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    Enra EGM 2022

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    © All Rights Reserved
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    43 views37 pages

    ENRA - Circular For Proposed Diversification (EGM 2022)

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    varrcialli
    Enra EGM 2022

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    ‘THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solictor, accountant or other professional advisers immediately Bursa Malaysia Secures Berhad takes no responsibilty for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any lability whatsoever for any loss howsoever arising fom orin reliance upon the whole or any part of the contents ofthis Circular. ENRA GROUP BERHAD (Rogstazon No, 19820 008208 (36800-7) enrpraasin Malye) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE: PROPOSED DIVERSIFICATION OF OUR GROUP'S EXISTING CORE BUSINESSES TO INCLUDE THE MAINTENANCE, REPAIR AND OVERHAUL BUSINESS AND NOTICE OF EXTRAORDINARY GENERAL MEETING ("EGM’ Sole Principal Adviser RHBinvestmentBank RHB Investment Bank Berhad (Rcisaton No. 127403002099 (8882-7) (a Porcpatng Oman of ura Malye Scares Boras) “This Circular is delivered together withthe Notice of our EGM and the Form of Prony as enclosed herein, Our forthcoming EGM willbe held 2s a virtual meeting conducted entirely through lve strearsing and remote voting using the Remote Participation and Voting RPV’) facilties hosted on the Securities Services e-Portal at https /sshsb,net my! provided by SS E Solutions Sdn, Bhd, Please follow te procedures as setin the Administrative Gude inorder to register, partcipate and vote remotely ia RPY facies, Meeting platform ‘Securities Services e-Portal ('SS e-Portal) at htipsisshsb.net my! Day and date uesday, 27 September 2022 Time 11:30 aim. oF immediately after the conclusion of our Annual General Meeting, which will be held at 10:00 a.m. on the same day, whichever Is later, or at any adjournment thereof Broadcast Venue Meeting Room of Securities Services (Holdings) Sdn. Bhd Level 7, Menara Nien Jalan Damanisla Pusat Bandar Damansara Damansara Heights '50490 Kuala Lumpur Malaysia Last date and time for lodging of the Form of : Sunday, 25 September 2022 at 11:30 am., or at any adjournment Proxy thereof Ifyou are unable to participate and vote in person at our forthcoming EGM, you are requested to complete, sign and deposit the enclosed Form of Proxy in accordance withthe instructions printed thereon as soon as possible so as to arrive atthe office ‘ofthe Poll Administrator, SS E Solutions Sdn. Bhd. at Level 7, Menara Millenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50890 Kuala Lumpur, Malaysia not less than 48 hours before the ime set forthe meeting or adjourned meeting, Atematively the Form of Proxy can be electronically submitted via SS e-Poral at https Jissnsb.netamy! or by fax to "+603 2034 9940 or by email to eservices@sshsb.com.my before the Form of Proxy lodgement’s cutof time as mentioned above. Please refer to the Administrative Guide for the procedures on electronic lodgement of Form of Proxy. The lodging of the Form of Proxy wil not preclude you from participating at our ferticoming EGM should you subsequently wish to do so. This Circular is dated 13 September 2022 DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular: Board Bursa Securities Circular Director(s) Eom ENRA or Company ENRA Energy Solutions ENRA Group or Group ENRA Kimia Divestment FYE IMR Report Independent Market Researcher or Ipsos Let Listing Requirements Leo MRO Msm MSM Collaboration MSMENRA NA 8G Per Proposed Diversification RHB Investment Bank or Sole Principal Adviser RM uso (ur Board of Directors Bursa Malaysia Securities Berhad This circular dated 13 September 2022 in relation to the Proposed Diversification Directors of our Company as at the LPD and shall have the meaning ascribed to it in Section 2(1) of the Companies Act 2016 and Section 2(1) of the Capital Markets and Services Act 2007 and shall be construed accordingly Extraordinary general meeting ENRA Group Berhad ENRA Energy Solutions Sdn, Bhd. (our wholly-owned indirect, subsidiary) Collectively, our Company and subsidiaries Divestment by ENRA Energy Sdn. Bhd. (our wholly-owned subsidiary) ofits entire equity interest in ENRA Kimia Sdn. Bhd. and its subsidiaries to Ekopintar Sdn. Bhd. and Hextar Global Berhad, which was completed ‘on 30 November 2021 Financial year ended, 31 March Independent Market Research Report dated 15 August 2022, prepared by Ipsos Ipsos Sdn. Bhd. Loss before tax Main Market Listing Requirements of Bursa Securities 416 August 2022, being the latest practicable date before the printing of this Circular Maintenance, repair and overhaul MTU Services (Malaysia) Sdn. Bhd. Collaboration with MSM to pursue new projects and contracts in MRO services across various industries via MSMENRA MSMENRA Sdn. Bhd. (our 70%-owned indirect subsidiary) Net assets il and gas Profit before tax Proposed diversification of our Group's existing core businesses to include the MRO business RHB Investment Bank Berhad Ringgit Mataysia United States Dollar PRESENTATION OF INFORMATION References to “our Company’, ‘we", "us" and “our’ in this Circular are to our Company. References to “our Group" in this Circular are to our Company and our subsidiaries. All references to "you" and “your’ in this Circular are to our shareholders. Unless specifically referred to, words denoting the singular shall, if applicable, include the plural and vice versa and words denoting the masculine gender shall, if applicable, include the feminine andlor neuter genders and vice versa. References to persons shall include corporations, unless otherwise specified. ‘Any reference in this Circular tothe provisions of any statute, rules, regulation orrules of stock exchange shall (where the context admits) be construed as a reference to the provisions of such statute, rules, regulation or rules of stock exchange (as the case may be) as modified by any written law or (i applicable) amendments to the statute, rules, regulation or rules of stock exchange for the time being in force. ‘Any reference to atime of day and date in this Circular shall be a reference to Malaysian time and date respectively, unless otherwise specified Certain amounts and percentage figures included herein have been subject to rounding adjustments. Certain statements in this Circular may be forward-looking in nature, which are subject to uncertainties and contingencies. Forward-looking statements may contain estimates and assumptions made by our Board after due inquiry, which are nevertheless subject fo known and unknown risks, uncertaintios and other factors which may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in such forward-looking statements, In ight of these and other uncertainties, the inclusion of a forward-looking statement in this Circular should not be regarded as a representation or warranty that our Company's andlor our Group's plans and objectives will be achieved. TABLE OF CONTENTS LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSED DIVERSIFICATION CONTAINING: 1 2 10. "1 12. 13, 14, INTRODUCTION. DETAILS OF THE PROPOSED DIVERSIFICATION. FINANCIAL COMMITMENT AND SOURCE OF FUNDING. RATIONALE AND BENEFITS OF THE PROPOSED DIVERSIFICATION, INDUSTRY OVERVIEW AND OUTLOOK. RISK FACTORS. EFFECTS OF THE PROPOSED DIVERSIFICATION APPROVALS REQUIRED. