonably be required);
(c)
Mr. Goh and/or the Vendor-related Entities acknowledge that, in the event the SAL
Group, for whatsoever reason, does not wish to pursue such New QR Opportunity, the
SAL Group will have to seek the approval of its board of Directors of whether to reject
the New Opportunity and whether to grant its consent to Mr Goh and/or the Vendorrelated Entity to pursue the same.
4.
THE PROPOSED ACQUISITIONS AS INTERESTED PERSON TRANSACTIONS
4.1
Chapter 9 of the Rules of Catalist governs transactions by a listed company, as well as transactions
by its subsidiaries and associated companies that are considered to be at risk, with the listed
company’s interested persons. When this Chapter applies to a transaction and the value of that
transaction alone or in aggregation with other transactions conducted with the interested person
during the financial year reaches, or exceeds, certain materiality thresholds, the listed company is
required to make an immediate announcement, or to make an immediate announcement and seek
its shareholders’ approval for that transaction.
Under the Rules of Catalist:
An “entity at risk” means:
(a)
the listed company;
(b)
a subsidiary of the listed company that is not listed on the SGX-ST or an approved exchange;
or
(c)
an associated company of the listed company that is not listed on the SGX-ST or an
approved exchange, provided that the listed company and/or its subsidiaries (“listed group”),
or the listed group and its interested person(s), has control over the associated company,
In the case of a company, an “interested person” means:
(a)
a director, chief executive officer or controlling shareholder of the issuer; or
(b)
an associate of any such director, chief executive officer or controlling shareholder.
An “associate”:
(a)
in relation to any director, chief executive officer, substantial shareholder or controlling
shareholder (each being an individual) includes an immediate family member (that is, the
spouse, child, adopted-child, step-child, sibling or parent) of such director, chief executive
officer, substantial shareholder or controlling shareholder, the trustees of any trust of
15
LETTER TO SHAREHOLDERS
which the director/his immediate family, the chief executive officer/his immediate family, the
substantial shareholder/his immediate family or controlling shareholder/his immediate family
is a beneficiary or, in the case of a discretionary trust, is a discretionary object, and any
company in which the director/his immediate family, the chief executive officer/his immediate
family, the substantial shareholder/his immediate family or controlling shareholder/his
immediate family has or have an aggregate interest (directly or indirectly) of 30% or more;
and
(b)
in relation to a substantial shareholder or a controlling shareholder (each being a company)
means any other company which is its subsidiary or holding company or is a subsidiary
of such holding company or one in the equity of which it and/or such other company or
companies taken together (directly or indirectly) have an interest of 30% or more;
An “approved exchange” means a stock exchange that has rules which safeguard the interests of
shareholders against interested person transactions according to principles similar to Chapter 9 of
the Rules of Catalist; and
An “interested person transaction” means a transaction between an entity at risk and an interested
person.
4.2
Details of the Interested Person
Mr. Goh is a director and Controlling Shareholder of the Company. He is also the SSB Vendor,
holding 100% of the issued share capital of SSB HoldCo. In addition, he is also one of the QR
Vendors, holding 77.55% of the issued share capital of QR HoldCo.
As such, Mr. Goh is an “interested person” within the meaning of Rule 904 of the Rules of Catalist
and the proposed acquisitions by the Company of the SSB Sale Shares and Mr. Goh’s portion of
the QR Sale Shares will constitute interested person transactions pursuant to Chapter 9 of the
Rules of Catalist.
4.3
Materiality Thresholds under Chapter 9 of the Rules of Catalist
Except for certain transactions which, by reason of the nature of such transactions, are not
considered to put the listed company at risk to its interested person and, hence, are excluded from
the ambit of Chapter 9 of the Rules of Catalist, an immediate announcement and shareholders’
approval would be required in respect of transactions with interested persons if certain financial
thresholds (which are based on the value of the transaction as compared with the listed company’s
latest audited consolidated NTA) are reached or exceeded. In particular, shareholders’ approval is
required for an interested person transaction of a value equal to, or which exceeds:
(a)
5% of the listed group’s latest audited consolidated NTA; or
(b)
5% of the listed group’s latest audited consolidated NTA, when aggregated with other
transactions entered into with the same interested person (as such term is construed under
Chapter 9 of the Rules of Catalist) during the same financial year.
Based on the audited accounts of the SAL Group for FY2009, the audited NTA of the SAL Group
was RM159.68 million (or the equivalent of S$65.80 million, based on the exchange rate of S$1.00:
RM2.4269 as at the day preceding the date of the SSB Sale and Purchase Agreement and the
QR Sale and Purchase Agreement). Accordingly, in relation to the SAL Group, for the purposes of
the Rules of Catalist in the current financial year, Shareholders’ approval would be required for any
interested person transaction of a value equal to, or more than RM7.98 million (or S$3.29 million,
based on the exchange rate of S$1.00: RM2.4269), being 5% of the latest audited NTA of the SAL
Group.
Based on the financial information of the SSB Group as set out in Section 7.8 and applying
the formula in Section 2.2 and assuming there will be no adjustment to the SSB Purchase
Consideration, the SSB Consideration Shares shall amount to 879,388,625 Shares. Accordingly,
based on the price of S$0.3307 per Share, being the weighted average price of the Shares on
16
LETTER TO SHAREHOLDERS
the day immediately preceding the date of the SSB Sale and Purchase Agreement, the aggregate
value of the consideration payable to Mr. Goh and/or his nominee(s) in connection with the SSB
Acquisition will be approximately S$290.81 million.
Based on the financial information of the QR Group as set out in Section 8.8 of this Circular and
applying the formula in Section 3.2, the QR Consideration Shares shall amount to 146,247,009
Shares, of which Mr Goh shall receive 113,420,430 Shares, representing his 77.55% shareholding
interest in QR HoldCo. Accordingly, based on the price of S$0.3307 per Share, being the weighted
average price of the Shares on the day immediately preceding the date of the QR Sale and
Purchase Agreement, the aggregate value of the consideration payable to the QR Vendors or their
nominees in connection with the QR Acquisition will be S$48.36 million, of which Mr. Goh’s share is
approximately S$37.51 million, representing his 77.55% shareholding interest in QR HoldCo.
Based on the above, the total number of Shares to be issued pursuant to the Proposed Acquisitions
will be 1,025,635,634, out of which Mr Goh shall receive 992,809,055 Shares. The total value of
the interested person transactions involving Mr Goh in connection with the Proposed Acquisitions
will, therefore, amount to approximately S$328.32 million, representing approximately 499% of the
latest NTA of the Group as at 30 June 2009, and which exceeds the abovementioned 5% threshold.
Accordingly, approval of the Shareholders is required for the Proposed Acquisitions as interested
person transactions pursuant to Rule 906 of the Rules of Catalist.
5.
THE PROPOSED ACQUISITIONS AS A MAJOR TRANSACTION
5.1
Chapter 10 of the Rules of Catalist governs the continuing listing obligations of an issuer in respect
of acquisitions and realisations and shareholders’ approval and/or an immediate announcement
may be required depending on the size of the relative figures of such a transaction computed on
certain bases.
5.2
Rule 1006 of the Rules of Catalist sets out these bases of computation. No shareholders’ approval
is required if any of the relative figures computed on the bases set out in Rule 1006 of the Rules of
Catalist does not exceed 75%.
5.3
The relative figures of the Proposed Acquisitions computed on the relevant bases set out in
Rule 1006(a) to (d) of the Rules of Catalist are as follows:
Rule 1006 Bases
%
(a)
Net asset value of the assets to be disposed of, compared with the
SAL Group’s net asset value
Not applicable
to acquisitions
(b)
The net profits(1) attributable to the assets acquired or disposed of,
compared with the SAL Group’s net profit
328.5%(2)
(c)
Aggregate value of the consideration given or received, compared
with the SAL Group’s market capitalisation on 5 January 2010, being
the market day immediately preceding the date of the SSB Sale and
Purchase Agreement and the QR Sale and Purchase Agreement
96.2%(3) (4)
(d)
The number of equity securities issued by the Company as
consideration for an acquisition, compared with the number of equity
securities previously in issue.
96.2% (4)
Notes:
(1)
Rule 1002 (3)(a) of the Rules of Catalist defines ‘net profit’ as the profit or loss before tax, minority interests and
extraordinary items.
(2)
Computed based on the proforma profit before tax, minority interests and extraordinary items of (a) the SSB Group
for FY2009 of approximately RM60.79 million, (b) the QR Group for the twelve months period ended 30 June 2009
of approximately RM10.11 million, and (c) the SAL Group for FY2009 of approximately RM21.58 million.
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LETTER TO SHAREHOLDERS
(3)
Computed based on the Company’s market capitalisation of approximately S$352.56 million, excluding treasury
shares.
(4)
Computed based on the issue and allotment of up to 1,025,635,634 new Shares in connection with the Proposed
Acquisitions.
As the relative figure under Rule 1006 (b) exceeds 100% and the relative figures under Rules
1006(c) and (d) above exceed 75% (but are less than 100%), the Proposed Acquisitions constitute
a major transaction as defined in Chapter 10 of the Rules of Catalist. Accordingly, the Proposed
Acquisitions are conditional upon approval by Shareholders at the SGM pursuant to Rule 1014 of
the Rules of Catalist. Rule 1015 does not apply in the case of an acquisition of profitable assets if
the only limit breached is Rule 1006(b).
6.
THE PROPOSED SHARE ISSUE
6.1
Rule 805(1) of the Rules of Catalist requires the approval of shareholders in a general meeting to
be obtained for the issue of shares or convertible securities or the grant of options carrying rights
to subscribe for shares of the issuer. Accordingly, Shareholders’ approval is sought for the allotment
and issuance of the Overall Consideration Shares, pursuant to Rule 805(1) of the Rules of Catalist.
6.2
In addition, pursuant to Rule 804 of the Rules of Catalist, other than an issue made on a pro-rata
basis or pursuant to a share option scheme or share scheme, no directors of an issuer or associate
of the director, may participate directly or indirectly in an issue of equity securities or convertible
securities unless the shareholders in a general meeting have approved the specific allotment. Mr.
Goh is the executive chairman of the Company, and is also the SSB Vendor and one of the QR
Vendors who will be receiving new Shares pursuant to the Proposed Acquisitions. Accordingly, the
proposed allotment and issuance of the relevant Overall Consideration Shares in connection with
the Proposed Acquisitions to Mr. Goh is subject to the approval of the Shareholders at the SGM.
6.3
Based on the proforma PBT of the SSB Group for FY2009 and the QR Proforma FY2009 Accounts,
the total number of new Shares to be issued and allotted pursuant to the Proposed Acquisitions,
applying the formulas set out in Sections 2.2 and 3.2 and on the basis that there will be no
adjustments to the SSB Purchase Consideration, will be up to 1,025,635,634 new Shares.
7.
INFORMATION ON THE SSB GROUP
7.1
General Information
The SSB Group is a new group of companies that was set up for the purpose of acquiring the
Structured Services Business from the Silverlake Private Entities and the SIP Group by way of the
transfer of the SSB Contracts and the SSB Employees pursuant to the Restructuring Exercise.
SSB HoldCo was incorporated in Bermuda to act as the ultimate holding company of the SSB
Group. The SSB Group Companies operate in various countries throughout the region including
Malaysia, Singapore, Indonesia, Brunei, the Philippines and Thailand.
7.2
Business of the SSB Group
The Structured Services Business involves the provision of maintenance services, AMS and/or
PCR services to customers who license and use the SIBS Software.
Maintenance
The SSB Group provides maintenance services relating to the SIBS Software for customers who
have licensed the SIBS Software. This involves providing customers with round-the-clock software
recovery services for production system recovery and the rectification of production defects, as well
as services to ensure that the production system continues to meet the business requirements of
such customers.
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LETTER TO SHAREHOLDERS
AMS
AMS involves a pre-planned arrangement with customers for the provision of manpower services
relating to the enhancement of the SIBS Software. Costing for AMS is calculated based on an
agreed period and agreed rates for the provision of manpower and involves resources being
stationed at the customer’s site for the agreed period.
PCR Services
PCR services are provided upon a customer’s request to enhance or supplement their existing
production applications through the integration of new modules to the SIBS Software. Such PCR
services are ad hoc in nature, with costing agreed on a case by case basis and calculated based
on the estimated man-hours required for each PCR service request.
7.3
Major Customers
The SSB Group contracts with customers in Singapore, as well as in Indonesia, Malaysia, China,
the Philippines, Brunei, Thailand, Sri Lanka, Vietnam, Middle East and Bangladesh, through its
various subsidiaries and branch.
The major customers of the SSB Group for FY2009 are set out below:
Customers*
Country
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Singapore
Indonesia
Indonesia
Indonesia
Thailand
Sri Lanka
Affin Bank Berhad
Alliance Bank Malaysia Bhd
AmBank (M) Berhad
Bank Islam Malaysia Berhad
EON Bank Berhad
Hong Leong Bank Berhad
Kumpulan Wang Simpanan Pekerja
Oversea-Chinese Banking Corporation Limited
PT Bank CIMB Niaga, Tbk
PT Bank Mandiri (Persero), Tbk
PT Bank Rakyat Indonesia (Persero), Tbk
Siam City Bank Public Company Limited
The People’s Bank
*The major customers listed in the table above are set out in alphabetical order.
7.4
Major Suppliers
The SSB Group does not have any major suppliers.
7.5
Key Management of the SSB Group
Lau Siow Ling, Chief Operating Officer
Ms. Lau Siow Ling (“Ms. Lau”) holds a degree in Computer Science from the University of Lousiana
(formerly known as University of Southwestern Lousiana) in the USA.
Ms. Lau has 24 years of working experience in the information technology industry with an
extensive background in sales and marketing, focusing on the finance industry. She joined IBM
Malaysia in 1985 and gained in-depth knowledge and experience relating to the installation of the
IBM iSeries together with the implementation of the SIBS Software. Her last position held in IBM
Malaysia was as country manager for the IBM iSeries and she was responsible for all the sales of
the IBM iSeries in Malaysia.
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LETTER TO SHAREHOLDERS
In 2001, Ms Lau joined Silverlake System Sdn. Bhd. as a vice-president. Since 2004, she has been
heading and over-seeing the finance/cash flow, human resource and administrative department of
the business.
Ms Lau’s appointment as the chief operating officer for SSB Malaysia will involve focusing on the
daily business and operations of the Structured Services Business.
Audrey Yap Mooi Yen, Customer Fulfilment Manager
Ms. Audrey Yap Mooi Yen (“Ms. Yap”) is certified by the Project Management Institute in the USA
as a Project Management Professional (PMP). Ms. Audrey Yap has more than 34 years of working
experience in information technology and financial industries.
Ms. Yap’s career in the financial industry began with Public Bank Berhad in 1977. In 1979, she was
attached to Credit Corporation (M) Bhd. as EDP (Electronic Data Processing) manager responsible
for the setup of its information technology division. She moved on to join Sabah Bank Bhd as an
information technology consultant for 2 years, working on the bank’s core banking migration project.
Prior to joining the SSB Group, she was the senior vice president for Silverlake System Sdn. Bhd.
She is a very experienced project director and has successfully implemented many major projects
relating to the SIBS Software for customers in Malaysia, as well as overseas. Some of those
banks were Overseas United Bank (M) Berhad, EON Bank Berhad, Multipurpose Bank Berhad,
Bank Utama (Malaysia) Bhd, Bank of China (Malaysia) Berhad, Affin Bank Berhad, Bank Islam
Malaysia Berhad, Wall Street Finance & Securities Public Co Ltd, PT Bank Mandiri (Pesero) Tbk,
PT Bank Rakyat Indonesia (Persero) Tbk, Bank for Foreign Trade of Vietnam, The People’s Bank,
and Oversea-Chinese Banking Corporation Limited. She is also an advisor/consultant to Kumpulan
Wang Simpanan Pekerja and Pertubuhan Keselamatan Sosial in relation to their use of the SIBS
software.
Teoh Guat Ain, Country Services Manager, Thailand
Ms. Teoh Guat Ain (“Ms. Teoh”) has 38 years experience in the information technology and
financial services industries. She started her career with NCR Malaysia Sdn Bhd as a programmer
in relation to the company’s customer service solutions. She left to join Tan Chong Motors Holding,
as head of the information technology department, in 1981. In 1991, she joined United Overseas
Bank Malaysia as vice president, head of business solutions. During her 10 years of employment
with United Overseas Bank (Malaysia) Bhd, she led a team of technical staff in supporting the
bank’s information technology requirements and successfully oversaw the enhancement to its core
banking software.
Prior to joining the SSB Group, she was the executive vice president for Silverlake Thailand Ltd.
and was responsible for managing the company’s business operations in Thailand. She has been
involved in many successful implementation projects of the SIBS Software for customers, including
Bank Islam Malaysia Berhad, UOB Radanasin Bank Plc, Siam City Bank Public Co. Ltd and Land
& House Credit Foncier Public Co. Ltd. As such, she has in-depth knowledge and experience in
relation to the SIBS Software and the Structured Services Business.
Migie Eryadi, Country Services Manager, Indonesia
Mr. Migie Eryadi (“Mr. Eryadi”) holds a degree in Computer Information Management from
Gunadarma University, Indonesia. He started his career with PT. Bank Tabungan Negara (Persero)
(“Bank BTN”) as a system programmer in charge of its housing loan and credit scoring system.
Over his 15 years with Bank BTN’s information technology department, Mr. Eryadi was promoted to
head the application system development of the bank.
His current appointment as country services manager of the SSB Group is to manage the
operations and customers relating to the Structured Services Business in Indonesia.
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Vincent Yong Kok Leong, Senior Account Services Manager, the Philippines
Mr. Vincent Yong Kok Leong (“Mr. Yong”) holds a degree in computer science, majoring in
information technology and mathematics, from Campbell University, USA. He is certified by the
Project Management Institute in the USA as a Project Management Professional.
Mr. Yong joined Silverlake System Sdn Bhd in 1996 as a software engineer in Hosteller and ATM
implementation and support. He was made an application specialist in 1998 and further promoted
to project manager in 2002. He has been involved with the successful implementation of the SIBS
Software for various customers including GE Money Bank (formerly known as Keppel MonteBank,
Inc Bank), Robinsons Savings Bank, Maybank Philippines, Inc., Bank of Commerce and Premiere
Development Bank.
Mr. Yong’s in-depth knowledge and experience in the banking industry in the Philippines places him
in good stead to manage and run the SSB Group’s business operations in the Philippines.
Leslie Cheah Eng Hong, Senior Account Services Manager, Singapore
Mr. Leslie Cheah Eng Hong (“Mr. Cheah”) holds an honours degree in computing from the
University of Portsmouth, United Kingdom.
Mr. Cheah joined Silverlake System Sdn. Bhd. in 1990 as a software engineer for the company’s
loan system implementation and support services. He was promoted to senior application specialist
in relation to the loan system in 1996 and has also been involved as a project manager for various
key projects for Oversea-Chinese Banking Corporation Limited.
Mr. Cheah has in-depth knowledge and experience in the Singapore banking industry, which makes
him well-placed to manage the Singapore business operations of the SSB Group.
7.6
Risks
The business of the SSB Group is subject to a number of risks, a summary of which is set out
below:
The SSB Group may be affected by a worldwide economic downturn
In the event that there is a worldwide economic downturn, the business and operations of the
SSB Group may be adversely affected. For example, such downturn may result in a decrease in
IT capital expenditure and the overall demand for IT-applications by the banking sector. This could
result in lesser demand by customers in relation to the Structured Services Business.
The SSB Group may face risks due to competition
Although the Structured Services Business is specific to the SIBS Software and, as such, the
market in which the SSB Group operates is niche and the barrier to entry is high, this does not
preclude other third party service providers from also providing such maintenance and support
services to customers using the SIBS Software. In the event that there are such new market
entrants, there is no guarantee that the SSB Group will be able to retain its existing customer base
and/or to obtain new contracts with customers who are using the SIBS Software and failure to do
so will adversely affect the SSB Group’s revenue.
The SSB Group is exposed to foreign exchange risks
The SSB Group is exposed to foreign exchange risks as its reporting currency is in RM but its
sales revenue is denominated in a number of different currencies, such as USD and/or the local
currencies of the countries in which it operates. Accordingly, any fluctuations in the applicable
foreign currency exchange rates may have an adverse impact on the financial performance of the
SSB Group.
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The SSB Group is dependent upon its key management
The SSB Group’s continued success depends on its ability to identify, hire and retain qualified and
experienced management. In particular, the current key management of the SSB Group has been
instrumental in the growth of the Structured Services Business to date. As such, the loss of any of
such key personnel, without a suitable replacement, may have an adverse impact on the business
and operations of the SSB Group.
The SSB Group is dependent on its skilled workforce
The SSB Group’s continued success depends on its ability to identify, hire, train and retain technical
personnel with the requisite skills and who can provide quality support services that meet the
requirements of its customers. Limitations of the ability of the SSB Group to hire, train and retain a
sufficient pool of skilled technical personnel would limit its ability to undertake the provision of the
Structured Services Business and may have an adverse impact on the business and operations of
the SSB Group.
The SSB Group is dependent on the licensing and use of the SIBS software by customers
The business of the SSB Group, namely the provision of maintenance, AMS and PCR services to
customers in relation to the SIBS Software is dependent upon both the continued licensing and
use of the SIBS Software by existing customers and the acquisition of new customers for the SIBS
Software. In the event that existing customers discontinue the use of the SIBS Software and/or
there are no new customers for the SIBS Software, the growth and financial position and growth of
the SSB Group will be adversely affected.
The SSB Group is exposed to risks specific to services contracts in relation to the
Structured Services Business
The majority of the SSB Group’s revenue is derived from contracts for the provision of services
which are based on fixed-prices and fixed-durations. The pricing for these services contracts is
based on the SSB Group’s internal estimates determined at the time when the relevant contract
is signed. Failure to estimate such services contracts costs accurately may adversely affect the
SSB Group’s margins and financial results. Incomplete specifications at the outset or unanticipated
difficulties encountered during the provision of the services may require the SSB Group to channel
more time and resources to complete the services and this will adversely affect the financial
performance of the SSB Group.
The SSB Group extends warranties to its customers in relation to the PCR services
The SSB Group provides warranties of between 3 to 6 months to customers under some of its
PCR service contracts. Such warranties require the SSB Group to rectify any defects or errors in
its works at no additional cost to its customers within the period of the warranty. To date, the SSB
Group has not incurred any significant liability for damages in respect of any works undertaken.
However, any failure of its services to operate properly could give rise to a risk of claims against
the SSB Group and/or the incurring of additional time and manpower costs to rectify the same.
The performance of the SSB Group’s current operations may be adversely affected by
political and social uncertainties
The SSB Group has offices in Singapore, including Malaysia, Indonesia, Thailand and the
Philippines. Political and social uncertainties in these jurisdictions may lead to social tensions which
will adversely affect the local economies and market conditions of such countries, in which event
the business and financial performance of the SSB Group may be adversely affected.
7.7
Key Strengths
The key competitive strengths of the SSB Group are set out below.
The SSB Group has a skilled workforce
The SSB Group has a stable and dedicated workforce, comprising a team of skilled technical staff
possessing in-depth understanding and knowledge of the SIBS software.
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LETTER TO SHAREHOLDERS
The SSB Group has experienced key management personnel
The SSB group is led by its key management, who have been instrumental in the growth and
development of the Structured Services Business. In addition, the SSB Group’s key management
have extensive experience in providing services relating to the SIBS Software and possess indepth knowledge of the SSB Group’s customers and their requirements.
The SSB Group has established customer relationships
The SSB Group’s customer base comprises banks, financial institutions and companies from
various countries across the region, including Malaysia, Indonesia, Thailand and the Philippines.
The Structured Services Business has been developed over the last 20 years by the various
Silverlake Private Entities, which are predecessors of the SSB Group. During such time, strong
relationships have developed with the majority of the customers who have implemented the SIBS
Software, resulting in their continued use of the SIBS software and the resulting continuous need
by such customers of services relating to the Structured Services Business.
The SSB Group is able to rely on the inherent requirement for continued provision of the
Structured Services Business by customers
Customers who are licensed and use the SIBS Software will continually and regularly require the
provision of services relating to the Structured Services Business. In particular, due to the nature
of the banking industry, customers will have to engage support services as a form of insurance for
the maintenance of an adequate and reliant information technology infrastructure, thus increasing
the need for services relating to the Structured Services Business. Furthermore, the SSB Group
has the added advantage of being the sole official provider of the Structured Services Business to
customers using the SIBS Software. Therefore, the SSB group is able to maintain a steady flow of
revenue arising from the use of the SIBS software by its customers and the resulting need for the
Structured Services Business by such customers.
The SSB Group has the advantage of familiarity with and in-depth technical knowledge of
the SIBS Software
The SSB Group provides services relating to the SIBS Software which is a proprietary software
belonging to the SAL Group.
The employees of the SSB Group were formerly with the Silverlake Private Entities and/or SIP
Group Companies and have the requisite in depth knowledge and technical know how relating to
the provision of the Structured Services Business. This enables the SSB Group to carry out the
works in an efficient and cost effective manner.
In addition, the Structured Services Business is specific to the SIBS Software, thus providing a
considerable barrier to entry by other information technology service providers that may compete
with the SSB Group in the provision of such support services.
7.8
Review of Past Performance
7.8.1 Summary of Historical Financial Performance:
A summary of the SSB Group’s proforma historical financial information for FY2007, FY2008
and FY2009 is set out below.
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LETTER TO SHAREHOLDERS
FY2007
(Unaudited)
FY2008
(Unaudited)
FY2009
(Unaudited)
Revenue
Cost of sales
85,106
(37,932)
88,971
(39,024)
111,564
(49,133)
Gross profit
Gross profit margin
Other income
Administration expenses
Other operating expenses
47,174
55.43%
172
(325)
(2,041)
49,947
56.14%
34
(585)
(1,303)
62,431
55.96%
66
(440)
(1,200)
Profit from operations
Finance cost, net
Profit before tax
Taxation
44,980
(22)
44,958
(5,502)
48,093
(49)
48,044
(6,519)
60,857
(72)
60,785
(7,207)
Profit after tax
39,456
41,525
53,578
46.36%
46.67%
48.02%
(RM’000)
Net profit margin
A review of the operations, business and financial performance of the SSB Group for
FY2007, FY2008 and FY2009 is set out below:
FY2008 vs FY2007
Revenue
Revenue increased by approximately RM3.86 million or approximately 5%, from
approximately RM85.11 million in FY2007 to approximately RM88.97 million in FY2008.
The increase was mainly due to the increase in maintenance revenue by approximately
RM6.60 million. The contributors to this increase were the new maintenance contracts
secured from 2 customers in Malaysia. This increase was, however, offset by a reduction
in revenue from program change request and application management services of
approximately RM2.40 million and RM0.34 million respectively.
Profit from operations
Other income decreased by approximately RM0.14 million or approximately 80%, from
approximately RM0.17 million in FY2007 to approximately RM 0.03 million in FY2008, mainly
due to lower interest income earned from cash generated from operating activities of the
SSB Group.
Administration expenses increased by approximately RM0.26 million or approximately 80%,
from approximately RM0.33 million in FY2007 to approximately RM0.59 million in FY2008,
mainly due to the increase in staff expenses such as provision for unutilised leave, insurance
and medical expenses.
Other operating expenses decreased by approximately RM0.74 million or approximately
36%, from approximately RM2.04 million in FY2007 to approximately RM1.30 million in
FY2008, mainly due to provision for doubtful debts of approximately RM1.26 million which
was provided for in FY2007. The drop in other operating expenses due to the absence of
provision for doubtful debt in FY2008 was offset by higher expenses incurred in relation to
staff expenses and shared services.
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LETTER TO SHAREHOLDERS
Finance cost, net
Net finance cost increased by approximately RM0.03 million or approximately 123%, from
approximately RM0.02 million in FY2007 to approximately RM0.05 million in FY2008. The
finance expenses incurred were mainly for leasing of computers.
Taxation
Taxation comprises withholding taxes and income taxes.
Withholding tax expense increased by approximately RM0.92 million or approximately 41%,
from approximately RM2.22million in FY2007 to approximately RM3.14million in FY2008,
mainly due to the increase in collection of payments from Indonesian customers.
Income tax expense increased by approximately RM0.10 million or approximately 3%, from
approximately RM3.28 million in FY2007 to approximately RM3.38 million in FY2008, mainly
due to higher tax payable for income derived from Singapore and Philippines.
Profit after tax
As a result of the above, SSB Group recorded profit after tax of approximately RM41.53
million in FY2008, an increase of approximately RM2.07 million or approximately 5% as
compared to FY2007.
FY2009 vs FY2008
Revenue
Revenue increased significantly by approximately RM22.59 million or approximately 25%,
from approximately RM88.97 million in FY2008 to approximately RM111.56 million in
FY2009.
