A BC BE RH A D

(C omp an y N o. X XX X - X)
(In c o rp o r at ed in M al ay sia )

BO A RD P A PE R
Pr iv a te & Co n fi d e nt i a l

T O SEE K TH E BO A RD ’ S G U I D A NC E O N

TH E PRO PO SED O F FER O F 2 0% EQ U I TY IN TER EST I N X Y Z L IM ITE D

X X F e br u a ry 20 X X
(F or me et i n g of th e B o a rd of D i r ect o r s o n X X Fe b ru a r y X X X X )

Pr e pa r ed b y :

____ ___ ____ ___ __ ____

Re vi e w ed by :

____ ___ ____ ___ __ ____

Re c om m en d ed :
an d app r o v ed f o r
su bm is si on b y ____ ___ ____ ___ __ ____
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PROPOSED OFFER BY XYZ LIMITED

1. O B JE CT I V E

Th e obj e ct i v e o f th i s pa p er i s t o s e e k t h e gu i dan c e f r o m th e B o a rd
o f Di r e ct o r s (“ B o ar d” ) o f A BC B e rh ad (“ A BC ”) on th e p r op o s ed
o ff e r o f 2 0 % equ i ty in t er e st in XY Z Li mit ed (“ X Y Z” ) by th e
man ag e m en t of X YZ ( “P ro p os e d O f fe r ”) .

2. B AC K G RO U ND O N T H E PRO PO SED O F FER

2.1 On X X Jan u a r y 20 X X, A BC B e rh ad ( “ A BC ”) wa s ap p r oa ch ed
by th e man a g em en t o f X YZ , n a m el y R R R , th e M an ag in g
Di r ec to r an d AA A , t h e G r ou p Fin an c e Di r ec to r , t o c on si d e r
th e P r o po s ed O ff e r .

2.2 Th e P r op o s ed Of f e r en ta ils the o ff e r in g of 40 .0 m illi o n

o rdi n a ry sh a r e s in X YZ (“XYZ S h a re s ”) r ep r e s en tin g
app r ox i ma t el y 19 .8 % of th e i s su ed an d pa id - u p sh a r e
cap i tal i n XY Z f o r a n in d ic ati v e c ash c on sid e ra ti on ran gin g
f ro m A UD $62 .7 to AUD $64 .7 mill io n o r th e equ i val en t of
app r ox i ma t el y RM 2 02. 7 mill i on to R M20 9.2 mill io n ( F X:
AUD $1. 00: R M3 .23 , as at X X F eb ru a r y 2 0 XX) .

2.3 Th e P r op o s ed O f f er will all ow th e ex is tin g s h a r eh old e r s t o

mon i ti s e / r ea l i s e p art o f t h ei r i n v e stm en t s .

3. B AC K G RO U ND O F X Y Z

3.1 XYZ i s a p r of e s si on al s e r vic e s f i rm wi t h Au st ra lian o rigin s

an d an e st abl i sh ed glo bal n et w or k .

3.2 XYZ h as op e r at ed f o r m o r e th an 4 0 y e ar s , alth ou gh n ot i n

i ts cu r r en t f o r m. XYZ ’ s o rigin s d at e b ac k t o th e Sn o wy
Mo u n tai n s H yd r o- E l e ct ri c S ch em e in th e 1 940 s . Du r in g th e
1990 s , X YZ w as s ol d t o it s sta ff as p a rt of a g ov e rn m en t
as s et sal e i n 199 3. XYZ is cu r r en tl y ow n ed by em pl o ye e s o r
f or m e r e mpl o y e es .

3.3 XYZ p r ovi d es h igh - qu alit y c on su ltan c y s e rv ic e s t o cl i en t s

ran gi n g f r om p r iv at e s e ct o rs o rg an i sat ion s t o g o v e r n m en t
ag en c i es an d i n t e rn ati on al fin an ci al in st itu ti on s ( “ IF I ”) .

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PROPOSED OFFER BY XYZ LIMITED

3.4 Th e XY Z ’ s Au st ra lia n an d In te rn ati on al s egm en ts op e ra te i n

th e f o l l owi n g t ech n i cal di s cip lin e s: -

(i ) T ran sp o rt;
(i i ) Ci v i l i n f r as tr u ct u r e an d u r ban d e v el opm en t;
(i i i ) Wat e r an d en vi r on m en t;
(i v) P ow e r;
(v) G o v ern m en t ad vi s o r y;
(vi ) So ci al d ev el o pm en t; an d
(vi i ) Mi n i n g , oil an d g as .

3.5 XYZ ’ s c l i en t s r an g e f r o m la rg e p ri vat e s e ct o r c omp an i e s ,

Au st r al i an and in te rn ati on al g o v e rn men t d e pa rt m en t s ,
bi l at e ra l ag en ci e s a n d IF I i n c lu din g th e W o rld B an k , A sia n
D ev el o pm en t B an k a n d Au sA ID .

3.6 XYZ h a s o v e r 5 ,00 0 em pl oy e e s an d an e sta bli sh ed n et w or k

o f m o r e th a n 70 o ff ic e s in Au st r alia , A sia , th e Mid dl e E a st ,
Af ri ca an d N o rth an d S ou th A m e ri ca .

