Dear all,

Below are the questions I prepared for the upcoming INSAS 57^th AGM Q&A session. If you have any of your questions that you want me to include in, please feel free to comment. I will send in these questions by 7^th Nov 2019.

Thank you

Questions for INSAS 57^th AGM

1. General

Refer: INSAS 56^th AGM minutes

http://www.insas.net/pdf/img-20181226.pdf

Dividend and Dividend Policy

The Board has considered the level of dividends to be paid to shareholders for the FY2018 but in view of the current depressed market conditions due to numerous external and internal events, the Board has exercised a conservative and prudent management to retain adequate cash reserves in order to weather any potential unforeseen deterioration in the market conditions, and to position the Group for future growth and any good investment opportunities which may arise during this downturn. The Board will evaluate and if appropriate, formulate a dividend policy when the markets recover.

Q1: When will the Board formulate a dividend policy?

Note: Included below TAE dividend policy for the Board perusal:

The Company had adopted a dividend policy, which will pay the shareholders consistent yearly dividends ranging between 40% and 60% of the Group’s net realised profit (excluding TA Global Berhad Group’s Profit After Tax but including dividend receivable from TA Global Berhad for the same financial year) for that financial year.
 

Shared Prosperity

Five Years Financial Highlights

Q2: Shared prosperity should start with listed company sharing the company’s profit with the shareholders (fair dividend) unless the company have better use of capital and can generate high return on capital. Looking at the five years financial highlights, INSAS did not do well in this scorecard. May I suggest to Board, please distribute higher dividend to INSAS’s 25,726 shareholders where with cash in hand of 25,726 peoples, they can generate more buying/trading/investing activities that will benefit Malaysia economy and stock market.

INSAS Market Price

Refer: https://www.theedgemarkets.com/article/newsbreak-insas-controlling-shareholders-may-seek-waiver

A few months ago, Kok Khee is said to have told a group of friends, “Insas is the most undervalued company on Bursa Malaysia”

https://klse.i3investor.com/servlets/staticfile/370450.jsp

Source: Hong Leong Investment Bank Research - 24 Oct 2019

INSAS valuations are compelling with share prices trading 68% and 71% below its BVPS of RM2.62 and RNAV of RM2.88 (despite applying a 30% investment holding discount), respectively. We believe such steep discounts could provide sufficient margin of safety and cushion further price fall, thanks to the strong growth from its technology related divisions (predominantly from INARI) and stable earnings from its financial services and credit & leasing and retailing businesses as well as its solid balance sheet (with net cash/equivalent of RM390m or 56sen/share). Given the abundant net cash (66% share price), INSAS has solid capacity to declare sustainable (or higher) dividends in future, despite prevailing headwinds.

Q3: Controlling shareholder Dato’ Sri Thong, HLIB research and all minority shareholders are in agreement that INSAS is the most undervalued company on Bursa Malaysia. May I ask the Board any steps to be taken in unlocking the value of INSAS during FY2020?

Refer: https://themalaysianreserve.com/2019/10/17/halim-submits-rm5-2b-bid-for-khazanahs-51-stake-in-plus/

Halim, the executive vice chairman of Sumatec Resources Bhd, partners Datuk Wong Gian Kui in the quest to acquire Khazanah’s stake in PLUS, based on the offer letter to the government.

Q4: May I know what is the roles of INSAS in the bid to buy Khazanah’s 51% stake in PLUS Malaysia Bhd by TAN Sri Halim Saad?

Refer: Inari Financial report 2019 page 224:

As at 26^th September 2019

WARRANTS 2015/2020

No. of outstanding warrants: 51,442,985

Exercise price per warrants: RM 0.5333

Expiry date of Warrant: 17^th February 2020

INSAS PLAZA SDN BHD: 15,746,625

Q5: May I know this 15,756,625 Inari Warrant is booked in INSAS Balance sheet as associate company or financial assets at fair value through profit or loss?

Q6: What is the original cost or book value of this 15,746,625 Inari warrant and what the Board intend to do with these warrants as warrants expiry date is 17 Feb 2020?

1. Financial Year 2019 Operation review and Business outlook

Refer page 9: Technology and IT related services

Numoni is a financial technology (Fintech) company incorporated in Singapore and 49.6% owned by Insas Technology. Note: 42.6% (2018): 28.4% (2017)

Q1: Please provide Numoni last financial year P&L statement, Balance sheet and equity structure.

Q2: What is INSAS plan for Numoni?

Refer page 16: Inari is targeting to grow its light emitting diode (LED), fiber optics and sensor product portfolio. Inari is working with its major German customer to develop several new products being fine pitch LED used in billboards and other public display panels and also health sensors as well as vertical cavity surface emitting laser (VCSEL) components for both 2D and 3D sensing applications. This and relocation plans of companies moving out of China due to the ongoing USA tariff issue will add new and potential customers for the new 680,000 sq ft Inari P34 plant located in Batu Kawan, Penang. These developments should contribute to new revenue growth for FY2020 and beyond.

Q3: What is the progress of above development and target?

Q4: Does Inari or Insas technology holds any patented technology beside Sengenics holding the patented technology called KREX in the biomarker industry.