The maintenance revenue had the highest contribution to the increase by approximately
RM10.49 million. The increase in maintenance revenue was mainly due to new multi-year
maintenance contracts secured from customers in Malaysia and the United Arab Emirates.
The revenue from program change request and application management services have also
increased by approximately RM8.36 million and RM3.75 million respectively. The increase
was mainly derived from customers in Indonesia, Malaysia and Singapore.
Profit from operations
Other income increased by approximately RM0.04 million or approximately 94%, from
approximately RM0.03 million in FY2008 to approximately RM0.07 million in FY2009, mainly
due to higher interest income earned from cash generated from operating activities of the
SSB Group.
Administration expenses decreased by approximately RM0.15 million or approximately 25%,
from approximately RM0.59 million in FY2008 to approximately RM0.44 million in FY2009,
mainly due to a drop in costs incurred in relation to staff training and recreational expenses.
Other operating expenses decreased by approximately RM0.10 million or approximately 8%,
from approximately RM1.30 million in FY2008 to approximately RM1.20 million in FY2009,
mainly due to a reduction in office expenses and professional fees.
Finance cost, net
Net finance cost increased by approximately RM0.02 million or approximately 47%, from
approximately RM0.05 million in FY2008 to approximately RM0.07 million in FY2009. The
finance expenses were incurred in relation to the leasing of computers.
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LETTER TO SHAREHOLDERS
Taxation
Taxation comprises withholding taxes and income taxes.
Withholding tax expense decreased by approximately RM0.08 million or approximately 3%,
from approximately RM3.14 million in FY2008 to approximately RM3.06 million in FY2009,
mainly due to lower collection of revenue derived from Indonesian customers.
Income tax expense increased by approximately RM0.77 million or approximately 23%, from
approximately RM3.38 million in FY2008 to approximately RM4.15 million in FY2009, mainly
due to the higher income tax payable in Indonesia following the significant increase in project
change request revenue.
Profit after tax
As a result of the above, SSB Group recorded profit after tax of approximately RM53.58
million in FY2009, an increase of approximately RM12.05 million or approximately 29% as
compared to FY2008.
7.8.2 Financial Position
The summary balance sheet of the SSB Group as at 30 June 2009 is set out below:
As at
30 June 2009
(Unaudited)
(RM’000)
Assets
Current assets
19,583
Total assets
19,583
Liabilities
Current liabilities
(19,636)
Total liabilities
(19,636)
Net liabilities
(53)
Total deficit
(53)
Current assets
Current assets as at 30 June 2009 mainly comprised:
amount due from related parties of RM17.42 million, which relate to the assignment of
customer maintenance contracts to SSB Group by the Silverlake Private Entities;
prepayment of maintenance costs to sub-contractors of RM2.15 million; and
prepayment of professional fees of RM0.01 million.
Current liabilities
Current liabilities as at 30 June 2009 mainly comprised:
advance maintenance fees of RM17.42 million billed to customers for which the
services have yet to be performed by the SSB Group
amount due to related parties of RM2.15 million which relate to the assignment of subcontractor agreements relating to the Structured Services Business to the SSB Group
by the Silverlake Private Entities; and
other payables of RM0.07 million
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LETTER TO SHAREHOLDERS
Total deficit
The total deficit as at 30 June 2009 was RM0.05 million. The deficit was mainly due to
company secretary fees and government fees incurred by SSB HoldCo since the date of
incorporation. This deficit was capitalised before the Latest Practicable Date.
8.
INFORMATION ON THE QR GROUP
8.1
General Information
The QR Group is an established and profitable retail solutions provider and is the owner of the
intellectual property rights to its flagship proprietary software, called “PROFIT”.
QR HoldCo was founded in January 1992 with the objective of providing retail consulting and retail
software development and implementation services to the retail industry worldwide.
QR Malaysia was incorporated in September 1992 and became a wholly-owned subsidiary of QR
Holdco in 1993.
Mr. Goh first became a shareholder of QR HoldCo in 2002 and subsequently acquired a majority
stake in 2004.
8.2
Business of the QR Group
QR HoldCo is an investment holding company and the sole shareholder of QR Malaysia, which, in
turn, has a wholly-owned subsidiary, QR Singapore.
Both QR Malaysia and QR Singapore are engaged in the business of providing customized
software solutions to customers in the retail industry who utilise ‘PROFIT’.
8.3
Key Customers
The QR Group’s key customers include the following:
(a)
Aeon Co. (M) Bhd, who became a customer of the QR Group in 2008;
(b)
Aeon (China) Co. Ltd, together with Vinculum China Co., Ltd, who also contracts with the
QR Group to operate the application of ‘PROFIT’ for Aeon (China) Co. Ltd, who has been a
customer of the QR Group since 2005;
(c)
Marks & Spencer PLC, which began its working relationship with QR Malaysia in 2004; and
(d)
Robinson & Company (Singapore) Pte Ltd, which has been contracting with QR Singapore
since 1998.
The services provided by QR Malaysia and QR Singapore for the above customers include the
licensing and implementation of ‘PROFIT’ as well as the provision of maintenance services,
program enhancements and user change requests works relating to ‘PROFIT’, as required from
time to time by these customers.
8.4
Major Suppliers
The major suppliers of the QR Group are Oracle Corporation Malaysia Sdn. Bhd. who licenses its
Oracle Database and Oracle Applications Server to the QR Group, as well as IBM Malaysia which
provides the operating system and related hardware for ‘PROFIT’.
8.5
Key Management of the QR Group
Mr. See Chuang Thuan, Managing Director
Mr. See Chuang Thuan (“Mr. See”) graduated from University Malaya, in 1978, with a bachelor
of science (honors) degree, majoring in mathematics, whereupon he joined IBM Malaysia as a
sales representative and work there for sixteen years, until 1994, during which time he held
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LETTER TO SHAREHOLDERS
various sales and management position, including marketing manager responsible for servicing
the retail, manufacturing, distribution and financial services industries. In 1992, he was seconded
to become the general manager of QR Systems Sdn Bhd, a joint venture company involved in the
development and implementation of Electronic Data Interchange solutions. In 1994, Mr. See joined
the QR Group, as an executive director, responsible for the marketing of PROFIT. Mr. See took over
the helm of the QR Group, as its managing director, in 2002.
Mr. See has entered into a service agreement with the QR Group, on 7 January 2010, pursuant to
which, inter alia, he has undertaken that he will continue to manage the QR Business for at least
three (3) years, in accordance with the QR Group’s relevant policies and guidelines.
Mr. Yew Yee Ming, Vice President (Project & Consulting)
Mr. Yew Yee Ming (“Mr. Yew”) has an advanced diploma in computer studies. He began his career in
the retail industry with Parkson, as an analyst programmer, in 1993. He joined the QR Group, as a
programmer, in 1995 and has since been involved as its project manager and director in connection
with the implementation of ‘PROFIT’ in many countries including China, Taiwan and the Philippines.
He is currently the vice president of the QR Group in charge of projects and consulting. Mr. Yew has
16 years of work experience in the retail industry, covering software development, implementation,
application/retail industry consulting, project management and account management.
Mr. Sim Meng Yang, Vice President (Product Development & Implementation Services)
Sim Meng Yang (“Mr. Sim”) graduated from Campbell University, United States, in 1998, with a
bachelor of science degree. He also holds a diploma in microelectronics from Tunku Abdul Rahman
College, Kuala Lumpur. Mr. Sim has 9 years of work experience in the information technology
industry. He began his career as a test and product engineer with QT Optoelectronics Sdn Bhd. In
2000, he joined the QR Group as an analyst programmer. He left the QR Group, in 2002, to join
Lafarge Malayan Cement Berhad where he provided application support services for the company’s
software systems. In 2004, he rejoined the QR Group and was subsequently promoted to project
development manager and, thereafter, promoted to vice president in 2008.
Mr. Chieng Lei Sing, Senior Manager (Customer Support Management)
Mr. Chieng Lei Sing (“Mr. Chieng”) holds a degree in information technology from Charles Stuart
University, Australia. He began his career in the information technology industry with Synergy Card
& Payment Services Sdn Bhd, in 1997, as a programmer. He joined the QR Group as an analyst
programmer, in 1998, and currently holds the position of senior manager for customer support
management. In his 11 years with the QR Group, he has been involved in software development,
implementation and project management services relating to ‘PROFIT’.
8.6
Risks
The business of the QR Group is subject to a number of risks, a summary of which is set out
below:
The QR Group is dependent upon its skilled workforce
A significant part of the QR Group’s operations is labor intensive and skilled workers with technical
and retail industry knowledge are required to support its services. Due to the nature of the QR
Group’s services, it may take between six to twelve months on-the-job training for a new hire to
attain the necessary skills and to become familiar with ‘PROFIT’ and its related programs. Skilled
workers are also not easily replaceable. An inability to recruit and retain technically competent
personnel could limit the QR Group’s output capacity, which could limit its growth and adversely
affect its operations.
The QR Group is dependent upon its key management
The QR Group relies upon its managing director, Mr See, and senior managers, including Mr.Yew,
Mr. Sim and Mr. Chieng, to oversee its operations, development and expansion plans. The loss of
any member of the QR Group’s key management team, without adequate and timely replacements,
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LETTER TO SHAREHOLDERS
could adversely affect its business. The growth of the QR Group will depend on its ability to attract,
retain and motivate the current management team, as well as its ability to hire, retain and develop
a second tier of employees to provide the increased capacity needed to grow its business.
The QR Group is largely reliant on its major customers
The QR Group’s major customers are Aeon Co. (M) Bhd (“Aeon Malaysia”), Aeon (China) Co.
Ltd (“Aeon China”), Marks & Spencer PLC and Robinson & Company (Singapore) Pte Ltd,
which collectively accounted for more than 90% of its revenue for QRFY2009. On-going annual
maintenance contracts, regular program change requests, as well as planned expansion projects
with the abovementioned customers will ensure a steady income stream for the foreseeable future.
Nevertheless, such maintenance services contracts with these customers are generally renewable
on a yearly basis and, therefore, although these key customers have been with the QR Group for
a considerable amount of time, there is no assurance that the QR Group will be able to continue
contracting with these customers in the event that these customers decide to engage the services
of a new software supplier. There is also no assurance that the QR Group will be able to secure
new customers.
The QR Group extends warranties to its customers which exposes it to potential liabilities
The QR Group typically provides its customers with a six months warranty in respect of the
software licenses provided by the QR Group. Such warranties require the QR Group to rectify
any defects or errors in its solutions at no additional cost to its customers within the period of the
warranty. To date, the QR Group has not incurred any significant liability for damages in respect
of any services and solutions it has provided. However, any failure of its services and solutions
to operate properly could give rise to claims against the QR Group that, in turn, could adversely
impact its operations and financial performance.
8.7
Key Strengths
The key strengths of the QR Group are as follows:
Stable workforce led by an experienced management team with a good track record
The QR Group has a stable and dedicated workforce led by the key management of the QR
Group, who, in turn, has extensive experience in providing customized software solutions in the
retail industry. The key management team will continue to contribute to the continuous growth
and success of the QR Group through their understanding of the industry and its customers, their
extensive network and their management know-how. Members of the management team also
have in-depth knowledge of the retail industry, the QR Group’s flagship software ‘PROFIT’ and the
foundation technology used for the development of ‘PROFIT’.
Strong working relationship with existing key customers
The QR Group has strong working relationships with its existing key customers, particularly, Aeon
Malaysia, Aeon China, Marks & Spencer PLC and Robinson & Company (Singapore) Pte Ltd, all
of whom have been contracting with the QR Group in relation to the provision of the QR Group’s
software solutions and services for a considerable period of time.
In addition, the QR Group is also able to ride on its strong working relationships with these
customers to obtain favourable customer references from, as well as to secure preferred and
strategic positions for new services as may be required by, these customers.
Ownership of its flagship proprietary software ‘PROFIT’
The QR Group has the ownership of and proprietary rights to its flagship software, ‘PROFIT’.
‘PROFIT’ is a proven product built on stable and highly scalable technology and primarily serves
the end-to-end business process, as well as management information requirements of chain store
retailing. In addition, having developed its own proprietary software, the QR Group is in a position
to customise PROFIT cater to the specific needs of each of its customers.
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LETTER TO SHAREHOLDERS
8.8
Review of Past Performance
8.8.1 Summary of Historical Financial Performance:
A summary of the QR Group’s historical financial information for financial year ended
31 March (“QRFY”) 2007, 2008 and 2009 and for the twelve months period ended 30 June
2009 (based on the QR Proforma FY2009 Accounts) is set out below.
(RM’000)
Revenue
Cost of sales
Gross profit
Gross profit margin
Other income
Administration expenses
Other operating expenses
QRFY2007
QRFY2008
QRFY2009
(Audited)
(Audited)
(Audited)
QR Proforma
FY2009
Accounts
(Unaudited)
3,633
5,782
13,923
19,030
(2,584)
(6,317)
(7,981)
2,733
3,198
7,606
11,049
75.23%
55.31%
54.63%
58.06%
15
2
108
81
(900)
(1,805)
(547)
(688)
(624)
(479)
(373)
(432)
(378)
Profit from operations
464
Finance cost, net
(29)
Profit before tax
435
Taxation
Profit after tax
Net profit margin
(3)
2,280
(17)
2,263
(17)
6,594
(16)
10,128
(19)
6,578
10,109
(1,037)
(2,120)
432
2,246
5,541
7,989
11.89%
38.84%
39.80%
41.98%
A review of the operations, business and financial performance of QR Group for QRFY2007,
QRFY2008, QRFY 2009 and QR Proforma FY2009 is set out below:
QRFY2008 vs QRFY2007
Revenue
Revenue increased by approximately RM2.15 million or approximately 59% from
approximately RM3.63 million in QRFY2007 to approximately RM5.78 million in QRFY2008.
The increase was due mainly to the sale of an additional PROFIT user license to AEON
China of approximately RM1.00 million, PCR services to Marks & Spencer PLC of
approximately RM0.70 million, the sale of Oracle and Pro-IV licenses to Robinsons &
Company (Singapore) Pte Ltd, AEON China, Marks and Spencer PLC of approximately
RM0.60 million and hardware sales to Marks & Spencer PLC of approximately RM0.47
million.
30
LETTER TO SHAREHOLDERS
Profit from operations
Other income comprised mainly interest income, net foreign exchange gains and proceeds
from the disposal of assets. The decrease of approximately RM0.01 million or approximately
87%, from approximately RM0.02 million in QRFY2007 to approximately RM2,000 in
QRFY2008 was mainly due to losses from foreign exchange fluctuations.
Administration expenses decreased by approximately RM1.26 million or approximately
70%, from approximately RM1.81 million in QRFY2007 to approximately RM0.55 million
in QRFY2008, mainly due to the reclassification of approximately RM1.28 million of staff
expenses from administration expenses to cost of sales.
Other operating expenses decreased by approximately RM0.11 million or approximately
22%, from approximately RM0.48 million in QRFY2007 to approximately RM0.37 million in
QRFY2008, largely due to a reduction in travelling expenses and cessation of amortisation
of research & development in QRFY2007.
Finance cost, net
Net finance cost decreased by approximately RM0.01 million or approximately 41%, from
approximately RM0.03 million in QRFY2007 to approximately RM0.02 million in QRFY2008,
due to a reduction in bank overdraft interest charges.
Taxation
Income tax expense increased by approximately RM0.01 million, or approximately 466%, to
RM0.02 million in QRFY2008, as a result of an increase in taxable profits.
Net profit
As a result of the above, the QR Group recorded profit after tax of approximately RM2.25
million in QRFY2008, an increase of approximately RM1.81 million or approximately 420%
over profit after tax of QRFY2007.
QRFY2009 vs QRFY2008
Revenue
Revenue increased by approximately RM8.14 million or approximately 141%, from
approximately RM5.78 million in QRFY2008 to approximately RM13.92 million in QRFY2009.
The increase was due mainly to the securing of a large contract with AEON Malaysia in
September 2008.
Profit from operations
Other income increased by approximately RM0.11 million, from approximately RM2,000 in
QRFY2008 to approximately RM0.11 million in QRFY2009, due mainly to the reclassification
of income earlier declared as outsource income in relation to marketing & MIS support.
Administration expenses increased by approximately RM0.14 million or approximately
26%, from approximately RM0.55 million in QRFY2008 to approximately RM0.69 million in
QRFY2009, due to increase in spending on recruitment expenses of approximately RM0.08
million and provision for staff unutilised leave of approximately RM0.05 million.
Other operating expenses increased by approximately RM0.06 million or approximately
16%, from approximately RM0.37 million in QRFY2008 to approximately RM0.43 million in
QRFY2009, due largely to an increase in legal fees for new agreements and a tax penalty.
Finance cost, net
Net finance cost decreased by approximately RM1,000 or approximately 6%, from
approximately RM17,000 in QRFY2008 to approximately RM16,000 in QRFY2009, due to
reduction in bank overdraft interest charges.
31
LETTER TO SHAREHOLDERS
Taxation
Income tax expense increased by approximately RM1.02 million, from approximately RM0.02
million in QRFY2008 to approximately RM1.04 million in QRFY2009, due to a significant
increase in the profit for the year.
Net profit
As a result of the above, the QR Group recorded profit after tax of approximately RM5.54
million in QRFY2009, an increase of approximately RM3.30 million or approximately 147%
over QRFY2008.
QR Proforma FY2009 Accounts vs QRFY2009
Revenue
Revenue increased by approximately RM5.11 million or approximately 37%, from
approximately RM13.9 million in QRFY2009 to approximately RM19.0 million in FY2009.
The increase was due mainly to an increase in the percentage of project work completion
by approximately 14.6% in relation to the securing of an additional implementation service
contract based on the existing contract with AEON Malaysia and involving the installation of
3rd party (Oracle) software for AEON Malaysia.
Profit from operations
Other income decreased by approximately RM0.03 million or approximately 25%, from
approximately RM0.11 million in QRFY2009 to approximately RM0.08 million in FY2009, due
mainly to the cessation of income with effective from April 2009 derived from rendering of
outsourcing service to marketing & MIS support.
Administration expenses decreased by approximately RM0.1 million or approximately 9%,
from approximately RM0.7 million in QRFY2009 to approximately RM0.6 million in FY2009,
due mainly to reversal of provision for staffs unutilised leave.
Other operating expenses decreased by approximately RM0.05 million or approximately
12%, from approximately RM0.43 million in QRFY2009 to approximately RM0.38 million in
FY2009, due mainly to reversal of tax penalty over provided in QRFY2009.
Finance cost, net
Net finance cost increased by approximately RM3,000 or approximately 19%, from
approximately RM16,000 in QRFY2009 to approximately RM19,000 in FY2009, due mainly
to an increase in hire purchase interest as a result of the addition of a motor vehicle.
Taxation
Income tax expense increased by approximately RM1.08 million or approximately 104%, from
approximately RM1.04 million in QRFY2009 to approximately RM2.12 million in FY2009, due
mainly to an increase in the profit for the year.
Net profit
As a result of the above, QR Group recorded profit after tax of approximately RM7.99 million
in FY2009, an increase of approximately RM2.45 million or 44% over QRFY2009.
32
LETTER TO SHAREHOLDERS
8.8.2 Financial Position
A summary of the balance sheet of the QR Group as at 31 March 2009 and 30 June 2009 is
set out below:
As at
31 March 2009
(Audited)
(RM’000)
As at
30 June 2009
(Unaudited)
Assets
Non-current assets
Current assets
610
7,687
588
11,527
Total assets
8,297
12,115
Non-current liabilities
Current liabilities
341
2,622
327
3,183
Total Liabilities
2,963
3,510
Net Assets
5,334
8,605
Total Equity
5,334
8,605
Liabilities
Non-current assets
Non-current assets as at 31 March 2009 and 30 June 2009 comprised mainly property, plant
and equipment, as follows:
Motor vehicle of approximately RM0.41 million and RM0.39 million as at 31 March
2009 and 30 June 2009, respectively;
Office equipment of approximately RM0.02 million as at 31 March 2009 and 30 June
2009;
Computer equipment of approximately RM0.08 million as at 31 March 2009 and
30 June 2009;
Furniture and fittings of approximately RM0.05 million as at 31 March 2009 and
30 June 2009; and
Renovation of approximately RM0.04 million as at 31 March 2009 and 30 June 2009
Current assets
Current assets amounted to approximately RM7.69 million and RM11.53 million as at
31 March 2009 and 30 June 2009 respectively. It comprised mainly:
Accounts receivables of approximately RM1.96 million and RM3.20 million as at
31 March 2009 and 30 June 2009, respectively. The increase in accounts receivables
was in line with the increase in revenue for the QR Group;
Amounts due from customers of approximately RM0.31million and RM0.40 million as
at 31 March 2009 and 30 June 2009 respectively. The increase was mainly due to the
additional extension implementation service contract built on the existing contract to
AEON Malaysia;
Cash and bank balances of approximately RM2.67 million and RM5.34 million as at
31 March 2009 and 30 June 2009 respectively;
33
LETTER TO SHAREHOLDERS
Loan owing from directors of approximately RM2.50 million as at 31 March 2009 and
30 June 2009 (note: this loan will be settled within one (1) month from 31 December
2009 by way of off-set against the dividend of RM6.92 million declared on
31 December 2009):
Amount owing from related party of approximately RM0.21 million and RM0.05 million
as at 31 March 2009 and 30 June 2009 respectively. Such amount was subsequently
settled in October 2009. The decrease was mainly due to collection from the related
party of approximately RM0.05 million and charge out of approximately RM0.11 million
of prepaid maintenance to the income statement; and
Other receivables of approximately RM0.04 million and RM0.03 million as at 31 March
2009 and 30 June 2009 respectively. The decrease was mainly due to charge out of
prepayment to income statement.
Non-current liabilities
Non-current liabilities amounted to approximately RM0.34 million and RM0.33 million as at
31 March 2009 and 30 June 2009 respectively. It comprised mainly:
Hire purchase lease creditor of approximately RM0.32 million and RM0.31 million as
at 31 March 2009 and 30 June 2009 respectively; and
Deferred taxation of approximately RM0.02 million as at 31 March 2009 and 30 June
2009 respectively.
Current liabilities
Current liabilities amounted to approximately RM2.62 million and RM3.18million as at
31 March 2009 and 30 June 2009 respectively. It comprised mainly:
Income tax payable of approximately RM0.58 million and RM1.59 million as at
31 March 2009 and 30 June 2009 respectively. The increase was mainly due to an
increase in profit before taxation;
Trade payable of approximately RM0.08 million and RM0.01 million as at 31 March
2009 and 30 June 2009 respectively. The decrease was mainly due to payment
settlement;
Accrual expenses and other payables of approximately RM0.73 million and RM1.53
million as at 31 March 2009 and 30 June 2009 respectively. The increase was mainly
due to prepayment of maintenance and support services;
Lease payable of approximately RM0.06 million as at 31 March 2009 and 30 June
2009; and
Dividend payable to shareholders of RM1.17 million as at 31 March 2009.
Total equity
Total equity amounted to approximately RM5.33 million and RM8.60 million as at 31 March
2009 and 30 June 2009 respectively. It is made up largely of:
Accumulated profit of approximately RM3.70 million and RM6.96 million as at
31 March 2009 and 30 June 2009 respectively;
Capital reserve of approximately RM0.47 million as at 31 March 2009 and 30 June
2009; and
Paid-up share capital of RM1.17 million as at 31 March 2009 and 30 June 2009.
34
LETTER TO SHAREHOLDERS
Subsequent to FY2009, on 31 December 2009, QR HoldCo declared an interim, single-tier
exempt, dividend amounting to RM6.92 million in respect of QRFY2010. Part of the dividend
of RM6.92 million will be used to settle the outstanding directors’ loan of RM2.5 million and
the balance amount of RM4.42 million will be paid in cash.
9.
RATIONALE FOR THE PROPOSED ACQUISITIONS
The Proposed Acquisitions will expand the Company’s income base, add range and depth to its
existing application services offerings and enhance its customer base and network. It will also allow
the enlarged group, comprising the SAL Group, the SSB Group and the QR Group, to market its
software solutions to conglomerates with both banking and retail businesses.
The current customer base for the Structured Services Business consists principally of banks and
financial institutions which have previously implemented the SIBS Software. The addition of the
Structured Services Business (i.e. via the acquisition of SSB HoldCo) will expand the Company’s
income base and enable it to provide a comprehensive range of services relating to its core
competency and focus in developing and licensing the SIBS Software. Importantly, income from the
Structured Services Business is relatively stable, repeatable and has the potential to grow steadily
over time. It is also a business that is currently generating good margins and profits. For illustration
purposes, the SSB Group recorded a gross profit margin and net profit margin of approximately
55.96% and 48.02% respectively for FY2009.
The QR Group specialises in developing, licensing, implementing, maintaining and servicing
retail management systems to the retail industry. It has a good base of successful customer
installations, comprising established retail enterprises with operations across Asia and a very large
Japanese retail company with international operations. The addition of the QR Business (i.e. via
the acquisition of QR HoldCo) will expand the Company’s product range, industry and geographic
reach. The QR Business is also currently generating good margins and profits. For illustration
purposes, the QR Group recorded a gross profit margin and net profit margin of approximately
58.06% and 41.98% respectively for FY2009.
10.
FINANCIAL EFFECTS OF THE PROPOSED ACQUISITIONS
The proforma financial effects of the Proposed Acquisitions on the Company as shown below are
for illustrative purposes only and are not indicative of the actual financial performance or position of
the enlarged group immediately after completion of the Proposed Acquisitions.
The objective of presenting the proforma financial effects of the Proposed Acquisitions as shown
below is to illustrate what the historical financial information might have been had the Proposed
Acquisitions been completed at an earlier date. However, such financial information is not
necessarily indicative of the results of the operations or the related effects in the financial position
that would have been attained had the Proposed Acquisitions been completed at such earlier date.
The financial effects of the Proposed Acquisitions were prepared using the audited consolidated
financial statements of the Company for the financial year ended 30 June 2009, the proforma
accounts of the SSB Group for FY2009 and the QR Proforma FY2009 Accounts and on the
assumption that the total consideration will be S$339.18 million, i.e comprising 1,025,635,634
Shares at the issue price of S$0.3307 (representing the weighted average closing price of the
Shares on the Latest Practicable Date), and take into account the dividend of RM6.92 million
declared by QR HoldCo on 31 December 2009.
35
LETTER TO SHAREHOLDERS
(a)
Share Capital
The effects of the Proposed Acquisitions on the issued and paid-up share capital of the
Company for FY2009 are as follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
Number of shares(1) (’000)
Issued and Paid-up Share Capital (RM’000)
1,121,907
81,919
2,147,543
152,934
Note:
(1)
(b)
The respective figures include the 55,808,000 treasury shares held by the Company.
Net Tangible Assets
The effects of the Proposed Acquisitions on the net tangible assets per share of the SAL
Group for FY2009, assuming the Proposed Acquisitions had been effected at the end of
FY2009 are as follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
NTA (RM’000)
Number of shares excluding treasury shares
(’000)
NTA per share (RM sen)
(c)
159,685
1,066,099
161,319
2,091,735
14.98
7.71
Earnings per Share
The effects of the Proposed Acquisitions on the earnings per share of the SAL Group for
FY2009, assuming the Proposed Acquisitions had been effected the beginning of FY2009,
are as follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
Profit attributable to Shareholders (RM’000)
Number of shares excluding treasury shares
(’000)
Earnings per share (RM sen)
(d)
19,088
1,066,099
80,656
2,091,735
1.79
3.86
Gearing
The effect of the Proposed Acquisitions on the gearing of the SAL Group for FY2009 is as
follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
Deposits, cash and bank balances (RM’000)
Total borrowings (RM’000)
Net cash (RM’000)
Total shareholders’ funds (RM’000)*
Net gearing ratio**
61,630
2,521
59,109
168,397
Not applicable
62,552
2,883
59,669
170,031
Not applicable
* “Total shareholders’ funds” means the aggregate amount of issued and paid-up share capital and reserves.
** “Net gearing ratio” means the ratio of net debt to total shareholders’ funds.
36
LETTER TO SHAREHOLDERS
11.
THE PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL
In connection with the Proposed Acquisitions, the Directors propose to increase the authorised
share capital of the Company from US$40,000,000, comprising 2 billion Shares, to US$80,000,000,
comprising 4 billion Shares, by the creation of 2 billion new Shares in order to accommodate the
allotment and issue of the Consideration Shares and any future issues of new Shares by the
Company.
12.
THE PROPOSED ANCILLARY TRANSACTIONS AS INTERESTED PERSON TRANSACTIONS
12.1 Restructuring Exercise
In connection with the Restructuring Exercise, the SSB Group entered into the Restructuring
Agreements with the relevant Silverlake Private Entities as well as the Services Agreement with the
SIP Group.