3.7 Th e s al i en t f i n an cia l in fo r mat io n on X YZ i s as f oll ow s: -

1
FY20XXA
FY20XXA FY20XXA 2 FY20XXF
(Proforma)
AUD$ AUD$ AUD$ AUD$
million million million million
Fees 271.7 317.0 426.4 422.1
Reimbursable 119.6 91.1 91.1 90.1
Other 10.8 2.5 2.5 0.0
Revenue 402.1 410.5 520.0 512.1
3
EBITDA 31.6 43.7 58.2 59.1
4
EBITDA% 11.6% 13.8% 13.6% 14.0%
EBIT 24.6 34.2 48.7 51.8
4
EBIT% 9.1% 10.8% 11.4% 12.3%

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PROPOSED OFFER BY XYZ LIMITED

Notes: -

1. I n c l u d e s 6 m o n t h s c o n t r i b u t i o n fr o m G G G ( J a n u a r y 2 0 X X t o
June 20XX E BI T D A of AUD$5.3 million) and no
consolidation of VVV (a company acquired in 20 XX). GGG is
a leading player in the provision of supply chain services
to the resources industry , which was acquired in 20 XX
2. A s s u m i n g 1 2 m o n t h fu l l c o n s o l i d a t i o n o f G G G ( F Y 2 0 X X A
E B I T D A o f A U D $ 9 . 3 m i l l i o n ) a n d V V V ( F Y 2 0 X X A E BI T D A o f
A U D $ 1 0 . 5 m i l l i o n ) o n a p r o fo r m a b a s i s
3. EBITDA in FY20XXF excludes redundancy costs
4. E B I T D A a n d E BI T m a r g i n s c a l c u l a t e d a s a p e r c e n t a g e o f
fees

3.8 Addi ti on al f i n an ci al in f o rma ti on , am o n g oth e r s , in clu d e

r e v en u e, r e v en u e b y g e og r aph y an d X Y Z h i st o ri cal di vid en d
pay m en t s a r e d e pi ct ed in th e ch a rt s b el ow : -

Total revenue CAGR: 12.8%

Figure 1: XYZ - revenue

Figure 2: XYZ – fee revenue by geography

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PROPOSED OFFER BY XYZ LIMITED

Figure 3: XYZ - historical dividend payments

4. I N VE ST ME NT T H ES IS

4.1 Engineering excellence and technical expertise

• XYZ is a leading provider of multidisciplinary engineering consulting

services to the physical and social infrastructure sectors in Australia
and internationally.

• Through its seven technical disciplines, XYZ is able to undertake a

range of complex and highly technical projects across the complete
lifecycle of infrastructure projects, and has expertise to tailor its
services to meet the specific requirements of each project.

• XYZ is recognised as a leader in Australian engineering consultancy

industry, winning a record of four (4) gold awards at the 20XX
Consult Australia Awards for Excellence.

• XYZ is recognised for engineering expertise and design innovation

and is consistently ranked among the top engineering design firms
in the world.

• XYZ also improved its rankings in Engineering News Record (“ENR”)

20XX lists. XYZ was ranked 74 in the Top 150 Global Design Firms’
list (an increase of 13 positions) and ranked at number 58 in the
‘Top 200 International Design Firms’ list (an increase of 9
positions). In ENR’s 20XX ‘Top Ten by Market’ list for Water, XYZ
ranked at number nine (9).

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PROPOSED OFFER BY XYZ LIMITED

4.2 Significant experience in international operations

• XYZ has established an international presence over 40 years, and

has significant experience working in and developing operations in
new regions and markets.

• The Company has 70 permanent offices throughout Australia,

Africa, Asia Pacific, South Asia and the Middle East and North Africa
(MENA).

• XYZ has expanded its international operations by focusing on the

need for local market knowledge and a strong local presence. In
most countries, XYZ seeks to implement a level of regional
autonomy and operational sustainability, which is achieved through
increased recruitment, training and development of local staff.

• XYZ’s established network of relationships with clients,

governments, IFI regulatory bodies and local market participants
enables XYZ to best position for new opportunities.

4.3 Diversified operations

• XYZ’s diversified operations have enabled it to provide a number of

technical disciplines to various international regions, minimising
XYZ’s exposure to any one region or technical discipline.

• Diversity of region: In FY20XXF, XYZ’s Australian and

International businesses are expected to contribute approximately
57% and 43% of fee revenue respectively.

• Diversity of contracts: XYZ has a diverse contract base. As at 30

November 20XX, the current work (project) in hand of AUD$310.8
million represents over 1,700 projects within the XYZ group of
companies.

• Diversity of workforce: XYZ has 72% of its workforce located

outside of Australia. As at 30 June 20XX, 37% of XYZ’s staff was
based in South Asia and Middle East, 28% in Australia, 24% in
Africa, 10% in Asia Pacific and 1% in North and South America.

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4.4 Strong financial characteristics

• XYZ has strong EBITDA margins and is forecasting its EBITDA

margin to grow in FY20XXF.

Figure 4: EBITDA Movement – FY20XXA to FY20XXF

• As at 30 November 20XX, XYZ had total work in hand of AUD$310.8

million, which was underpinned by:

– 33.9% of FY2013 forecast Australian fee revenue;

– 115.8% of forecast FY20XX International fee revenue; and
– 48.5% of forecast Mining, Oil & Gas fee revenue.