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS, CHIEF EXECUTIVE ANDIOR PERSONS CONNECTED WITH THEM. RECOMMENDATION BY OUR DIRECTORS CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION ESTIMATED TIMEFRAME FOR COMPLETION. EOM FURTHER INFORMATION. APPENDICES FURTHER INFORMATION ON MSM AND MSM COLLABORATION. FURTHER INFORMATION. IMR REPORT. NOTICE OF EGM. FORM OF PROXY. PAGE " 2 R 12 2 13 13 8 “ 7 at Enclosed Enclosed RA ENRA GROUP BERHAD (Registration No, 198201005296 (236800-7)) Itncorporated i Mt Board of Directors Datuk Ali bin Abdul Kadir Tan Sri Dato’ Kamaluddin bin Abdullah Kok Kong Chin ‘Tan Sti Dato’ Seri Shamsul Azhar bin Abbas Dato’ Wee Yiaw Hin Loh Chen Yook ‘YM Tunku Afwida binti Tunku Abdul Malek os) Registered office D3-U6-15, Block D3 Solaris Dutamas No.1, Jalan Dutamas 1 50480 Kuala Lumpur 13 September 2022 Chairman, independent Non-Executive Director President / Group Chief Executive Officer Executive Director Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director To: Our Shareholders Dear Sir/ Madam, PROPOSED DIVERSIFICATION 1. INTRODUCTION (On 16 August 2022, RHB Invastment Bank had, on behalf of our Board, announced that we intend to undertake a proposed diversification of our Group's existing core businesses to include the MRO business. ‘The details of the Proposed Diversification are set out in the ensuing sections. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE RELEVANT INFORMATION IN RELATION TO THE PROPOSED DIVERSIFICATION AND TO SEEK YOUR APPROVAL FOR THE RESOLUTION PERTAINING TO THE PROPOSED DIVERSIFICATION WHICH WILL BE TABLED AT OUR FORTHCOMING EGM. THE NOTICE OF OUR FORTHCOMING EGM AND THE FORM OF PROXY ARE ENCLOSED IN THIS CIRCULAR. YOU ARE ADVISED TO READ AND CAREFULLY CONSIDER THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES CONTAINED HEREIN BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED DIVERSIFICATION TO BE ‘TABLED AT OUR FORTHCOMING EGM. DETAILS OF THE PROPOSED DIVERSIFICATION Currently, our Group is principally involved in the provision of energy services, property development, and investment holding, The reportable segments of our Group are set out below: No. Segment Description (Property development Joint venture property development activities (i) Energy services Provision of floating storage and offloading, single point mooring services, smart lighting solutions as well as provision of MRO services to O8G customers (ii) Investment holdings and others Investment holdings and provision of management services activites ‘The segmental financial performance of our Group for the past three audited FYEs 2020, 2021 and 2022 is set out below: Audited FYEs TRM"000) TRM"000) (wooo) Revenue from external customers Property development 51,962 1,674 2.675 Energy services 174,884 53,628 60,032 Investment holdings and others - - - 226,646 55,302 62,707 PTs (Let) Property development (680) (1,273) (1,533) Energy services 19.015 4,132 23,013 Investment holdings and others (10,073) (10,597) (15,231) 8,362 (7,738) 6,249 Notes: (1) Extracted based on our annual report for the FYE 2020; (2) Extracted based on our annual report forthe FYE 2022: and (3) The financial results for FYEs 2022 and 2021 (comparative year) have excluded, in their entirety, the financial performance of ENRA Kimia Sdn. Bhd. and its subsidiaries as it was divested on 30 November 2021, save for the one-off gain recognised from the ENRA Kimia Divestment. During the past three FYEs 2020 to 2022, our Group's revenue has been on a declining trend whilst PBT has been inconsistent. Further, our Group's PBT in FYE 2022 of approximately RM6.2 million was mainly due to the one-off gain of approximately RM19.6 milion recognised from the ENRA Kimia Divestment. In relation to the historical financial performance for our Group's property development and energy services segments for the past three FYEs 2020 to 2022: () the revenue from the property development segment recorded a decline from approximately RMS2.0 milion in FYE 2020 to approximately RM2.7 million in FYE 2022. For the energy services segment, it recorded a decline from approximately RM174.7 million in FYE 2022 to approximately RM60.0 milion in FYE 2022 after the ENRA Kimia Divestment; and (i) the property development segment had recorded LBTS. The energy services segment had posted declining PBTs after excluding the one-off gain of approximately RM19.6 million recognised from the ENRA Kimia Divestment. ‘Our Group intends to grow and expand our current MRO services under the energy services segment to improve future financial performance due to our Group's declining financial performance in the past three FYEs 2020 to 2022. For the FYE 2022, the contribution of our ‘Group's current MRO services, which had only commenced its business in 2019, was minimal Generally, MRO services involve the upkeep of plant facilities and equipment through preventive and corrective actions to ensure that the assets are kept in running condition. The MRO services are described below: (Source: IMR Report) MRO services serve a wide range of end users such as the O&G, marine, agriculture, industrial and other relevant and applicable industries. Currently, our Group provides MRO services to ‘O&G customers to, amongst others, maintain and preserve diese! engines and generators {including their ancillary equipment). Our Group's key O&G customers for MRO services in the past three FYEs up to the LPD include (i) ExxonMobil Exploration and Production Malaysia Inc. (*ExxonMobit’) for the maintenance and preservation of a diesel engine, and (i) SEA Hibiscus ‘Sdn, Bhd. for the provision of MRO support services and supply of spare parts. We intend to expand our current range of MRO services and serve a wider range of industries, in addition to the O&G industry. Further, the new MRO services are also expected to include the provision of manpower to our existing and potential customers to undertake thelr respective MRO projects and/or contracts. Additionally, in line with our Group's intention to grow and ‘expand our current MRO services, we are collaborating with MSM to pursue new projects and contracts in MRO services across various industries via MSMENRA. As at the LPD: ()__ENRA Energy Solutions holds 70% equity interest in MSMENRA, whilst MSM holds the remaining 30% equity interest; and (i) MSMENRA hes not undertaken any projects and contracts. Please refer to Appendix | ofthis Circular for further details on MSM and the MSM Collaboration. Premised on the above, we believe that the growth and expansion of our Group's current MRO. services and the MSM Collaboration may contribute 25% or more of our Group's net profits andlor result in a diversion of 25% or more of our Group's NA towards MRO services moving forward. In this regard, our Board proposes to seek your approval for the Proposed Diversification pursuant to Paragraph 10.13(1) of the Listing Requirements at our forthcoming EGM, 24 Key management personnel ‘Our Group has identified Ahmad Zaki Anmad Zainuddin (‘Encik Zaki") from our existing management team to lead and oversee our Group's intention to expand our current MRO services. Encik Zaki will be supported by Ikhmal Mirza bin Maziin ("Encik Mirza’) for this expansion. As at the LPD, our Group has six employees who are involved in ‘our current MRO services. Further details of the qualification and experience of the key management personnel are set out below: “ Encik Zaki Currently, Encik Zaki is the Chief Executive Officer of ENRA Energy Solutions which undertakes our Group's current MRO services. He joined our Group in 2018 as the Chief Operating Officer of ENRA Power System Sdn. Bhd. and assumed his current position now in ENRA Energy Solutions in 