The Restructuring Exercise involves, inter alia, the following:
(a)
the transfer of the Structured Services Business from the Silverlake Private Entities to the
SSB Group pursuant to and in accordance with the terms and conditions of the Restructuring
Agreements; and
(b)
the cessation of the provision of support services in relation to the Structured Services
Business by Silverlake System Sdn Bhd to the SIP Group and the transfer of the Structured
Services Business being undertaken by the SIP Group to the SSB Group as evidenced by
the terms and conditions of the Services Agreement.
12.2 The Proposed Ancillary Transactions
Pursuant to the Restructuring Arrangements, the Silverlake Private Entities and/or the SIP Group
are required to take steps, as far as possible, to procure the novation of the SSB Contracts to
the SSB Group or, where a novation cannot be achieved for any reason, to procure the legal
assignment of the benefits of the applicable SSB Contracts to the SSB Group.
Pending such novation and/or assignment, the Silverlake Entities and the SIP Group are required
to hold all monies and benefits arising under the applicable SSB Contracts as bare trustees for
the SSB Group and to remit such monies and benefits to the SSB Group in accordance with the
terms of the Restructuring Arrangements from the applicable completion date as set out in the
Restructuring Arrangements.
In consideration of the aforesaid arrangements, the SSB Group shall correspondingly be
responsible for carrying out all obligations and for all liabilities arising under the relevant SSB
Contracts on or after the applicable completion date.
Where a Silverlake Private Entity and/or SIP Group Company had previously furnished a
performance bond to a customer in connection with an SSB Contract that has not yet been
novated to the SSB Group, the applicable Silverlake Private Entity and/or SIP Group Company
shall continue to maintain such performance bond subject to the corresponding SBB Group
Company bearing any bank charges or commission payable in connection with the issuance of
such performance bond.
The Restructuring Arrangements also allow the Silverlake Private Entities and/or the SIP Group to
continue as a party to and/or to enter into new SSB Contracts (subject to the other provisions of
the Restructuring Arrangements) in the following situations:
(a)
where negotiations with the customer on the applicable contracts were on-going as at the
date of the Restructuring Arrangements and provided the execution of such contracts takes
place prior to 30 April 2010;
(b)
where the contract relates to the provision of maintenance services under an existing
maintenance agreement that is due for renewal prior to 30 April 2010; and
37
LETTER TO SHAREHOLDERS
(c)
where the SSB Contracts relate to projects which are still in the process of being
implemented by the Silverlake Private Entities or SIP Group on behalf of a customer.
Upon completion of the SSB Acquisition, the aforesaid on-going transactions (collectively referred
to as the “Proposed Ancillary Transactions”) will amount to interested person transactions for
which the Company shall be seeking Shareholders’ approval in accordance with Chapter 9 of the
Rules of Catalist.
12.3 Interested Person Transaction
As set out under Section 1.5 above, the Silverlake Private Entities and/or the SIP Group are
deemed to be interested persons and, upon completion of the SSB Acquisition, the Proposed
Ancillary Transactions will amount to interested person transactions within the meaning of Chapter
9 of the Rules of Catalist.
The Proposed Ancillary Transactions will take place based on and/or in accordance with the terms
of the applicable SSB Contracts and/or with reference to the terms of performance bonds procured
from third parties for purposes of the SSB Contracts.
It is not possible to ascertain at this juncture whether any payments made or to be made pursuant
to the Proposed Ancillary Transactions will cross the applicable threshold under Chapter 9 of the
Rules of Catalist so as to require Shareholders’ approval. The Directors have, nonetheless, decided
to seek Shareholders’ approval for the Proposed Ancillary Transactions to facilitate any future
transactions and/or payments arising therefrom.
12.4 Review Procedures
To ensure that the Proposed Ancillary Transactions are effected in accordance with the terms of the
Restructuring Arrangements, the management of the Company will prepare management reports
relating to such transactions and/or payments, supported by relevant documents, for submission
to and approval by the Audit Committee on a quarterly basis. Any member of the Audit Committee
who is deemed interested in any such interested person transactions, shall abstain from reviewing,
recommending and/or approving such transactions and/or payments.
12.5 Disclosure in Financial Statements and Annual Report
The Company will announce the aggregate value of all transactions and/or payments arising from
the Proposed Ancillary Transactions made to and/or by the Company for the relevant financial
periods which the Company is required to report on pursuant to the Rules of Catalist and within the
time required for the announcement of such reports. Disclosure will also be made in the Company’s
annual reports of the aggregate value of all of the transactions and/or payments made to and/or
by the Company pursuant to the Proposed Ancillary Transactions during the applicable financial
year and for so long as such transactions and/or payments continue. These disclosures will be
presented in the following format:
Name of
interested person
Aggregate value of all interested person
transactions during the financial year
under review (excluding transactions
less than S$100,000 and transactions
conducted under shareholders’ mandate
pursuant to Rule 920 of the Rules of
Catalist)
38
Aggregate value of all
interested person transactions
conducted under shareholders’
mandate pursuant to Rule
920 of the Rules of Catalist
(excluding transactions less
than S$100,000)
LETTER TO SHAREHOLDERS
13.
INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
A comparative table showing the Directors’ interests in the issued and paid-up share capital of
the Company as at the Latest Practicable Date and after the Proposed Acquisitions based on the
assumption that 1,025,635,634 new Shares will be issued pursuant to the Proposed Acquisitions
and that there is no further issuances of Shares by the Company since the Latest Practicable Date
up to the date of issuance of the new Shares, is set out below:
Before completion of the Proposed
Acquisitions
Direct Interest
No. of Shares %
After completion of the Proposed
Acquisitions
Deemed Interest
No. of Shares %
Direct Interest
No. of Shares %
Deemed Interest
No. of Shares %
Directors
Goh Peng Ooi
Dr. Kwong Yong
Sin
Datuk Sulaiman
bin Daud
Ong Kian Min
Tan Sri Dato’
Dr. Lin SeeYan
Lim Kok Min
–
560,000
–
0.05
798,277,292 74.88
–
–
–
560,000
– 1,791,086,347 85.63
0.03
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
798,277,292 74.88
–
–
1,791,086,347 85.63
–
–
Substantial
Shareholders
(other than
Directors)
Intelligentsia
Holding Ltd
NTAsian
Discovery
Master Fund (2)
Orkla ASA (2)
–
–
59,016,000
5.54
59,016,000
2.82
–
–
–
–
55,000,000
5.16
55,000,000
2.63
–
–
Notes:
(1)
Intelligentsia Holding Ltd is wholly-owned by Mr. Goh Peng Ooi. As such, Mr. Goh Peng Ooi is deemed to have an
interest in the 798,277,292 Shares held by Intelligentsia Holding Ltd.
(2)
NTAsian Discovery Master Fund and Orkla ASA are deemed to have an interest in the 59,016,000 Shares and the
55,000,000 Shares respectively held by HSBC (Singapore) Nominees Pte Ltd.
Save as disclosed above and in this Circular, none of the Directors and Substantial Shareholders
and/or their associates has any interest in the Company or the Proposed Acquisitions or in SSB
HoldCo or QR HoldCo.
The percentage of Shares held in the hands of the public (as defined in the Rules of Catalist)
before the completion of the Proposed Acquisitions is approximately 14.31% (excluding NTAsian
Discovery Master Fund and Orkla ASA, each of whom holds a shareholding interest of over 5%
prior to completion). After completion of the Proposed Acquisitions, based on the assumptions that
(i) 1,025,635,634 new Shares will be issued pursuant to the Proposed Acquisitions and that (ii)
there is no further issuances of Shares by the Company since the Latest Practicable Date up to
the date of issuance of the new Shares, the percentage of Shares held in the hands of the public
(as defined in the Rules of Catalist) shall be approximately 12.73% (including NTAsian Discovery
Master Fund and Orkla ASA, each of whom will hold a shareholding interest of less than 5% after
completion).
39
LETTER TO SHAREHOLDERS
14.
FINANCIAL ADVISER
The Company has appointed its Sponsor, CIMB Bank Berhad, Singapore Branch, as Financial
Adviser in relation to the Proposed Acquisitions and the Proposed Ancillary Transactions.
15.
OPINION OF THE INDEPENDENT FINANCIAL ADVISER
15.1 Chapter 9 of the Rules of Catalist provides that, where Shareholders’ approval is required for a
transaction, the Circular must include an opinion from an independent financial adviser as
to whether or not such transaction is on normal commercial terms and if it is prejudicial to the
interests of the Company and the minority Shareholders.
15.2 Accordingly, the IFA has been appointed to advise the Independent Directors on the Proposed
Acquisitions, as well as the Proposed Ancillary Transactions.
15.3 Taking into consideration the factors set out in its letter dated 13 January 2010 to the Independent
Directors (“IFA Letter”), the IFA is of the opinion that:
(a)
the terms of the Proposed Acquisitions are on normal commercial terms and are not
prejudicial to the interests of the Company and its minority Shareholders; and
(b)
the terms of the Proposed Ancillary Transactions are on normal commercial terms and are
not prejudicial to the interests of the Company and its minority Shareholders;
The IFA Letter is reproduced and appended as Appendix I of this Circular. Shareholders are
advised to read the IFA Letter carefully.
16.
STATEMENT OF THE AUDIT COMMITTEE
The Audit Committee members for the purposes of the Proposed Acquisitions and the Proposed
Ancillary Transactions are Tan Sri Dato’ Dr. Lin See-Yan, Mr. Ong Kian Min and Mr. Lim Kok Min.
Mr. Goh, being an interested person, is not a part of the Audit Committee involved in the Proposed
Acquisitions and the Proposed Ancillary Transactions.
The Audit Committee has reviewed inter alia, the terms of the Proposed Acquisitions and the
Proposed Ancillary Transactions, as set out in this Circular and the IFA Letter, and are of the
opinion that:
17.
(i)
the terms of the Proposed Acquisitions are on normal commercial terms and are not
prejudicial to the interests of the Company and its minority Shareholders; and
(ii)
the terms of the Proposed Ancillary Transactions are on normal commercial terms and are
not prejudicial to the interests of the Company and its minority Shareholders.
INDEPENDENT DIRECTORS’ RECOMMENDATION
Proposed Acquisitions
The Independent Directors, having considered the terms of the Proposed Acquisitions, the rationale
for entering into the Proposed Acquisitions and the recommendations given by the IFA as contained
in the IFA Letter, are of the view that the Proposed Acquisitions are in the best interest of the
Company and, accordingly, recommend that Shareholders vote in favour of the ordinary resolution
relating to the Proposed Acquisitions at the SGM.
Proposed Ancillary Transactions
The Independent Directors, having considered the terms of the Proposed Ancillary Transactions,
the rationale for effecting the Proposed Ancillary Transactions and the recommendations given by
the IFA as contained in the IFA Letter, are of the view that the Proposed Ancillary Transactions are
in the best interest of the Company and, accordingly, recommend that Shareholders vote in favour
of the ordinary resolution relating to the Proposed Ancillary Transactions at the SGM.
40
LETTER TO SHAREHOLDERS
18.
SPECIAL GENERAL MEETING
The SGM, notice of which is set out in this Circular (“Notice of SGM”), is to be held at Pan
Pacific Singapore, 7 Raffles Boulevard, Marina Square, Singapore 039595, on 28 January
2010 at 11.30 a.m. for the purpose of considering and, if thought fit, passing with or without any
amendments the ordinary resolutions set out in the Notice of SGM.
A Depositor shall not be regarded as a Shareholder entitled to attend the SGM and to speak
and vote thereat unless he is shown to have Shares entered against his name in the Depository
Register, as certified by the CDP, as at least 48 hours before the SGM.
19.
ACTION TO BE TAKEN BY SHAREHOLDERS
Shareholders who are unable to attend the SGM and who wish to appoint a proxy to attend and
vote on their behalf, should complete, sign and return the attached proxy form in accordance with
the instructions printed thereon as soon as possible and in any event so as to arrive at the office
of Boardroom Corporate & Advisory Services Pte Ltd at 3 Church Street #08-01, Samsung Hub,
Singapore 049483 not less than 48 hours before the time fixed for the SGM.
The completion and lodgement of a proxy form by a Shareholder does not preclude him from
attending and voting in person at the SGM in place of his proxy if he so wishes. However, any
appointment of a proxy or proxies by such Shareholder shall be deemed to be revoked if the
Shareholder attends the SGM in person, and in such event, the Company reserves the right to
refuse to admit any person or persons appointed under the instrument of proxy, to the SGM.
20.
ABSTINENCE FROM VOTING
In accordance with Chapter 8 and Chapter 9 of the Rules of Catalist, Mr. Goh and his associates
shall abstain from voting on the resolutions approving the Proposed Acquisitions, the Proposed
Share Issue and the Proposed Ancillary Transactions. Furthermore, Mr. Goh and his associates
shall not act as proxies in relation to such resolutions unless voting instructions have been given by
a Shareholder.
Save as disclosed herein, none of the Directors or Substantial Shareholders of the Company
has any interest, direct or indirect, in the Proposed Acquisitions and/or the Proposed Ancillary
Transactions.
21.
CONSENTS
The IFA, Asian Corporate Advisors Pte Ltd, has given and has not withdrawn its consent to the
issuance of this Circular with the inclusion in this Circular of its name and all references to its name
in the form and context in which it appears in this Circular.
22.
FINANCIAL ADVISER’S RESPONSIBILITY STATEMENT
CIMB Bank Berhad, Singapore Branch, as the Financial Adviser to the Company for the Proposed
Acquisitions and the Proposed Ancillary Transactions, acknowledges that, based on the information
provided by the Company and after making all reasonable enquiries and to the best of its
knowledge and belief, the facts stated and opinions expressed in this Circular (save for Appendix
I for which the IFA has taken responsibility, as the case may be, and the recommendation of the
Independent Directors) are fair and accurate and that, where appropriate, no material facts have
been omitted from this Circular, the omission of which would make any statement in this Circular
misleading in any material respect. Where information in this Circular (other than such information
in Appendix I) has been extracted from published or otherwise publicly available sources, the
sole responsibility of the Financial Adviser has been to ensure that such information has been
accurately extracted and reflected in this Circular.
41
LETTER TO SHAREHOLDERS
23.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors (including those who may have delegated detailed supervision of this Circular)
collectively and individually accept responsibility for the accuracy of the information given in this
Circular (save for those expressed by the IFA in the IFA Letter) and confirm, after having made all
reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions
expressed in this Circular (excluding those expressed by the IFA in the IFA Letter) are fair and
accurate in all material respects as at the date of this Circular and that no material facts have been
omitted which would make any such information misleading in any material respect.
However, in respect of the IFA Letter, the sole responsibility of the Directors has been to ensure
that the facts stated with respect to the Company are fair and accurate in all material respects.
Where information contained in this Circular (excluding the IFA Letter) has been extracted from
published or otherwise publicly available sources, the sole responsibility of the Directors has been
to ensure that such information has been accurately and correctly extracted from these sources.
24.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection at the office of Colin Ng & Partners
LLP at 36 Carpenter Street, Singapore 059915 during normal business hours from the date of this
Circular up to and including the date of the SGM:
(1)
the SSB Sale & Purchase Agreement, dated 6 January 2010;
(2)
the QR Sale & Purchase Agreement, dated 6 January 2010;
(3)
the IFA Letter, dated 13 January 2010;
(4)
the letter of consent from the IFA;
(5)
the Memorandum & Articles of Association of the Company;
(6)
a copy of the unaudited proforma accounts of the SSB Group for FY2009;
(7)
a copy of the audited consolidated financial statements of the QR Group for QRFY2007,
QRFY2008 and QRFY2009;
(8)
a copy of the unaudited management accounts of the QR Group for the twelve months
ended 30 June 2009; and
(9)
copies of the audited consolidated financial statements of the Company for FY2007, FY2008
and FY2009.
Yours faithfully
For and on behalf of the Board of Directors of
Silverlake Axis Ltd
Kwong Yong Sin
Managing Director
42
APPENDIX I
LETTER FROM ASIAN CORPORATE ADVISORS TO THE INDEPENDENT
DIRECTORS OF SILVERLAKE AXIS LTD
ASIAN CORPORATE ADVISORS PTE. LTD.
(Incorporated in the Republic of Singapore)
(Company Registration No: 200310232R)
105 Cecil Street The Octagon #11-02
Singapore 069534
The Independent Directors
Silverlake Axis Limited
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
13 January 2010
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID UP SHARE CAPITAL
OF SILVERLAKE SOLUTIONS LIMITED BY THE COMPANY AS AN INTERESTED PERSON
TRANSACTION;
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID UP SHARE CAPITAL OF QR
TECHNOLOGY SDN. BHD. BY THE COMPANY AS AN INTERESTED PERSON TRANSACTION; AND
THE PROPOSED ANCILLARY TRANSACTIONS PURSUANT TO THE RESTRUCTURING
ARRANGEMENTS AS INTERESTED PERSON TRANSACTIONS.
1.
INTRODUCTION
1.1
On 4 September 2009 (“MOU Date”), the directors (the “Directors”) of Silverlake Axis Limited
(“Silverlake Axis” or “Company”) announced that the Company has entered into a non-legally
binding Memorandum of Understanding (“MOU”) with its Executive Chairman and controlling
shareholder, Mr Goh Peng Ooi (“Mr Goh”), in relation to the proposed acquisitions (the “Proposed
Acquisitions”) by the Company of the entire issued and paid-up share capital of Silverlake
Solutions Limited (“SSB HoldCo” or “SSB”) and QR Technology Sdn. Bhd. (“QR HoldCo” or “QR”),
(collectively the “Target Companies”).
1.2
On 6 January 2010 (the “Announcement Date”), the Directors announced that the Company had
entered into a sale and purchase agreement (“SSB Sale and Purchase Agreement”) with Mr Goh
(“SSB Vendor”) for the acquisition (the “SSB Acquisition”)of the entire issued and paid up share
capital of SSB (“SSB Sale Shares”).
1.3
On 6 January 2010, the Directors also announced that the Company had entered into a sale and
purchase agreement (the “QR Sale and Purchase Agreement”) with Mr See Chuang Thuan (“Mr
See”) and Mr Goh (collectively the “QR Vendors”) for the acquisition (the “QR Acquisition”) of the
entire issued and paid up share capital of QR (“QR Sale Shares”).
1.4
In addition, the various companies (the “Silverlake Private Entities”) which are either wholly
owned by the SSB Vendor or in which the SSB Vendor holds and/or controls a majority interest,
are transferring the Structured Services Business (as defined in the Circular) to SSB HoldCo and
its subsidiaries (collectively termed the “SSB Group” and “SSB Group Company” means any
one of them), pursuant to the terms of the written agreements (the “Restructuring Agreements”)
variously entered into between the Silverlake Private Entities and the SSB Group Companies in
connection with the restructuring exercise (“Restructuring Exercise”), referred to in the SSB Sale
and Purchase Agreement, which involves steps taken to effect the following: (i) the transfer of the
business (“Structured Services Business”) of providing maintenance, application management
I-1
APPENDIX I
and program change request services to customers who have licensed and are using the software,
‘Silverlake Axis Integrated Banking Solution’, the Company and its subsidiaries’ (“SAL Group”)
proprietary banking solution software (“SIBS Software”) for use by the banking industry from
the Silverlake Private Entities to the SSB Group pursuant to and in accordance with the terms
and conditions of the Restructuring Agreements; and (ii) the cessation of the provision of support
services in relation to the Structured Services Business by Silverlake System Sdn Bhd to Silverlake
Innovation Partners Sdn. Bhd (formerly known as Global Integration Management PACT Sdn
Bhd and in which the SSB Vendor holds and/or controls a majority interest) and its subsidiary
(collectively the “SIP Group” and “SIP Group Company” means any one of them) and the transfer
of the Structured Services Business being undertaken by the SIP Group to the SSB Group as
evidenced by the terms and conditions of the Services Agreement.
1.5
As Mr Goh is a director and the Controlling Shareholder of the Company and also the SSB Vendor,
holding 100% of the issued and paid up share capital of SSB, the proposed acquisition by the
Company of Mr Goh’s portion of the SSB Sale Shares is an interested person transaction and
requires Shareholders’ approval under Chapter 9 of the Rules of Catalist.
1.6
Furthermore, in relation to the QR Acquisition, Mr Goh is also one of the QR Vendors holding
approximately 77.55% of the issued and paid up share capital of QR. As such, the proposed
acquisition by the Company of Mr Goh’s portion of the QR Sale Shares is an interested person
transaction and requires Shareholders’ approval under Chapter 9 of the Rules of Catalist.
1.7
Pursuant to and in accordance with the terms of the Restructuring Arrangements, as further
referred to in Sections 1.5 and 12.2 of the circular (“Circular”) dated 13 January 2010, there will be
various continuing transactions (collectively referred to as the “Proposed Ancillary Transactions”)
between the Silverlake Private Entities and/or the SIP Group and the SSB Group Companies,
wherein Mr Goh holds and/or controls a majority interest. Upon completion of the SSB Acquisition,
the Proposed Ancillary Transactions will amount to interested person transactions, which may
require Shareholders’ approval under Chapter 9 of the Rules of Catalist. For more details on the
Proposed Ancillary Transactions as interested person transactions, please refer to Section 12 of
this Circular.
1.8
The SSB Acquisition and the QR Acquisition (the “Proposed Acquisitions”) also constitute a
major transaction under Chapter 10 of the Rules of Catalist. Accordingly, the Proposed Acquisitions
is conditional upon the approval by the registered holders (“Shareholders”) of the fully paid up
ordinary shares (“Shares”) of par value US$0.02 in the capital of the Company. Please refer to
Section 5 of this Circular for the relative figures of the Proposed Acquisitions computed on the
relevant bases set out in Rule 1006(a) to (d) of the Rules of Catalist.
1.9
Asian Corporate Advisors Pte. Ltd. (“ACA”) has been appointed as the independent financial
adviser (the “IFA”) to the independent directors of the Company (the “Independent Directors”). We
note from the Circular that the Independent Directors of the Company comprise Messrs Ong Kian
Min, Tan Sri Dato’ Dr. Lin See-Yan, Lim Kok Min and Dr. Kwong Yong Sin.
1.10 This letter (“Letter”) sets out, inter alia, our views and evaluation of the financial terms of the
Proposed Acquisitions and/or Proposed Ancillary Transactions, and our recommendations thereon.
It will form part of the Circular providing, inter alia, details of the Proposed Acquisitions and/or
Proposed Ancillary Transactions, and the recommendations of the Independent Directors in respect
of the Proposed Acquisitions and/or Proposed Ancillary Transactions. Unless otherwise defined
or the context otherwise requires, all terms defined in the Circular shall have the same meaning
herein. Certain figures and computations as enumerated or set out in this letter are based on
approximation and their accuracy are subject to rounding.
2.
TERMS OF REFERENCE
ACA has been appointed to advise the Independent Directors in relation to the Proposed
Acquisitions and Proposed Ancillary Transactions. We were neither a party to the negotiations
entered into by the Company in relation to the Proposed Acquisitions and Proposed Ancillary
Transactions nor were we involved in the deliberation leading up to the decision on the part of
I-2
APPENDIX I
the Directors to enter into the Proposed Acquisitions and Proposed Ancillary Transactions, and we
do not, by this Letter or otherwise, advise or form any judgement on the merits of the Proposed
Acquisitions and Proposed Ancillary Transactions other than to form an opinion, on the bases set
out herein on whether the financial terms of the Proposed Acquisitions and Proposed Ancillary
Transactions as a consequence of effecting the Proposed Acquisitions will be carried out on normal
commercial terms and will not be prejudicial to the interests of the Company and its minority
shareholders. We do not warrant the merits of the Proposed Acquisitions and Proposed Ancillary
Transactions or the acceptability of the risk for the Proposed Acquisitions and Proposed Ancillary
Transactions other than to form a view, solely for the purposes of Chapter 9 of the Listing Manual
Section B: Rules of the Catalist, in the context of this Letter, as to whether the financial terms of
the Proposed Acquisitions and Proposed Ancillary Transactions are on normal commercial terms
and will not be prejudicial to the interests of the Company and its minority shareholders other than
Mr Goh (the “Independent Shareholders”).
We have confined our evaluation strictly and solely on the financial terms of the Proposed
Acquisitions and Proposed Ancillary Transactions and have not taken into account the commercial/
financial/legal risks and/or merits (if any) of the Proposed Acquisitions and Proposed Ancillary
Transactions or their strategic merits or the future prospects of the Company or its subsidiaries (the
“SAL Group” or “Group”) or the comparison with other deals involving shares of the Company. We
do not and are not required to confirm the nature or the types of Interested Person Transactions
or the disclosure required of the Interested Person Transactions that the SAL Group is involved in
or whether the procedures for effecting the Proposed Ancillary Transactions after the resolutions
are passed, are prejudicial to the interest of the Company and its minority shareholders. Likewise,
we are not required to comment on or evaluate the methods or procedures used by the Group to
manage the change in any risk profile for the SAL Group in the context of possible changes in
the nature of operations. Such evaluation or comment remains the responsibility of the Directors
and the management of the Company (“Management”) although we may draw upon their views or
make such comments in respect thereof (to the extent deemed necessary or appropriate by us) in
arriving at our view as set out in this Letter.
We were not requested or authorised to solicit, and we have not solicited, any indications of interest
from any third party with respect to the Proposed Acquisitions and Proposed Ancillary Transactions.
In addition, we do not express any views or opinion on the merits of the Proposed Acquisitions and
Proposed Ancillary Transactions or on the accuracy of any of the financial statements (audited or
otherwise) used for the purposes of the Circular or the transactions contemplated, the legality of
the Proposed Acquisitions and Proposed Ancillary Transactions or any other and all other matters
pertaining to the Proposed Acquisitions and Proposed Ancillary Transactions, documents for the
Proposed Acquisitions and Proposed Ancillary Transactions (the Circular and the accompanying
explanatory notes), inter alia, the independence of any party or mechanism or process of voting,
acceptance, its eligibility or validity or the other alternatives (if any) or the sufficiency of information.
In the course of our evaluation, we have held discussions with certain Directors and the
Management, inter alia, regarding their assessment of the rationale for the Proposed Acquisitions
and/or Proposed Ancillary Transactions and have examined publicly available information collated
by us including the audited financial statements as well as information, both written and verbal,
provided to us by the Directors and Management and professional advisers of the Company,
including its consultants or advisers or solicitors or auditors. We have not independently verified
such information but have made enquiries and used our judgement as we deemed necessary on
such information and have found no reason to doubt the reliability of the information. Accordingly,
we cannot and do not expressly or impliedly represent or warrant, and do not accept any
responsibility for, the accuracy, completeness or adequacy of such information or the manner it has
been classified or presented or the basis of any valuations.
We have relied upon the assurance of the Directors and Management that all statements of fact,
belief, opinion and intention made by the Directors and the Management in the Circular have
been reasonably made after due and careful enquiry. Accordingly, no representation or warranty,
expressed and implied, is made and no responsibility is accepted by us concerning the accuracy,
completeness or adequacy of such information.
I-3
APPENDIX I
Our evaluation is based solely on publicly available information and other information provided by
the Company as well as the economic and market conditions prevailing as at the Latest Practicable
Date, and therefore does not reflect expected financial performance after the relevant financial
year or period ended (“FY”) 30 June 2009 for the SSB Group or 31 March 2009 for the QR
Group. Accordingly, we have not commented on or assessed the expected future performance or
prospects of the Company or the Group or the ordinary shares in the capital of the Company, the
SSB Group, the QR Group or Silverlake Private Entities or the magnitude or extent or the effects
of the termination of any contracts entered into between SSB and its customers or whether in the
event this occurs, the limit of up to 30% for reduction of the relevant profit before tax figures for
computation of the consideration payable for the SSB Acquisition as agreed between the parties is
sufficient, irrespective of whether the Proposed Acquisitions and Proposed Ancillary Transactions
will or will not become effective. Accordingly, our evaluation and opinion and recommendation
do not and cannot take into account future or prospective performance of the Company, the SAL
Group, SSB Group, QR Group and Silverlake Private Entities and neither are we responsible
for it. We have not been provided and the Company has not provided in the Circular, any proforma balance sheet or plans with respect to the possible scenarios for the capital structure of the
Company after the Proposed Acquisitions and Proposed Ancillary Transactions. We do not warrant
and have not commented on the acceptability of the risk that the Group may be subject to for the
Proposed Acquisitions and Proposed Ancillary Transactions. Accordingly, the estimates or analysis
or evaluation of the merits of the Company or the Group or its Shares or SSB or SSB Group or
SSB Sale Shares or QR or QR Group or QR Sale Shares or the Silverlake Private Entities, if any,
in this Letter is necessarily limited and we do not warrant or represent that it is complete or in
entirety.
