ASIAEP RESOURCES BERHAD (FORMERLY KNOWN AS ASIAEP BERHAD) (“ASIAEP” OR
THE “COMPANY”)
PROPOSED SUBSCRIPTION OF 20 MILLION NEW ORDINARY SHARES OF RM1.00 EACH IN
LESTARI PASIFIK BERHAD (“LESTARI”) (“SUBSCRIPTION SHARES”) AT AN ISSUE PRICE OF
RM1.00 PER SUBSCRIPTION SHARE REPRESENTING APPROXIMATELY 3.23% OF THE
ENLARGED ISSUED AND PAID-UP SHARE CAPITAL OF LESTARI (“PROPOSED
SUBSCRIPTION”)
1.
INTRODUCTION
The Board of Directors of AsiaEP (“Board”) wishes to announce that the Company has on
even date entered into a conditional share subscription agreement (“SSA”) with Lestari for the
Proposed Subscription, the details of which are set out in Section 2 below.
2.
DETAILS OF THE PROPOSED SUBSCRIPTION
2.1
Particular of the Proposed Subscription
The Proposed Subscription entails the acquisition of 20 million Subscription Shares at an
issue price of RM1.00 per Subscription Share representing 3.23% of the enlarged issued and
paid-up share capital of Lestari for a total cash consideration of RM20.0 million
(“Subscription Amount”).
The Subscription Shares shall be free from any security interest (including mortgage, deposit,
charge, pledge, lien, assignment or other form of encumbrances) and with all rights attaching
to them on and after the completion of the Proposed Subscription. The Company will not
assume any liabilities (including contingent liabilities and guarantees) arising from the
Proposed Subscription.
There are no additional financial commitments required by AsiaEP in putting the assets/
businesses subscribed on-stream.
2.2
Salient terms of the SSA
(a) Payment terms
The Subscription Amount of Ringgit Malaysia Twenty Million (RM20,000,000.00) only
shall be paid as follows:
i. Deposit
Ringgit Malaysia Two Million (RM2,000,000) only (the “Deposit”) as refundable
deposit and part-payment towards the Subscription Shares.
Upon payment of the Deposit and within three (3) business days upon receipt of the
approvals from the board of directors and shareholders of both parties, Lestari shall
issue and allot the Subscription Shares to AsiaEP. Lestari shall endorse
(“Endorsement”) on the Subscription Shares that such shares are partially paid-up
and shall be recognised in accordance with the Memorandum and Articles of
Association of Lestari.
ii. Balance Subscription Amount on Conditional Date
Balance of Ringgit Malaysia Eighteen Million (RM18,000,000.00) only to be paid
within twenty (21) days upon the completion of the last conditions precedent as
specified under paragraph 2.2(b) below, or any other extended date to be mutually
agreed in writing between AsiaEP and Lestari .
Upon fulfilment of the payment of the Balance Subscription Amount, Lestari shall
immediately remove the Endorsement followed by a notice of allotment stating that
the Subscription Shares have been credited into a Central Depository System’s
Account held by or on behalf of AsiaEP which shall be furnished to AsiaEP.
(b) Conditional Share Subscription
The rights and obligations of the Company and Lestari under the SSA is conditional upon
the following conditions precedent (“Conditions”) being satisfied within twelve (12)
months period from the execution of the SSA or other extension period as may be
mutually agreed by the Company and Lestari:
i.
the approval of the board of directors and shareholders of AsiaEP having been
obtained for the subscription of the Subscription Shares under the SSA;
ii.
the approval of the board of directors and shareholders of Lestari been obtained for
the issuance and subscription of the Subscription Shares on the terms set out in the
SSA;
iii.
approvals from the relevant authorities for the listing of Lestari on Bursa Malaysia
Securities Berhad and/ or any other stock exchanges deemed appropriate; and
iv.
approvals from any other relevant authorities and/or any other parties, if required .
(c) Salient representations and warranties by Lestari
i.
Prior to subscription, there will be no pledge, lien or other encumbrance on, over or
affecting the Subscription Shares and there is prior to subscription will be no
agreement or arrangement to give or create any such encumbrance and no claim has
been or will be made by any person to be entitled to any of the foregoing save and
except for any encumbrance created by AsiaEP over the Subscription Shares in order
for AsiaEP to facilitate the subscription of the Subscription Shares;
ii.
Upon satisfaction of the Conditions, Lestari will be entitled to issue and allot the
Subscription Shares on the terms of the SSA without consent of any third party; and
iii.