• As at 30 June 20XX, XYZ had AUD$33.4 million cash on hand as

well as AUD$68.7 million of available debt funding.

4.5 Strong growth outlook

• Strong growth is forecast to continue, driven by the following key

initiatives:

(i ) I nf i l l of c u r re nt fo ot pr i nt : X YZ w ill c on tin u e t o
f ocu s on in c r ea sin g th e l e v el o f se r vi c e s p r o vid ed by
ea ch o f fi ce to in c r ea s e m a rk et sh ar e in ea ch
te ch n i ca l di sc iplin e in wh i ch it op e ra t es . L o ca lis ati on
pr o vi d e s a c om p eti tiv e a dv an ta g e in ach i e vin g an
i n c r ea s ed m a rk et sh ar e .

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(i i ) Diversification of existing technical disciplines: XYZ

intends to diversify the technical disciplines offered through
pursuing projects requiring XYZ’s existing technical disciplines
not currently offered in that region. The provision of services
in existing technical disciplines will be undertaken using the
flexibility in the current workforce or through new hires.

(i i i ) Geographic expansion: XYZ intends to expand into new

countries and regions through the establishment of new
permanent offices, or through selective acquisitions. XYZ’s
strategy is to target countries that have social and physical
infrastructure requirements and develop operations through
the process of localisation. For example: acquisition of Vela
VKE.

(i v) New services and technical disciplines: XYZ plans to

provide an expansion of and new services to existing technical
disciplines, such as rail services within the transport technical
discipline and renewable energy within the industrial and
power technical discipline. It also plans to provide new
technical disciplines, such as mining and oil and gas. These
new services and technical disciplines will be achieved through
a combination of organic growth and selective acquisitions. For
example: acquisition of GMC Global.

4.6 Experienced management team

• XYZ has a proven executive management team with significant

operational and financial expertise.

• As at 31 January 20XX, XYZ’s executive management team had an

average tenure of approximately 13 years with the Company.

• The Managing Director and CEO, RRR, has 30 years of experience

with XYZ in all phases of its major engineering and development
projects. Prior to his appointment as Managing Director and CEO in
January 20XX, RRR was Managing Director of XYZ International,
where he gained substantial experience working with IFI’s and
international clients.

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PROPOSED OFFER BY XYZ LIMITED

5. KE Y R IS KS

So m e of th e key ri s ks (b oth bu s i n e s s an d in ve st m en t) of
i n v e sti n g i n X YZ i n c l u d e th e f oll ow in g: -

5.1 Deterioration in general economic conditions and a decrease in

demand for engineering consulting services

• XYZ is influenced by a variety of economic and business conditions

in both developed and developing markets, including the level of
government and IFI funding, the level of foreign and domestic
investment, government policy, regulation and taxation.

• The demand for engineering and consulting services is linked to

demand for social and physical infrastructure, which in turn is
closely linked to the level of investment in gross fixed capital
formation, especially in developing countries, which is
predominantly funded by IFIs and governments.

• XYZ is influenced by a variety of economic and business conditions

in both developed and developing markets, including the level of
government and IFI funding, the level of foreign and domestic
investment, government policy, regulation and taxation.

5.2 Contracts may be terminated

• XYZ ’ s A u st r ali an a n d in t e rn a ti on al c on t ra ct s ma y be
te rm i n at e d b y th e o th e r pa rt y at it s c on v en i en c e.

• Th e r e i s n o a s su ra n c e th at XY Z will b e ab l e t o r e c ov e r
f e es ow i n g an d th e r e i s g en e r all y n o en titl em en t t o c lai m
f or u n r e al i s ed fu tu r e r e ve n u e or p r ofi t s i f a c on t ra ct i s
te rm i n at e d on th i s b asi s .

5.3 Loss of key funding resources

• A si gn i f i c an t p r op o rti on o f X YZ ’ s in t e rn a ti on al p roj e ct s
ar e fu n d ed by IF Is . XY Z ma y b e san cti on ed b y an IF I as
a r esu l t o f mi s c on d u ct , fr au d o r o th e r i mp ro p e r a cti vit i es
by X YZ ’s sta f f.

• Th e san cti on in g of XYZ by on e IF I ma y l e ad t o XY Z b ein g

san cti on e d by oth e r fu n din g s ou rc e s , in clu di n g o th e r IFI s
an d s om e cu st om e r s .

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PROPOSED OFFER BY XYZ LIMITED

5.4 Reliance on brand and reputation

• XYZ h as an e s tabli sh ed b r an d an d r e pu tat io n .

Mai n t ai n i n g t h e XY Z b r an d an d r epu t a tion i s im po r tan c e
to mai n tai n i n g an d e xp an din g it s cli en t ba s e an d
c on ti n u i n g i t s st ra t e gy o f l o cali s ati on .