2019, Encik Zaki graduated with a Bachelor of Mechanical Engineering (Hons) from ‘Tenaga Nasional University, Malaysia in 2001. In the same year, he began his career as a Turbine Engineer in Sapura Energy Sdn. Bhd. where he was responsible for establishing a gas turbine facility in Shah Alam. After leaving the company in 2005, Encik Zaki joined various local and foreign companies that were in the power and O8G industries. Some of his notable positions and roles are set out below: (a) ALSTOM group of companies (“ALSTOM Group’) (from 2005 to 2012) He was mainly involved in the following departments throughout his tenure in ALSTOM Group: 1. Customer Service & Sales department in ALSTOM Power Asia Pacific Sdn. Bhd., where he was responsible for managing Tenaga Nasional Berhad's service account, 2. Product Development department in ALSTOM (Switzerland) Lid where he was responsible for developing their MRO services division; and 3. Product & Services Global MRO Network department in ALSTOM Power Services (Arabia) FZE, where he was responsible for implementing technology transfers and expanding their MRO ‘capability in Dubai, United Arab Emirates. (b) General Electric Inc. (from 2013 to 2016) and GE Power Systems Malaysia Sdn. Bhd, (from 2016 to 2017) He was an Asia-Pacific (‘APAG") Region Product Leader where he was responsible for leading all of GE's power gas turbine services within the ‘APAC region as well as GE's O&G MRO facility in Malaysia, (c)_ Sapura Energy Berhad (from 2017 to 2018) He was a General Manager under the Project Services department where he was mainly responsible for overseeing and managing their Engineering, Procuroment and Construction (EPC) projects. He subsequently left to join our Group. 22 (i) Encik Mirza Currently, Encik Mirza is an Assistant Vice President in the business development unit of ENRA Energy Solutions, after joining our Group in 2018, In his current role, he oversees corporate planning, identification of growth opportunities and market strategies of our Group (including MRO business activities) Encik Mirza graduated with a Bachelor of Commerce degree from Curtin University of Technology, Australia in 2012. Encik Mirza began his career as a Sales & Marketing Executive in Paintshield Asia Pacific Sdn. Bhd. in 2012. He was subsequently promoted to Sales and Marketing Manager in 2013 where he was responsible for the averall sales and ‘marketing initiatives of the company for various product lines and services. He then joined Crosscolors Autospa Sdn. Bhd. as the Operations Manager under the Autospa and Fitness division in 2013 where he was responsible for the day- to-day operations as well as the implementation of growth initiatives for the company. Subsequently, he left to join our Group. ‘Our Company may also appoint additional management personnel, technical personnel and qualified skilled workers to support our Group's MRO business activities when required. Further, our Company may also acquire well-equipped facilities and specialised equipment to undertake any MRO projects andlor contracts. This will mitigate the risk of dependency on extemal contractorsithird parties involved in undertaking our Group’s MRO business activities. Based on the above, our Board believes that by leveraging on the expertise of the key ‘management personnel as well as on MSN's experience in the business of MRO under the MSM Collaboration (please refer to Section 2 of Appendix ofthis Circular for further details), our Group has the capacity, capability and resources to diversify into MRO business activities Our business strategies and future plans to expand and grow our Group's current MRO services We intend to expand and grow our Group's current MRO services through ENRA Energy Solutions. As at the LPD, our growth strategies for ENRA Energy Solutions ‘comprise the following (Organic growth We intend to utlse the strengths and current capabilities of our key management personnel of ENRA Energy Solutions to secure more MRO projects and/or Contracts within our Group's current coverage in the O&G industry. Based on their experiences in MRO business activities as set out in Section 2.1 of this Circular, ENRA Energy Solutions has managed to complete MRO contracts for, amongst others, SEA Hibiscus Sdn, Bhd. and ExxonMobil. Further, ENRA Energy Solutions has managed to secure additional MRO contracts fram ExxonMobil for the maintenance and preservation of diesel engines. (il) Inorganic growth We may explore acquisitions of well-equipped facilities, specialised equipment or companies that are principally involved in MRO business activities. Additionally, we may also enter into joint ventures/partnerships with various companies or technical partners as well as collaborate with other MRO service providers to secure or undertake any other new MRO projects and contracts. As at the LPD: (@) we are in the midst of identifying and evaluating suitable investment ‘opportunities for the expansion of our Group's current MRO services, Accordingly, as and when required, we will make tho necessary announcements and obtain your approval at an EGM to be convened upon the finalisation of terms for such investment opportunities; and (b) we are collaborating with MSM to pursue new projects and contracts in MRO services across various industries in addition to our current involvement in the O8G industry via MSMENRA under the MSM Collaboration. Please refer to Section 2 of Appendix | of this Circular for further details on the MSM Collaboration. Further, our Company will also take into account the key factors to build a successful business in MRO set out in Section 5.2 of this Circular when identifying business strategies, FINANCIAL COMMITMENT AND SOURCE OF FUNDING As at the LPD, our Board cannot reasonably determine any financial commitment to be incurred by our Group for the Proposed Diversification as it can only be determined as and when our Group is able to secure MRO projects andior contracts or upon the finalisation of our investment ‘opportunities as set out in Section 2.2 of this Circular. ‘Our Group expects to fund any financial commitment through equity financing, debt financing andlor internally generated funds of our Group, and will take into consideration, amongst ‘others, the gearing level and working capital requirements of our Group at that point in time to determine the mode of funding. ‘Our Group's current MRO services, through ENRA Energy Solutions, have incurred overhead ‘expenses and marketing costs of approximately RMO.96 milion far the FYE 2022 (being the latest audited financial statement of ENRA Energy Solutions). RATIONALE AND BENEFITS OF THE PROPOSED DIVERSIFICATION Alter the successful ENRA Kimia Divestment that generated good returns to you, our Group intends to source for an additional major income stream to enhance our Group's financial performance. Our Group has determined that the current MRO services should be expanded to capture the favourable outlook of the MRO industry. Please refer to Section 2 of this Circular for further details of the expansion and Section 5.2 of this Circular for the outlook of the MRO. industry. We believe that the nature of MRO business activities is stable and recurring due to the continuous need for ongoing maintenance of assets to keep operations running. An ‘example of those assets includes diesel engines and generators (including ancillary and related equipment) in industries such as O&G, marine, industrial and agriculture. ‘Our Board is also of the view that with additional income from the expansion of MRO business. activities, our Group will be