All facts as stated and contained in the SSA and documents including the information
memorandum dated 23 September 2011 relating to Lestari disclosed or supplied by
Lestari to AsiaEP, its solicitors, accountants or financial advisers during or with a view
to the negotiations leading up to the SSA, to the best knowledge and belief of Lestari,
true and accurate in all material respects and there is no fact not disclosed which
would render any such information or document materially and adversely inaccurate
or misleading or which, if disclosed, might reasonably have been expected to affect
the decision of AsiaEP to enter into the SSA.
(d) Rights on default
Without limiting any right or remedy available to AsiaEP at law or in equity, if there is any
default on any rights and obligations to be performed under the SSA, AsiaEP shall be
entitled for the refund of the Deposit within seven (7) days upon termination of the SSA
and each party shall within seven (7) days return all relevant documents which have
been forwarded to the other party.
2.3
Information on Lestari
Lestari was incorporated under the name of Lestari Pasifik Sdn Bhd in Malaysia on 8
February 2010 as a private limited company under the Companies Act, 1965. It subsequently
changed its status to a public limited company and assumed its present name on 21 April
2011.
As at 10 October 2011, Lestari does not have any subsidiary or associate company.
The Directors of Lestari as at 10 October 2011 are as follows:(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Dato’ Abdul Latiff bin Hussain
Mr Mohamed Jawad Khan
Dato’ Dr Clement Tan Wei Loon
Mr Andrey Chuguevskiy
Ms Natalia Silich
Ms Irina Dyukova
Dr Anatoly Politov
The shareholders of Lestari and their respective shareholdings in Lestari as at 10 October
2011 are as follow: Name
Arter Biofuel Products Limited
Richnion Sdn Bhd
Mohamed Jawad Khan
Dato’ Dr Clement Tai Wei Loon
Total
(%)
50.0
16.7
25.0
8.3
100.0
Lestari is in the business of producing second generation bioethanol from biomass mainly oil
palm empty fruit bunches (“EFB”). This is in support of the Malaysian Government’s
Economic Transformation Program (“ETP”) under Chapter 9 – Deepening Malaysia’s Palm Oil
Advantage, Entry Point Projects 7: Commercialising Second Generation Biofuels (“EPP 7”).
Lestari has secured an exclusive licence to commercialise the Mechano-enzymatic system for
bioethanol production by forming a joint venture collaboration with the Arter Biofuel Products
Limited.
Lestari has also developed strategic collaboration partnership with Sirim (a wholly owned
Government corporation for research and development, Kilang Minyak Sawit Meru Sdn Bhd
and PT. Inkud Exchange (a joint venture company with Koperasi Unit Desa INDUK,
Indonesia) and currently in the midst of finalising the collaboration with Felda Palm Industries
Sdn Bhd, a subsidiary of Lembaga Kemajuan Tanah Persekutuan.
It is envisaged that Lestari will be completing more than 600 bio-refinery modules lines in
Malaysia and Indonesia within the next 5 years, which will have the capacity of producing up
to 3.7 billion litres of bioethanol per annum.
In view of the high capital expenditure involved in the production of the second generation
bioethanol, Lestari is currently preparing the necessary documentation for an initial public
offering (“IPO”) to raise additional funding requirements.
The financial information of Lestari is set out in Appendix I.
2.4
Subscription Amount
The Subscription Amount for the Proposed Subscription is RM20.0 million which shall be
satisfied via internally generated fund and/ or bank borrowings.
2.5
Basis and justification for the Subscription Amount
The Subscription Amount for the Proposed Subscription was arrived at on a willing buyer
willing seller basis after taking into consideration the following:-
2.6
(a)
the audited net assets (“NA”) of the Lestari of approximately RM599.9 million as at 30
November 2010;
(b)
the earnings potential of Lestari;
(c)
the potential capital gain arising from the IPO of Lestari; and
(d)
the par value of Lestari shares of RM1.00.
Highest applicable percentage ratio
The highest percentage ratio applicable to the Proposed Subscription, as prescribed under
Rule 10.02 (g) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad
is 50.1%.
3.
RATIONALE FOR THE PROPOSED SUBSCRIPTION
The Proposed Subscription is part of AsiaEP’s plan to mitigate the over-dependence on its
existing core business of providing e-commerce solutions and developing e-market place for
both local and international enterprises.