• Th e f ai l u r e o r p e rc e i v ed f ailu r e t o p r o vi de s e rv ic e s t o th e
c on t ra ct ed or ex p ec ted s tan d a rd , o r n e glig en c e b y an y of
XYZ ’ s s ta ff , it s su b c on s u ltan ts o r i ts j oin t v en tu r e
pa rtn e rs ma y dam a ge th e X YZ ’ s r epu ta tion , ex is tin g an d
pot en ti al cl ie n t r e lati on sh ip s an d m ay e xp o s e it t o
pot en ti al l i abil ity .

5.5 Political and sovereign risk

• XYZ o p e rat e s in a n u mb e r o f f o r e ign j u ri sdi cti on s,

i n cl u di n g th o s e wi t h d e v el opin g l ega l , r e gu lat o r y an d
pol i ti cal s y st em s , wh i ch a r e su bj e ct t o r apid an d
u n pr e di c tab l e ch an g e .

• As a r e su l t , X YZ ’ s f or e ign op e rat i on s may b e ad v e rs el y

i mpa ct ed by p o liti cal an d s ov e r ei gn ri sk s , in clu d in g
ch an g es i n th e f is c al o r r egu l at o ry r e gim e s o r p oli ci e s ,
ch an g es i n lo c al l aw s an d r egu lati o n s, dif fi cu lt i es in
en f o rci n g c on tr a ct s su bj e ct t o l o cal l a w an d th e th r eat o r
ou tb r e ak o f wa r , t e r r o ri sm o r oth e r h o st iliti e s.

5.6 Foreign exchange rates

• A si g n i f i c an t p r op o r tion o f X YZ ’ s r ev en u e s an d pr o fit s a r e
den o mi n at e d in cu r r en ci e s ot h er th a n th e Au st r alian
dol l a r an d th e r ef o r e m ay b e su bj ec t t o a dv e r s e f o r ei gn
cu r r en c y f l u c tu ati on s.

5.7 Dependence on qualified technical and management staff

• XYZ i s p ri n cip all y d ep en d en t on th e kn ow l edg e an d s kill s

o f i t s p e rm an en t an d c on t ra ct ed sta f f t o c o mpl et e
pr oj e ct s an d s e cu r e n e w b u s in es s .

• Th e r e i s n o a s su ra n c e th at XY Z will be abl e t o att ra ct

an d r e tai n qu ali fi ed t e ch n i cal an d m an ag em en t sta f f t o
pr o vi d e s e r vi c e s w h ich m e et th e sp e ci fi cati on s o f it s
cl i en t s .

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• Addi ti on al l y, an y si gn ifi c an t tigh t en in g of a va ilab l e an d

qu al i fi ed t ec h n i cal s taf f c ou ld l ea d t o h i gh e r lab ou r c o st s
f or XY Z .

5.8 Labour disputes

• XYZ m ay b e adv e r s el y a f f ect e d b y l a bou r di spu t e s i n

c on n e cti on s with it s p r oj ec ts o r j o in t v e n tu r e pa r tn e rs .

• Addi ti on al l y, X Y Z m ay b e d ep en d en t on t ran sp o rt l ogi sti c ,

ra w m at e ri al p ro c e s sin g an d oth e r s u pp or t o p e rati on ,
wh i ch i f i mpa ct ed b y lab ou r di sp u t e s, ma y h av e a
mat e ri a l i mpa ct t o X YZ ’s op e r ati on s an d f in an cia l
pe r f o rman c e .

5.9 Professional liability

• XYZ i s i n v ol v ed in th e d e sign of la rg e , e ss en tial

i n f ra st ru ctu r e .

• L os s e s ma y o c cu r f r om an a ct , e rr o r o r om is si on in h e r en t
i n th e s er vi c e s p r o v ide d b y X YZ . L o ss e s m ay o c cu r f ro m
th e c o st of h a vin g t o d e f en d th e o rg an is ati on ag ain st
cl a i m s o r a wa rd f o r dam ag e s, c o st o f r e cti fi cati on o f a
de si g n e r r o r o r f ailu r e att ri bu tab l e t o d e sign .

5.1 0 Litigation

• Gi v en th e n atu r e an d s co p e o f th e ac tiv iti e s o f th e

bu si n e s s, an d th e wid e r an g e o f pa rti e s i t d e al s with ,
XYZ ma y b e e xp o s e d t o p ot en ti al clai m s of o r l itig ati on
f ro m, th i rd pa rti e s su ch as cli e n ts , emp l oy e e s ,
man u fa ctu r e rs , s u ppli e r s, go v e rn men t ag en ci e s ,
r egu l at o r s o r oth e r th i rd pa rti e s . T o th e e xt en t t h at
th e s e ri s k s a r e n ot c o v e r ed by in su ra n c e, lit igat i on a n d
th e c o st s of r e sp o n din g t o an y th r e a ts of l ega l a cti on
may have an a dv e r s e im pa ct on th e fin an ci al
pe r f o rman c e of t h e Co mpa n y .

• In ad di ti on , an y ma te ri al li tiga ti on m ay i mpa ct on X YZ ’s
r epu t ati on an d ma y div e rt it s m an a ge men t, fin an cial or
pe r s on n el r e s ou r c e s th at wo u ld oth e r wis e b e av aila bl e
f or th e on g o in g ma n ag em en t , d e v el op men t o r e xpan si on
o f XY Z ’ s bu sin e s s.