able to reduce the reliance on our existing businesses, especially the property development segment which has been affected by the impact of the COVID-19 pandemic. The COVID-19 pandemic had resulted in our Group not being able to obtain timely approvals for our projects which in turn, delayed our property launches. Premised on the above, our Board believes that the Proposed Diversification will augur well to ‘our Group and expect that future financial performance of our Group will improve. . INDUSTRY OVERVIEW AND OUTLOOK 5A 52 Overview and outlook of the Malaysia economy ‘The Malaysian economy has rebounded following the COVID-19 pandemic, Gross Domestic Product ("GDP") grew by 3.1% year-on-year ("y-o-y") (2020: -5.5%) as domestic consumption recovered. The growth in GDP was mainly due to growth in the services and manufacturing sectors, which constituted 81.3% of the total GDP. The ‘surge in employment growth has also contributed to the overall economy. In May 2022, labour force employment rose to an all-time high of 3.4% y-o-y as firms continued to ‘expand following the positive momentum of the domestic economy. AAs the Malaysian ‘economy continues its recovery, the economic stimulus introduced by the government, the Twelfth Malaysia Plan, and the Budget 2022 will continue to support the economy's, gradual recovery. Furthermore, the Budget 2022 also outlines several strategies to assist the economic growth of the country by providing financial assistance and creating job opportunities. Nonetheless, there are some downward risks to Malaysia's growth outlook, especially {rom the slow growth in China and the ongoing war in Ukraine. One of the growing cconcems for the economy isthe gradual increase in inflation. In June 2022, the headline inflation rate grew by 3.4% y-o-y. However, in the mid to long term, Malaysia's economy is expected to experience continued growth. (Source: IMR Report) ‘Overview and outlook of the MRO industry in Malaysia ‘The Malaysian MRO services serve a wide range of end users such as the O&G, marine, agriculture, industrial and other relevant and applicable industries. An example cof assets which requires MRO services include diesel engines. Through Department of Stalistic Malaysia's ("DOSM’) reported sales value for the Repair and Installation Of Machinery and Equipment under Malaysia Standard Industrial Classification of Division 33 (‘Repair and Installation Of Machinery and Equipment’), Ipsos estimates that the MRO service segment which falls under the repair and maintenance of industrial machinery and equipment, and transport equipment (excluding motorcycles and bicycles) constitutes approximately 60% to 70% of the total sales value for Repair and Installation Of Machinery and Equipment ("Market Size of MRO Services"). Please refer below for the total sales value for Repair and Installation Of Machinery and Equipment: aroition Compound Annual Growth Rate ("CAGR) rom 20720 2025:-50% Anne! Growth Rate (Source: Ipsos analysis, DOSM) ‘The Market Size of MRO Services will likely be positively affected by Malaysia's forecasted GDP CAGR from 2021 to 2025 of approximately 4.5% to 5.5%, inline with the historical CAGR from 2015 to 2019 of Repair and Installation Of Machinery and Equipment of approximately 5%, Further, the sales value for Repair and Installation Of Machinery and Equipment is forecasted to grow from RM5.8 billion in 2022 to RM6.7 billion in 2026, which in turn the Market Size of MRO Services is expected to correspondingly improve. As more assets are utilised to increase capacity and production, the need for MRO activities should also increase as industry players look to keep their operations running. In addition, some maintenance activites are scheduled on a recurring basis over a fixed period of time to ensure smooth operation over a prolonged period, 5.2.4 MRO industry landscape in Malaysia ‘The MRO industry is divided into three groups of service providers; namely (i) Original Equipment Manufacturers (‘OEMs’), (i) OEM-approved service providers and (i) Independent Service Providers (‘ISPs"), as shown below: Care onan eects () Original Equipment Manufacturers (OEMs) OEM companies design and manufacture the equipment. The design and technology used in the process are usually proprietary and protected by intellectual property rights, Typically, OEMs would provide support throughout the agreed warranty period in which most of the repairs or support required by clients will be covered by the OEMs. Over the years, OEMs have enhanced their distribution and service centres to provide better and more comprehensive service offerings to claim a more significant stake in the MRO market. (i) OEM-approved service providers OEM-approved service providers are companies aligned with OEMs that provide OEM equipment services. By having OEM-approved service providers, OEMs are able to increase their local presence in locations where they do not have an adequate local presence. OEM-approved service providers may receive exclusive privilege to service-specitic OEM equipment, brands or type within any geographical location (iti) Independent Service Providers (ISPs) ISPs typically provide third-party services and have the expertise to provide MRO services for selected brands, They possess the technical capability to perform these services adequately and usually at their facilities. ISPs compete with OEMs and OEM-approved service providers. The fees charged by ISPs are typically lower than OEMs and OEM. approved service providers as the latter usually include plant maintenance fees in their pricing. In addition, ISPs are able to buy parts in buk at a cheaper cost which are passed onto their customers, making ISPs an attractive alternative to end-users ‘The landscape for ISPs in Malaysia is highly fragmented and mainly consists of many small and mid-sized ISPs with annual revenues ranging from RM5.0 milion to RM50.0 milion. A significant portion of these ISPs comprises of smaller ‘companies that provide basic repair services such as changing filters and casing repaint. They also do not have the capital investment to extend their range of services to include specialised tests, ‘The key success factors for ISPs in the MRO industry are as follows: (@) Own specialised equipment to undertake the MRO services Industry equipment comes in many specifications for various applications, resulting in end-users having to adhere to different regulations specific to their industry. This gives rise to the demand for specialised tests in the MRO market. If clients require specialised tests, ISPs usually rely on OEMs or other service providers with relevant facities to perform those tests. As such, ISPs with better-equipped facilities (e.g. capability to do dyno testing) have a competitive edge. (0) Have the relevant expertise to undertake the MRO services Equipment and machineries that require MRO services are typically complex and specialised. They require substantial expertise which need to be performed effectively and efficiently by trained personnel. A well- structured MRO team would need to have a reliable management team, subject matter experts and proper documentation systems to assist their customers to identify necessary repairs, save time and lower costs, (c) Able to purchase spare parts and have ability on technical know-how Procuring spare parts from OEMs or third-party suppliers is critical in maintaining MRO business activities. The spare parts af an equipment or ‘machinery are usually not interchangeable with any other spare parts. In addition, for a particular spare part of a machine or equipment, the difference in type exists due to design and material changes over time. ‘Therefore, these service providers need to be able to procure specific parts from original equipment suppliers, (2) Good market reputation MRO service providers with an established record and reputation have a distinct advantage. This is evident in some sectors, such as the O&G, ‘marine, agriculture, industrial and other relevant and applicable industries where end-users engage the same service providers for MRO activities, and in some cases, engage these service providers at a premium price. (e) Cost competitiveness Pricing is always one of the main considerations for the MRO service providers to be competitive. The industries served are increasingly driven by rising demand for efficiency and cost effectiveness. Cost is always a primary factor in selecting or differentiating between the ISPs, OEM- approved service providers and OEMs. ISPs typically serve at a lower cost compared to the OEM-approved service providers and OEMs. Customers prefer to have their machines and equipment serviced at a more competitive price. 