Refer page10: Melium Group is one of Malaysia’s leading retail group on international luxury fashion brands such as Aigner, Emilio Pucci, Farah Khan, Givenchy, Hackett London, Max Mara, MCM, Roger Vivier and Tod’s. Melium also operates a multi-brand “M Store” at Pavilion Mall which presents fashion trend from more than 50 international brands. Melium also holds the Malaysian franchise for Dome Café and operates over 19 outlets in Klang Valley, Genting Highland, Johor and Penang. Besides luxury fashion and F&B, Melium Group also owns and operates the Seminyak Village, a boutique mall in Bali that offers international brands along with the best of Bali’s home-grown labels.

Page 13: Retail trading condition remains tough due to the onslaught of online retail spending and the poor market confidence arising from the US-China trade war and unstable global economy which has dampen consumer spending. Disregarding drop in revenue, the pre-tax loss in FY 2019 decreased primarily due to higher gross profit margin arising from improved product mix and reduction in rental expenses. For FY2019, the Group’s share of Melium Group’s losses was RM0.4 million (2018: loss RM3.1 million).Note: (2017: loss RM0.5 million), (2016: loss RM 4.4million), (2015: profit RM 1.02million)

Q5: Any plan and steps taken to turnaround Melium group for FY2020:

2. Financial Year 2019 Financial Report

Refer page: 62

Amount due from Associate companies 11(b) RM 89,571,000

11 (b): The amount due from associate companies are unsecured, interest free (except for certain advances which are secured and are interest bearing) and are repayable on demand.

Q1: Please give the detail breakdown list on amount due from which associate companies (RM 89,571,000) with interest bearing or interest free.

Refer page 71: CASH FLOWS FROM INVESTING ACTIVITIES

Subscription of shares and investment in associate companies: (RM 45,199,000)

Proceeds from disposal of shares in associate companies: RM 31,820,000.

Q2: Please give the detail breakdown list of subscription of shares and investment in associate companies (RM 45,199,000) and proceeds from disposal of shares in associate companies RM 31,820,000.

Refer page: 62 and 63

• Deposits with licensed banks and financial institutions RM 554,552,000
• Cash and bank balances RM 95,148,000
• Non-current and current Borrowings
• Loans and borrowings RM 20,280,000
• Hire purchase payables RM 53,931,000
• Hire purchase payables RM 28,789,000
• Loans and borrowings RM 281,653,000
• Preference shares RM 130,106,000

Refer page 151: Interest income from deposits and cash balances with licensed banks and financial institutions: RM 15,086,000

Refer page 153: FINANCE COSTS

Interest expenses on:-

• Term loans: RM 7,471,000
• Bank overdrafts: RM 160,000
• Revolving credit facilities: RM 5,215,000
• Hire purchase payables: RM 3,524,000
• Dividends on RPS: RM 5,966,000
• Margin financing facility: RM 884,000

Total: RM 23,200,000

Q3: Perhaps Management can better utilizing deposits and cash balances to pare down Loans, Borrowings and Hire purchase payable to save on interest expenses?

Refer page 186: FINANCIAL INSTRUMENTS

Q4: What is the purpose and interest earned from deposit in Australia dollar of RM equivalent 167,694,000, deposit in UK Pound of RM equivalent 49,471,000? And interest paid for borrowing is USD and Euro of RM equivalent of 58,030,000 and 21,466.000?

Refer page 149: Revenue

Technology and IT-related manufacturing, trading and services:-

- Sale of goods and services: RM 24,710,000(2019), 17,529,000(2018)

Q5: This revenue is from what type of goods and services, the profit margin and expected revenue growth rate?

Refer page 164: Retail trading and car rental

Cars and limousines for hire/rental, repair and maintenance of motor vehicles, promote use of electric vehicles, wine merchant, retail and trading of high fashion wear, leather goods and other lifestyle-related products and operating food and beverages outlets.

Page 134: INVENTORIES

Wines and others: RM 5,289,000(2019), RM 5,292,000(2018)

Page 149: Revenue

Retail trading and car rental:-

- Sale of goods and services: RM 364,000(2019), RM 4,739,000(2018)

Q6: What had happen to this Wine Merchant and retail trading business as revenue dropped drastically from RM 4,739,000(2018) to RM 364,000(2019)?

Refer page 164: Investment holding and trading: Business activities:  Investment holding and trading of quoted securities and other related financial instruments.

Page 162: SEGMENTAL INFORMATION

Investment holding and trading: Assets: Investments in associate companies: RM 24,297,000

Q7: Please clarify which associate companies worth RM 24,297,000 classified under Investment holding and trading business segment?

Refer page128: ASSOCIATE COMPANIES

Other associate companies:

Revenue: RM 31,253,000

Profit/(Loss) for the financial year: RM 10,650,000

Q8: Please provide the list of all these other Associate Companies: Revenue and Profit/(Loss) for the financial year.

Refer page 158: Diversified Gateway Solutions Berhad (“DGSB”)

On 17 August 2018, ITB acquired an additional 110,000,000 ordinary shares in DGSB via direct

business transaction from Omesti Holdings Berhad for a total cash consideration of RM 6,930,000. Arising from this acquisition, ITB’s shareholding in DGSB has increased from 19.91% to 25.48%, and DGSB became an associate company of the Group.

Q9: What is INSAS plan for DGSB?

Refer page 220: Share buyback

The Company does not intend to undertake the Proposed Share Buy-Back such that it will trigger any obligation on the Major Shareholders and/or person acting in concert with them to undertake a mandatory general offer pursuant to the Code.

Q10. Do the board has plan to seek SC and shareholder approval to waive obligation on the Major Shareholders and/or person acting in concert with them to undertake mandatory general offer pursuant to the Code if proposed share buy-back trigger the MGO’s threshold?