We have not made any independent evaluation or appraisal of the assets and liabilities (including
without limitation, real property or intellectual property) of SAL or the SAL Group or SSB or the SSB
Group or QR or QR Group or Silverlake Private Entities and we have not been furnished with any
such evaluation or appraisal. In addition, the Directors confirmed that to the best of their knowledge
or belief that such information is true, complete and accurate in all respects and that there is no
other information or fact, the omission of which would render those statements or information to be
untrue, inaccurate or incomplete in any respect or misleading in general including our evaluation,
of and recommendation for the Proposed Acquisitions and Proposed Ancillary Transactions. With
respect to such valuation, we are not experts in the evaluation or appraisal of assets and liabilities
(including without limitation, real property and plant and machinery) and have relied on the opinion
of the Directors and the financial statements (audited and management where applicable) for the
SAL Group and the Company or SSB or SSB Group or QR or QR Group or Silverlake Private
Entities. Our opinion in this letter is based on economic condition, market, industry, monetary and
other conditions (if applicable) in effect on, and the information provided to us, as of 5 January
2010 (the “Latest Practicable Date”). Accordingly, the bases or assumptions and likewise our
views or opinion or recommendation may and do change in the light of these developments which
inter alia, includes general as well as company specific or industry specific conditions or sentiments
or factors. Independent Directors (as well as Independent Shareholders who would be receiving the
Circular and this Letter enclosed with the Circular) should note that our evaluation is based solely
on publicly available information and other information provided by the Company, the Directors
as well as the economic and market conditions prevailing as at the Latest Practicable Date, and
therefore does not reflect expected financial performance after FY2009 or developments both
macro and company specific and that these factors do and will necessarily affect the evaluation
of the Proposed Acquisitions and/or Proposed Ancillary Transactions, the relevant purchase
considerations and our recommendation or opinion or views. Likewise this Letter outlines some of
the matters or bases or factors or assumptions which we have used in our assessment and is a
summary. They are by no means exhaustive or a reproduction of all the matters or bases or factors
or assumptions etc. which we have used in our assessment.
The Directors have jointly and severally accepted full responsibility, as set out in the Circular,
for the truth, accuracy and completeness of all information and representations as provided by
the Directors and contained herein. The Directors have confirmed to ACA that all material
information including but not limited to plans or prospects or proposals or strategies or matters
involving possible termination of contracts entered into between SSB and its customers, involving
the Proposed Acquisitions and/or Proposed Ancillary Transactions or issue or changes to its
I-4
APPENDIX I
capital structure of the Company as may be applicable, available to them and the Management
in connection with the Proposed Acquisitions and/or Proposed Ancillary Transactions or such
other parties has been disclosed to ACA and included in the Circular, that such information is
true, complete and accurate in all material respects and that there is no other information or fact
including the expected future performance or future growth prospects or restructuring plans of
the Company or the SAL Group or SSB, the SSB Group, QR, the QR Group or Silverlake Private
Entities or the basis of valuation or the value of the assets or liabilities of the Group or those for
SSB, QR and Silverlake Private Entities, the omission of which would result in the facts stated
and the opinions expressed by the Directors in the Circular to be untrue, inaccurate or incomplete
in any respect or misleading. Accordingly, no representation or warranty, expressed or implied,
is made and no responsibility is accepted by ACA concerning the truth, accuracy, completeness
or adequacy of such information or facts. The scope of our appointment does not require us to
express, and we do not express, a view on the future growth prospects of the Company or the
Group. We are therefore not expressing any view herein as to the prices at which the Shares or
Sale Shares may trade upon completion or rejection of the Proposed Acquisitions and Proposed
Ancillary Transactions or the returns that the Shareholders may have owning the Shares or voting
for or voting against the Proposed Acquisitions and Proposed Ancillary Transactions or on the
future financial performance of Company or the SAL Group or SSB, the SSB Group, QR, the QR
Group or Silverlake Private Entities or the plans (if any) of the Company or the SAL Group or SSB,
the SSB Group, QR, the QR Group or Silverlake Private Entities.
In rendering our opinion and giving our recommendation, we have not regard the general or specific
investment objectives, financial situation, tax position, risk profiles or unique needs and constraints
of any individual Shareholder. As different Shareholder would have different investment profiles
and objectives, we would advise the Independent Directors to recommend that any individual
Shareholder who may require advice in the context of his or her specific investment portfolio,
including his or her investment in the Company, consult his or her stockbroker, bank manager,
solicitor, accountant, tax adviser or other professional adviser immediately.
Accordingly, any factor or assumption or basis as well as the relative emphasis on any matter set
out in this Letter or the Proposed Acquisitions and Proposed Ancillary Transactions or the Company
or Group or the Shares which we used or may have used may differ from the relative emphasis
accorded by any individual Shareholder or Independent Director, and as such the Independent
Directors are advised to highlight to Shareholders as well as note for themselves that any reliance
on our opinion or view or assessment, is subject to the contents of this Letter in its entirety. In
addition, ACA will not be responsible or required to provide an updated assessment or opinion or
views of the Proposed Acquisitions and Proposed Ancillary Transactions or its recommendation,
following the date of the issue of this Letter.
Accordingly, our Letter or opinion or views or recommendation should not be used or relied by
anyone for any other purposes and should only be used by the Independent Directors for the
purposes of their opinion and recommendation for the Proposed Acquisition and the Proposed
Ancillary Transaction as a consequence of effecting the Proposed Acquisitions, subject to our
terms of reference and the contents of this Letter as one of the basis for their opinion or views or
recommendation. In addition, any references to our Letter or opinion or views or recommendation,
should not be made except with our prior consent in writing and even if made with our prior
consent in writing, shall be subject to the contents of this Letter in its entirety inter alia the matters,
conditions, assumptions, factors and bases as well as our terms of reference for this Letter.
3.
THE SSB ACQUISITION
As set out in the Circular, we note that as at the Latest Practicable Date, the issued and paidup share capital of SSB consists of 160 SSB Sale Shares. We recommend that Independent
Shareholders read the terms and conditions contained therein carefully. A summary of the key
terms of the SSB Acquisition are as follows:
I-5
APPENDIX I
3.1
Terms of the SSB Acquisition
Pursuant to the SSB Sale and Purchase Agreement, the Company agreed, subject to the terms
and conditions therein, to purchase from Mr Goh his entire interest of 100% in the issued and paid
up share capital of SSBHoldco, comprising of 160 SSB Sale Shares.
Upon the completion of the SSB Acquisition, the Company will own 100% of SSB.
3.2
Conditions Precedent for the SSB Acquisition
The salient terms and conditions of the SSB Sale and Purchase Agreement can be found in
Section 2 of the Circular. The conditions have been extracted from the Circular and are set out
in italics below. We recommend that Independent Shareholders read those pages of the Circular
carefully. Unless otherwise defined or the context otherwise requires, all terms defined in the
Circular shall have the same meaning herein.
“2.4
Conditions Precedent
Completion of the SSB Acquisition is conditional, inter alia, upon the fulfilment of the
following conditions on or before the SSB Completion Date:
(a)
the approval of the Shareholders in respect of the Proposed Acquisitions, the proposed
allotment and issuance of new Shares in connection with the Proposed Acquisitions
and the proposed increase in the authorized share capital of the Company being
obtained at the SGM;
(b)
the approval and/or clearance of the SGX-ST, the Sponsor and/or any other third
party or governmental, regulatory or competent authority having jurisdiction over the
proposed transactions contemplated herein, including the listing and quotation of
the SSB Consideration Shares, having been obtained and such approval not having
been withdrawn or revoked and, if such approval is subject to the imposition of any
condition(s) or restrictions(s), such condition(s) or restriction(s) (i) being reasonably
acceptable to the SSB Vendor and the Company; and (ii) where applicable and so
required, being duly fulfilled or complied with;
(c)
the results of the financial, legal and business due diligence to be conducted by the
Company and/or its professional advisers on the SSB Group, including investigations
as to title to assets, the due transfer of employees and/or the due and effective
novation or assignment of rights under the SSB Contracts, and/or the contents of
the Disclosure Letter (as defined in the SSB Sale and Purchase Agreement) being
satisfactory to the Company;
(d)
the receipt by the Company and the SSB Vendor of written confirmation from the
reporting accountant as to the proforma PBT of the SSB Group for FY2009;
(e)
the business of each company within the SSB Group having been conducted only in
the ordinary course from the date of its incorporation up to the SSB Completion Date
and there having been no material adverse change (as determined by the Company
in its sole and absolute discretion) affecting the prospects, operations or financial
condition of any of the SSB Group companies on or prior to the SSB Completion Date;
(f)
the Restructuring Agreements and the Services Agreement having been duly executed
between the relevant parties and being legal, valid, binding and enforceable on the
relevant parties thereto and there being no breach of any of the terms and conditions
of the Restructuring Agreements and/or the Services Agreement by any of the parties
thereto;
(g)
all the SSB Vendor’s warranties under the SSB Sale & Purchase Agreement being
true and accurate and not misleading and there being no breach of any of the SSB
Vendor’s covenants and undertakings under the SSB Sale & Purchase Agreement;
and
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APPENDIX I
(h)
the execution and performance of the SSB Sale & Purchase Agreement by the
Company and the SSB Vendor not being prohibited, restricted, curtailed, hindered,
impaired or otherwise adversely affected by any relevant statute, order, rule, directive
or regulation promulgated by any legislative, executive or regulatory body or other
authority of competent jurisdiction.”
Independent Shareholders should also be aware that the SSB Acquisition is subject to the
conditions set out above being fulfilled and thus may not become effective.
3.3
SSB Purchase Consideration
Pursuant to the SSB Sale and Purchase Agreement and as described in Section 2 of the Circular,
the purchase consideration payable by the Company to the SSB Vendor for the SSB Acquisition
(“SSB Purchase Consideration”) is based on the formula as shown therein and will be satisfied
via the issuance of such number of new Shares (“SSB Consideration Shares”) in the manner as
set out therein.
The following section relating to the SSB Purchase Consideration and the SSB Consideration
Shares have been extracted from the Circular and are set out in italics below.
“2.2
Purchase Consideration for the SSB Acquisition
The SSB Purchase Consideration will be satisfied by way of an issue to the SSB Vendor
and/or his nominee(s) of new Shares in the capital of the Company (“SSB Consideration
Shares”) to be calculated in the manner as set out below:
2.2.1 Formula for calculation
Subject to the provisions set out in subsection 2.2.2 below, the number of SSB
Consideration Shares shall be calculated using the following formula (fractional
entitlements to be disregarded):
C1 = B1 /A x E
Where:
A=
Average PBT of the SAL Group for FY2007, FY2008 and FY2009 based on the
audited accounts of the SAL Group for FY2007, FY2008 and FY2009
B1 = Proforma PBT of the SSB Group for FY2009
C1 = Number of SSB Consideration Shares (fractional entitlements to be disregarded)
E=
Total number of Shares in the capital of the Company prior to Completion
(excluding treasury shares)
2.2.2 Adjustment
If any of the SSB Contracts that were used to calculate `B1’ above are terminated by
the relevant customer as a result of the Restructuring Exercise or otherwise due to
any act or omission on the part of the Silverlake Private Entities and/or the SIP Group
on or before 30 April 2010 (“Terminated SSB Contracts”), the Parties agree that `B1’
shall be revised to remove the profit before tax attributable to such Terminated SSB
Contract(s) and `C1’ shall be recalculated applying the revised `B1’ and correspondingly
reduced up to a maximum of 30% of the original number.
If there is any dispute between the Company and the SSB Vendor on the appropriate
deduction to be made pursuant to the above, both the Company and the SSB Vendor
agree to refer the matter to the Reporting Accountant (as defined in the SSB Sale and
Purchase Agreement) for final determination and to equally bear the costs of such
exercise.
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APPENDIX I
2.2.3 Allotment and issuance
To facilitate the provisions of subsection 2.2.2 above, both the Company and the SSB
Vendor agree that the SSB Consideration Shares shall be alloted and issued to the
SSB Vendor and/or his nominee(s) in two tranches as follows:
(a)
70% upon the SSB Completion Date in accordance with the provisions of
the SSB Sale and Purchase Agreement (“1st Tranche SSB Consideration
Shares”);
(b)
the balance 30% by 14 May 2010 in the event that there is no adjustment
pursuant to the above; and
(c)
in the event there is any adjustment pursuant to the above, the balance 30%,
as adjusted, will be alloted and issued within 14 days after determination of the
amount of adjustment.
The SSB Consideration Shares when allotted and issued to the SSB Vendor will rank pari
passu in all respect with the existing issued ordinary Shares.
Notwithstanding this Section 2.2 and Section 3.2 below, the Overall Consideration Shares to
be issued pursuant to the Proposed Acquisitions shall not exceed 1,045,000,000 Shares. In
the event the total number of Shares to be issued by the Company pursuant to the Proposed
Acquisitions would otherwise exceed the Overall Consideration Shares, the excess amount
will be deducted from the Shares to be issued in respect of each of the SSB Acquisition and
the QR Acquisition on a pro-rata basis.
2.3
Basis for Payment
The SSB Purchase Consideration was arrived at on a willing-buyer and willing-seller basis
taking into account the proforma PBT of the SSB Group for FY2009, of approximately
RM60.79 million. For further details on the financial information of the SSB Group, please
refer to Section 7.8 of this Circular.”
On basis and assumption that the SSB Consideration Shares are issued at the price of S$0.330,
being the last transacted price of the Shares on the Latest Practicable Date, the SSB Purchase
Consideration will be approximately S$290.2 million.
4.
THE QR ACQUISITION
4.1
Terms of the QR Acquisition
Pursuant to the QR Sale and Purchase Agreement, the Company agreed, subject to the terms and
conditions therein, to purchase all the issued and paid-up ordinary shares in the capital of QR, from
Mr Goh and Mr See comprising of 907,382 and 262,618 QR Sale Shares respectively.
Upon the completion of the QR Acquisitions, the Company will own 100% of the issued and paid
up share capital of QR.
4.2
Conditions Precedent for the QR Acquisition
The salient terms and conditions of the QR Sale and Purchase Agreement can be found in
Section 3 of the Circular. The conditions have been extracted from the Circular and are set out
in italics below. We recommend that Independent Shareholders read those pages of the Circular
carefully. Unless otherwise defined or the context otherwise requires, all terms defined in the
Circular shall have the same meaning herein.
“3.4
Conditions Precedent
Completion of the QR Acquisition is conditional, inter alia, upon the fulfilment of the following
conditions on or before the QR Completion Date:
I-8
APPENDIX I
(a)
a service agreement being duly executed between Mr. See Chuang Thuan and the
QR Group, pursuant to which Mr. See Chuang Thuan shall undertake to continue
to manage the QR Business for at least three (3) years, in accordance with the QR
Group’s relevant policies and guidelines;
(b)
the approval of the Shareholders in respect of the Proposed Acquisitions, the proposed
allotment and issuance of new Shares in connection with the Proposed Acquisitions
and the proposed increase in the authorized share capital of the Company being
obtained at the SGM;
(c)
the approval and/or clearance of the SGX-ST, the Sponsor and/or any other third
party or governmental, regulatory or competent authority having jurisdiction over the
proposed transactions contemplated herein, including the listing and quotation of
the QR Consideration Shares, having been obtained and such approval not having
been withdrawn or revoked and, if such approval is subject to the imposition of any
condition(s) or restrictions(s), such condition(s) or restriction(s) (i) being reasonably
acceptable to the QR Vendors and the Company; and (ii) where applicable and so
required, being duly fulfilled or complied with;
(d)
the results of the financial, legal, and business due diligence to be conducted by the
Company and/or its professional advisers on the QR Group, and/or the contents of
the Disclosure Letter (as defined in the QR Sale and Purchase Agreement) being
satisfactory to the Company;
(e)
the receipt by the Company and the QR Vendors of written confirmation from the
auditor and/or reporting accountant as to the PBT of the QR Group based on the QR
Proforma FY2009 Accounts;
(f)
the business of each company within the QR Group having been conducted only in
the ordinary course from the date of the MOU up to the QR Completion Date and
there having been no material adverse change (as determined by the Company in its
sole and absolute discretion) affecting the prospects, operations or financial condition
of any of the QR Group companies on or prior to the QR Completion Date;
(g)
all the QR Vendors’ warranties under the QR Sale & Purchase Agreement being true
and accurate and not misleading and there being no breach of any of the QR Vendors’
covenants and undertakings under the QR Sale & Purchase Agreement; and
(h)
the execution and performance of the QR Sale & Purchase Agreement by the
Company and the QR Vendors not being prohibited, restricted, curtailed, hindered,
impaired or otherwise adversely affected by any relevant statute, order, rule, directive
or regulation promulgated by any legislative, executive or regulatory body or other
authority of competent jurisdiction.”
Independent Shareholders should also be aware that the QR Acquisition is subject to the conditions
set out above being fulfilled and thus may not become effective.
4.3
QR Purchase Consideration
Pursuant to the QR Sale and Purchase Agreement and as described in Section 3 of the Circular,
the purchase consideration payable by the Company to the QR Vendors for the QR Acquisition
(“QR Purchase Consideration”) is based on the formula as shown therein and will be satisfied via
the issuance of such number of new Shares (“QR Consideration Shares”) in the manner as set
out therein.
The following section relating to the QR Purchase Consideration and the QR Consideration Shares
have been extracted from the Circular and are set out in italics below.
I-9
APPENDIX I
“3.2
Purchase Consideration for the QR Acquisition
The QR Purchase Consideration will be satisfied by way of an issue to the QR Vendors
and/or their nominee(s) of new Shares in the capital of the Company (“QR Consideration
Shares”) to be calculated based on the following formula:
C2 = B2 /A x E
Where:
A=
Average PBT of the SAL Group for FY2007, FY2008 and FY2009 based on the
audited accounts of the SAL Group for FY2007, FY2008 and FY2009
B2 = PBT of the QR Group based on the QR Proforma FY2009 Accounts
C2 = Number of QR Consideration Shares to be issued to the QR Vendors (in
proportion to their respective shareholdings)
E=
Total number of Shares in the capital of the Company prior to the QR
Completion Date (excluding treasury shares)
The QR Consideration Shares shall be allotted and issued to the QR Vendors and/or their
nominee(s) in proportion to their respective shareholdings in QR HoldCo immediately
preceding the QR Completion Date and, when allotted and issued, will rank pari passu in all
respects with the existing issued ordinary Shares.
Notwithstanding this Section 3.2 and Section 2.2 above, the Overall Consideration Shares to
be issued pursuant to the Proposed Acquisitions shall not exceed 1,045,000,000 Shares. In
the event the total number of Shares to be issued by the Company pursuant to the Proposed
Acquisitions would otherwise exceed the Overall Consideration Shares, the excess amount
will be deducted from the Shares to be issued in respect of each of the SSB Acquisition and
the QR Acquisition on a pro-rata basis.
3.3
Basis for Payment
The QR Purchase Consideration was arrived at on a willing-buyer and willing-seller basis
taking into account the PBT of the QR Group, of approximately RM10.11 million, based
on the QR Proforma FY2009 Accounts. The QR Proforma FY2009 Accounts are set out in
Appendix III of this Circular.”
On basis and assumption that the QR Consideration Shares are issued at the price of S$0.330,
being the last transacted price of the Shares on the Latest Practicable Date, the QR Purchase
Consideration will be approximately S$48.3 million.
5.
LIMIT ON THE NUMBER OF CONSIDERATION SHARES
Notwithstanding Section 3.3 and Section 4.3 above, the aggregate SSB Consideration Shares and
QR Consideration Shares to be issued pursuant to the Proposed Acquisitions shall not exceed
1,045,000,000 Shares. In the event the total number of Shares to be issued by the Company
pursuant to the Proposed Acquisitions would otherwise exceed 1,045,000,000 Shares, the excess
amount will be deducted from the Shares to be issued in respect of each of the SSB Acquisition
and the QR Acquisition on a pro-rata basis. In the event that 1,045,000,000 Shares are issued, the
aggregate purchase consideration for both the acquisitions based on the last transacted price of
the Shares on the Latest Practicable Date, will be approximately S$344.9 million.
6
PROPOSED ANCILLARY TRANSACTIONS
The rationale for the Proposed Ancillary Transactions has been set out in Section 12.2 of the
Circular and we recommend that Independent Shareholders read those sections carefully.
I-10
APPENDIX I
7.
RATIONALE FOR PROPOSED ACQUISITIONS
The rationale for the Proposed Acquisitions in relation to the Company has been extracted from
Section 9 of the Circular and is set out in italics below. Unless otherwise defined or the context
otherwise requires, all terms defined in the Circular shall have the same meaning herein.
“9.
RATIONALE FOR THE PROPOSED ACQUISITIONS
The Proposed Acquisitions will expand the Company’s income base, add range and depth
to its existing application services offerings and enhance its customer base and network.
It will also allow the enlarged group, comprising the SAL Group, the SSB Group and the
QR Group, to market its software solutions to conglomerates with both banking and retail
businesses.
The current customer base for the Structured Services Business consists principally of banks
and financial institutions which have previously implemented the SIBS Software. The addition
of the Structured Services Business (i.e. via the acquisition of SSB HoldCo) will expand the
Company’s income base and enable it to provide a comprehensive range of services relating
to its core competency and focus in developing and licensing the SIBS Software. Importantly,
income from the Structured Services Business is relatively stable, repeatable and has the
potential to grow steadily over time. It is also a business that is currently generating good
margins and profits. For illustration purposes, the SSB Group recorded a gross profit margin
and net profit margin of approximately 55.96% and 48.02% respectively for FY2009.
The QR Group specialises in developing, licensing, implementing, maintaining and servicing
retail management systems to the retail industry. It has a good base of successful customer
installations, comprising established retail enterprises with operations across Asia and a
very large Japanese retail company with international operations. The addition of the QR
Business (i.e. via the acquisition of QR HoldCo) will expand the Company’s product range,
industry and geographic reach. The QR Business is also currently generating good margins
and profits. For illustration purposes, the QR Group recorded a gross profit margin and net
profit margin of approximately 58.06% and 41.98% respectively for FY2009.”
8.
FINANCIAL ANALYSIS OF THE SAL GROUP
The following are extracts from the audited consolidated financial statements of the SAL Group for
FY2007, FY2008, FY2009, first quarter ended 30 September 2008 (“1Q2009”), and first quarter
ended 30 September 2009 (“1Q2010”).
Revenue
Cost of sales
Other income
Share of associate profit /
(losses)
Expenses (excluding tax
expenses)
Profit for the year before taxation
Net profit for financial year
1st Quarter
Ended 30
September
2009
RM
1st Quarter
Ended 30
September
2008
RM
Audited
FY2009
RM
Audited
FY2008
RM
Audited
FY2007
RM
9,135,643
(3,007,692)
552,124
12,286,075
(5,083,609)
1,179,579
54,814,826
(22,922,677)
3,212,400
146,946,931
(31,977,632)
9,178,600
137,293,907
(35,111,112)
3,860,333
631,495
(126,389)
801,074
3,857,496
(2,503,869)
(3,834,633)
(4,430,373)
(14,323,483)
(17,005,749)
(15,044,997)
3,476,937
3,030,965
3,825,283
3,634,812
21,582,140
19,088,167
110,999,646
108,780,146
88,494,262
80,001,064
I-11
APPENDIX I
1st Quarter
Ended 30
September
2009
RM
1st Quarter
Ended 30
September
2008
RM
Audited
FY2009
RM
Audited
FY2008
RM
Net working capital
68,554,645
68,981,773
65,891,773
63,159,357
113,337,613
Net cash (used in)/ generated
from operating activities
(2,207,459)
9,851,998
29,913,710
90,142,093
84,036,979
Net cash (used in)/ generated
from investing activities
(204,064)
43,484
(941,526)
(68,175,784)
(9,963,744)
Net cash (used in)/ generated
from financing activities
(111,036)
(116,780)
(21,033,829)
(68,469,512)
(19,519,597)
7,938,355
(46,503,203)
54,553,638
Net increase/(decrease) in cash
and cash equivalents
(2,522,559)
9,778,702
Audited
FY2007
RM
Profit and Loss Review
The Group’s total revenue decreased by approximately 25.6% (or RM3.2 million) in 1Q2010, from
approximately RM12.3 million in 1Q2009 to approximately RM9.1 million in 1Q2010; due to the
curtailing of IT activities and spending by the Group’s customers in 1Q2010. The Group’s total
revenue declined by approximately 62.7% (or RM92.1 million) in FY2009, from approximately
RM146.9 million in FY2008 to approximately RM54.8 million in FY2009 due to delays in projects
and the longer time taken to secure new projects and upgrades. This was attributable to the fact
that the Group’s main clientele base, being financial institutions had reduced IT spending as a
result of increasing uncertainties arising from the sub-prime crisis. For FY2008, SAL Group’s
revenue increased by approximately 7.0% (or RM9.7 million) from approximately RM137.3
million in FY2007 to approximately RM146.9 million in FY2008, due to the expansion of business
activities in both existing and new markets. The following shows a segmental breakdown in terms
of business activities, and we note that the decline in the revenues for FY2009 as compared to
FY2008 was due to the declines in licensing of SIBS, sale of software and hardware products and
sale of customised solutions. Likewise, we note the continued downward trend in revenues for
1Q2010 as compared to 1Q2009, with declines in licensing and sale of software and hardware
products activities being offseted by increases in maintenance and enhancement as well as sale of
customised solutions.
Revenue breakdown by Business Activities
(RM million)
1Q2010
1Q2009
FY2009
FY2008
FY2007
Sale of software and hardware products
Sale of customised solutions
Maintenance and enhancement services
Licensing of SIBS
0.2
2.6
4.8
1.5
2.6
2.0
4.0
3.7
10.2
8.9
20.5
15.2
20.9
16.4
19.0
90.6
25.9
7.9
23.9
79.6
Total
9.1
12.3
54.8
146.9
137.3
Net profit before tax declined by approximately 9.1% (or RM0.3 million) in 1Q2010 from
approximately RM3.8 million in 1Q2009 to approximately RM3.5 million in 1Q2010; while net profit
after tax declined by approximately 16.6% (or RM0.6 million) from approximately RM3.6 million in
1Q2009 to approximately RM3.0 million in 1Q2010. The Group’s net profit after tax attributable to
shareholders declined significantly by approximately 82.5% (or RM89.7 million) from approximately
RM108.8 million in FY2008 to approximately RM19.1 million in FY2009 and was attributable to
I-12
APPENDIX I
the decline in revenue for reasons stated above. In FY2008, the Group reported a net profit after
attributable to shareholders of approximately RM108.8 million for FY2008, representing an increase
of approximately 36.0% (or RM28.8 million) as compared to FY2007.
The following tabulates the gross profit, profit before tax and after tax margins for the SAL Group:
Gross Profit Margin
Profit before tax margin
Profit after tax margin
1Q2010
1Q2009
FY2009
FY2008
FY2007
67.1%
38.1%
33.2%
58.6%
31.1%
29.6%
58.2%
39.4%
34.8%
78.2%
75.5%
74.0%
74.4%
64.5%
58.3%
We note that over the three year period analysed, margins for gross profit, profit before tax and
profit after tax had declined from the highs registered for FY2008. However, margins for gross profit
for 1Q2010 as compared to 1Q2009 had improved as there was a greater decrease in cost of sales
as compare to the decrease in revenue. The improvement in profit before and after tax margin for
1Q2010 as compared to 1Q2009, was due to lower operating expenses and positive contribution or
share of profits from associates.
Cash flow statements for 1Q2010
In 1Q2010, the Group used cash of approximately RM2.2 million in operating activities, this was
mainly due to the lower revenue and profits generated in 1Q2010, and this was further exacerbated
by an increase in trade receivables and amounts due from related parties. In addition, to the
cash used in operating activities in 1Q2010, the Group also used cash for investing activities of
approximately RM0.2 million and for financing activities of approximately RM0.1 million.
In FY2009, the Group generated cash of approximately RM7.9 million mainly due to cash generated
from operating activities of approximately RM29.9 million. The cash was used for investing activities
of approximately RM0.9 million and for financing activities of approximately RM21.0 million.
In FY2008, the Group generated RM90.1 million from operating activities and used cash of
approximately RM68.2 million in investing activities in FY2008 due to the acquisition of a 30%
equity interest in Unisoft, an established information technology services company focusing on
the financial services sector in China and the acquisition of a 24.5% equity interest in ePetrol
Silverswitch Sdn. Bhd, a company providing cashless payment solutions for the fuel retailing
industry. In FY2008, the Group also used approximately RM68.5 million in financing activities in
FY2008 mainly due to a payment of approximately RM71.5 million in dividends; this was partially
offset by a drawdown of RM2.9 million in borrowings. In FY2007, the Group generated cash of
approximately RM54.6 million in FY2007 mainly due to cash generated from operating activities
of approximately RM84.0 million. The cash derived from operating activities is offset by utilisation
of approximately RM10.0 million for investing activities in FY2007; of which approximately RM3.3
million was mainly attributed to investment in associate companies, approximately RM7.5 was used
for the purchase of property, plant and equipment and approximately RM0.8 million was used to
pay for software development. The cash outflows were partially moderated by interest income of
approximately RM1.5 million. In addition, the Group also used approximately RM19.5 million for
financing activities in FY2007 which mainly attributed to payment of dividends of approximately
RM19.5 million.