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5.1 1 Inadequate insurance coverage

• Gi v en th e n atu r e an d s co p e o f th e ac tiv iti e s o f th e

bu si n e s s an d th e wi de r an g e o f pa rt i es it d eal s with , X YZ
may b e e xp o s ed t o pot en tial cla im s o f o r liti gati on fr o m
th i r d pa rti e s su ch a s c li en t s, e mpl o y e e s, man u fa ctu r e r s,
su pp l i e rs , go v e rn m e n t ag en ci e s, r egu la t o r s o r oth e r th i r d
pa rti e s.

• So m e cl ai m s o r th r e ats m ay n ot b e c o v e r ed b y in su r an c e.

5.1 2 XYZ’s competitive position

• XYZ f ac e s c om p eti tion f r om in cu mb e n t l oc al , r egi on a l

an d i n t e rn a ti on al c on su lt an t s a s w el l as p ot e n tial n e w
en t r an t s.

• In c r e as ed c omp et it ion ma y r e su lt i n r e du c e d f e es ,
pr e s en ti n g ch all en ge s f or main tain i n g gr o wth ra t es ,
pr o fi t ma r gi n s an d c ash f l ow s .

5.1 3 Taxation

• XYZ ’ s o p e rati on s gen e r at e e a rn in g s in a n u mb e r of

j u ri sdi ct i o n s (in clu din g s om e with d e ve l opin g t ax
sy st e ms ) an d th r ou gh di f f e r en t c o mpa n y st ru ctu r e s . In
s om e i n st an c es , X YZ ma y r ec e iv e fu ll o r pa rti al t ax
e x empt i on on i ts a s s oc iat ed in c o m e an d al s o ma y
u n kn ow i n gl y tr igg e r ad v e r s e an d o n e r ou s ou tc o m es .

• Ac c o rdi n g l y , ta x p aid h i st o ri call y b y X YZ m ay n ot b e

r e fl ec ti v e o f th e Au st ral ian c or p o rat e t ax rat e . Ch an g e s
to th e c omp o siti on o f XY Z ’ s e a rn in g s by g e og rap h y o r
typ e of wo r k ma y adv e r s el y imp ac t X YZ ’ s e ff e ct iv e ta x
rat e . Ad di ti on all y, i f th e la w s g ov e rn i n g ta xa ti on an d th e
tr ea tm en t o f in c o me as s o ciat e d wit h c er tain p r oj e ct
typ e s ch an g e , X YZ may b e r e qu i r ed t o in c r ea s e it s t ax
pay abl e i n Au st ral ia an d in t e rn ati on all y.

5.1 4 Acquisition

• XYZ i n t en d s to s el e cti v el y pu r su e ac qu i siti on s t o

c omp l em en t it s or g an ic g r o wth . Th e r e i s n o a s su ran c e
th at XY Z wi l l b e a b le t o id en ti f y su it ab le can di dat e s f o r
acqu i s i ti on o r th at it w ill b e a bl e to in t e gr at e th e
bu si n e s s a cqu i r ed .

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• An y co r p or at e opp o rtu n i ty th at X YZ pu r su es ma y h av e a
mat e ri a l ad v er s e e ff e ct on th e b u si n e ss , wh ich m ay
i n cl u d e th e c o st an d t e rm s o f ac q u isit i on f u n din g ,
i n te g rati on i s su es an d im pl em en tati on o r failu r e t o
ach i e v e s yn e rgi e s .

5.1 5 Growth management

• As X YZ c on t in u e s t o g ro w it s bu si n e s s, it w ill n e e d t o
mai n t ai n e ff ic i en t c on t r ol an d s u pe r vi si on of i ts
op e ra ti n g an d fin an cia l s ys t em s an d c o n tin u e t o e xpan d,
tra i n an d m an ag e it s st af f .

• In p e ri od s of p ea k s e rvi c e d eman d th i s m ay le ad t o an
i n c r ea s e i n o v e rh ea d c o sts , wh i ch ma y h a v e a mat e ri al
adv e r s e i m pa ct on th e fin an ci al p e r f or man c e of th e
bu si n e s s.

5.1 6 Market conditions

• Th e fi n an ci al p e r f o rm an c e of XY Z is in flu en c ed by
gen e r al d o m es ti c a n d ov e r s ea s e c on o mic co n diti on s an d
ou tl o o k , i n clu din g in fl ati on rat e s , in te r e st r at e s,
e xch an g e rat e s an d u n emp l oy m en t r at e s, a c c e ss t o d ebt
an d equ i ty ca pita l ma rk et s , ch an g es to g o v e rn m en t fi s ca l
o r m on eta r y p oli c y , a n d ch an g e s t o oth e r g ov e rn m en t
pol i c i es an d l e gi slat ion o r r egu lati on , in clu di n g ta xati on .

• A p r ol on g ed d et e ri o rat i on in an y n u mb e r o f th e s e fa ct o r s
may have a mat e r ial a dv e r s e e ff e ct on XY Z ’ s fu tu r e
fi n an ci al p e rf o r man c e or p o sit io n .

5.1 7 Future dividends

• N o as su ra n c e can b e gi v en on th e p ay m en t of d ivi d en d s.