53 (Able to undertake wide range of MRO services Ancillary value-add services such as asset management, upgrading, retrofiting, specialised tests and start-up support will give ISPs a competitive edge. In addition, offering add-on services to customers can be instrumental in winning and retaining customers. (Source: IMR Report) Prospects of the Proposed Diversification ‘The Proposed Diversification will allow our Group to capitalise on the healthy outlook of Malaysia's MRO industry whereby itis expected to grow at a CAGR of approximately '5% from years 2022 to 2025 as set out in Section 5.2 of this Circular. Further, the total sales value of the Market Size of MRO services will Ikely be positively affected by Malaysia's forecasted GDP CAGR from 202 to 2025 of approximately 4.5% to 5.5% ‘Taking into consideration of the above, we intend to expand aur Group's MRO services by utlising the strengths and current capabilities of our key management personnel ‘exploring various investment opportunities and leveraging on the MSM Collaboration, In this regard, we believe that our Group will be able to experience growth in our MRO business activities and financial performance. Please refer to Section 2.2 of this Circular for further details on our business strategies and future plans to grow and expand our Group's current MRO services. (Source: Management of our Company) 6, RISK FACTORS Pursuant to the Proposed Diversification, our Group will be more exposed to risks inherent in the MRO business activities, which include, but not limited to, the following: 64 Business risk ‘Our Group will now be subjected to more risks inherent within the MRO industry, These include but are not limited to, adverse changes in overall usage and demand of industries in which MRO customers operate in, increase in inflation rate, adverse foreign exchange fluctuations, outbreak of diseases, availabilty of technical expertise, accessibility to spare parts and availabilty of financing. Any material changes in such ‘conditions may affect the MRO industry. Notwithstanding the above, our Board will seek to conduct periodic reviews on the performance of the MRO business activiies, and will adopt prudent financial management and efficient operating procedures to limit the impact of the business risks. However, there can be no assurance thal our Group may be able to successfully mitigate the various risks inherent in the MRO industry, and if unable to do so, the business operations and financial performance of our Group may be adversely affected. 10 62 63 64 Dependence on key management personnel The success of the MRO business activities of our Group depends largely on the capabilties, skills, competencies and continued efforts of our Group's key management personnel, and is not dependent on MSM and the MSM Collaboration to grow and ‘expand our current MRO services. Hence, our Group will adopt appropriate approaches, including better incentives and remuneration packages as well as providing a good working environment to promote productivity and retain their services. Our Group will engage suitable technical personnel and/or qualified skilled workers in the areas necessary for the operation andior management of our Group's MRO business activities to manage risk arising from dependency on key management personnel. Notwithstanding this, there can be no assurance that the loss of any such key management personnel will not adversely affect our Group's abilty to succeed and ‘compete in the MRO business activities. Competition risk (Our Group may face competition from existing competitors andior new entrants operating in a similar business relating to the MRO business activities. Nevertheless, ‘we will continue to take proactive measures to remain competitive in this business by, inter-alia, constantly keeping abreast with the latest market conditions, and reviewing ‘our development and marketing strategy to respond to the changes in economic conditions and market demands in the MRO industry. However, there can be no assurance that our Group will be able to compete effectively with existing and new entrants in similar MRO business in the future which may materially affect our Group's financial performance, Political, economic and regulatory risk (Our Group's MRO business activities, prospects and financial performance are now subject, to a certain extent, to the developments in the economic, political and regulatory environment of Malaysia. Such risks include economic’ uncertainties, changes in rules and regulations (including any licenses, permits and approvals required by our Group to undertake MRO business activities), changes in political leadership and changes in tax laws. Notwithstanding that, we will constantly keep abreast of the political, economic and regulatory developments through various media, events andlor seminars, and may also ‘engage in discussions or meetings withthe relevant stakeholders to evaluate, introduce andlor undertake measures with the aim of mitigating the impact of the aforementioned risks. However, there can be no assurance that any adverse development in the economic, political and regulatory environment in Malaysia will not have any material adverse effect on the business operations and financial performance of our Group, 7. EFFECTS OF THE PROPOSED DIVERSIFICATION 7A 72 Issued share capital and substantial shareholders’ shareholdings The Proposed Diversification will not have any effect on our issued share capital and substantial shareholders’ shareholdings as it will not involve the issuance of any ordinary shares of our Company. Earnings and earnings per share ("EPS") The Proposed Diversification is not expected to have any immediate material effect on the eamings of our Group for FYE 2023. Nevertheless, barring any unforeseen circumstances, the expansion of our Group's MRO business activities may contribute positively to our earnings and EPS in the future financial years. " 10. " 7.3 NAper share and gearing Barring any unforeseen circumstances, the Proposed Diversification is not expected to have any material effect on the NA and gearing of our Group, However, the future NA ‘and gearing of our Group will depend on the manner of funding for the expansion of our Group's MRO business activities, as well as profit contribution arising from our Group's MRO business activities as and when profit is made in the future financial years. APPROVALS REQUIRED ‘The Proposed Diversification is subject to the folowing approvals being obtained: () your approval forthe Proposed Diversification at our forthcoming EGM; and (i) any othor relevant authority andlor party if any required. ‘The Proposed Diversification is not coneitional upon any other proposals undertaken or to be undertaken by our Company. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS, CHIEF EXECUTIVE ANDIOR PERSONS CONNECTED WITH THEM None of our directors, major shareholders andior chief executive andor persons connected with them have any interest, direct or indirect in the Proposed Diversification, RECOMMENDATION BY OUR DIRECTORS ‘Our Board, having considered all aspects of the Proposed Diversification which include the rationale and benefits, industry overview and outlook, risk factors and prospects of the Proposed Diversification: (is ofthe opinion that the Proposed Diversification is in the best interest of our Company; (i) recommends that you vote in favour of the resolution pertaining to the Proposed Diversification to be tabled at our forthcoming EGM. CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION ‘Save for the Proposed Diversification, there are no other corporate exercises which have been announced by our Company that are pending completion as at the LPD. Additionally, if there is, any transaction to be entered into by our Company pursuant to the MSM Collaboration, we will bbe making the necessary announcement on Bursa Securities. ‘The Proposed Diversification is not conditional upon any corporate exercises. 12 12, 18. 14, ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the estimated timeframe for the Proposed Diversification is as follows: Date Events 27 September 2022 + Our forthcoming EGM for the Proposed Diversification ‘+ Completion of the Proposed Diversification EGM ur forthcoming EGM willbe held as a virtual meeting conducted entirely through lve streaming ‘and remote voting using the RPV facilities hosted on the SS e-Portal at https:/isshsb.net.my! provided by SS E Solutions Sdn, Bhd. from the broadcast venue at Meeting Room of Securities Services (Holdings) Sdn. Bhd., Level 7, Menara Milenium, Jalan Damaniela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia on Tuesday, 27 September 2022 at 11:30 a.m. or immediately after the conclusion of our Annual General Meeting, which will be held at 10:00 am. on the same day, whichever is later, or at any adjournment thereof for the purpose of considering the Proposed Diversification. A member entitled to participate and vote at ‘our forthcoming EGM is entitled to appoint a proxy or proxies to participate and to vote on his/her behalf. I you are unable to participate and vote in person at our forthcoming EGM, you are requested to complete, sign and deposit the enclosed Form of Proxy in accordance with the instructions printed thereon as soon as possible so as to arrive at the office of the Poll Administrator, SS Solutions Sdn. Bhd. at Level 7, Menara Milenium, Jalan Damaniela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia not less than 48 hours before the time set, for the meeting or adjourned meeting. Alternatively, the Form of Proxy can be electronically submitted via SS e-Portal at https://sshsb.net my! or by fax to +603 2094 9940 or by email to eservices@sshsb.com.my before the Form of Proxy lodgement’s cut-off ime as mentioned above. Please refer to the Administrative Guide for the procedures on electronic lodgement of Form of Proxy. The ladging of the Form of Proxy will not preclude you from participating at our forthcoming EGM should you subsequently wish to do so. FURTHER INFORMATION You ate advised to refer to the attached appendices for further information. Yours faithfully, For and on behalf of the Board of ENRA GROUP BERHAD DATUK ALI BIN ABDUL KADIR Independent Non-Executive Chairman 13 ‘APPENDIX |- FURTHER INFORMATION ON MSM AND MSM COLLABORATION 4. Information on MSM (The information relating to MSM has been extracted from () publicly available information which includes results of company searches and documents relating to MSM obtained from the ‘Companies Commission of Malaysia, and (i) the materials and documents provided by MSM to us) 14. 12. History and business MSM was incorporated in Malaysia under the Companies Act 1965 as a private limited company on 24 June 1987 under the name Diesel Product and Support (M) Sdn. Bhd. and had commenced its operations since. Subsequently, on 27 November 1996, it changed its name to MTU Services (Malaysia) Sdn. Bh MSM is principally involved in the provision of (i) MRO services for diesel engines (which are utlised in propulsion and power generation systems) including ancillary equipment, and (i) in-service support and fleet maintenance management of vessels, in the marine defense industry. It has two facilities, located in Manjung, Perak and Rawang, Selangor, to undertake its MRO business activities. ‘Some of the major projects undertaken by MSM for its MRO business activities in the past five years are for the Royal Malaysian Navy, Royal Malaysia Police and Malaysian Maritime Enforcement Agency to: () provide MRO services for diesel engines, and in-service support and fleet maintenance management of vessels; and (i) supplyltemanufacture engines and engine components af vessels. ‘Additionally, MSM has also supplied equipment and provided services to Boustead Naval Shipyard Sdn. Bhd. Directors and substantial shareholders () The directors of MSM and their respective shareholdings in MSM are as follows: Direct ct No. of Name Nationality shares __% % Tan SriHaji Mahamad Malaysian = = 2,025,000 100.01 Fatt Bin Dato! Mahmood Mohd QabilAmbak Malaysian = = 2,025,000 100.01 Bin Mahamad Fathil ‘Quzandria Nur Binti Malaysian = = 2,025,000 100.0 Mahamad Fathi! Dato’ Quzier Ambak Malaysian = = 2,025,000 100.0 Bin Mohd Fathil Note: (1) Deemed interested by virtue of Section 8 of the Companies Act 2016 held ‘through MFDM Holdings Sdn, Bhd. (‘MFDM"), 4 ‘APPENDIX |- FURTHER INFORMATION ON MSM AND MSM COLLABORATION 13, (i) ‘The substantial shareholders of MSM and their respective shareholdings in MSM are as follows: ct No. of Name shares % MFoM 2,025,000 100.0 - - ‘Tan Sri Haji Mahamad Fathil Bin : = 2,025,000 100.0) Dato’ Mahmood Mohd Qabil Ambak Bin Mahamad : = 2,025,000 100.0 Fathi ‘Quzandria Nur Binti Mahamad Fathil - = 2,025,000 100.0 Dato’ Quzier Ambak Bin Mohd Fathil : = 2,025,000 100.0 Note: (1) Deemed interested by virtue of Section & of the Act held through MFDM. ‘Summary of financial information of MSM Key financial information on the statement of profit or loss and other comprehensive income, and statement of financial position of MSM are set out below: 2019, (wooo) Statement of profit and loss Revenue 97.152 PBT/(LBT) 5,600 Profit for the year / (loss for the 3,733 year) Statement of financial position Non-current assets 25,75 Current assets 417,297 Non-current liabilities 6 Current liabilities 195,527 Total equity 247,139 18 Audited yancial year ended 31 December 72020 2021 (Rwr000) (Rwro00) 18,402 45,537 (14,976) (118,033) (14,888) (12,138), 20,967 19.544 393,529 317,504 201 27,208 182,041 198,749 232,254 111,093 ‘(APPENDIX |— FURTHER INFORMATION ON MSM AND MSM COLLABORATION 2. Information on the MSM Collaboration ‘Our Group's business relationship with MSM started in the year 2021 which had resulted in the establishment of MSMENRA. The MSM Collaboration represents one of the avenues for us to grow ENRA Energy Solutions via MSMENRA in the MRO industry. We believe that the combination of our Group and MSM's MRO expertise and experience across 0&G and marine defense industries coupled with