For the three financial year ended, FY2009, FY2008 and FY2007 analysed, the SAL Group
generated aggregate positive cash of approximately RM16.0 million, with aggregate cash from
operating activities of RM204.1 million, while aggregate cash of approximately RM79.1 million and
approximately RM109.0 million were used for investing and financing activities.
I-13
APPENDIX I
Financial Position Review
Assets
The table below the extract of the Group’s audited balance sheet for FY2009, FY2008 and FY2007
and the unaudited balance sheet for 1Q2010.
Non-current assets
Current assets
Non current liabilities
Current liabilities
Total equity
Net working capital
1Q2010
RM
FY2009
RM
FY2008
RM
FY2007
RM
106,292,241
73,829,094
3,559,945
5,274,449
171,286,941
68,554,645
106,089,973
71,483,963
3,585,243
5,592,190
168,396,503
65,891,773
108,378,665
71,944,518
4,137,657
8,785,161
167,400,365
63,159,357
22,924,037
127,658,796
1,587,970
14,321,183
134,673,680
113,337,613
The Group’s total assets increased by approximately 1.4% (or RM2.5 million) from approximately
RM177.6 million as at 30 June 2009 to approximately RM180.1 million as at 30 September 2009.
The increase was mainly attributed to an approximately RM2.3 million or 3.3% increase in total
current assets from approximately RM71.5 million as at 30 June 2009 to approximately RM73.8
million as at 30 September 2009. The increases in current assets as at 30 September 2009 as
compared to 30 June 2009, is attributable to the increase in amounts due from related parties of
approximately RM3.8 million which was offset by a decrease in aggregate deposits and cash and
bank balances of approximately RM2.1 million.
The Group’s total assets decreased by approximately 1.5% (or RM2.7 million) from approximately
RM180.3 million as at 30 June 2009 to approximately RM177.6 million as at 30 June 2008 mainly
attributable to a decrease in non-current assets of approximately 2.1% (or RM2.3 million) from
approximately RM108.4 million as at 30 June 2008 to approximately RM106.1 million as at 30 June
2009. The decrease in non-current assets as at 30 June 2009 as compared to 30 June 2008, was
mainly attributed to the decrease in software development expenditure of approximately RM2.7
million.
Total assets of the Group increased by approximately 19.8% (or RM29.7 million) from approximately
RM150.6 million as at 30 June 2007 to approximately RM180.3 million as at 30 June 2008 mainly
due to an increase in non-current assets of approximately 372.8% (or RM85.5 million) from
approximately RM22.9 million as at 30 June 2007 to approximately RM108.4 million as at 30 June
2008. The increase in non-current assets, as at 30 June 2008 as compared to 30 June 2007, was
mainly attributed to the increases in investments in associates of approximately RM87.4 million. The
increase in of non-current assets was offset by decreases in current assets of approximately 43.6%
(or RM55.7 million) from approximately RM127.7 million as at 30 June 2007 to approximately
RM71.9 million as at 30 June 2008, with the decreases in aggregate deposits and cash and bank
balances of approximately RM49.4 million.
Liabilities
The Group’s total liabilities decreased by approximately 3.7% (or RM0.3 million) from approximately
RM9.2 million as at 30 June 2009 to approximately RM8.8 million as at 30 September 2009. The
Group’s total liabilities decreased by approximately 29.0% (or RM3.7 million) from approximately
RM12.9 million as at 30 June 2008 to approximately RM9.2 million as at 30 June 2009 due to
decrease in current liabilities of approximately RM3.2 (or 36.3%) from approximately RM8.8
million as at 30 June 2008 to approximately RM5.6 million as at 30 June 2009 and decrease in
non-current liabilities of approximately RM0.6 million (or 13.4%) from approximately RM4.1 million
as at 30 June 2008 to approximately RM3.6 million as at 30 June 2009. The decrease in current
liabilities, as at 30 June 2009 as compared to 30 June 2008, is mainly attributed to the decrease
in other payables of approximately RM3.3 million which comprises maintenance fees received in
advance, allowance for untilised leave and other miscellaneous payables.
I-14
APPENDIX I
Total liabilities of the Group decreased approximately 18.8% (or RM3.0 million) from approximately
RM15.9 million as at 30 June 2007 to RM12.9 million as at 30 June 2008. The current liabilities
decreased by approximately 38.7% (or RM5.5 million) from approximately RM14.3 million as at
30 June 2007 to approximately RM8.8 million as at 30 June 2008, this was partially moderated by
an approximately 160.6% or RM2.5 million increase in non-current liabilities from approximately
RM1.6 million in FY2007 to approximately RM4.1 million as at 30 June 2008. The decrease in
current liabilities, as at 30 June 2008 as compared to 30 June 2007, was mainly attributed to the
decrease in trade payables, due to customer on contracts and current income tax liabilities of
approximately RM2.8 million, RM2.3 million and RM1.8 million respectively while the increase in
non-current liabilities was due to the aggregate increase in hire purchase liabilities and term loans
of approximately RM2.2 million.
9.
FINANCIAL ASSESSMENT OF THE PROPOSED ACQUISITIONS AND THE PROPOSED
ANCILLARY TRANSACTIONS
For the purposes of evaluating the financial terms of the Proposed Acquisitions and the Proposed
Ancillary Transactions, we have relied upon the following general bases:
(a)
As at the Latest Practicable Date and the Announcement Date, SSB and QR had paid up
and issued ordinary share capital of approximately US$16,000 comprising of 160 SSB Sale
Shares and RM 1,170,000 comprising 1,170,000 QR Sale Shares respectively. In addition,
as at the Latest Practicable Date, the Company has an issued and paid up Share capital of
approximately RM81.9 million comprising 1,066,099,476 Shares (excluding treasury shares).
As at the Latest Practicable Date, there are no outstanding instruments convertible into,
rights to subscribe for, and options in respect of the Shares.
(b)
the annual reports, financial statements of the Company and comparables companies which
are publicly available;
(c)
the historical trading prices of the Company and comparative companies on the SGX-ST or
SGX Catalist as the case maybe; and
(d)
the financial information or proforma financial information or the audited financial information
(as the case may be) for SSB or the SSB Group or QR or the QR Group and information in
the Circular on SSB or the SSB Group and QR or the QR Group.
(e)
Unless otherwise stated, the following exchange rates had been used
(i)
S$1: RM 2.43
(ii)
S$1: HKD 5.55
Source: MAS website
Methodology
In assessing the financial terms of the Proposed Acquisitions and the Proposed Ancillary
Transactions, we have taken into account the following pertinent factors as well as others as set out
in this Letter, which we consider as having a significant bearing on our assessment:
(i)
Earnings approach;
(ii)
Net tangible assets or NTA;
(iii)
Relative valuation analysis;
(iv)
Market quotation and trading activity of Silverlake Axis Shares;
(v)
Financial effects of the Proposed Acquisitions; and
(vi)
Other relevant considerations which have a significant bearing on our assessment.
I-15
APPENDIX I
These factors are discussed in greater detail in the ensuing sections.
Assessment of SSB Purchase Consideration and QR Purchase Consideration
In our deliberations and considerations, we would be assessing the value of SSB and QR pursuant
to the value as implied by the SSB Purchase Consideration and the QR Purchase Considerations
for the Proposed Acquisitions. As an illustration and based on the last transacted price of the
Shares on the Latest Practicable Date and the analysis in Sections 10.4 of our Letter, the implied
values for the SSB Acquisition and the QR Acquisition is approximately S$290.2 million and S$48.3
million respectively. We note that the consideration for implied values for the SSB Acquisition and
the QR Acquisition has increased when compared to values based on the last transacted price of
the Shares on 3 September 2009, prior to the MOU Date, of approximately S$184.7 and S$30.7
million respectively.
Pursuant to the formulae used and terms proposed, as elaborated in Circular and Sections 3 and 4
of our Letter, we note the following:
(i)
the formulae for the computation for the number of SSB Consideration and QR Consideration
Shares is based on the FY2009 PBT of the SSB Group and the PBT of the QR Group based
on the Proforma FY2009 Accounts while that for the SAL Group is based on the average
PBT for the three financial years, being FY2007, FY2008 and FY2009;
(ii)
there is an adjustment mechanism which provides for a reduction in the SSB Purchase
Consideration via the issuance of a lower number of SSB Consideration Shares (subject
to a maximum reduction of 30% of original number. This is to provide for the termination of
any SSB Contracts (as defined in the Circular) by the relevant customer as a result of the
Restructuring Exercise or otherwise due to any act or omission on the part of the Silverlake
Private Entities and/or the SIP Group on or before 30 April 2010 (“Terminated SSB
Contracts”), the Parties agree that `B1’ (or the proforma PBT of the SSB Group/Structured
Services Business), as defined in the Circular, shall be revised (the “Revised Proforma SSB
Group PBT”) to remove the profit before tax attributable to such Terminated SSB Contract(s)
and `C1’ (or the number of SSB Consideration Shares), as defined in Section 2.2 of the
Circular, shall be recalculated applying the revised `B1’ and correspondingly reduced up to
a maximum of 30% of the original number. In addition, if there is any dispute between the
Company and the SSB Vendor on the appropriate deduction to be made pursuant to the
above, both the Company and the SSB Vendor have agreed to refer the matter to a third
party, the Reporting Accountant (as defined in the SSB Sale and Purchase Agreement) for
final determination and to equally bear the costs of such exercise. Likewise, the issuance
of the SSB Consideration Shares is structured in two tranches, with the final tranche being
30% of the number of SSB Consideration Shares, to be allotted and issued by 14 May
2010 (about a month after the agreed date for determination of Terminated SSB Contracts),
pursuant to the applicable adjustments if any in Section 2.2.2 of the Circular;
(iii)
that the PBT of QR Group used for the purpose of arriving at QR Purchase Consideration
is based on the proforma financial statements of the QR Group for year ended 30 June
2009 and not the audited financial statements for year ended 31 March 2009. We note
that proforma PBT of the QR Group for the 12-month period ended 30 June 2009 is higher
than the audited PBT of the QR Group for the financial year ended 30 March 2009 by
approximately RM3.5 million, and that pursuant to the formula agreed between the parties
for the QR Purchase Consideration, this would result in approximately 51.1 million additional
Shares being issued, and based on the last transacted prices of the Shares as at the Latest
Practicable Date a RM16.9 million increase in consideration as compared to the hypothetical
consideration based on the audited PBT of the QR Group of approximately RM6.6 million.
We understand from the Company, that as the nature of activities for the SAL Group and the
QR Group is fairly similar, albeit the end customers for each operate in different industries,
the use of the 12 month period ended 30 June 2009 for the QR Purchase Consideration is
to, inter alia, provide for the different financial year ends of QR Group and the Company and
to ensure that agreed formula for computation of purchase consideration, takes into account
I-16
APPENDIX I
economic and business conditions as well cyclical or seasonal factors that affects both the
SAL Group and the QR Group. In addition, the use of the profit figures for 12 months ended
30 June 2009 reflects the arms length negotiations between the parties and is attributable to
the increase in revenues and profit before tax generated by the QR Group during the period
March 2009 to June 2009;
(iv)
the SSB Acquisition and the QR Acquisition are inter-conditional, notwithstanding the fact
that the vendor(s) for each of the transactions are different although the principal vendor for
both transactions is Mr Goh, the interested person. In addition, the terms for the Proposed
Acquisitions provide that the total number of Overall Consideration Shares to be issued
pursuant to the Proposed Acquisitions shall not exceed 1,045,000,000 Shares. In the
event the total number of Shares to be issued by the Company pursuant to the Proposed
Acquisitions would otherwise exceed the Overall Consideration Shares, the excess amount
will be deducted from the Shares to be issued in respect of each of the SSB Acquisition and
the QR Acquisition on a pro-rata basis. We note that as at the Latest Practicable Date, and
on the basis that there are no Terminated SSB Contracts or adjustments an aggregate of
1,025,635,634 Shares will be issued as consideration for the Proposed Acquisitions.
We understand from the Directors that the contracts between the Silverlake Private Entities and
its customers are automatically renewed until terminated. Most contracts provide for an advance
termination notice of between 1 to 3 months. We further understand from the directors that this
arrangement will continue to hold after the Proposed Restructuring has been completed. To the best
knowledge of the Directors, as at the Latest Practicable Date, there has been no termination of the
contracts as a result of the Restructuring Exercise received from the customers of the Silverlake
Private Entities. We also understand from Management of the SSB Group, that termination of its
services is infrequent.
We note from the Directors that the maximum reduction of 30% of the SSB Purchase Consideration
and the stipulated period ending on or before 30 April 2010 (or about three months), for the
determination of the Terminated SSB Contracts is adequate and will, inter alia, provide for
situations of terminations by customers and that based on information available to them and barring
unforeseen circumstances, the 30% limit is adequate. As at the Latest Practicable Date and barring
unforeseen circumstances, the Directors do not expect material adjustments to the SSB Group
PBT to be used for the computation of the number of SSB Consideration Shares.
I-17
APPENDIX I
In our assessment of the SSB Purchase Consideration and QR Purchase Consideration, we
have applied certain valuation ratios in assessing the reasonableness of the SSB Purchase
Consideration and QR Purchase Consideration. A brief description of such valuation ratios are as
follows:–
(i)
EV/EBITDA
“EV” or “Enterprise Value” is defined as the sum of a
company’s market capitalisation, preferred equity, minority
interests, short term and long term debts less its cash and
cash equivalents. “EBITDA” stands for earnings before
interest, tax, depreciation and amortisation but after share
of associates’ and joint ventures’ income but excluding
exceptional items.
The “EV/EBITDA” multiple is an earnings-based valuation
methodology that does not take into account the capital
structure of a company as well as its interest, taxation,
depreciation and amortisation charges. Therefore, it serves
as an illustrative indicator of the current market valuation of
the business of a company relative to its pre-tax operating
cash flow and performance.
(ii)
Price-to-Earnings (“PER”)
The PER is a widely used earnings-based valuation
methodology that illustrates the ratio of the current market
price of a company’s shares relative to its net earnings per
share. Unlike the EV/EBITDA multiple, the PER is based on
the net earnings attributable to shareholders after interest,
taxation, depreciation and amortisation expenses. As such,
the PER is affected by the capital structure of a company, tax
position as well as its depreciation and goodwill policies.
(iii)
Price-to-NTA (“P/NTA”)
The P/NTA ratio is the ratio of the relevant prices of the
shares to the net tangible asset value of the relevant
companies. It is an asset-based valuation methodology
that illustrates the ratio of the current market valuation of a
company relative to its asset backing as measured in terms
of its NTA value. The NTA of a company provides an estimate
of its value assuming a hypothetical sale of all its tangible
assets, the proceeds of which are first used to repay the
liabilities and obligations of that company with the balance
available for distribution to its shareholders. The NTA-based
approach is widely used for valuing the shares of propertybased companies as their tangible asset backings are
perceived as providing support for the value of their shares.
In assessing the financial terms of the Proposed Acquisitions and the Proposed Ancillary
Transactions as a consequence of effecting the Proposed Acquisitions, we have taken into account
the following pertinent factors, which we consider will have a significant bearing on our assessment.
I-18
APPENDIX I
9.1
Earnings approach
SSB Group
The table below summaries the unaudited proforma consolidated income statement SSB Group
after the Restructuring Exercise for the financial year ended 30 June 2007, 30 June 2008 and
30 June 2009.
Year ended
30 June
2007
Year ended
30 June
2008
Year ended
30 June
2009
Revenue
85,106
88,971
111,564
Profit before tax
44,958
48,044
60,785
Profit after tax attributable to SSB shareholders
39,456
41,525
53,578
RM’000
For Period Ended
Profit and Loss Statement
Revenue of SSB Group increased by approximately 25.4% (or RM22.6 million) in FY2009 from
approximately RM89.0 million in FY2008 to approximately RM111.6 million in FY2009. Profit
before tax increased by approximately 26.5% (or RM12.7 million) in FY2009 from approximately
RM48.0 million in FY2008 to approximately RM60.8 million in FY2009. Profit after tax increased
approximately 29.0% (or RM12.1 million) from approximately RM41.5 million in FY2008 to
approximately RM53.6 million in FY2009.
Revenue of SSB Group increased by approximately 4.5% or RM3.9 million from approximately
RM85.1 million in FY2007 to approximately RM89.0 million in FY2008. Profit before tax
increased approximately 6.9% or RM3.1 million from approximately RM45.0 million in FY2007 to
approximately RM48.0 million in FY2008. Profit after tax increased approximately 5.2% or RM2.1
million from approximately RM39.5 million in FY2007 to approximately RM41.5 million in FY2008.
For the three year period analysed, SSB Group’s revenue increased by approximately 31.1%
while profit before tax increased by approximately 35.2%. In general the SSB had exhibited fairly
stable gross profit margins between approximately 55.4% to 56.1% and profit before tax margins
of between approximately 52.8% to 54.5% for the last three financial years. We note that for the
similar period analysed, and based on the audited financial statements of the SAL Group, revenues
for the SAL group declined from approximately RM137.3 million in FY2007 to approximately
RM54.8 million in FY2009. The gross profit margins of the SAL Group ranged from between
approximately 58.2% to 78.3% for the last three financial years (for FY2009, the gross profit margin
was the lowest of the three financial years assessed due to a decline in revenues for the SAL
Group in FY 2009). Likewise, the profit before tax margins for the SAL Group for FY2009 declined
to approximately 39.4% due to a decline in revenues for the SAL Group in FY2009. In summary,
notwithstanding the possible similarity in the nature of business for the SAL Group and the SSB
Group and that certain of the SSB services and activities relates to proprietary software owned
by the SAL Group, the SSB group had exhibited relatively better financial performance in terms of
margins and revenue growth. This, we understand from the Directors, may be attributable to the
I-19
APPENDIX I
revenue mix of SSB Group’s business with higher recurring application maintainace services as
compared to the revenue mix of SAL Group’s business with relatively higher but lumpy proprietory
software licensing fee revenue for the period under comparison .
QR Group
The table below summarises the historical audited consolidated profit and loss statement and cash
flow statement of QR Group for the financial year ended 31 March 2007, 31 March 2008, 31 March
2009 and unaudited proforma consolidated profit and loss statement and cash flow statement for
the financial year ended 30 June 2009.
RM’000
For Period Ended
Profit and Loss Statement
Revenue
Profit before tax
Profit after tax attributable to QR
shareholders
QRFY2007
QRFY2008
QRFY2009
FY2009
3,633
435
432
5,782
2,263
2,246
13,923
6,578
5,541
19,030
10,109
7,989
596
969
1,494
3,132
(16)
(359)
(324)
(329)
(50)
238
88
66
Cash Flow Statement
Net cash generated from/ (used in)
operating activities
Net cash generated from/ (used in)
investing activities
Net cash generated from/ (used in)
financing activities
Revenue of QR Group increased by approximately RM5.11 million or 36.7% from approximately
RM13.9 million in QRFY2009 to approximately RM19.0 million in FY2009, and recorded profit after
tax of approximately RM8.0 million in FY2009, an increased of approximately RM2.4 million or
44.1% over QRFY2009, which was mainly attributable to the recognition of higher attributable profit
recognised from the AEON Malaysia project subsequent to the variation order from the sale of
additional software user licenses and maintenance revenue.
Revenue of QR Group increased by approximately 140.8% or RM8.1 million in QRFY2009 from
approximately RM5.8 million in QRFY2008 to approximately RM13.9 million in QRFY2009; while
profit before tax increased by approximately 190.6% or RM4.3 million from RM2.3 million in FY2008
to RM6.6 million in QRFY2009; while profit after tax attributable to shareholders of QR increased
146.7% or RM3.3 million to approximately RM5.5 million in QRFY2009 from approximately
RM2.2 million in QRFY2008.
Revenue of QR Group increased by approximately 59.2% or RM2.1 million from approximately
RM3.6 million in QRFY2007 to approximately RM5.8 million in QRFY2008. Profit before tax of QR
Group increased by approximately 419.8% or RM1.8 million from approximately RM0.4 million
in QRFY2007 to approximately RM2.3 million in QRFY2008; while profit after tax increased
by approximately 419.6% or RM1.8 million in QRFY2008 to approximately RM2.2 million from
approximately RM0.4 million in QRFY2007.
QR Group reported positive operating cash flows in FY2009, QRFY2009, QRFY2008 and
QRFY2007 of approximately RM3.1 million, approximately RM1.5 million, approximately
RM1.0 million and approximately RM0.6 million respectively. In QRFY2009, QR Group used cash
of approximately RM0.3 million for its investing activities. This was mainly due to the purchase
of property, plant and equipment amounting to approximately RM0.3 million. In QRFY2008, QR
Group used cash of approximately RM0.4 million in investing activities and this was mainly due
to the purchase of property, plant and equipment amounting to S$0.4 million; while in QRFY2007,
QR used cash of approximately RM16,000 in investing activities which was mainly attributed
I-20
APPENDIX I
to the purchase of property, plant and machinery amounting to approximately RM22,000 which
was partially offset by proceeds from disposal of property, plant and equipment of approximately
RM3,000 and interest income of approximately RM3,000. In QRFY2009, QR Group raised
approximately RM0.1 million from financing activities, this was mainly attributed to the draw of
finance leases of approximately RM0.1. In QRFY2008, QR raised approximately RM0.2 million
from financing activities which was derived mainly from the drawdown of hire purchase financing
of approximately RM0.3 million however this was partially offset by repayment of RM62,000
in principal amounts due lease creditors. In QRFY2007, QR used approximately RM50,000 in
financing activities due a repayment of principal amounts to lease creditors.
For the periods FY2009, QRFY2009, QRFY2008 and QRFY2007, QR Group’s revenue has
displayed a strong upward trend, recording an increase of approximately RM15.4 million or 423.8%
from approximately RM3.6 million in QRFY2007 to approximately RM19.0 million in FY2009, while
gross profit margins ranged between 54.6% and 77.5%. The PBT of QR Group demonstrated
similarly strong growth, recording an increase of approximately RM9.7 million or 2221.7% from
RM0.4 million in QRFY2007 to approximately RM10.1 million in FY2009, while profit before tax
margins ranged between 12.0% and 53.1%. We note that for the similar period analysed, and
based on the audited financial statements of the SAL Group, revenues for the SAL group declined
from approximately RM137.3 million in FY2007 to approximately RM54.8 million in FY2009. The
gross profit margins of the SAL Group ranged from between approximately 58.2% to 78.3% for the
last three financial years (for FY2009, the gross profit margin was the lowest of the three financial
years assessed due to a decline in revenues for the SAL Group in FY 2009). Likewise, the profit
before tax margins for the SAL Group for FY2009 declined to approximately 39.4% due to a decline
in revenues for the SAL Group in FY2009. In summary, notwithstanding the similarity in the nature
of business for the SAL Group and the QR Group, the QR group had exhibited relatively better
financial performance in terms of margins and revenue growth.
9.2
NTA
The NTA based approach of valuing a company or group is based on the aggregate value of all the
assets of the company or group in their existing condition, after deducting the sum of all liabilities
and intangible assets of the company or group. The NTA based approach is meaningful as it shows
the extent to which the value of each share is backed by tangible assets and would be relevant in
the event that the company or group decides to realise or convert the use of all or most of its assets.
The NTA based approach in valuing a company or group may provide an estimate of the value
of a company or group assuming the hypothetical sale of all its assets over a reasonable period
of time at the aggregate value of the assets used in the computation of the NTA, the proceeds of
which are used to settle the liabilities, minority interest and obligation of the company or group with
the balance to be distributed to its shareholders. However the NTA approach does not take into
account or consider the presence of any intangible assets such as goodwill, trademarks and brand
names. The NTA of a company or group is equivalent to the historical cost of replacing its assets in
their existing condition after deducting its liabilities, obligations and intangible assets, with the values
of the assets in their existing condition, obligations and intangible assets being determined as the
amounts or values as recorded or reflected in its audited financial statements. In assessing the SSB
Purchase Consideration and QR Purchase Consideration, we have used the NTA of SSB Group and
QR Group respectively. Independent Shareholders should note, as the financial statements of the
SAL Group does not reflect the market valuation of any intellectual property or proprietary software
rights, the use of NTA may not be reflective of the valuation of assets owned.
(i)
NTA of Target Companies
In assessing the SSB Purchase Consideration and the QR Purchase Consideration in
relation to the NTA per SSB Sale Shares and NTA per QR Sale Shares respectively, we
have reviewed the unaudited proforma consolidated income statement and balance sheet
of the SSB Group after the Proposed Restructuring as at 30 June 2009 and the audited
financial statements of the QR Group as at 31 March 2009 to determine whether there are
any assets that are of an intangible nature and as such would not appear in a valuation
based on an NTA approach. Save as disclosed in the proforma balance sheet of the SSB
Group as at 30 June 2009, audited balance sheet of the QR Group as at 31 March 2009 and
the proforma balance sheet as at 30 June 2009, the Directors have confirmed, that as at the
I-21
APPENDIX I
Latest Practicable Date, to the best of their knowledge and as disclosed to them, there are
no other intangible or tangible assets which ought to be disclosed in the respective balance
sheets in accordance with Singapore Financial Reporting Standards.
The Directors have also confirmed that as at the Latest Practicable Date, there were no
material contingent liabilities, bad or doubtful debts (except for those provided in the financial
statements for FY2009 and QRFY2009) or unrecorded earnings or expenses or assets or
liabilities which could have a material impact on the NTA of the SSB Group as at 30 June
2009 and the NTA of the QR Group as at 31 March 2009 and 30 June 2009, save as
disclosed in its financial statements for the SSB Group and the QR Group for FY2009 and
QRFY2009 (as the case maybe).
In addition, the Directors confirm, to the best of their knowledge and as disclosed to them,
that nothing has come to their attention which may render the values of the assets and
liabilities as well as financial performance or position of the SSB Group and the QR Group
as reflected in the proforma financial statements as at 30 June 2009 for the SSB Group and
audited financial statement or information as the case may be, as at 31 March 2009 and 30
June 2009 for the QR Group to be false or misleading in any material aspect. In addition,
the Directors confirmed that to the best of their knowledge or belief and as disclosed to
them, that nothing has come to their attention that such information is untrue, incomplete
and inaccurate in all respects and nothing has come to their attention that there is no other
information or fact, the omission of which would render those statements or information,
including our references, as well as analysis of such information to be untrue, inaccurate,
incomplete or misleading in any respect.
The following table shows an extract of the balance sheet of SSB Group as at 30 June 2009
SSB Group
RM’000
RM’000
Current Assets
Trade receivables and other receivables
Amount due from related parties
Cash and bank balances
2,164
17,419
–
19,583
Current Liabilities
Due to Director
Due to related parties
Deferred income
19,583
13
2,204
17,419
19,636
Net Assets
NAV for SSB Group
NTA for SSB Group
19,636
(53)
(53)
NTA per SSB Sale Share based on the issued share capital
of 160 SSB Shares (RM)
NTA less Cash for SSB Group (RM)
(331)
(53,000)
NTA less Cash per SSB Sale Share based on the issued
share capital of 160 SSB Shares (RM)
SSB Purchase Consideration per SSB Sale Share (S$)
(based on Share price as at Latest Practicable Date)
Less: Cash per SSB Sale Share, as at 30 June 2009 (S$)
I-22
(331)
1,813,739
1,813,739
APPENDIX I
SSB Group
RM’000
RM’000
Premium/(Discount) of SSB Purchase Consideration over NTA
NM
Premium/(Discount) of SSB Purchase Consideration less Cash over NTA
less Cash
NM
Note:
(1)
The Premium/(Discount) of SSB Purchase Consideration is not meaningful since the SSB Group is a net
tangible liability position.
For illustrative purposes only, the SSB Purchase Consideration, based on the last transacted
prices of the Shares as at the Latest Practicable Date, is approximately S$290.2 million as
compared to the negative NAV and NTA for SSB.