• Th e abi l i ty of X YZ t o d ec la r e an d pa y d ivid en ds d ep en ds ,
am on g st oth e r s, on X YZ ’ s fu tu r e pr o fita bili ty , th e
s ou rc e s of it s r ev en u e , it s fin a n ci al p o siti on an d th e
Di r ec to r s ’ vi e w o f th e ap pr o pr iat e p ay ou t rati o .

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6. ST R AT E GI C F IT W I T H 12 3 B ERH A D ( “ 12 3” )

6.1 123 p r o vi d e s mu l tidi sc iplin a ry c on s u ltan cy an d p r oj e ct

man ag e m en t s er vi c e s in th e fi e ld s o f ci vil , m e ch an i ca l an d
el e ct ri ca l en g in e e rin g , pla n n in g, e n vi r on m en t al,
ar ch i t e ctu r al an d p r op e rt y man ag em en t .

6.2 123 i s a c o mpa ra bl e c om pan y t o X YZ in t e r ms of s imil a r

pri n ci pal ac ti v i ti e s. S yn e rgi e s c ou ld be e xt ra ct e d in th e
e v en t th at p r op e r w o rk in g s tr u ct u r e i s e sta bli sh ed .

6.3 In vi e w o f th e ab o v e, th e m an ag e m en t h a s su mm a ri s ed a
ge og r aph i ca l s eg m en t al o p e rati on mat ri x to i d en ti f y
pot en ti al s egm en t f o r s yn e rgi e s . Th e ma t ri x i s p r e s en t ed in
th e en su i n g p ag e.

[ T h e r e s t o f t hi s p a ge ha s be e n i n t e nt i o na l l y l e f t bl a nk ]

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6.4 G e og ra ph i cal s egm e n tal o p e rati on m at ri x f o r 123 an d XY Z : -

North &
South Asia / Australia &
Operating A s i a P a c i fi c Africa South Eu r o p e
M i d d l e Ea s t New Zealand
Sectors America
123 XYZ 123 XYZ 123 XYZ 123 XYZ 123 XYZ 123 XYZ
Airports &
√ √ √ √ √
seaports
Building &
√ √ √ √ √ √ √ √
urban dev.
Energy &
√ √ √ √
renewables
Govt. &
√ √ √ √ √ √ √ √
advisory
Hydro power
√ √ √ √
& dams
Natural
resources & √ √ √ √ √ √
environment
Mining, oil &
√ √ √
gas
Rail √ √ √ √ √ √ √
Roads √ √ √ √ √ √ √ √
Social dev. √ √ √ √
Tunnel &
√ √ √ √ √
geo-tech
Water &
√ √ √ √ √ √
waste mgt.

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6.5 Ba s ed on th e m at ri x ab o v e, th e f oll ow in g i s n o t ed: -

(i ) 123 d o e s n o t st r on g p r e s en ce in S ou th Asi a/ Mi ddl e

E ast an d Af ri c a; an d

(i i ) XYZ d o e s n ot st r o n g p r e s en c e in N o rth & S ou t h

Am e ri ca an d E u r op e .

6.6 H en c e, a j o i n t ef f o rt b y X YZ an d 12 3 w ou ld en ab l e t o
th e m to l ev e r ag e on ea ch o th e r to p en et rat e th e
u n e xpl o r ed / w e ak op e ra tin g se gm en t s . In addi ti on , th e y
c ou l d p r ov i d e cli en t s with g r eat e r v alu e p ro p os iti on with
mo r e c om pl et e s e r vi ce s/ o f f er in g s an d p ot en ti al cr o s s
s el l i n g i n th e en g in e e rin g a n d c on st ru cti on in du st r y.

7. PRO SPE CT S

7.1 Pr os p ect s of t h e I nf r a st r uct u re I nd us t ry

[ Th e w o rl d n e ed s to b o o st i ts in v e st m en t in
i n f ra st ru ctu r e by n ea rl y 60 p e rc e n t f r om th e USD $36
tri l l i on sp en t on in f ra st ru ctu r e o v e r th e pa st 18 y ea r s t o
USD $57 t ri l l i on o v e r th e n e xt 18 y e ar s . Th e US D$5 7
tri l l i on r equ i r ed in v e stm en t is mo r e th an t h e e sti mat e d
val u e o f t oda y ’s w o rld wi d e in f ra st ru ctu r e . Th i s e stim at ed
n e ed w ou l d b e su f f ici en t t o su pp o rt p r oj e ct ed e c on omi c
gr o wth b etw e en n ow and 20 X X an d ma in tain t ypi c al
cu r r en t l ev el s of in f ra st ru ctu r e c apa cit y an d s e r vi c e
r el a ti ve t o GD P .

Gl ob al i n f ra st ru ctu r e sp en din g has a l r ea dy sh i ft e d to

de v el opi n g ec on o mi e s, f oll o win g th e path of e c on omi c
gr o wth . Wi th it s r api d e c on omi c exp an si on an d
u rb an i z a ti on , Ch in a h a s ov e rt ak e n th e Un it ed St at e s an d
th e E u ro p ean Un i on to b e c om e th e w o rld ’ s la r g est
i n v e st o r i n i n fr a st r u ctu r e . Man y l a rg e lo w e r - in c om e an d
mi ddl e- i n co m e c ou n tri e s are exp e ct e d to c on t in u e to
rai s e i n f ra st ru ctu r e in v e st m en t r api dly o v e r th e c om in g
y ea r s t o su pp o rt th e ir g r ow th .