The Board believes that renewable energy related business has long term prospects, as there
is an increased demand for renewable energy products and more environmental-friendly
energy sources. The Board expects the bioethanol industry to be a growth industry in the
future and seeks to tap on the expertise as well as the research and development capabilities
of Lestari in relation to the bioethanol industry.
In addition, the Board believes that the Proposed Subscription would provide the opportunity
to participate in a potentially high yielding asset, before its value is realised via the impending
IPO of Lestari.
4.
INDUSTRY OVERVIEW AND PROSPECTS
4.1
Overview and prospects of the bioethanol industry
In 2009 alone, the palm-oil industry generated over 60 million tonnes of oil palm biomass in
the form of EFB, tree fronds and trunks. The biomass potential especially for EFB is
significantly underutilized and the industry norm of burning (to produce bunch ash fertilizer),
composting and mulching is not the best use of these resources from either economic or an
environmental perspective.
The objective of the EPP 7 is to fast track the commercialization of second generation biofuels to leverage the biomass generated in the industry. Based on current technological
progress, the production of bio oil using biomass-to-liquid technology is one of the best
possible high-value utilization of biomass generated at mills and is ready for immediate
commercialisation.
With the available technology, the EFB will be treated and upgraded into uniform and useful
fuels such as bioethanol.
As Lestari is venturing into the business of bioethanol refinery, the government’s green
initiatives as outlined in the EPP 7 augur well for the its growth prospect based on its strategic
model of collaboration with the oil palm plantation companies where the latter will have the
pre-emptive right to purchase the bioethanol produced from their supply of the empty fruit
bunches.
The use of bioethanol will bring about the eventual betterment of the environment in the future
in terms of utilisation of waste generated from the palm oil industry and savings in the usage
crude oil.
5.
RISK FACTORS
5.1
Business risks
Lestari was only incorporated in February 2010 and has not commenced any
commercialization of its second generation bioethanol, thus has not generated any revenue
to-date. In addition, Lestari is subject to certain risks inherent in the renewable energy
industry. These may include changes in general economic conditions and political conditions,
taxation, interest rates, foreign exchange and changes in business conditions such as, but not
limited to, deterioration in prevailing market conditions, labour shortages, increase in costs of
labour and materials.
5.2
Political, economic and regulatory risks
Like all other business entities, changes in political, economic and regulatory conditions in
Malaysia, could materially and adversely affect the financial and business prospects of
Lestari. Amongst the political, economic and regulatory uncertainties are the changes in
political leadership, expropriation, nationalisation, re-negotiation or nullification of existing
contracts, interest rates and method of taxation. While Lestari will seek to limit the impact of
such risks to its business by focusing on its core competencies, there is no assurance that
any change in the above factors will not have a material adverse effect on the business and
operations of Lestari.
5.3
Competition
Lestari may face competition from both new entrants and established players in the
renewable energy industry. The competitiveness of Lestari will depend on its technical
expertise, production and process know-how, production management, marketing strategy
and ability to provide the sustainable bioethanol products to meet the needs of the target
market. Lestari will also emphasize on marketing and planning, constantly review its research
and development and marketing strategy to respond to the changes of economic conditions
and market demands in the renewable energy industry. Nonetheless, no assurance can be
given that any change to these factors would not have any material adverse impact on the
Lestari.
5.4
Dependence on the palm oil industry
Lestari believes that the production activities and growth in the palm oil industry is supported
by the importance and global growth in demand for palm oil products and various government
initiatives to promote sustainable palm oil development and biomass energy.
5.5
Dependence on Executive Directors and key management team of Lestari
Lestari believes that its continued success will depend, to a significant extent upon the
abilities, capabilities and continued efforts of its Executive Directors and key management.
The loss of Executive Directors or key management personnel of Lestari without suitable and
timely replacement may adversely affect Lestari’s continued ability to compete effectively in
the renewable energy industry.
5.6
Risks of investment
Investment in unquoted company like Lestari, due to limited relevant past information on the
management, product, market, financial and operating track record, is especially difficult to
appraise and the proposed IPO of Lestari may or may not materialise.
6.
EFFECTS OF THE PROPOSED SUBSCRIPTION
6.1
Share capital and substantial shareholders’ shareholdings
The Proposed Subscription would not have any effect on the share capital and substantial
shareholders’ shareholdings in AsiaEP as it does not involve any new issuance of shares in
AsiaEP.