The following table shows an extract of the balance sheet of the QR Group as at 31 March
2009
QR Group
RM
Current Assets
Trade receivables
Other receivables
Cash
Tax Recoverable
RM
2,264,486
2,747,544
2,672,889
2,354
7,687,273
Non-current Asset
Property, plant and equipment
7,687,273
610,055
610,055
Current Liabilities
Trade payables
Other payables
Taxation
Dividend Payable
Lease Payable
610,055
80,504
732,777
583,849
1,170,000
55,247
2,622,377
Non Current Liabilities
Lease payables
Deferred tax liabilities
2,622,377
320,305
20,583
340,888
340,888
Net Assets
NAV for QR Group
5,334,063
I-23
APPENDIX I
QR Group
RM
NTA for QR Group
RM
5,334,063
NTA per QR Share based on the issued share capital of
1,170,000 Shares (RM)
NTA per QR Share based on the issued share capital of
1,170,000 Shares (S$)
NTA less Cash for QR Group (RM)
NTA less Cash for QR Group (S$)
4.56
1.88
2,661,174
1,096,936
NTA less Cash per QR Share based on the issued share
capital of 1,170,000 Shares (RM)
NTA less Cash per QR Share based on the issued share
capital of 1,170,000 Shares (S$)
QR Purchase Consideration per QR Share (S$)
(based on Share price as at Latest Practicable Date)
Less: Cash per QR Share, as at 31 March 2009 (S$)
2.27
0.94
S$41.25
S$40.31
Premium/(Discount) of QR Purchase Consideration over NTA
2,095.0%
Premium/(Discount) of QR Purchase Consideration less Cash over NTA
less Cash
4,199.2%
For illustrative purposes only, the QR Purchase Consideration of approximately S$48.3
million based on the last transacted prices of the Shares as at the Latest Practicable Date
represents a premium of approximately 2,095.0% from the NTA of QR Group as at 31 March
2009 and a premium of approximately 1,260.6% from NTA of QR Group as at 30 June 2009,
based on the issued share capital of 1,170,000 QR Sale Shares, as at the Latest Practicable
Date We understand from the Directors that subsequent to the financial year ended 31 March
2009, QR Group declared a dividend of approximately RM6.92 million and this will reduce
the consolidated NTA of the QR Group by the same amount.
If the consolidated cash and cash equivalents of the QR Group is deducted from the QR
Purchase Consideration (the “Adjusted QR Purchase Consideration (QRFY2009)”),
and likewise from the NTA of the QR Group, the Adjusted QR Purchase Consideration
(QRFY2009) of approximately S$47.2 million represents a premium of approximately
4,199.2% from the NTA of QR Group as at 31 March 2009, adjusted for its cash & cash
equivalents holdings.
Likewise, if the consolidated cash and cash equivalents of the QR Group as at 30 June
2009 is deducted from the QR Purchase Consideration (the “Adjusted QR Purchase
Consideration (FY2009)”), and likewise from the NTA of the QR Group as at 30 June
2009, the Adjusted QR Purchase Consideration FY2009 of approximately S$46.1 million,
represents a premium of approximately 3,322.0% from the NTA of QR Group as at 30 June
2009, adjusted for its cash & cash equivalents holdings.
I-24
APPENDIX I
The above computation on NTA for QR Group is necessarily limited in view of the dividends
which have been declared subsequent to the financial year end and has reduced the NTA of
the QR Group significantly.
The computations and analysis in section 9.2 are meant as an illustration and it does
not necessary mean or imply that the net realisable value of the SSB Sale Shares and
QR Sale Shares are as stated above. It also does not imply that the assets or property
of the SSB Group and QR Group can be disposed of at the estimated values indicated
above and that after payment of all liabilities and obligations, the values or amounts
as indicated for the respective types of NTA per SSB Share and NTA per QR Share are
realisable or distributable to the shareholders of SSB, QR or the Company.
9.3
Relative valuation analysis
In evaluating the Proposed Acquisitions, we have also considered the range of valuation statistics,
including PER, EV/EBITDA, P/NTA of selected companies listed in Singapore that may, in our
view, be broadly comparable to the core business of SSB Group and QR Group (“Selected
Companies”).
The Selected Companies have been identified after a search done on SGX and evaluation of
companies operating in relatively similar industry as the SSB Group and the QR Group. We have
had discussions with the Directors and Management about the suitability and reasonableness of
these Selected Companies acting as a basis for comparison with the core businesses of the SSB
Group and the QR Group. Relevant information has been extracted from the annual reports and/
or public announcements of these Selected Companies. The Selected Companies may or may not
have similar business operations in regions/countries where SSB Group and QR Group operate
or will operate in and they do differ in terms of their activities, products and services with regards
to the type of software and information technology activities, products and services that they offer
or provide, end customers or industry that they offer such services or products as well as whether
proprietary technology or intellectual property is involved. The Selected Companies’ assets and
the accounting policies with respect to the values for which the assets or the revenue and cost are
recorded may also differ from SSB Group and QR Group.
We advise Independent Shareholders to note that there may not be any company listed on any
relevant stock exchange that is directly comparable to the SSB Group and the QR Group in terms
of size, diversity of business activities and products/services, branding, geographical spread, track
record, prospects, operating and financial leverage, risk profile, quality of earnings and accounting,
listing status and such other relevant criteria. In addition, the SSB Sale Shares and the QR Sale
Shares are not listed and quoted on a stock exchange. We wish to highlight that it may be difficult
to place reliance on the comparison of valuation statistics for the Selected Companies as the
business of the Selected Companies, its capital structures, growth rates, operating and financial
leverage, taxation and accounting policies as well as the liquidity of these shares and the demand/
supply conditions for these shares and that of the SSB Group and the QR Group or the SSB Sale
Shares and the QR Sale Shares may differ. As such, any comparison made herein is necessarily
limited and serves only as an illustrative guide and any conclusion drawn from the comparison
may not necessarily reflect the perceived or implied market valuation (as the case may be) of SSB
Group and QR Group as of the Latest Practicable Date.
I-25
APPENDIX I
Company
Stratech Systems
Limited (“Stratech”)
Market
Capitalisation
(S$’ million)
39.4
Description of activities
Leading, world-class e-business infrastructure and
Internet enabler capable of providing innovative
technology-intensive solutions for the knowledge
based economy. Established in 1989, Stratech is
today a focused techno-centric player with two
business divisions, viz. its technology-intensive
IT division and its e-business enabler division.
Stratech started in 1989 as a manufacturers’
representative for US and European high technology
suppliers to industries in the Asia Pacific region
serving as the marketing and sales arm of the
manufacturers as well as managing all aspects of
customer orders, including delivery to customers,
payments and in some cases implementation. In the
early 1990s, Stratech became a systems integrator
and developer, mainly making use of third party
technologies and products to undertake largescale IT projects. Later, Stratech developed its own
technologies and ventured into computer vision and
intelligent transport systems.
Since 1996, Stratech has evolved into a systems
and technology developer for e-business IT projects.
Some of these projects were a passenger information
kiosk system for the Hong Kong airport and a medical
claims proration system for the Singapore Civil
Service. Stratech has developed an online Certificate
of Entitlement open bidding system for the Land
Transport Authority.
Armarda Group Limited
(“Armarda”)
28.1
Armarda was incorporated on 13 August 2003 in
Bermuda. Armarda is principally engaged in the
provision of a comprehensive and integrated suite of
IT consulting, IT support and business transformation
services for enterprises in the banking and financial
services industry predominantly in China. Some of the
major customers include Hunan Nengtong Technology
Development Co Ltd, Bank of Communications, The
Shanghai Commercial and Saving Bank Limited and
Beijing Brilliant Technology Co Ltd.
Armarda has established operations in Beijing,
Chengdu, Shanghai and Zhuhai in China, as well as
Singapore and Hong Kong.
I-26
APPENDIX I
Company
Azeus Systems Holdings
Ltd. (“Azeus”)
Market
Capitalisation
(S$’ million)
18.0
Description of activities
Azeus was incorporated in Bermuda on 10 May
2004 and is a provider of IT consultancy services
based in Hong Kong. Under Azeus’ IT services
segment, Azeus designs and implements a range
of IT software and systems, as well as develop and
integrate various software programs of IT systems to
satisfy its customers’ outsourcing needs. The broad
array of its services and system implementation work
ranges from e-government initiatives and management
information system based projects to the provision
of solutions utilising innovative technologies. Other
than the provision of IT services, it also provides
maintenance and support services either in the course
of the provision of its solutions as part of a project or
separately. In addition, it is also engaged in business
process outsourcing.
It is headquartered in Hong Kong and maintains
offshore development centres in the Philippines and
China to support its operations.
Azeus provides services to both the public and the
private commercial sectors, with an emphasis on
the Hong Kong public sector as reflected by the
several large-scale IT projects it has completed or
are undertaking for various Hong Kong government
departments.
CSE Global Ltd (“CSE”)
430.8
CSE originated in 1985 as the engineering projects
division of Chartered Electronics Industries Pte Ltd. In
1991, the division was transferred to operate as CEI
Systems & Engineering Pte Ltd.
CSE is a global system integrator operating in the
Americas, Europe, the Middle East, Africa, Asia and
has 1200 employees spread over 32 offices in 20
countries. CSE provides state-of-the art, cost-effective
total integrated industrial automation, information
technology and telecommunication solutions to clients
globally in the energy (Oil & Gas/Power), chemical/
petrochemical, utilities, water and waste water,
healthcare and public sectors.
CSE offers its customers a total turnkey capability
through two business units, namely, Industrial Business
Unit and IT Consulting Business Unit
I-27
APPENDIX I
Company
NTI International Ltd
(“NTI”)
Market
Capitalisation
(S$’ million)
8.0
Description of activities
NTI was incorporated in Singapore under the name of
NTI Intl Pte Ltd on 6 March 2002. It changed its name
to NTI Intl Limited on 25 June 2002.
The NTI Group is a developer and provider of IT
solutions and systems for the financial, education,
logistics, telecommunications, healthcare and
corporate sectors of industry, with business activities
primarily in Malaysia and in the region. NTI core
activities span four areas of expertise, namely systems
integration and network management, software
development, engineering-related IT services and
enterprise management (including helpdesk and
maintenance services).
NTI Group comprises of three main entities:
(1)
New Technology and Innovation Sdn Bhd
(NTISB)
(2)
Dlab (M) Sdn Bhd (Dlab)
(3)
Fuziq Software Sdn Bhd
Its core business activities are Systems Integration,
Enterprise Management and IT services. NTISB is
one of Malaysia’s integrated IT solutions providers
with expertise in designing, building and deploying
customised IT solutions.
NTI not only distributes and integrates externally
sourced products and systems, it also has the inhouse expertise to develop its own unique products.
These include comprehensive banking solutions
Probank, a tool for conventional banking and iProbank,
a comprehensive tool for Islamic banking, as well as
InfoCare Hospital Information Systems and others.
Most of its activities and customers are in Malaysia,
concentrated in five major sectors - oil and gas,
government, automotive and transportation, finance
and healthcare.
Source: Respective stock exchange website and latest annual report of the companies as at the Latest Practicable Date
I-28
APPENDIX I
The following table tabulates the ratios for financial performance and position of the Selected
Companies, the SAL Group, the SSB Group and the QR Group.
Selected Companies (4)
ROE (1)
(%)
Net Profit
Margin (2)
(%)
Asset
turnover
(times)
Total
Assets/
Total
Liabilities
(times)
Stratech Systems
Armarda
Azeus
CSE
NTI
8.0%
(0.5%)
0.7%
44.6%
(0.8%)
7.8%
(2.0%)
1.0%
10.9%
(0.5%)
0.50
0.24
0.65
1.31
0.86
1.93
8.38
10.89
1.47
2.18
1.07
0.14
0.10
2.11
0.85
0.70
–
–
1.19
0.57
High
Low
Simple Average
Median
44.6%
(0.8%)
10.4%
0.7%
10.9%
(2.0%)
3.4%
1.0%
1.31
0.24
0.71
0.65
10.89
1.47
4.97
2.18
2.11
0.10
0.85
0.85
1.19
–
0.49
0.57
11.3%
NM
34.8%
48.0%
0.31
5.70
19.35
1.00
0.05
NM
0.01
NM
103.9%
39.8%
1.68
2.80
0.56
0.07
92.8%
42.0%
1.57
3.45
0.41
0.04
SAL Group
SSB Group (based on
FY2009)
QR Group (based on Mar
2009) (5)
QR Group (based on
June 2009) (5)
Total
Liabilities(3)/
shareholders’
equity
(times)
Total
Borrowings/
shareholders’
equity
(times)
Notes:
1.
ROE is the return on equity based on the ratio of the consolidated net profit/(loss) attributable to shareholders to the
consolidated shareholders’ equity excluding minority interest (“SHF”).
2.
Net profit margin is the ratio of the consolidated net profit/(loss) after tax attributable to shareholders to the
consolidated sales for each of the respective companies.
3.
Total borrowings include all bank loans and borrowings as well as hire purchase obligations and interest bearing
debts, on a consolidated basis.
4.
The figures above are based on the relevant financial statements for the companies as at their respective financial
year end dates or such other dates as may be applicable and all the figures are on a consolidated basis (where
applicable).
5.
The figures for the QR Group (based on Mar 2009) is based on the audited financial statements of the Group as at
31 March 2009 (“QR Group (based on Mar 2009)”), while that for the QR Group (based on FY2009) (“QR Group
based on June 2009”) is based on the proforma financial information/statements of the QR Group as at 30 June
2009.
SAL Group
For illustrative purposes only, we note the following
(i)
SAL Group’s ROE is higher than simple average and the median for the Selected Companies.
Its net profit margin is significantly higher than those for all the Selected Companies.
(ii)
SAL Group’s asset turnover ratio, though within the range for the Selected Companies is
lower than the simple average and median for the Selected Companies. The low asset
turnover may be attributable to the low revenues for the SAL Group for FY2009, and the
I-29
APPENDIX I
effects of the global financial crisis which had a significant impact on financial institutions and
the industry for which its end customers operate in thereby affecting its sale of software and
hardware products as well as licensing revenues from proprietary products.
(iii)
SAL’s Group’s ratio of total assets to total liabilities is significantly higher than those for
the Selected Companies. Its ratios for total liabilities to SHF, is lower than the Selected
Companies. SAL’s Group’s ratio of total borrowings to SHF, is lower than the simple average
and median for the Selected Companies and comparable to that for the low for the Selected
Companies. This may be attributable to the relatively higher capitalisation of the SAL Group
as compared to the Selected Companies.
(iv)
In addition, we note that as SAL is involved principally in activities that involves the sale
of software and hardware products, customised solutions as well as maintenance and
enhancement services and licensing of proprietary software application (SIBS), and that its
major customers comprises financial institutions in Singapore, Indonesia and Malaysia, it is
likely that these customers would have significant “buying” power.
In summary, the historical financial performance of the SAL as reflected by its ROE, net profit
margins, asset turnover and the ratios for its total assets to total liabilities, total liabilities to
SHF, total borrowings to SHF appears to be better than those for the Selected Companies,
notwithstanding the fact that the Group had exhibited historical trends of declining revenues
(FY2008 as compared to FY2009) and profitability and the end customers have significant buying
power and that the industry may have been affected by the global financial crisis and “cut-backs” in
terms of operating expenditures.
SSB Group
For illustrative purposes only, we note the following
(i)
SSB Group’s net profit margin is higher than all the Selected Companies.
(ii)
SSB Group’s asset turnover ratio is higher than all the Selected Companies.
(iii)
Although the SSB Group’s ratio of total assets to total liabilities is lower than all the Selected
Companies, this may be attributable to its business model.
(iv)
The comparisons for ROE, ratios for total liabilities to SHF as well as total borrowings to
SHF is not meaningful due to a deficit in share capital of SSB group as at 30 June 2009.
We understand that the negative NAV was due to the company secretarial fees and
governmental fees incurred by SSB HoldCo since the date of incorporation, which has been
capitalised subsequently prior to the Latest Practicable Date.
In summary, the historical financial performance of the SSB Group as reflected by its net profit
margins and asset turnover appears to be better than those for the Selected Companies,
notwithstanding the fact that like the SAL Group, its end customers have significant buying power
and may have been affected by the global financial crisis. SSB Group’s financial performance in
terms of net profit margins is significantly better than those for the SAL Group despite the fact
that they operate in similar industries with financial institutions as end customers and may be
attributable to the nature of their respective products and services.
QR Group
For illustrative purposes, we note the following:
(i)
The ROE and the net profit margin of the QR Group (based on Mar 2009) and the QR Group
(based on June 2009) is higher than that for all the Selected Companies.
(ii)
The asset turnover ratio of QR Group (based on Mar 2009) and QR Group (based on June
2009) is higher than that for all the Selected Companies.
I-30
APPENDIX I
(iii)
The ratio of total liabilities to SHF and total borrowings to SHF of QR Group (based on Mar
2009) and QR Group (based on June 2009) is lower than that of the simple average and
median but is within the range for the Selected Companies. While the ratio of total assets to
total liabilities of QR Group (based on Mar 2009) and QR Group (based on June 2009) is
lower than the simple average, it is within the range of the Selected Companies.
In summary, the historical performance of the QR Group as reflected by its ROE, net profit margin
and asset turnover appears to be better than those for the Selected Companies and the ratio of its
total assets to total liabilities, total liabilities to SHF and total borrowings to SHF is within the range
of the Selected Companies and lower than the simple average of the Selected Companies.
The below sets out the trade receivable turnover days, trade payable turnover days, inventory
turnover days and working capital cycle for the SAL Group, the SSB Group, the QR Group and the
Selected Companies.
Trade
receivable
turnover
days (1)
(Days)
Trade
Payable
turnover
days (2)
(Days)
Stratech Systems
Armarda
Azeus
CSE
NTI
90
182
35
72
54
128
–
41
83
23
13
–
23
14
–
(25)
182
16
3
31
High
Low
Simple Average
Median
182
35
86
72
128
–
55
41
23
–
10
13
182
(25)
41
16
8
57(5)
59
42
4.5
–
8.9
0.2
–
–
–
–
3
57
50
42
Selected Companies
SAL Group
SSB Group (based on FY2009)
QR Group (based on Mar 2009)(6)
QR Group (based on June 2009) (6)
Inventory
turnover
days (3)
(Days)
Working
Capital
Cycle (4)
(Days)
Notes:
(1)
Trade Receivable Days = (365 x Average trade receivables)/ Revenue
(2)
Trade Payable Days = (365 x Average trade payable)/ Cost of goods sold
(3)
Inventory Turnover Days = (365 x Average inventory)/ Cost of goods sold
(4)
Working Capital Cycle = (Trade Receivable Days + Inventory Turnover Days – Trade Payable Days)
(5)
Trade Receivable Days of SSB Group = (365 x trade receivables as at 30 June 2009)/ Revenue;
(6)
The figures for the QR Group (based on Mar 2009) is based on the audited financial statements of the Group as at
31 March 2009 (“QR Group (based on Mar 2009)”), while that for the QR Group (based on FY2009) (“QR Group
based on June 2009”) is based on the proforma financial information/statements of the QR Group as at 30 June
2009.
I-31
APPENDIX I
SSB Group
We note that SSB Group’s does not have any trade payables and inventory and its trade receivable
days is lower than simple average and median for the Selected Companies but within the range of
the Selected Companies. Its working capital cycle is higher than the simple average and median of
the Selected Companies but within the range of the Selected Companies.
As compared to SAL Group, the SSB Group has a significantly longer working capital cycle.
We note that the SAL Group has low working capital requirements based on its working capital cycle.
QR Group
We note that the QR Group’s does not have any inventory. The trade receivable and payable days
for both QR Group (based on Mar 2009) and QR Group (based on June 2009) are lower than the
simple average and median of the Selected Companies. Notwithstanding its lower trade receivable
days which was offset by its relatively shorter trade payable days, the working capital cycle for
the QR Group (based on Mar 2009) and the QR Group (based on June 2009) are both within the
range but higher than the simple average and median for the Selected Companies.
As compared to SAL Group, the QR Group has a significantly longer working capital cycle.
The valuation of the Selected Companies and the SAL Group, are based on their respective last
transacted prices as at the Latest Practicable Date and their respective latest financial statements
for the relevant financial periods, while those for the SSB Group and the QR Group are based on
the prices as implied by the SSB Purchase Consideration and the QR Purchase Consideration
based on the last transacted prices of the Shares, as at the Latest Practicable Date and its latest
financial statements or proforma financial statements or information for FY2009 (as the case may
be). All the valuation statistics are computed on a historical basis using financial data obtained from
their latest available financial statements or annual reports unless otherwise stated.
The following table tabulates the valuation statistics of the Selected Companies, the SAL Group,
the SSB Group and the QR Group.
Selected Companies
Stratech
Armarda
Azeus
CSE
NTI
Financial Year
Market
End
Capitalisation
(S$’million)
31-Mar-09
31-Dec-08
31-Mar-09
31-Dec-08
31-Dec-08
High
Low
Simple Average
Median
SAL Group
SSB Group implied by SSB Purchase
Consideration (6)
QR Group implied by QR Purchase
Consideration (Mar 2009) (4)
QR Group implied by QR Purchase
Consideration (June 2009) (5)
PER
(times)
P/NTA
(times)
EV/ EBITDA
(times)
39.4
28.1
18.0
430.8
8.0
33.35
NM(3)
128.46
8.93
NM(3)
3.99
0.89
0.93
10.64
13.69
13.16
14.14
17.21
6.88
95.77
430.8
8.0
104.9
28.1
128.46
8.93
56.91
33.35
13.69
0.89
6.03
3.99
95.77
6.88
29.43
14.14
351.8
290.2
44.71
13.14
5.07
NM
31.26
11.60
48.3
21.13
21.95
17.00
48.3
14.66
13.61
10.89
Source: Respective annual reports or latest financial statement
I-32
APPENDIX I
Notes:
1.
The Selected Companies’ computations for the PER, P/NTA and EV/EBITDA are based on the respective share
price of the Selected Companies as at the Latest Practicable Date.
2.
The SSB Group and QR Group computations for the PER, P/NTA, EV/EBITDA,P/Sales and EV/Sales are based
on the price as implied by the SSB Purchase Consideration and QR Purchase Consideration and the respective
inputs from the latest full year financial statements or any other such dates as may be applicable as at the Latest
Practicable Date.
3.
N.M: Not meaningful
4.
Based on Share price of S$0.330 as at the Latest Practicable Date and the audited historical financial statements
for the QR Group.
5.
Based on Share price of S$0.330 as at the Latest Practicable Date and the proforma historical financial statements
for the QR Group as at or for period ending 30 March 2009. The implied purchase consideration for the QR Group is
computed based on the number of shares to be issued and based on the financial performance of the QR Group for
30 June 2009.
6.
Based on Share price of S$0.330 as at the Latest Practicable Date and the proforma historical financial statements
for the SSB Group as at or for period ending 30 June 2009. The implied purchase consideration for the SSB Group
is computed based on the number of shares to be issued and based on the financial performance of the SSB Group
for 30 June 2009.
SAL Group
For illustrative purposes, we note the following:
(a)
The SAL Group’s market capitalisation is generally higher than those of the Selected
Companies (with the exception of CSE), and it is generally accepted that there may be a
difference in the trading statistics of companies with larger capitalisations as compared to
those with smaller capitalisation.
(b)
The SAL Group’s PER and P/NTA multiples of approximately 44.71 and 5.07 times
respectively is lower than simple average but higher than the median of the Selected
Companies but within the range of the Selected Companies.
(c)
However the SAL Group’s EV/EBITDA of approximately 31.26 times is higher than the
simple average and median of the Selected Companies but within the range of the Selected
Companies.
The valuation of the Company, based on PER and P/NTA is lower when compared to the simple
average of the Selected Companies but higher when compared to the median of the Selected
Companies. The SAL Group valuation based on the ratio of EV to EBITDA is higher than the simple
average and median of the Selected Companies but within the range of the Selected Companies.
SSB Group
For illustrative purposes, we note the following:
(a)
The valuation of the SSB Group based on the SSB Purchase Consideration, is significantly
higher than all the Selected Companies (with the exception of CSE). Based on the SSB
Purchase Consideration, the historical PER of the SSB Group of 13.14 times is lower than
simple average and median of the PER multiples of the Selected Companies but within the
range of the Selected Companies.
(b)
SSB Group’s P/NTA multiple based on the SSB Purchase Consideration is not meaningful
due to the deficit in share capital of SSB Group.
(c)
SSB Group’s EV/EBITDA multiple based on the SSB Purchase Consideration of 11.60 times
is lower than the simple average and median of the Selected Companies’ EV/EBITDA but
within the range of the Selected Companies.
The above illustrates that the valuation of the SSB Group based on the price as implied by the SSB
Purchase Consideration is approximately S$290.2 million. Additionally, the valuation of the SSB
Group based on the price as implied by the SSB Purchase Consideration is lower as compared to
I-33
APPENDIX I
the simple average for the PER and EV/EBITDA multiples for the Selected Companies. Likewise,
the SSB Group’s PER and EV/EBITDA multiples based on the price as implied by the SSB
Purchase Consideration is significantly lower than those for SAL. This is despite relatively better
profit margins and asset turnover.
QR Group
For illustrative purposes, we note the following:
(a)
QR Group’s PER of 21.13 times as implied by the QR Purchase Consideration (Mar 2009) is
lower than the simple average and median for the Selected Companies.
(b)
QR Group’s PER of 14.66 times as implied by QR Purchase Consideration (June 2009) is
lower than the simple average and median of the Selected Companies.
(c)
QR Group’s P/NTA of 21.95 times, as implied by the QR Purchase Consideration (Mar 2009)
is higher than that for all the Selected Companies.
(d)
QR Group’s P/NTA of 13.61 times, as implied by the QR Purchase Consideration (June
2009) is higher than the simple average and the median for the Selected Companies but
within the range of the Selected Companies.
(e)
QR Group’s EV/EBITDA of 17.00 times, as implied by the QR Purchase Consideration
(Mar 2009), is lower than the simple average, but higher than the median for the Selected
Companies but within the range of the Selected Companies.
(f)
QR Group’s EV/EBITDA of 10.89 times, as implied by the QR Purchase Consideration
(June 2009) respectively, is lower than the simple average and the median for the Selected
Companies but within the range of the Selected Companies.
The use of 12 months ending 30 June 2009 proforma financial statements had attributed a higher
purchase consideration for the QR Group, as the higher financial performance for the QR Group
for the 12-months ending 30 June 2009 is higher that for the 12-months ending 31 March 2009.
However, we note that the value of the QR Group as implied by the QR Purchase Consideration
(based on June 2009) is significantly lower (based on PER and EV/EBITDA) than those for the SAL
Group and in general, the Selected Companies. In addition, we note that in general, companies like
the SAL Group, the SSB Group and the QR Group and the Selected Companies usually trade
or are valued on earnings and EBITDA multiples as compared to the net tangible assets basis.
Likewise, we note that although the SAL Group had developed proprietary software and intellectual
properties, these may not have been incorporated and reflected in its financial statements. Similarly,
the computation on NTA for QR Group is necessarily limited in view of the dividends which have
been declared subsequent to the financial year end and has reduced the NTA of the QR Group
significantly.
The following table tabulates the PER and EV/EBITDA multiples for the Proposed Acquisitions in
aggregate.
Aggregate of the SSB Purchase Consideration and the QR Purchase Consideration
as implied by the Last transacted Prices of Shares as at the Latest Practicable Date
S$338.5 m
Aggregate PAT for the SSB Group (FY2009) and the QR Group (based on audited
financial statements for financial year ended 31 Mar 2009)
RM59.1 m (a)
Aggregate PAT for the SSB Group (FY2009) and the QR Group (based on
proforma financial statements for the 12 months ended 30 June 2009)
RM61.6 (b)
PER (based on (a) above) times
13.9
PER (based on (b) above) times
13.36
I-34
APPENDIX I
EV/EBITDA (based on SSB Group (FY2009) and the QR Group (audited financial
statements for financial year ended 31 Mar 2009)
12.16
EV/EBITDA (based on SSB Group (FY2009) and the QR Group (proforma financial
statements for the 12 months ended 30 June 2009)
11.52
We note from the computations above and those for the comparative comparisons against Selected
Companies that:
(a)
The PER multiple for the SSB Acquisition and QR Acquisition, based on the Aggregate PAT
for the SSB Group (FY2009) and the QR Group (based on audited financial statements for
financial year ended 31 Mar 2009) of approximately 13.91 times is lower than the simple
average and median for the Selected Companies as well as that for SAL, despite the fact that
both the SSB Group and the QR Group had exhibited better historical financial performance
in general (profitability and where applicable ROE).
(b)
The PER multiple for the SSB and QR Acquisition, based on the Aggregate PAT for the SSB
Group (FY2009) and the QR Group (based on proforma financial statements for 12 months
ended 30 June 2009)) of approximately 13.36 times is lower than the simple average and
median for the Selected Companies as well as that for SAL.
(c)
The EV to EBITDA multiple for the SSB and QR Acquisition (based on SSB Group
(FY2009) and the QR Group (audited financial statements for financial year ended 31 Mar
2009)) of approximately 12.16 times is lower than the simple average and median for the
Selected Companies as well as that for SAL, despite the generally better historical financial
performance in general (profitability and where applicable ROE) as mentioned in this letter.
(d)
The EV to EBITDA multiple for the SSB and QR Acquisition (based on SSB Group (FY2009)
and the QR Group (proforma financial statements for the 12 months ended 30 June
2009)) of approximately 11.52 times is lower than the simple average and median for the
Selected Companies as well as that for SAL, despite the generally better historical financial
performance in general (profitability and where applicable ROE) as mentioned in this letter.