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PROPOSED OFFER BY XYZ LIMITED

In ad di ti on to Ch i n a, f ou r of th e w or l d’ s m o st p opu l ou s
c ou n t ri e s — B raz il, In dia, In d on e si a, an d Ru s sia — ar e all in
n e ed of i n fr a st ru ctu r e e xp an s i on t o su p po rt th ei r g r owin g
e c on omi e s . In 2 0 X X, B r az il an d In di a bo th an n ou n c ed
pl an s t o i n c r ea s e i n f ra st ru ctu r e in v e st men t in o rd e r t o
su pp o rt e co n o mi c gr o wth . In In dia , t h e P ri m e Min i st e r
an d u rb an d ev e lo pm en t mi n i st e r are u r gin g US D$ 1
tri l l i on i n i n f r as tru ctu r e in v e st m en t o v e r th e n e xt fi v e
y ea r s. At th e sa m e ti m e, m an y of th e wo r ld ’s l e as t
de v el op ed c ou n t ri e s a r e li k el y to in c r e as e in f ra st ru ctu r e
sp en d i n g a s th e y wo r k t o wa rd m e eti n g e c on om ic an d
h u man d e v el opm en t g oal s .

Adv an c e d e c on om i e s, m an y o f wh i ch h a v e c on c e rn s ab ou t
sl ow G DP g r o wth an d h i gh pu bl ic d e fi cit s, a r e lik e ly t o b e
r el a ti ve l y c on st rai n ed in th ei r a bi lity to in c r ea s e
i n f ra st ru ctu r e i n v e s tm en t a n d, a s a r e su lt , will n e ed t o
tak e a m o r e ta rg e t e d a p p r oa ch .

(Sou r c e: McK in s ey Gl ob al In stitu t e an d th e M cK in s e y

In f ra st ru ctu r e P r ac tic e , Jan u ar y 20 X X, In f ra st ru ctu r e
pr odu ct ivit y: H ow t o s av e U SD$1 t ril li o n a y e a r) ]

7.2 Pr os p ect s of X Y Z

[ Al th ou gh X YZ h a s r e gi st e r ed r e v en u e CA G R o f 12 .8 %
o v er th e pa st f iv e ( 5) y ea r s , th e M an ag e m en t
r e c omm en ds a du e dili g en c e on XY Z ’ s op e r ati on s a n d
pr oj e cti on s b e f o r e an y c on cr e t e vi e w can b e mad e on
XYZ ’ s gr o wth p r os pe ct s . N on eth el e ss , a key su c c es s
fa ct o r i n an y p os t M & A d eal i s th e r et en ti on of key
em pl oy e e s . ]

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PROPOSED OFFER BY XYZ LIMITED

8. V AL U A T I O N

8.1 XYZ ’ s ad vi s e r, ANZ Co r p or at e Ad vi s o ry (“ANZ C A ”) ,

opi n e s t h at XY Z s h o u ld b e valu e d u s in g t r adin g mu lti pl e ,
n am el y en t er p ri s e v alu e - t o- E BI TD A ( “E V /E B ITD A ”) .

8.2 Th e su mm a ry o f t h e t ra din g m u ltip l es f o r th e p e e r g r ou p

s el e ct ed b y A NZ C A ba s ed on E V/E BI TD A an d p r ic e - t o-
ea rn i n g s ( “P /E ”) a r e d epi ct ed in th e fo l lo win g ch a rt s: -

Total revenue CAGR:

12.8%

Figure 5: Trading Multiples – EV/EBITDA FY20XX

Average: 7.4x

Figure 6: Trading Multiples – P/E FY20XX

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PROPOSED OFFER BY XYZ LIMITED

8.3 Ba s ed on f o rw a rd (F Y20 XXF ) E V / E B I TD A of 6. 5x t o 7 .0 x

ran g e, th e i mpli e d valu e o f XY Z i s b et w ee n AU D$ 1. 80 t o
AUD $1. 93 p e r sh a r e .

8.4 Th e c o mpu ta ti on for th e imp li ed v a lu ati on is sh o wn

bel o w : -

(mi l l i on ) FY 20 X X

EV/EBITDA Multiple 6.5x 7.0x

FY2013F EBITDA AUD$59.1 AUD$59.1

Implied enterprise value AUD$384.2 AUD$413.7

FY20XXA net debt AUD$22.9 AUD$22.9

Equity value AUD$361.3 AUD$390.8

No. of shares on issue 202.3 202.3

Indicative share price AUD$1.80 AUD$1.93

NPAT AUD$34.7 AUD$34.7
EPS ($) AUD$0.172 AUD$0.172

FY20XXF P/E Multiple 10.5x 11.3x

Note: -
P/E price-to-earnings

T h e P ro po s ed O ff e r

Issue Price AUD$1.55 AUD$1.60

EV / EBITDA 5.7x 5.8x
P/E 9.0x 9.3x
P/ S a le s 0.6x 0.6x

8.5 Ba s ed on t h e pr ic e of A UD $1. 55 - AU D$1 .60 p e r sh a r e

( “P ro p os e d O f f er P r ic e ”) , th e P r o po s ed O ff e r P ri c e
r ep r e s en t s a d i s c ou n t r an gin g f r om 10 .9 % t o 1 9. 8 % t o
th e i n d i c ati v e sh ar e p ri c e .