6.2
NA and NA per share and gearing
The proforma effects of the Proposed Subscription on the NA, NA per share and gearing of
AsiaEP and its subsidiaries (“AsiaEP Group”) are as follows:Proforma I
Proforma II
Audited as at 28
February 2011
(RM’000)
After the
Private
Placement (1)
Share capital
Treasury shares
Reserves
Accumulated losses
Shareholders’ Funds
73,411
(738)
12,925
(45,670)
39,928
80,111
(738)
12,925
(45,740) (2)
46,558
After Proforma I
and the Proposed
Subscription
(RM’000)
80,111
(738)
12,925
(45,740)
46,558
Number of AsiaEP Shares in issue
NA per share (RM)
Total borrowings
Gearing (times)
734,110
0.054
-
801,112
0.058
-
801,112
0.058
18,000 (3)
0.39
Notes:(1)
(2)
(3)
After taking into account the private placement of [51.0 million] new AsiaEP shares at the issue price
of [RM0.10] each which was deemed completed on 5 October 2011 (“Private Placement”).
After taking into account expenses of RM70,000 for the Private Placement.
Assuming the balance of the Proposed Subscription amounting to RM18,000,000 will be funded via
borrowings
6.3
Earnings per share (“EPS”)
The Proposed Subscription is expected to be completed by the second half of calendar year
2012 and is not expected to have material any effect on the consolidated earnings and EPS of
the AsiaEP Group for the financial year ending 29 February 2012.
7.
APPROVALS REQUIRED
The Proposed Subscription is subject to the following approvals being obtained:(a)
the approval of the board of directors and shareholders of AsiaEP having been
obtained for the subscription of the Subscription Shares under the SSA;
(b)
the approval of the board of directors and shareholders of Lestari been obtained for
the issuance and subscription of the Subscription Shares on the terms set out in the
SSA;
(c)
approvals from the relevant authorities for the listing of Lestari on Bursa Malaysia
Securities Berhad and/ or any other stock exchanges deemed appropriate; and
(d)
approvals from any other relevant authorities and/or any other parties, if required.
The Proposed Subscription is not conditional upon any other corporate proposals undertaken
by AsiaEP.
8.
DIRECTORS AND MAJOR SHAREHOLDERS’ INTERESTS
None of the Directors and major shareholders of AsiaEP together with persons connected to
them (if any) has any interest, directly or indirectly, in the Proposed Subscription.
9.
DIRECTORS’ STATEMENT
The Board, having considered all aspects of the Proposed Subscription (including, but not
limited to the rationale, the salient terms of the SSA, the prospects of Lestari, and the risks of
the Proposed Subscription), is of the opinion that the Proposed Subscription is fair and
reasonable and is in the best interest of the AsiaEP Group.
10.
ESTIMATED TIME FRAME FOR COMPLETION
Barring unforeseen circumstances and subject to the fulfillment of all the Conditions
Precedent as outlined in Section 2.2 above, the Proposed Subscription is expected to be
completed by the second half of calendar year 2012.
A circular to shareholders containing further information on the Proposed Subscription shall
be issued to the shareholders of AsiaEP in due course.
The application to the relevant authorities for the listing of Lestari as part of the Conditions
under the Proposed Subscription shall be made in due course.
11.
ADVISER
The Company shall appoint an adviser for the Proposed Subscription in due course.
12.
DOCUMENTS AVAILABLE FOR INSPECTION
The SSA will be made available for inspection during normal working hours (except for public
holidays) from the date of this announcement for a period of three (3) months at the
Registered Office of AsiaEP at No. 18 & 20, Jalan TK 2/1C, Taman Kinrara Seksyen 2, 47180
Puchong, Selangor.
This announcement is dated 10 October 2011.
APPENDIX I
FINANCIAL INFORMATION ON LESTARI
A summary of the key audited financial data of Lestari for the financial period from 8 February 2010 to
30 November 2010 are as follows:Financial period from 8
February 2010 to 30
November 2010 (RM’000)
Revenue
Loss before tax
Loss for the financial period
Shareholders’ funds*
Total borrowing
(75)
(75)
599,925
-
Note:
*
Comprises mainly the intellectual property rights for the technology and know-how in respect of production
of bioethanol from oil palm EFB and mechano-enzymatic system.
Commentary
As Lestari was only incorporated on 8 February 2010, its first year audited financial statement, was at
30 November 2010. As to date, Lestari has yet to commence its production of bioethanol .