In summary, we note that in general the SSB Purchase Consideration and QR Purchase
Consideration values the SSB Group and the QR Group at values lower than the comparative ratios
for the Selected Companies. As shares would be used as currency for the purchase considerations,
it appears that the acquisitions will be made or paid for by shares, which the market has valued on
a higher basis than the values for the SSB Group and the QR Group as implied by their respective
purchase considerations pursuant to the respective agreements.
9.4
Comparisons with other transactions involving initial public offerings of companies on the
SGX-ST
We have reviewed the recent initial public offering (“IPO”) statistics on the SGX-ST for an indication
of the perceived valuation that public investors ascribed to these businesses upon their listing. The
IPO statistics were compiled from selected IPOs (“Selected IPOs”) which are essentially listings on
the SGX-ST during the six-month period prior to the Latest Practicable Date with proceeds raised
from the Selected IPOs. However, the Independent Directors should note that the comparison
with the Proposed Acquisitions may be subject to the factors such as, inter alia, timing, market
sentiment, business of the issuer and the industry in which it operates in, size of offering, pricing
of the IPO shares, analyst coverage and competing issues at the time of their respective IPO as
well as the fact that SSB Sale Shares and QR Sale Shares are unquoted. Hence, any comparison
thereof is at best an indication or illustration of the possible valuation of the IPOs as compared to
that of SSB Group and QR Group. Notwithstanding this, the comparisons with IPO transactions
is presented in view of the fact that the sale of SSB and QR Sale Shares to the SAL Group, a
company controlled by Mr Goh, may viewed similarly as an IPO (for valuation basis only) as the
vendors will pursuant to the transactions be issued listed SAL shares.
I-35
APPENDIX I
We list below the PER multiples of the Selected IPOs on the SGX-ST based on their respective
IPO issue prices, historical PER and post-issue NTA per share based on their IPO issue prices.
Selected IPOs
Date of IPO
Ziwo Holdings Ltd.
Great Group Holdings Limited
China Gaoxian Fibre Fabric Hldg Ltd
SBI Offshore Limited
Jason Marine Group Limited
Hengyang Petrochem Logistics Limited
Goodland Group Limited
Latitude Tree International Group Ltd.
Mary Chia Holdings Limited
Singapore Medical Group Limited
JLJ Holdings Limited
Heatec Jietong Holdings Ltd.
Teho International Inc Ltd.
Japan Foods Holding Ltd.
Westminster Travel Limited
Oct-09
Sep-09
Sep-09
Nov-09
Oct-09
Oct-09
Oct-09
Aug-09
Aug-09
Jul-09
Jul-09
Jul-09
Jun-09
Feb-09
Jan-09
Issue
price per
share
(S$)
PER
(times)
P/NTA
(times)
0.235
0.295
0.260
0.270
0.210
0.380
0.200
0.220
0.230
0.210
0.270
0.275
0.240
0.200
0.235
5.11
4.13
3.70
12.08
3.09
7.50
13.40
5.00
12.10
6.80
6.10
4.30
3.20
6.00
11.10
1.42
1.51
1.95
3.54
1.32
0.99
3.64
2.95
6.97
21.00
1.38
1.76
1.43
2.84
3.01
13.40
3.09
6.91
6.00
21.00
0.99
3.71
1.95
12.40
13.14
3.73
NM1
21.13
21.95
14.66
13.61
High
Low
Simple Average
Median
SAL Group
SSB Group implied by SSB Purchase
Consideration (4)
QR Group implied by QR Purchase
Consideration (Mar 2009) (2)
QR Group implied by QR Purchase
Consideration (June 2009) (3)
Feb-03
0.310
Notes:
(1)
Not meaningful
(2)
Based on Share price of S$0.330 as at the Latest Practicable Date and the audited historical financial statements
for QR as at 31 March 2009.
(3)
Based on Share price of S$0.330 as at the Latest Practicable Date and the proforma historical financial statements
for QR as at or for period ending 30 March 2009. The implied purchase consideration for the QR Group is computed
based on the number of shares to be issued and based on the financial performance of the QR Group for 30 June
2009.
(4)
Based on Share price of S$0.330 as at the Latest Practicable Date and the proforma historical financial statements
for SSB as at or for period ending 30 June 2009. The implied purchase consideration for the SSB Group is computed
based on the number of shares to be issued and based on the financial performance of the SSB Group for 30 June
2009.
I-36
APPENDIX I
SSB Group
For illustrative purposes, we have noted the following:SSB Group’s PER multiple of 13.14 times as implied by the SSB Purchase Consideration is higher
than the simple average and median of the Selected IPOs but is within the range of the Selected
IPOs.
QR Group
For illustrative purposes, we have noted the following:(a)
QR Group’s PER is 21.13 times as implied by the QR Purchase Consideration (Mar 2009) is
higher than all the PERs for the Selected IPOs.
(b)
QR Group’s PER is 14.66 times as implied by the QR Purchase Consideration (June 2009)
is higher than the PERs for all the Selected IPOs
(c)
QR Group’s P/NTA is 21.95 times as implied by the QR Purchase Consideration (Mar 2009)
is higher than the P/NTA for all the Selected IPOs.
(d)
QR Group’s P/NTA is 13.61 times as implied by the QR Purchase Consideration (June 2009)
is within the range for the P/NTA for the Selected IPOs but higher than the simple average
and median of the PERs for the Selected IPOs
From the above illustration, the valuation of the SSB Group as implied by the SSB Purchase
Consideration and the QR Group as implied by the QR Purchase Consideration (both Mar 2009
and June 2009) based on PER appears to be higher than those for the Selected IPOs.
However, we note that unlike an IPO, where the subscription of shares are paid in cash, the
Proposed Acquisitions provide for the sale of all the issued and paid up share capital of the SSB
Group and QR Group wherein the acquirer has control on management, board and cash flows.
Market quotations and trading activities for the SAL Group
Share Price Performance
The historical price chart (based on the daily closing prices) for the Shares during the period
commencing on 06 January 2009 and ending on the Latest Practicable Date is set out below
(being the one year period prior to the Latest Practicable Date):
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
Company Share Price
Share Price as at Latest Practicable Date
I-37
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
0.00
Feb-09
(i)
Jan-09
9.5
APPENDIX I
We observed that the Shares traded below the last transacted prices of the Shares as at
the Latest Practicable Date for majority of the period analysed and that the last transacted
prices of the Shares as at the Latest Practicable Date of S$0.33 is comparable to the last
transacted prices of the Shares as at the Announcement Date of S$0.325. The above chart
and the analysis below is presented for illustrative purposes only, and they are by no means
representative of the future trading performance or prices of the Shares.
SSB Purchase Consideration and QR Purchase Consideration
Based on the general observation of the chart above and after taking into account the
summary of the relevant transacted Share prices, we note that the values of the SSB
Purchase Consideration and QR Purchase Consideration as implied by the prices of the
Shares as at the Latest Practicable Date represents:
(a)
a premium of approximately 1.54% per cent. to the last transacted price per Share on
the Catalist of S$0.325 on the Announcement Date, being the last trading day of the
Shares on the SGX-ST prior to the Latest Practicable Date;
(b)
a premium of approximately 10.83% per cent. to the simple average of the last
transacted prices of the Shares on the SGX-ST of S$0.298 in the 30-day period prior
to (and excluding) the Latest Practicable Date;
(c)
a premium of approximately 5.39% per cent to the average of the last transacted
prices of the Shares on the SGX-ST of S$0.313 in the 60-day period prior to (and
excluding) the Latest Practicable Date;
(d)
a premium of approximately 11.00% per cent. to the average of the last transacted
prices of the Shares on the SGX-ST of S$0.297 in the 90-day period prior to (and
excluding) the Latest Practicable Date. We note that the last transacted prices of the
Shares had increased from S$0.21, as at the MOU Date, to S$0.33, as at the Latest
Practicable Date; and
(e)
a premium of approximately 64.39% per cent. to the average of the last transacted
prices of the Shares on the SGX-ST of approximately S$0.201 in the one-year period
prior to (and excluding) the Latest Practicable Date.
Shareholders are advised to note that it is generally accepted that the liquidity and ease of
buying or selling shares are generally higher for listed and quoted shares as compared to
unquoted shares.
(ii)
Market Liquidity
For illustrative purposes only, based on the historical daily trading volume for the Shares
during the period commencing on 06 January 2009 and ending on the Latest Practicable
Date (being the one year period prior to the Latest Practicable Date), we note that:
(a) From 06 January 2009 to the day prior to the Latest Practicable Date, the Shares were
traded on 239 trading days during the period with a total volume of approximately 171.1
million Shares, which represents approximately 16.05 per cent. of the total number of
Shares. The average daily trading volume of approximately 0.71 million Shares represents
approximately 0.07 per cent. of all the Shares outstanding as at the Latest Practicable Date.
(b) During the 12-month period prior to the Latest Practicable Date, the Shares were
traded on 239 trading days out of 257 days with highest and lowest trading volume being
approximately 14.2 million and 5,000 Shares respectively.
I-38
APPENDIX I
From the above, we note that while the Shares had been traded on the majority of the
market days, the volume of the Shares traded during the period analysed is substantially
less than the issued share capital of the Company. In general, it is usually accepted that the
more actively traded the share is, the greater the relative reliance on the market prices as a
determination of the fair value of the shares between willing buyers and willing sellers.
9.6
Financial Effects of the Proposed Acquisitions
The pro forma financial effects of the Proposed Acquisitions and the underlying assumptions are
set out in Section 10 of the Circular. We recommend that the Independent Directors advise the
Independent Shareholders to read those pages of the Circular carefully.
The following is an extract from the Circular and is set out in italics below. Unless otherwise defined or
the context otherwise requires, all terms defined in the Circular shall have the same meaning herein.
“10.
FINANCIAL EFFECTS OF THE PROPOSED ACQUISITIONS
The proforma financial effects of the Proposed Acquisitions on the Company as shown below
are for illustrative purposes only and are not indicative of the actual financial performance or
position of the enlarged group immediately after completion of the Proposed Acquisitions.
The objective of presenting the proforma financial effects of the Proposed Acquisitions as
shown below is to illustrate what the historical financial information might have been had
the Proposed Acquisitions been completed at an earlier date. However, such financial
information is not necessarily indicative of the results of the operations or the related effects
in the financial position that would have been attained had the Proposed Acquisitions been
completed at such earlier date.
The financial effects of the Proposed Acquisitions were prepared using the audited
consolidated financial statements of the Company for the financial year ended 30 June
2009, the proforma accounts of the SSB Group for FY2009 and the QR Proforma FY2009
Accounts and on the assumption that the total consideration will be S$339.18 million, i.e
comprising 1,025,635,634 Shares at the issue price of S$0.3307 (representing the weighted
average closing price of the Shares on the Latest Practicable Date), and take into account
the dividend of RM6.92 million declared by QR HoldCo on 31 December 2009.
(a)
Share Capital
The effects of the Proposed Acquisitions on the issued and paid-up share capital of the
Company for FY2009 are as follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
Number of shares(1) (’000)
Issued and Paid up Share Capital (RM’000)
1,121,907
81,919
2,147,543
152,934
Note:
(1)
(b)
The respective figures include the 55,808,000 treasury shares held by the Company.
Net Tangible Assets
The effects of the Proposed Acquisitions on the net tangible assets per share of the SAL
Group for FY2009, assuming the Proposed Acquisitions had been effected at the end of
FY2009 are as follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
NTA (RM’000)
Number of shares excluding treasury shares (’000)
NTA per share (RM sen)
I-39
159,685
1,066,099
14.98
161,319
2,091,735
7.71
APPENDIX I
(c)
Earnings per Share
The effects of the Proposed Acquisitions on the earnings per share of the SAL Group for
FY2009, assuming the Proposed Acquisitions had been effected the beginning of FY2009,
are as follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
Profit attributable to Shareholders (RM’000)
Number of shares excluding treasury shares (’000)
Earnings per share (RM sen)
(d)
19,088
1,066,099
1.79
80,656
2,091,735
3.86
Gearing
The effect of the Proposed Acquisitions on the gearing of the SAL Group for FY2009 is as
follows:
Before the Proposed After the Proposed
Acquisitions
Acquisitions
Deposits, cash and bank balances
Total borrowings (RM’000)
Net cash
Total shareholders’ funds (RM’000)*
Net gearing ratio**
61,630
2,521
59,109
168,397
Not applicable
62,552
2,883
59,669
170,031
Not applicable
* “Total shareholders’ funds” means the aggregate amount of issued and paid-up share capital and reserves.
** “Net gearing ratio” means the ratio of net debt to total shareholders’ funds.”
We note that although the Proposed Acquisitions based on the above financial effects are earnings
accretive, it would result in a lower value for the NTA per Share.
10.
OTHER CONSIDERATIONS IN RELATION TO THE PROPOSED ACQUISITIONS
The following factors should also be considered together with the other comments and issues
raised in this Letter and the contents of the Circular.
10.1 Analysis of shareholding and capital structure for the SAL Group
We note from the Proposed Acquisitions that approximately up to 1,025,635,634 Shares will be
issued in relation to the SSB Purchase Consideration and QR Purchase Consideration that in the
event inter alia, the Proposed Acquisitions are approved by Independent Shareholders.
The following tabulates the possible scenarios for illustrative purposes only.
Shareholdings based on the assumption that the Proposed Acquisitions are approved by
Independent Shareholders
Before the Proposed Acquisitions After the Proposed Acquisitions
Number of Shares
%
Number of Shares
%
Mr Goh
798,277,292
74.9%
1,791,086,347
85.6%
Other Shareholders
267,822,184
25.1%
300,648,763
14.4%
1,066,099,476
100.0%
2,091,735,110
100.0%
Total
I-40
APPENDIX I
We note that before the Proposed Acquisitions, Mr Goh (the sole vendor for the SSB Acquisition
and principal vendor for the QR Acquisition already has an interest of approximately 74.9%
(short of 75.0%) in the SAL Group and that his interest will increase to approximately 85.6%
after the Proposed Acquisitions. Independent Shareholders should note that the issuance of the
consideration shares would result in a reduction in their percentage interest in the SAL Group by
more than approximately 42.6%. Likewise, Independent Shareholders should note that Mr Goh’s
interest in the SAL Group, prior to the Proposed Acquisitions is already in excess of 50.0% and
close to 75.0% and that he already has a controlling interest in the Company.
10.2 Risk factors of the Proposed Acquisitions
We note that there are various risk factors in relation to the Proposed Acquisitions that have been
set out in Section 7.6 and Section 8.6 of this Circular.
“7.6
Risks
The business of the SSB Group is subject to a number of risks, a summary of which is set
out below:
The SSB Group may be affected by a worldwide economic downturn
In the event that there is a worldwide economic downturn, the business and operations of
the SSB Group may be adversely affected. For example, such downturn may result in a
decrease in IT capital expenditure and the overall demand for IT-applications by the banking
sector. This could result in lesser demand by customers in relation to the Structured Services
Business.
The SSB Group may face risks due to competition
Although the Structured Services Business is specific to the SIBS Software and, as such,
the market in which the SSB Group operates is niche and the barrier to entry is high, this
does not preclude other third party service providers from also providing such maintenance
and support services to customers using the SIBS Software. In the event that there are such
new market entrants, there is no guarantee that the SSB Group will be able to retain its
existing customer base and/or to obtain new contracts with customers who are using the
SIBS Software and failure to do so will adversely affect the SSB Group’s revenue.
The SSB Group is exposed to foreign exchange risks
The SSB Group is exposed to foreign exchange risks as its reporting currency is in RM but
its sales revenue is denominated in a number of different currencies, such as USD and/or
the local currencies of the countries in which it operates. Accordingly, any fluctuations in the
applicable foreign currency exchange rates may have an adverse impact on the financial
performance of the SSB Group.
The SSB Group is dependent upon its key management
The SSB Group’s continued success depends on its ability to identify, hire and retain
qualified and experienced management. In particular, the current key management of the
SSB Group has been instrumental in the growth of the Structured Services Business to date.
As such, the loss of any of such key personnel, without a suitable replacement, may have an
adverse impact on the business and operations of the SSB Group.
The SSB Group is dependent on its skilled workforce
The SSB Group’s continued success depends on its ability to identify, hire, train and retain
technical personnel with the requisite skills and who can provide quality support services
that meet the requirements of its customers. Limitations of the ability of the SSB Group to
hire, train and retain a sufficient pool of skilled technical personnel would limit its ability to
undertake the provision of the Structured Services Business and may have an adverse
impact on the business and operations of the SSB Group.
I-41
APPENDIX I
The SSB Group is dependent on the licensing and use of the SIBS software by
customers
The business of the SSB Group, namely the provision of maintenance, AMS and PCR
services to customers in relation to the SIBS Software is dependent upon both the continued
licensing and use of the SIBS Software by existing customers and the acquisition of new
customers for the SIBS Software. In the event that existing customers discontinue the use of
the SIBS Software and/or there are no new customers for the SIBS Software, the growth and
financial position and growth of the SSB Group will be adversely affected.
The SSB Group is exposed to risks specific to services contracts in relation to the
Structured Services Business
The majority of the SSB Group’s revenue is derived from contracts for the provision of
services which are based on fixed-prices and fixed-durations. The pricing for these services
contracts is based on the SSB Group’s internal estimates determined at the time when the
relevant contract is signed. Failure to estimate such services contracts costs accurately may
adversely affect the SSB Group’s margins and financial results. Incomplete specifications at
the outset or unanticipated difficulties encountered during the provision of the services may
require the SSB Group to channel more time and resources to complete the services and
this will adversely affect the financial performance of the SSB Group.
The SSB Group extends warranties to its customers in relation to the PCR services
The SSB Group provides warranties of between 3 to 6 months to customers under some of
its PCR service contracts. Such warranties require the SSB Group to rectify any defects or
errors in its works at no additional cost to its customers within the period of the warranty. To
date, the SSB Group has not incurred any significant liability for damages in respect of any
works undertaken. However, any failure of its services to operate properly could give rise to
a risk of claims against the SSB Group and/or the incurring of additional time and manpower
costs to rectify the same.
The performance of the SSB Group’s current operations may be adversely affected by
political and social uncertainties
The SSB Group has offices in Singapore, including Malaysia, Indonesia, Thailand and the
Philippines. Political and social uncertainties in these jurisdictions may lead to social tensions
which will adversely affect the local economies and market conditions of such countries, in
which event the business and financial performance of the SSB Group may be adversely
affected.
8.6
Risks
The business of the QR Group is subject to a number of risks, a summary of which is set out
below:
The QR Group is dependent upon its skilled workforce
A significant part of the QR Group’s operations is labor intensive and skilled workers with
technical and retail industry knowledge are required to support its services. Due to the nature
of the QR Group’s services, it may take between six to twelve months on-the-job training for
a new hire to attain the necessary skills and to become familiar with ‘PROFIT’ and its related
programs. Skilled workers are also not easily replaceable. An inability to recruit and retain
technically competent personnel could limit the QR Group’s output capacity, which could limit
its growth and adversely affect its operations.
The QR Group is dependent upon its key management
The QR Group relies upon its managing director, Mr See, and senior managers, including
Mr.Yew, Mr. Sim and Mr. Chieng, to oversee its operations, development and expansion
plans. The loss of any member of the QR Group’s key management team, without adequate
and timely replacements, could adversely affect its business. The growth of the QR Group
I-42
APPENDIX I
will depend on its ability to attract, retain and motivate the current management team, as well
as its ability to hire, retain and develop a second tier of employees to provide the increased
capacity needed to grow its business.
The QR Group is largely reliant on its major customers
The QR Group’s major customers are Aeon Co. (M) Bhd (“Aeon Malaysia”), Aeon (China)
Co. Ltd (“Aeon China”), Marks & Spencer PLC and Robinson & Company (Singapore)
Pte Ltd, which collectively accounted for more than 90% of its revenue for QRFY2009. Ongoing annual maintenance contracts, regular program change requests, as well as planned
expansion projects with the abovementioned customers will ensure a steady income stream
for the foreseeable future. Nevertheless, such maintenance services contracts with these
customers are generally renewable on a yearly basis and, therefore, although these key
customers have been with the QR Group for a considerable amount of time, there is no
assurance that the QR Group will be able to continue contracting with these customers in the
event that these customers decide to engage the services of a new software supplier. There
is also no assurance that the QR Group will be able to secure new customers.
The QR Group extends warranties to its customers which exposes it to potential
liabilities
The QR Group typically provides its customers with a six months warranty in respect of the
software licenses provided by the QR Group. Such warranties require the QR Group to rectify
any defects or errors in its solutions at no additional cost to its customers within the period of
the warranty. To date, the QR Group has not incurred any significant liability for damages in
respect of any services and solutions it has provided. However, any failure of its services and
solutions to operate properly could give rise to claims against the QR Group that, in turn,
could adversely impact its operations and financial performance.”
Should any of the considerations and uncertainties highlighted in the aforementioned risk factors
develop into actual events, the business, financial condition or results of the operations of the
Group, the Company, SSB, the SSB Group, QR, the QR Group or the Silverlake Private Entities
could be materially and adversely affected.
Although both the QR Group and the SSB Group is dependent on its principal customers (wherein
it has been estimated that a single principal customer of the QR Group contributed more than 75%
of the QR Group’s revenue, while the top 13 customers of the SSB Group contributed approximately
71.2% of the SSB Group’s revenue), the Proposed Acquisitions will allow the Group to leverage on
its proprietary software, customer base while tapping into the anticipated convergence of markets
and product/services offerings.
Independent directors should note that as both the SSB Group and the QR Group are dependent
on its principal customers and that the period or events as provided for in the agreements for
adjustments for contracts termination, may not fully reflect the extent of the customer concentration.
10.3 Alternative investment opportunity
As at the Latest Practicable Date, the Directors have confirmed that they are not aware of any
alternative investment opportunity available to the Company, which is comparable in nature, size
and scope to the Proposed Acquisitions which would allow the Group to leverage on its existing
resources.
10.4 Scenario Analysis of the Purchase Consideration of the Proposed Acquisitions
On basis and assumption that the SSB Consideration Shares are issued at the price of S$0.330
each, being the last transacted price of the Shares on Latest Practicable Date, the value for the
SSB Purchase Consideration is approximately S$290.2 million.
I-43
APPENDIX I
SSB Purchase Consideration
For illustrative purposes only, the following tabulates the number of consideration shares, and the
various implied SSB Purchase Consideration based on last transacted price of the Shares prior to
the MOU Date of S$0.210, last transacted Share price on the Latest Practicable Date of S$0.330,
the volume-weighted average Share price for the three-month period prior to the MOU Date of
S$0.175 and volume-weighted average Share price for the three-month period prior to the Latest
Practicable Date of S$0.309, based on the formula as stipulated in Section 2 of the Circular and
the modification of the formula as shown below.
Scenario
Formula
1
FY2009 PBT of SSB Group/ Average PBT of the SAL Group for FY2009, FY2008
and FY2007 based on the audited accounts of the SAL Group for FY2007, FY2008
and FY2009
2
FY2009 PBT of SSB Group/ FY2009 PBT of the SAL Group
3
Average PBT of SSB Group/ Average PBT of SAL Group
Implied SSB
Implied SSB
Purchase
Purchase
Implied SSB
Implied SSB
Consideration
Consideration
Purchase
Purchase
based on
based on
Consideration
Consideration
volume-weighted
volume-weighted
based on last
based on last
average Share
average Share
transacted
transacted Share
price for the
price for the
Share price
price prior to
three-month
three-month
on the Latest
MOU Date
period prior
period prior to Practicable Date
(S$)
to the Latest
MOU Date
(S$)
Practicable Date
(S$)
(S$)
Scenario
Number of SSB
Consideration
Shares
1
879,388,625
184,671,611
153,893,009
290,198,246
272,074,987
2
3,002,664,269
630,559,496
525,466,247
990,879,209
928,997,507
3
741,610,145
155,738,131
129,781,775
244,731,348
229,447,556
We note from the Directors that the term for the Proposed Acquisitions were arrived on a willing
buyer and seller basis and that these were based on historical trends, profit margins and financial
performance for the SSB Group and the QR Group which were significantly higher than those for
the SAL Group.
Independent Shareholders should note that there is a material difference, between the formula
as agreed between the parties (Scenario 1) and those as shown above for Scenario 2 and 3,
which would in the case for Scenario 3 (based on the ratios of average PBT for the SSB Group
as compared to that for the SAL Group) result in a lower number of Shares to be issued and
correspondingly, a lower purchase consideration for the SSB Group. However, we note that this
has to be analysed in the context of a decline profit and revenues for the SAL Group (FY2009 as
compared to FY2008) as compared to growth in revenues and improved profitability for the SSB
Group.
QR Purchase Consideration Analysis
On basis and assumption that the QR Consideration Shares are issued at the price of S$0.330
each, being the last transacted price of the Shares on 5 January 2010 on the Latest Practicable
Date, the value for the QR Purchase Consideration is approximately S$48.3 million.
I-44
APPENDIX I
For illustrative purposes only, based on last transacted Share price prior to the MOU Date of
S$0.210, last transacted Share price on the Latest Practicable Date of S$0.330 and the volumeweighted average Share price for the three-month period prior to the MOU Date of S$0.175 and
volume-weighted average Share price for the three-month period prior to the Latest Practicable
Date of S$0.309 based on the formula as stipulated in Section 3 of the Circular and the modification
of the formulas as shown below.
Scenario
Formula
1
FY2009 PBT of QR Group/ Average PBT of the SAL Group for FY2009, FY2008
and FY2007 based on the audited accounts of the SAL Group for FY2007,
FY2008 and FY2009
2
FY2009 PBT of QR Group/ FY2009 PBT of the SAL Group
3
Average PBT of QR Group
(1)
/ Average PBT of SAL Group
Implied QR
Implied QR
Purchase
Implied QR
Purchase
Consideration
Implied QR
Purchase
Consideration
based on
Purchase
Consideration
based on
volume-weighted
Consideration
based on last
volume-weighted
average Share
based on last
transacted
average Share
price for the
transacted Share
Share price
price for the
three-month
price prior to
on the Latest
three-month
period prior
MOU Date (S$)
Practicable Date
period prior to
to the Latest
(S$)
MOU Date (S$)
Practicable Date
(S$)
Scenario
Number of QR
Consideration
Shares
1
146,247,009
30,711,872
25,593,227
48,261,513
45,247,518
2
499,359,049
104,865,400
87,387,834
164,788,486
154,497,230
3
44,738,308
9,395,045
7,829,204
14,763,642
13,841,633
Notes:
(1)
Average PBT of QR Group = Average PBT of MarFY2009, MarFY2008 and MarFY2007
Like in the case of the SSB Acquisition, Shareholders should note the material differences in
the number of shares that will be issued pursuant to the agreed terms between the parties as
compared to the case for Scenario 3 which would result in a significantly lower number of Shares to
be issued based on the ratio of the average PBT for the QR Group (based on its audited financial
statements for period ending 31 March 2009, to the average PBT for the SAL Group. Similarly, we
note the significant growth in revenues for QR Group for the period ending 31 March 2008 and
2009 and the improvement in profit margins as compared to the financial performance of the SAL
Group as mentioned earlier.
We note that the parties have agreed for the QR Acquisitions to use the 12 month period
ended 30 June 2009, instead of the audited financial statements as at 31 March 2009 for the
determination of consideration. This has resulted in a higher profit before tax figure of approximately
RM4.5 million (approximately 81.2% more), being used for the determination of the QR Purchase
Consideration and correspondingly an approximately 81.2% increase in consideration. We note that
the number of Shares and accordingly the purchase consideration for the SSB Group and the QR
Group pursuant to the SSB and QR Sales and Purchase Agreements (as enumerated in scenario 1
above) is significantly lower than the case wherein the FY2009 PBT of the SSB Group and the SAL
Group is used (scenario 3 above).
I-45
APPENDIX I
10.5 Comparison between the listing SAL Group, the QR Group and the SSB Group
Company Name
Date
SAL Group
Feb-03
Issue
price per
share
PER
(S$)
(times)
12.40
3.73
Latest
0.33
Practicable Date
QR Group implied by QR Purchase Consideration (Mar 2009) (2)
QR Group implied by QR Purchase Consideration (June 2009) (3)
44.71
5.07
21.34
14.80
22.17
13.74
SSB Group implied by SSB Purchase Consideration (4)
13.27
NM1
SAL Group
0.310
P/NTA
(times)
Notes:
(1)
Not meaningful
(2)
Based on Share price of S$0.330 as at the Latest Practicable Date and the audited historical financial statements
for QR Group as at 31 March 2009.
(3)
Based on Share price of S$0.330 as at the Latest Practicable Date and the proforma historical financial statements
for QR Group as at or for period ending 30 March 2009. The implied purchase consideration for the QR Group is
computed based on the number of shares to be issued and based on the financial performance of the QR Group for
30 June 2009.
(4)
Based on Share price of S$0.330 as at the Latest Practicable Date and the proforma historical financial statements
for SSB Group as at or for period ending 30 June 2009. The implied purchase consideration for the SSB Group is
computed based on the number of shares to be issued and based on the financial performance of the SSB Group
for 30 June 2009.