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PROPOSED OFFER BY XYZ LIMITED

8.6 Th e Man ag em en t h a s c on du ct e d a si mil ar valu ati on ba s ed

on co mpa r abl e c o mpan i e s co mp ri s in g li st ed c omp an i e s
i n v ol v ed i n si m ila r p rin ci pal a ct ivi ti e s a s X YZ . Th e P/ E
an d E V/E B I TDA m u ltipl e s o f th e c o mp ar abl e co mp an i e s
ar e a s f ol l ow s:

Comparable Companies P/E multiple EV/EBITDA multiple

Cardno Ltd# 11.5x 8.8x
Coffey International Ltd# N/A 7.0x
Lycopodium Ltd# 11.8x 7.5x
123 International Consultants
11.3x 6.4x
Ltd
UGL Ltd# 14.3x 8.4x

High 14.3x 8.8x

Low 11.3x 6.4x
Average 12.2x 7.6x
Notes: -

# Listed on the Australia Securities Exchange

* P / E a n d E V / EBI T DA m u l t i p l e s a r e c o m p u t e d u s i n g t h e 5 -
day VWAP up to 31 January 20 XX

8.7 Ba s ed on th e f o r eg oin g an al y si s on th e im pli ed P / E an d

E V/E BI T DA b as e d on P ro p os e d Of f e r and c omp a rabl e
c omp an i e s an aly si s , th e P r op o s ed O f f e r P r ic e i s with in
Man a g em en t ’ s e xp e ctat i on as it s: -

(i ) i mpl i e d P / E mu l tipl e of 9 .3 x (th e h igh e r of f e r p ri c e

o f AU D$ 1. 60 p e r sh ar e) i s b el o w b oth th e av e r ag e
an d th e l o w e st PE o f th e c omp a rabl e c omp an i e s;
an d

(i i ) i mpl i e d E V/E BI TD A o f 5 .8 x (th e h igh e r o ff e r pr ic e

o f AU D$ 1. 60 p e r sh ar e) i s b el o w b oth th e av e r ag e
an d th e l o w e st PE o f t h e c omp a rab l e c o mpan i e s .

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9. DE AL ST R U CT U RE O PT IO NS

9.1 Pr em i s ed on t he a bo v em e nt io ne d pr e l im i n ar y
a s se s sm e nt on XYZ a nd a po t en t i al s yn e r gi e s
re s u lt i ng f ro m ex c l us i ve o p er a ti n g s eg me nt s , it m a y
be w or th w h i le fo r t h e m a n ag em e nt to lo ok in to t h e
po s s ib i l ity of h a vi ng a co nt ro l l i ng s ta ke i n XY Z i .e .
10 0% st ak e.

9.2 Ac c o rdi n g l y , th e p u r ch a s e c on s id e rat i on s f o r 20 % a n d

100 % s ta k e ar e a s f oll o w s: -

20% 100% Industry

Stake price
AUD$1.55 AUD$1.60 AUD$1.55 AUD$1.60 average

AUD$(million) 62.7 64.7 313.5 323.6 N/A

RM(million) 202.7 209.2 1,013.4 1,046.1 N/A

EV / EBITDA 5.7x 5.8x 5.7x 5.8x 7.4x

PE 9.0x 9.3x 9.0x 9.3x 12.7x

P/Sales 0.6x 0.6x 0.6x 0.6x 0.7x

Notes:-

N/A Not applicable

FX: AUD$1.00: RM3.23, as at 4 February 20 XX

10 . KE Y CO N S IDE R AT I O N S

If th e Bo a rd o f AB C d ec id e t o p r oc e e d with th e Pr o p os e d O ff e r ,
th e ke y co n si d e rati o n s a r e as f oll o ws: -

(i ) th e d e al st ru c tu r e (in clu din g bu t n ot li mit ed to

pe r c en t ag e of sh ar eh ol din g to be a cqu i r ed an d
i n v e stm en t v eh i cl e t o a cc e pt th e P r op o s ed Of f e r) ;

(i i ) th e d ep en d en c y on k ey p e r s on n el ; an d

(i i i ) th e f u n di n g st ru ctu r e f o r th e P r op o s ed O ff e r .

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11 . NE XT ST EP S

Th e Man a g em en t p r op o s es th at th e B oa rd ap pr o v e s fo r th e
Man a g em en t to e n te r into di s cu ssi on s w ith X YZ on th e
po s si bi l i t y of ac q u i rin g a c on t r oll in g sta k e in XY Z . Th e
Man a g em en t a l s o p r op o s e s t o i s su e a L e tte r of In t en t t o XY Z in
o rd e r f o r n e g oti a ti on s t o p r o c e ed an d to c ar r y ou t a du e
di l i g en c e o n XY Z .

Pl ea s e r e f e r t o App e n dix I f o r th e d ra ft L ett e r o f In t en t.

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