MSM's facilities will alow MSMENRA to pursue new projects and contracts in MRO services across various industries, This may facilitate ‘our Group's expansion in MRO services that is beyond our Group's current coverage of the O&G industry by leveraging on MSM’s technical know-how and expertise in providing MRO services for more than 20 years. Additionally, with the MSM Collaboration, MSMENRA js also able to offer additional MRO services to the existing customers of ENRA Energy Solutions and MSM. If any of the above materialises, it may contribute positively to the future earnings of MSMENRA ‘and our Group. However, as at the LPD, we cannot reasonably determine the timeframe required to realise such earnings as it can only be determined as and when MSMENRA is successful in ‘securing new MRO projects and contracts, Further, as at the LPD, our Group has not entered into any transaction involving MSMENRA andlor shareholders’ agreement with MSM for the MSM Collaboration. As we have a 70% equity interest in MSMENRA, our Group is expected to lead the financing efforts of any future commitments required by MSMENRA to undertake any MRO projects and contracts as well as lead the business development activities of MSMENRA. 16 ‘APPENDIX Il FURTHER INFORMATION 1, RESPONSIBILITY STATEMENT (ur Board has seen and approved this Circular, and they collectively and individually accept {ull responsiblity for the accuracy of the information given inthis Circular and confirm that, after making all reasonable enquiries and to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement inthis Circular false or misleading, 2. CONSENTS AND CONFLICTS OF INTEREST 24 RHB Investment Bank RHB Investment Bank, being the Sole Principal Adviser to our Company for the Proposed Diversification, has given and has not subsequently withdrawn its written Consent for the inclusion ofits name, letter and all references thereto in the form and context in which it appears in this Circular. RHB Investment Bank is not aware of any existing or potential conflict of interest or any circumstance which would give rise to a conflict of interest by virtue of its role as the Sole Principal Adviser for the Proposed Diversification 22 Ipsos Ipsos, being the Independent Market Researcher, has given and has not subsequently withdrawn its writen consent for the inclusion of its name, IMR Report and all references thereto in the form and context in which it appears in this Circular. Ipsos is not aware of any existing or potential confict of interest or any circumstance which would give rise to a conflict of interest by virtue of its role as the Independent Market Researcher for the Proposed Diversification. 3. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES 3.4. Material commitments. Save as disclosed below, as at the LPD, there are no material commitments Incurred fr known to be incurred by our Group which, may have a material impact on the financial position or business of our Group. As at the LPD RM'000 Approved and not contracted for = Purchase of property, plant and equipment 1,038 3.2. Contingent liabilities Save as disclosed below, as at the LPD, there are no contingent labilties incurred or known to be incurred by our Group which, upon becoming due or enforceable, may hhave a material impact on the financial position or business of our Group. As at the LPD RM'000 Bank guarantee given to customers in respect of contracts, 451 in subsidiaries 7 ‘APPENDIX Il FURTHER INFORMATION Notes: (1) Excluding the bank guarantee amounting to USD600,000 or approximately RM2,7 milion* provided by ENRA SPM Sdn, Bhd, (‘ESPM") (our 60%-owned indiréct subsidiary) to PC Myanmar (Hong Kong) Limited as at the LPD for a ‘completed contract in relation to ESPM's provision of condensate storing, offloading facilities and services; and (2) Excluding the bank guarantee amounting to USD222,000 or approximately RM1.0 million* to be provided by ESPM to Gulf Petroleum Myanmar Company Limited subsequent to the LPO in relation to ESPM's provision of condensate storage, offloading facilities and services for Yotagun offshore operations in Myanmar * Converted based on the middle rate of USD1.00:RM4.4595 quoted by Bank Negara Malaysia as at 5.00 p.m. on the LPD. 4, MATERIAL LITIGATION, CLAIMS OR ARBITRATION Save as disclosed below, as at the LPD, our Group is not engaged in any material Itigation, Claims or arbitration, either as plaintiff or defendant and our Directors have no knowledge of any proceedings pending or thre 1ed against our Group or of any fact likely to give rise to any proceedings which might adversely and materially affect the financial position or business of our Group. 0 iy Contraval USA LLC ("Controval” or “Claimant”) v SPM Terminals Pty Ltd. (“SPM Terminals") and ENRA SPM Labuan Limited (“ESPML") (our 60%-owned Indirect subsidiary) On 11 January 2021, ESPML received from Controval a notice of arbitration to ‘commence arbitration proceeding following the rules of the Singapore International ‘Arbitration Centre. The alleged dispute arises out of a purchase order purportedly entered into between the Claimant and both Respondents relating to the engineering, procurement and fabrication of a leased automated custody transfer with eight inch coriolis flow meters Unit installed on a condensate storing, offloading facilities belonging to ESPML known as Ratu ENRA. The Claimant is claiming a sum of USD381,211 allegedly for unpaid invoices under the contract, interest on the amount awarded fram 7 July 2020 unti settlement ofthe award, all arbitration costs including the Claimant's representative's costs and expenses, and such other amounts deemed appropriate by the Arbitral Trbunal ESPML served its defence and counterclaim on 9 July 2021 The parties reached a settlement agreement and the arbitration has been resolved by mutual acceptance on 10 August 2022. The tribunal awarded and directed that in full and final settlement of the claim by the Claimant against the Respondents, the Respondents shall jointly and severally pay the sum of USD90,000 to the Claimant within 14 days of the award. This payment of the sum of USD90,000 constitutes settlement of all claims and counterclaims between the Claimant and the Respondents. ESPML had on 24 August 2022 paid the settlement sum to the Claimant, however, ESPML did not receive any confirmation from the Claimant even after 14 days from such payment date. PT Cakra Manunggal Semesta (“PT CMS") v ESPML. (On 22 July 2020, ESPML received from PT CMS, a notice for arbitration to commence arbitration proceedings at the Asian Intemational Arbitration Centre, Kuala Lumpur. 