We note that the PER of the QR Group and the SSB Group as implied by the QR Purchase
Consideration and SSB Purchase Consideration is higher than the PER of Silverlake Axis during its
initial public offering (“IPO”).
For P/NTA, we note that the ratio is not meaningful for the SSB Group while the QR Group’s P/NTA
is significantly higher than the P/NTA of Silverlake Axis during its IPO.
We note that although, the PER and P/NTA multiples for the Proposed Acquisitions is higher than
that compared to the Company for its IPO as illustrated above, the Company will be issuing Shares
as consideration for its Proposed Acquisitions and as at the Latest Practicable Date, the valuation
statistics of the Company (the PER and P/NTA multiples) are significantly higher than those during
its IPO days.
Shareholders should note that the above illustration of the comparative valuation statistics may
be limited in terms of market conditions then prevailing, the general sentiments of the market
with regards to stocks and shares as well as the relative demand for the shares of the particular
industry, actual or perceived for the Company as well as the industry and the fact that the Company
is acquiring 100% of both the issued and paid up capital of the SSB and QR Group.
I-46
APPENDIX I
10.6 Proposed Ancillary Transactions
We note that the purpose of the ancillary transactions is to, inter alia, effect the Proposed
Acquisitions and provide for, inter alia, the following:
(i)
the novation provisions of the SSB Contracts to the SSB Group or, where a novation cannot
be achieved for any reason, the Silverlake Private Entities and/or the SIP Group are required
to take steps to procure the legal assignment of the benefits of the applicable SSB Contracts
to the SSB;
(ii)
the continued maintenance by the applicable Silverlake Private Entity and/or SIP Group
Company of such performance bond (which had previously been issued or furnished to a
customer in connection with an SSB Contract that has not yet been novated to the SSB
Group) subject to the corresponding SBB Group Company bearing any bank charges or
commission payable in connection with the issuance of such performance bond; and
(iii)
Silverlake Private Entities and/or the SIP Group to continue as a party to and/or to enter into
new SSB Contracts (subject to the other provisions of the Restructuring Arrangements) in
the certain situations outlined in Section 12.2 of the Circular and below.
The Restructuring Arrangements also allow the Silverlake Private Entities and/or the SIP Group to
continue as a party to and/or to enter into new SSB Contracts (subject to the other provisions of
the Restructuring Arrangements) in the following situations:
(a)
where negotiations with the customer on the applicable contracts were on-going as at the
date of the Restructuring Arrangements and provided the execution of such contracts takes
place prior to 30 April 2010;
(b)
where the contract relates to the provision of maintenance services under an existing
maintenance agreement that is due for renewal prior to 30 April 2010; and
(c)
where the SSB Contracts relate to projects which are still in the process of being
implemented by the Silverlake Private Entities or SIP Group on behalf of a customer.
The above provides for continuation in negotiations and renewal of contracts as well as
implementation of projects and should be viewed in the context of the Proposed Acquisition, which
essentially is, inter alia, to acquire the business and undertaking of the SBB Group and the QR
Group with provisions for determination of Terminated SSB Contracts, wherein a limit has been
agreed between the parties.
10.7 Restrictions on SBB Vendor and QR Vendors
The relevant restrictions for the vendor(s) of the SBB Acquisition and the QR Acquisition has been
set out in Sections 2.5 and 3.5 of the Circular and we recommend that Independent Shareholders
read those sections carefully.
We note from the provisions for anti-competition, that has been agreed and its applicability, that
for so long as the SSB Vendor remains a Controlling Shareholder and/or director of the Company,
he and/or such other parties stipulated therein, is restricted subject to those provisions to engage
or be engaged, concerned or interested, directly or indirectly, in operating, performing and/or
carrying on activities equivalent or similar to the Structured Services Business (“SSB Competing
Business”).
Likewise the SSB Vendor will undertake that if there should be any business opportunity offered to
the SSB Vendor and/or any of the Silverlake Private Entities and/or the SIP Group Companies and/
or any other company outside of the SAL Group that the SSB Vendor controls (“Vendor-related
Entities”), as the case may be, after the date of the SSB Sale and Purchase Agreement which
relates to the SSB Competing Business (“New Opportunities”), the SSB Vendor shall and shall
procure that the Vendor-related Entities will comply the procedures as set out in Section 2.5 of
the Circular, which inter alia contains procedures for notification of such opportunities and also
I-47
APPENDIX I
the SAL Group having to seek the approval of its board of directors on whether to reject the
New Opportunity and whether to grant its consent to the offeror pursuing the New Opportunity.
We understand from the Directors that procedures and policies are in place for the compliance of
such notice and evaluation of New Opportunity, and is consistent and compliant with any prevailing
guidelines or rules or laws governing such transactions wherein a Controlling Shareholder
or Director (or such other interested persons as may be defined in the Listing Manual) may be
interested in.
Likewise we note, in general, similar provisions for the QR Vendors.
10.8 Inter-conditional resolutions
We note that the SSB Acquisition and the QR Acquisition are both conditional on each other.
We note and understand from the Directors, that although the vendors for both acquisitions are
different, the provision for conditionality reflects arms length negotiations on a willing buyer and
seller basis and that it should be viewed in the context of QR’s relative size in terms of revenues
and profits as well as its historical growth in revenues, with improved profitability. In addition, the
Directors believe that the acquisition of both companies will be complementary, as the business
activities of the QR Group and the SSB Group are complementary to each other as well as to
those of the SAL Group, and that the QR Acquisition will provide opportunities for the enlarged
SAL Group (after the Proposed Acquisitions and through the SSB Group) to grow its offering of
proprietary software solutions for retail businesses through reliable maintenance services. Likewise
the QR Acquisition would also increase the possible “captive” customer base for maintenance
services while providing opportunities for the SAL Group to offer complementary banking and retail
solutions, services and products.
11.
OPINION
In arriving at our opinion in respect of the Proposed Acquisitions and Proposed Ancillary
Transactions, we have taken into account, reviewed and examined the factors which we consider
to be pertinent and to have a bearing on our assessment of the Proposed Acquisitions and the
Proposed Ancillary Transactions, including, inter alia, the following factors summarised below as
well as elaborated elsewhere in our Letter. The following should be read in conjunction with, and in
the context of, the full text of this Letter.
(a)
The historical financial performance of the SAL Group and the financial performance of the
SSB Group and the QR Group.
(b)
The valuation of the SSB Group based on the last transacted prices of the Shares, as at the
Latest Practicable Date and as implied by the SSB Purchase Consideration is approximately
S$290.2 million. Additionally, the valuation of the SSB Group based on the price as implied
by the SSB Purchase Consideration is lower as compared to the simple average and median
for the PER and EV/EBITDA multiples for the Selected Companies. Likewise, the SSB
Group’s PER and EV/EBITDA multiples based on the last transacted prices of the Shares,
as at the Latest Practicable Date and as implied by the SSB Purchase Consideration
is significantly lower than those for SAL. This is despite the fact that the SSB Group had
relatively better profit margins and asset turnover.
(c)
The historical financial performance of the SSB Group as reflected by its net profit
margins and asset turnover appears to be better than those for the Selected Companies,
notwithstanding the fact that like SAL, its the end customers have significant buying power
and may have been affected by the global financial crisis. SSB Group’s financial performance
in terms of net profit margins is significantly better than those for the SAL Group despite the
fact that they operate in similar industries with financial institutions as end customers and
may be attributable to the nature of their respective products and services.
(d)
The historical performance of the QR Group as reflected by its ROE, net profit margin and
asset turnover appears to be better than those for the Selected Companies and the ratio of
its total assets to total liabilities, total liabilities to SHF and total borrowings to SHF is within
the range of the Selected Companies and lower than the simple average of the Selected
I-48
APPENDIX I
Companies. QR Group’s financial performance in terms of ROE, net profit margins is
significantly better than those for the SAL Group. We note that although the two companies
operate in similar industries, they serve customers in different industries.
(e)
The QR Purchase Consideration represents a premium of approximately 2,095.0% from
the NTA of the QR Group as at 31 March 2009. The Adjusted QR Purchase Consideration
(Mar 2009) represents a premium of approximately 4,199.2% from the NTA less cash of the
QR Group as at 31 March 2009. The Adjusted QR Purchase Consideration (June 2009)
represents a premium 3,322.0% from the NTA less cash of the QR Group as at 30 June
2009.
(f)
The value of QR Group based on the last transacted prices of the Shares, as at the Latest
Practicable Date and as implied by the QR Purchase Consideration (based on June 2009) is
significantly lower (based on PER and EV/EBITDA mulitiples) than those for the SAL Group
and in general, the Selected Companies. However on a P/NTA basis, the value for the QR
Group based on the last transacted prices of the Shares, as at the Latest Practicable Date
and as implied by the QR Purchase Consideration (based on June 2009) is higher than
those for the SAL Group and in general, the Selected Companies. In addition, we note that in
general, companies like the SAL Group, the SSB Group and the QR Group and the Selected
Companies usually trade or are valued on earnings and EBITDA multiples as compared to
the net tangible assets basis. Likewise, we note that although the SAL Group had developed
proprietary software and intellectual properties, these may not have been incorporated and
reflected in its financial statements. The computation on NTA for QR Group (like (e) above)
is necessarily limited in view of the dividends which have been declared subsequent to the
financial year end and has reduced the NTA of the QR Group significantly.
(g)
The PER multiple for the SSB Acquisition and QR Acquisition, based on the Aggregate PAT
for the SSB Group (FY2009) and the QR Group (based on audited financial statements
for financial year ended 31 Mar 2009) is lower than the simple average and median for the
Selected Companies as well as that for SAL, despite the fact that both the SSB Group and
the QR Group had exhibited better historical financial performance in general (profitability
and where applicable ROE). The PER multiple for the SSB and QR Acquisition, based on
the Aggregate PAT for the SSB Group (FY2009) and the QR Group (based on proforma
financial statements for 12 months ended 30 June 2009)) is lower than the simple average
and median for the Selected Companies as well as that for SAL.
(h)
The EV to EBITDA multiple for the SSB and QR Acquisition (based on SSB Group (FY2009)
and the QR Group (audited financial statements for financial year ended 31 Mar 2009)) is
lower than the simple average and median for the Selected Companies as well as that for
SAL, despite the generally better historical financial performance in general (profitability
and where applicable ROE) as mentioned in this letter. The EV to EBITDA multiple for the
SSB Acquisition and QR Acquisition (based on SSB Group (FY2009) and the QR Group
(proforma financial statements for the 12 months ended 30 June 2009)) is lower than the
simple average and median for the Selected Companies as well as that for SAL, despite the
generally better historical financial performance in general (profitability and where applicable
ROE) as mentioned in this letter.
(i)
In general, the SSB Purchase Consideration and QR Purchase Consideration values
the SSB Group and QR Group at values lower than the comparative ratios for the
Selected Companies and SAL. As shares would be used as a currency for the purchase
considerations, it appears that the Proposed Acquisitions will be made or paid for by Shares,
which the market has valued on a relatively higher basis than the values for the SSB Group
and the QR Group as implied by their respective purchase considerations pursuant to the
respective agreements.
(j)
Share price performance of SAL and the market liquidity of the Shares of SAL from
6 January 2009 to the Latest Practicable Date. In particular, we observed that the Shares
traded below the last transacted prices of the Shares as at the Latest Practicable Date for
majority of the period analysed and that the last transacted prices of the Shares as at the
I-49
APPENDIX I
Latest Practicable Date of S$0.33 is comparable to the last transacted prices of the Shares
as at the Announcement Date of S$0.325. Thus as the SSB and QR Purchase Consideration
would be paid via the issuance of Shares, the Company will be issuing Shares for the
Proposed Acquisitions, at prices which were generally higher than those traded in the market
for the 12-month period prior to the Announcement Date.
(k)
The SSB Group does not have any trade payables and inventory and its trade receivable
days is lower than simple average and median for the Selected Companies but within the
range of the Selected Companies. Its working capital cycle is higher than the simple average
and median of the Selected Companies but within the range of the Selected Companies.
(l)
The QR Group’s does not have any inventory. The trade receivable and payable days for
both QR Group (based on Mar 2009) and QR Group (based on June 2009) are lower than
the simple average and median of the Selected Companies. Notwithstanding the lower trade
receivable days which was offset by its relatively shorter trade payable days, the working
capital cycle for the QR Group (based on Mar 2009) and the QR Group (based on June
2009) are both within the range but higher than the simple average and median for the
Selected Companies. As compared to the SAL Group, both the SSB Group and the QR
Group have a significantly longer working capital cycle and within the range for the Selected
Companies.
(m)
The financial effects of the Proposed Acquisitions, which indicates that the Proposed
Acquisitions are earnings accretive.
(n)
The rationale for the Proposed Acquisitions, which we note will expand the Company’s
income base, add range and depth to its existing application services offerings and enhance
its customer base and network. It will also allow the enlarged group, comprising the SAL
Group, the SSB Group and the QR Group, to market its software solutions to conglomerates
with banking and retail businesses.
(o)
Shareholding structure for the SAL Group before and after the Proposed Acquisitions and
the fact that as at the Latest Practicable Date and prior to the Proposed Acquisitions, Mr Goh
the SSB Vendor and one of the QR Vendors, has an interest of approximately 74.5% in the
Share capital of the Company and this is very close to the three-quarters majority required
for approval for most special resolutions.
(p)
Risk factors in relation to the Proposed Acquisitions.
(q)
As at the Latest Practicable Date, the Directors have confirmed that they are not aware of
any alternative investment opportunity available to the Company, which is comparable in
nature, size and scope to the Proposed Acquisitions which would allow the Group to leverage
on its existing resources.
(r)
The Proposed Ancillary Transactions which will allow SAL to effect the Proposed
Acquisitions.
In addition, we understand from the Company that the majority of SSB Group’s revenue is
contributed by the maintenance contracts that arise pursuant to customer purchases of software
licenses from the SAL Group. In this respect, the SSB Group may be viewed to be complementary,
albeit dependent on the the SAL Group since SAL holds the proprietary rights to the software and
owes no obligation to the SSB Group to recommend or sell the services of the SSB Group to SAL’s
clients.
The requirements of the SAL Group’s customers, being banks and/or financial institutions, we
understand and note is highly stringent due the regulatory requirements of the respective governing
bodies which stems from the high degree of frequency and volume of the transactions involved in
the day to day operations of banks and/or financial institutions. The reliability of a system is likely
and may be dependent on the maintenance support provided and reliability in this respect, is likely
to be valued and essential. Thus, we note that both the SAL Group and QR Group are mutually
I-50
APPENDIX I
dependent and complimentary to each other. Notwithstanding the mutual dependence, we note
that the Proposed Acquisitions will be satisfied via Shares of SAL, whose value is relatively higher
than the values to be paid for the Proposed Acquisitions as implied by their respective purchase
considerations.
In light of SSB Group’s strong track record, skilled labour force and in depth technical knowledge
of the SIBS System as demonstrated by the growth in revenues and profitability, we note that
the Directors believe that the SSB Acquisition is a realistic option for the SAL Group to develop
maintenance services (as opposed to organic development or growth of such services) and that
the integration of sale and maintenance of proprietary software will enhance the SAL Group’s value
added and product/services offerings. As the viability and continued growth of the SAL Group’s
business lies with the success and reliability of SIBS Systems, and is likely to be contingent on
reliable maintenance services for end clients, the SSB Acquisition will allow the Group to control an
essential part of value chain of its services / products.
We also understand that the Directors believe the acquisition of SSB Group will provide SAL with
a recurring stream of revenue as the earnings from maintenance contracts are mainly fixed and
locked-in as opposed to the cyclical nature of the current business of the SAL Group which is
highly dependent on the sale of software licenses of its SIBS System.
In summary, having regard to our analysis in this Letter and the generally relatively lower valuation
implied by the SSB Acquisitions and QR Acquisitions as compared to the Selected Companies
and those for SAL, subject to the assumptions and qualifications set out in the Letter, we are of
the opinion that the Proposed Acquisitions and Proposed Ancillary Transactions are on normal
commercial terms and are not prejudicial to the interests of the Company and the Independent
Shareholders.
12.
ACTION TO BE TAKEN BY SHAREHOLDERS
Shareholders who are unable to attend the forthcoming SGM are requested to complete the Proxy
Form enclosed in the Circular in accordance with the instructions printed thereon and return them
so as to arrive at the office of Boardroom Corporate & Advisory Services Pte Ltd at 3 Church Street
#08-01, Samsung Hub, Singapore 049483. not less than 48 hours before the time fixed for the
SGM. Alternatively, they could follow the procedures as outlined in Proxy Form for the appointment
of proxies.
The completion and lodgement of Proxy Forms will not prevent Shareholders from attending and
voting in person at the SGM if they subsequently wish to do so. In such event, the relevant Proxy
Forms will be deemed to be revoked. In addition, Shareholders are advised to read Section 19 of
the Circular carefully so that the appropriate action can be taken.
This Letter is addressed to the Independent Directors in connection with and for the purposes
of their evaluation of the financial terms of the Proposed Acquisitions and Proposed Ancillary
Transactions. Whilst a copy of this letter may be included in the Circular, neither the Company nor
the Directors nor any other party, may reproduce, disseminate or quote this Letter (or any part
thereof) for any other purpose at any time and in any manner without the prior written consent of
ACA in each specific case, except for the purpose of the discussion if any and on the Proposed
Acquisitions and Proposed Ancillary Transactions and at the forthcoming SGM. This opinion is
governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to
the matters and the scope of our appointment stated herein and does not apply by implication to
any other matter. Nothing herein shall confer or be deemed or is intended to confer any right of
benefit to any third party and the Contracts (Rights of Third Parties) Act Chapter 53B and any reenactment thereof shall not apply.
I-51
APPENDIX I
The recommendations made by the Independent Directors to the Shareholders in relation to the
Proposed Acquisitions and Proposed Ancillary Transactions and the issue of the Circular shall
remain the sole responsibility of the Independent Directors and the Directors respectively.
Yours faithfully,
For and on behalf of
ASIAN CORPORATE ADVISORS PTE. LTD.
H.K. LIAU
MANAGING DIRECTOR
FOO QUEE YIN
MANAGING DIRECTOR
I-52
APPENDIX II
II-1
APPENDIX II
II-2
APPENDIX II
II-3
APPENDIX II
II-4
APPENDIX II
II-5
APPENDIX II
II-6
APPENDIX II
II-7
APPENDIX II
II-8
APPENDIX II
II-9
APPENDIX II
II-10
APPENDIX II
II-11
APPENDIX II
II-12
APPENDIX III
QR GROUP
UNAUDITED MANAGEMENT ACCOUNTS FOR THE TWELVE MONTHS ENDED
30 JUNE 2009
Unaudited Special Purpose Consolidated Income Statements
Financial year ended
30 June 2009
RM’000
Revenue
Cost of sales
19,030
(7,981)
Gross profit
11,049
Other income
Administrative expenses
Other operating expenses
Finance charges
81
(624)
(378)
(19)
Profit before tax
Tax expense
10,109
(2,120)
Profit for the financial year
7,989
III-1
APPENDIX III
Unaudited Special Purpose Consolidated Balance Sheet
As at 30 June 2009
RM’000
Non-current assets
Property, plant and equipment
588
Current assets
Cash and bank balances
Trade and other receivables
Amounts due from directors
Tax recoverable
5,340
3,685
2,500
2
11,527
Current liabilities
Trade and other payables
Current income tax liabilities
Hire purchase liabilities
1,536
1,592
55
3,183
Net current assets
8,344
8,932
Shareholders’ equity
Share capital
Foreign currency translation reserve
Capital reserve
Retained earnings
1,170
4
467
6,964
8,605
Non-current liabilities
Hire purchase liabilities
Deferred tax liabilities
307
20
327
8,932
Note:
Subsequent to FY2009, on 31 December 2009, QR HoldCo declared an interim, single-tier exempt, dividend amounting to RM6.92
million in respect of QRFY2010. Part of the dividend of RM6.92 million will be used to settle the outstanding directors’ loan of RM2.5
million and the balance amount of RM4.42 million will be paid in cash.
III-2
NOTICE OF SPECIAL GENERAL MEETING
SILVERLAKE AXIS LTD
(Company Registration No. 32447)
(Incorporated in Bermuda)
NOTICE OF SPECIAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that a Special General Meeting of Silverlake Axis Ltd (“Company”) will be
held at Pan Pacific Singapore, 7 Raffles Boulevard, Marina Square, Singapore 039595, on 28 January
2010 at 11.30 a.m. for the purpose of considering and, if thought fit, passing the following ordinary
resolutions, with or without any modifications:
ORDINARY RESOLUTIONS:
Resolution 1:
The SSB Acquisition
That conditional upon the passing of Resolution 2, Resolution 3, Resolution 4 and Resolution 5:
(a)
(b)
approval be and is hereby given for the acquisition (“SSB Acquisition”) by the Company from Mr.
Goh Peng Ooi (“SSB Vendor”), a director and Controlling Shareholder (as defined in the Circular)
of the Company, of 160 ordinary shares (“SSB Sale Shares”) being the entire issued and paid-up
share capital of Silverlake Solution Limited (“SSB HoldCo”) at a consideration to be satisfied by
way of issue of new shares in the capital of the Company on the terms and conditions of the Sale
& Purchase Agreement dated 6 January 2010 (“SSB Sale & Purchase Agreement”), such new
shares in the capital of the Company shall be allotted and issued to the SSB Vendor and/or his
nominee(s) in two tranches as follows:
(i)
70% upon the SSB Completion Date (as defined in the Circular) in accordance with the
provisions of the SSB Sale & Purchase Agreement;
(ii)
the balance 30% by 14 May 2010 in the event that there is no adjustment pursuant to
paragraph 2.2.2 of the Circular; and
(iii)
in the event there is any adjustment pursuant to paragraph 2.2.2 of the Circular, the balance
30%, as adjusted, will be allotted and issued within 14 days after determination of the
amount of adjustment.
the directors of the Company (other than Mr. Goh Peng Ooi who is deemed to be interested in the
SSB Acquisition) or any one of them be, and are hereby authorised to complete, and do all such
acts and things (including modifying the SSB Sale & Purchase Agreement and executing all such
documents as may be required under or pursuant to the SSB Sale & Purchase Agreement) or
as they and/or he may consider expedient or necessary or in the interest of the Company to give
effect to the SSB Acquisition and/or this Resolution.
Resolution 2:
The QR Acquisition
That conditional upon the passing of Resolution 1, Resolution 3, Resolution 4 and Resolution 5:
(a)
approval be and is hereby given for the acquisition (“QR Acquisition”) by the Company from Mr.
Goh and Mr. See Chuang Thuan (who holds 77.55% and 22.45% of the issued and paid up share
capital of QR HoldCo respectively) (collectively, “QR Vendors”) of 1,170,000 ordinary shares (“QR
Sale Shares”) being the entire issued and paid-up share capital of QR Technology Sdn. Bhd. (“QR
HoldCo”) at a consideration to be satisfied by way of issue of new shares in the capital of the
Company on the terms and conditions of the Sale & Purchase Agreement dated 6 January 2010
(“QR Sale & Purchase Agreement”); and
(b)
the directors of the Company (other than Mr. Goh Peng Ooi who is deemed to be interested in the
QR Acquisition) or any one of them be, and are hereby authorised to complete, and do all such
acts and things (including modifying the QR Sale & Purchase Agreement and executing all such
NOTICE OF SPECIAL GENERAL MEETING
documents as may be required under or pursuant to the QR Sale & Purchase Agreement) or as
they and/or he may consider expedient or necessary or in the interest of the Company to give
effect to the QR Acquisition and/or this Resolution.
Resolution 3:
Proposed Allotment and Issuance of new shares in the Company in connection
with the SSB Acquisition and the QR Acquisition (collectively, the “Proposed
Acquisitions”)
That conditional upon the passing of Resolution 1, Resolution 2, Resolution 4 and Resolution 5:
(a)
approval be and is hereby given for the allotment and issuance of up to 1,025,635,634 new shares
in the Company to the SSB Vendor and the QR Vendors and/or their nominee(s), of which up to
992,809,055 ordinary shares in the Company will be allotted and issued to Mr. Goh and/or his
Associate(s) (as defined in the Listing Manual – Section B: Rules of Catalist), in satisfaction of the
purchase consideration under the Proposed Acquisitions (“Proposed Issue”); and
(b)
the directors of the Company, or any one of them be, and are hereby authorised to complete,
and do all such acts and things (including without limitation entering into all such transactions,
arrangements and agreements and executing all such documents) as they may consider necessary
or expedient for the purposes of giving effect to the Proposed Issue and/or this Resolution.
Resolution 4:
The Proposed Increase in Authorised Share Capital of the Company
That conditional upon the passing of Resolution 1, Resolution 2, Resolution 3 and Resolution 5:
(a)
approval be and is hereby given for the proposed increase in the authorised share capital of the
Company (“Proposed Increase in Authorised Share Capital”) from US$40,000,000, comprising 2
billion ordinary shares of par value US$0.02 each, to US$80,000,000, comprising 4 billion ordinary
shares of par value US$0.02 each, by the creation of 2 billion new shares of par value US$0.02
each; and
(b)
the directors of the Company or any one of them be, and are hereby authorised to issue and allot
shares and convertible securities (whether by way of rights, bonus or otherwise) in the Company at
any time and upon such terms and conditions and for such purposes and to such persons as the
Directors of the Company shall in their absolute discretion deem fit, provided that the aggregate
number of shares and/or convertible securities to be issued pursuant to such authority shall not
exceed 100% of the number of shares in the issued share capital of the Company excluding
treasury shares, and that the aggregate number of shares and/or convertible securities to be issued
other than on a pro-rata basis to the then existing shareholders of the Company shall not exceed
50% of the number of shares in the issued share capital of the Company excluding treasury shares.
Unless revoked or varied by the Company in a general meeting, such authority shall continue in full
force until the conclusion of the next annual general meeting of the Company or the date by which
the next annual general meeting is required by law to be held, whichever is earlier, except that the
Directors shall allot and issue new shares pursuant to the convertible securities notwithstanding
that such authority has ceased.
For the purposes of this Resolution 4 and pursuant to Rule 806(3) of the Rules of Catalist, the
percentage of the total number of issued shares excluding treasury shares is based on the
Company’s total number of issued shares excluding treasury shares at the time of the passing of
the resolution approving the mandate after adjusting for (i) new shares arising from the conversion
or exercise of convertible securities; (ii) new shares arising from exercising share options or vesting
of share awards outstanding or subsisting at the time such authority is given, provided that the
options or awards were granted in compliance with the Rules of Catalist, and (iii) any subsequent
bonus issue, consolidation or subdivision of shares.
NOTICE OF SPECIAL GENERAL MEETING
Resolution 5:
The Proposed Ancillary Transactions
That conditional upon the passing of Resolution 1, Resolution 2, Resolution 3 and Resolution 4:
(a)
approval be and is hereby given for the proposed ancillary transactions (“Proposed Ancillary
Transactions”) and all such transactions and/or payments arising therefrom pursuant to and in
accordance with the terms of the Restructuring Agreements and the Services Agreement entered
into between the SSB Group the Silverlake Private Entities and the SIP Group respectively; and
(b)
the Directors of the Company (other than Mr. Goh Peng Ooi who is deemed to be interested in the
Proposed Ancillary Transactions) or any one of them be, and are hereby authorised to complete,
and do all such acts and things as may be required or as they and/or he may consider expedient or
necessary or in the interest of the Company to give effect to this Resolution.
In accordance with Chapter 8 and Chapter 9 of the Rules of Catalist, Mr. Goh and his Associates shall
abstain from voting on Resolution 1, Resolution 2, Resolution 3 and Resolution 5 approving the Proposed
Acquisitions and the Proposed Ancillary Transactions. Furthermore, Mr. Goh and his associates shall not
act as proxies in relation to such resolutions unless voting instructions have been given by a shareholder
of the Company.
By Order of the Board
Silverlake Axis Ltd
Tan Min-Li
Hoong Lai Ling
Joint Company Secretaries
Singapore
13 January 2010
Notes:(1)
A Shareholder entitled to attend and vote at a meeting of the Company is entitled to appoint one or more proxies to attend
and vote in his stead. A proxy need not be a Shareholder of the Company.
(2)
Where a Shareholder appoints two proxies, the Company may treat the appointment as invalid unless the Shareholder
specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.
(3)
The instrument appointing a proxy or proxies must be deposited at the office of Boardroom Corporate & Advisory Services
Pte Ltd at 3 Church Street #08-01, Samsung Hub, Singapore 049483 not less than 48 hours before the time appointed for
holding the Special General Meeting.
(4)
The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in
writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under
its seal or under the hand of an officer or attorney duly authorised.
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