18 ‘APPENDIX Il FURTHER INFORMATION The alleged claim arises out of a BIMCO Standard Bareboat Charter “BARECON 2001 (‘Charterparty’) dated 16 October 2017 between ESPML and PT CMS for the vessel known as “MT. BRATASENA’ and a settlement agreement dated 9 December 2019 between ESPML, PT CMS, ESPM and Sea Trust Marine Pte. Ltd., a related company to PT CMS (‘BIMCO Settlement Agreement’) PT CMS allegedly claimed that ESPML is in breach andlor repudiatory breach and/or anticipatory repudiatory breach of the Charterparty andlor BIMCO Settlement Agreement. (On 6 May 2021, PT CMS served its first memorial and related documents including witness statement and expert report on ESPML and claimed approximately USD5.57 milion, (On 11 August 2021, ESPML served its first memorial together with the related documentary evidence including witness statement and expert report on PT CMS to dofend itself and to counter claim for loss and damages (including fines and penalties) Inthe excess of USD10.00 million ‘A.settlement agreement dated 10 August 2022 was entered into between PT CMS, ESPML, ESPM, Sea Trust Marine Pte. Lid., PT Adidaya Energi Mandiri (AEM") and ‘SPM Terminals. Under the terms of settlement, ESPML has agreed to pay the sum of USD3.2 million to PT CMS and USDO.15 milion to AEM in full and final settlement of any and all the various disputes between the parties with such settlement being without ‘any admission of labilty to any of the respective claims as against each other ("ESPML. Settlement Agreement dated 10 August 2022" Upon payment of the settlement sum, PT CMS and ESPML shall withdraw all claims and counterciaims in arbitration. ESPML had on 2 September 2022 paid the settlement sum to PT CMS and the High Court of Kuala Lumpur had on § September 2022 granted an order to release Ratu ENRA from an arrest, 5. MATERIAL CONTRACTS Save as disclosed below, our Group has not entered into any material contracts (not being contract entered into in the ordinary course of business), during the two years immediately preceeding the date ofthis Circular: @ 0) iy w Settlement agreement dated 16 December 2021 entered into between SPM Terminals and ESPML whereby in consideration of SPM Terminals withdrawing a notice of demand and refraining from presenting a winding-up petition against ESPML, ESPML had agreed to pay SPM Terminals the outstanding sum of USD1,000,000 by way of paying USD250,000 upon execution af the settlement agreement and USD750,000 in six equal monthly installments; Share sale agreement dated 2 August 2021 entered into between ENRA Energy Sdn. Bhd,, Ekopintar Sdn, Bhd. and Hextar Global Berhad in relation tothe sale of the whole of the issued share capital of ENRA Kimia by ENRA Energy Sdn. Bhd. for a cash consideration of RM50,000,000;, ESPML Settlement Agreement dated 10 August 2022; and Sale and purchase agreement dated 7 April 2022 entered into between Hamptons Homes Sdn. Bhd. and Seri Pajam Properties Sdn. Bhd. whereby Hamptons Homes ‘Sdn, Bhd. had agreed to dispose to Seri Pajam Properties Sdn. Bhd. two pieces of lands known as GM522, Lot 605, Mukim Rasah, Daerah Seremban, Negeri Sembilan and GM911, Lot 984, Mukim Rasah, Daerah Seremban, Negeri Sembllan, for a cash consideration of RM4,500,000, 19 ‘APPENDIX Il - FURTHER INFORMATION. 6, DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for your inspection at our registered office at 1D3-U6-15, Block D3, Solaris Dutamas, No. 1, Jalan Dutamas 1, 50480 Kuala Lumpur during normal business hours from Monday to Friday (except public holidays) following the date of this Circular up to and including the date of our forthcoming EGM: 0 @ i) m “ (wid ur Constitution; our Company's audited consolidated financial statements for FYEs 2021 and 2022, and our Unaudited consolidated financial statements for the 3-month financial period ended 30 June 2022; the letters of consent referred to in Section 2 of Appendix I! of this Circular the material contracts referred to in Section 5 of Appendix Il ofthis Circular; the cause papers referred to in Section 4 of Appendix Il of this Circular; and the IMR Report as appended in Appendix I of this Circular. 20 ‘APPENDIX Ill- IMR REPORT Independent Market Research Report The Maintenance, Repair and Overhaul (“MRO”) Industry in Malaysia SLPS Lr) ‘APPENDIX lil- IMR REPORT Contents Foreword 1.0 Overview and Outlook of Malaysia Economy 2.0 Introduction to MRO. 2.4 Maintenance. 2.2 Repair. 2.3 Overhaul 3.0 Estimated Market Size of MRO Services in Malaysia 4.0 MRO Landscape in Malaysia. 4.1 OEMs 4.2 OEM-Approved Service Provider. 43 ISPs. 4.4 Landscape for ISPs. 4.5 Key Success Factors for ISPs. a) Specialised equipment ) Expertise ©) Abilty to Purchase Spare Parts and Technical Know-how 4) Market Reputation ) Cost Competitiveness. 4d) Range of Services. 5.0 Risk and Challenges. 2) Industry Risks b) OEM lock-in practice, ©) Rising Inflation, 6.0 Conclusion 2 ‘APPENDIX i IMR REPORT Foreword ENRA Group Berhad ("ENRA’) intends to diversify their existing core business of ENRA and its group of companies ("Group") to include the maintenance, repair and overhaul ('MRO") business. ‘As part of ENRA's strategy to grow its business, the Group intends to expand its existing MRO services to cater to alhounded services of MRO for industrial machineries and equipment, and transport equipment in various industries such as the oll and gas, marine, industrial and agriculture industry 1.0 Overview and Outlook of Malaysia Economy The Malaysian economy has rebounded following the COVID-19 pandemic. Gross Domestic Product, (‘GDP’) grow by 3.1% y-o-y (2020: -5.5%) as domestic consumption recovered. The growth in GDP was mainly due to growth in the services and manufacturing sectors, which constituted 81.3% of the total GDP". The surge in employment growth has also contributed to the overall economy. In May 2022, labour force employment rose to an alltime high of 3.4% y-o-y as firms continued to expand following the positive momentum of the domestic economy.? As the Malaysian economy continues its recovery, the economic stimulus introduced by the government, the Tweltth Malaysia Plan, and the Budget 2022 will continue to support the economy's gradual recovery. Furthermore, Budget 2022 also outlines several strategies to assist economic growth of the country by providing financial assistance and creating job opportunities Nonetheless, there are some downward risks to Malaysia's growth outlook, especially from the slow growth in China and the ongoing war in Ukraine. One of the growing concerns in the economy is the gradual increase in inflation. In June 2022, the headiine inflation rate grow by 3.4% y-o-y. However, in the mid to long term, Malaysia's economy is expected to experience continued growth. 2.0 Introduction to MRO The MRO activities involve the upkeep of plant facilities and equipment through preventive and corrective actions to ensure that the assets are kept in running conditions. The MRO activities are described as shown in Figure 1 Figure 1: Description of MRO services. Preventive, predictive and corrective maintenance are done to prolong runtime of an equipment. Replacement of faulty parts on an equipment, Refurbishing equipment to to OEMs specification ‘Source: Secondary research, Ipsos Analysis, Deparment of Statsies Malaysia (;DOSM) - Malaysia Economic Performance 2021 * Malaysia Incustal Development Finance Berhad (MIDE) - May 2022 Labour Market 2 Malaysia Budget 2022 23 ‘APPENDIX Ill IMR REPORT 2.1 Maintenance Undertaking maintenance is essential to ensure that an equipment can function optimally over its productive lifespan. There are three main types of maintenance services: preventive, predictive and corrective maintenance in the MRO services. The distinction between corrective maintenance and repair is that corrective maintenance can be done on parts of the machine that are in poor working Conditions instead of being broken or faulty. In addition, some maintenance activities are scheduled on a recurring basis over a fixed period of time fo ensure smooth operation over a prolonged period, ‘The relevance of each type of maintenance services varies depending on the budget, resources, and ‘overall goals as shown in Table 1 Table 1: Type of Maintenance Type Corrective Preventive Predictive Frequency Typically carried out ‘Scheduled to be carried out Maintenance inthe form of, when a fault or based on OEM corrective andlor predictive ‘anomaly is detected. recommendations. Performed once signals indicate potential equipment failure or

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