Haisan Resources Berhad (“HRB” or “Company”) proposed acquisition by HRB of 750,000 ordinary shares of RM1.00 each in Malaysia Mega Galvaniser Sdn Bhd (“MMGSB”) representing 50% equity interest of the issued and paid-up share capital of MMGSB (“Proposed Acquisition”)
[12 February 2007]

Contents:

1. INTRODUCTION

The Board of Directors of HRB ("Board"), wishes to announce that HRB, had on 12 February 2007, entered into a conditional Share Sale Agreement ("SSA") with Ong Chin Yet, Ong Chin Cheong, Kamarudin Bin Md Derom and Goh Cheng Kum (collectively, the "Vendors") to acquire 50% equity interest of MMGSB comprising 750,000 ordinary shares of RM1.00 each in MMGSB ("Sale Shares") for a total cash consideration of RM13,500,000 ("Purchase Consideration").

2. DETAILS OF THE PROPOSED ACQUISITION

The Company proposes to acquire 750,000 ordinary shares of RM1.00 each in MMGSB representing 50% equity interest of the issued and paid-up share capital of MMGSB for a total cash consideration of RM13,500,000. HRB will acquire the 750,000 ordinary shares of RM1.00 each from the following Vendors as shown in Table 1.

2.1 Background Information on MMGSB
MMGSB is a company incorporated in Malaysia under the Companies Act, 1965 on 20 March 1996 with its registered office at Unit C-6-5, 6th Floor, Block C, Megan Avenue II, 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur.
MMGSB is principally engaged in the business of hot-dip metal galvanizing. MMGSB has a 100% wholly-owned subsidiary, Malaysian Mega Galvaniser (Kuantan) Sdn Bhd and its principal activities are metal galvanising and electroplating.
The authorised and issued and paid-up share capital of MMGSB are RM1,500,000 and RM1,500,000 respectively. For the financial period ended 31 August 2005, MMGSB's consolidated audited net profits and net assets ("NA") are RM668,831 and RM12,388,010 respectively.
A summary of the audited financial results of MMGSB for the past five (5) FYE are shown in Table 2.

2.2 Background Information on the Vendors
The background information of the Vendors are as follows:

1. Ong Chin Yet, a Malaysian, is a substantial shareholder and a managing director of HRB. He is also a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB
2. Ong Chin Cheong, a Malaysian, is a substantial shareholder and an executive director of HRB. He is also a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB;
3. Kamarudin Bin Md Derom, a Malaysian, is a substantial shareholder and Executive Chairman of HRB. He is also a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB; and
4. Goh Cheng Kum, a Malaysian, is a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB.

The number of shares and original dates of investment of the Vendors in MMGSB are shown in Table 3.

2.3 Basis of Arriving at the Purchase Consideration
The Purchase Consideration for the Proposed Acquisition was arrived at between HRB and the Vendors on a willing-buyer willing-seller basis after taking into consideration the following:

1. the earnings potential and the net assets of MMGSB; and
2. the profit guarantee from the Vendors whereby they warrant and represent that the profit after tax of MMGSB for the period 1 January 2007 to 31 December 2007 shall not be less than the sum of RM4,500,000 ("Profit Guarantee").

2.4 Sources of Funding
The purchase consideration shall be financed via internally generated funds and bank borrowings.

2.5 Liabilities to be assumed
The Sale Shares shall be acquired by HRB free from all charges, liens, options and encumbrances whatsoever and with all rights attaching thereto.
There will be no other liabilities to be assumed by HRB arising from the Proposed Acquisition.

2.6 Ranking of the Sale Shares
The Sale Shares to be acquired shall be free from all encumbrances and together with all rights and benefits attaching thereto and shall rank pari passu in all respects with all the other ordinary shares of MMGSB.

2.7 Other Salient Terms of the SSA
The other salient terms and conditions of the SSA are as follows:

1. Terms of payment
2. Upon execution of the SSA, HRB shall pay a sum of RM2,700,000 to the Vendor, being 20% deposit of the Purchase Consideration; and
3. The balance of the Purchase Consideration of RM10,800,000 shall be paid by HRB to the Vendor on Completion;
4. The conduct of a due diligence investigation by HRB into MMGSB and its affairs, the results of which are satisfactory to HRB in its absolute discretion;
5. If any of the conditions set out in clause 4.1 of the SSA is not fulfilled or waived by either the Vendors or HRB within six (6) months from the date of this SSA or such extended date as may be mutually agreed between the parties, either party may rescind this SSA forthwith by written notice to the other party; and

Upon the rescission of this SSA, the Vendors shall immediately refund the Deposit paid by HRB and this SSA shall thereafter cease to have any effect and shall become null and void and neither parties shall have any further claims against the other save and except for any antecedent breach.

3. RATIONALE FOR THE PROPOSED ACQUISITION

The Proposed Acquisition is expected to generate the following benefits to HRB Group:-

(i)   Complementary activites
The combined expertise of manpower will result in greater operational efficiency in terms of production for HRB, which will in turn result in greater cost savings for the Company. Further to that, the Proposed Acquisition will result in the consolidation of manufacturing processes such as in the provision of metal galvanising and electroplating services to the engineering division of HRB. This will complement the existing services of the engineering division. It is the intention of HRB for the engineering division of the Group to work closely with MMGSB to enhance the present activities of the Group.

(ii)   Greater cost savings
The Proposed Acquisition will also generate a greater economy of scale for HRB via cost savings and revenue synergies generated arising from the combination of similar activities of HRB's engineering division and MMGSB.

(iii) Capitalise on the growth of MMGSB
The Proposed Acquisition would provide the HRB Group an opportunity to participate in the growing business of hot-dip galvanising. MMGSB is involved in a niche market with established customer base. The prospects of the Company are further shown in Section 8 of this announcement.

4. APPROVALS REQUIRED

The Proposed Acquisition is conditional upon approvals being obtained from the following:

(i)   The shareholders of HRB for the Proposed Acquisition at the forthcoming EGM to be convened; and

(ii)   Any other relevant authorities, if required.

5. Effects of the Proposed Acquisition

The effects of the Proposed Acquisition on the share capital, NA, substantial shareholders' shareholdings, earnings and dividends of the HRB Group, are as follows:

5.1 Share Capital
The Proposed Acquisition is not expected to have any effect on the share capital of HRB.

5.2 NA
The Proposed Acquisition is not expected to have any effect on the NA or NA per share of HRB.

5.3 Substantial Shareholders' Shareholdings
The Proposed Acquisition is not expected to have any effect on the substantial shareholders' shareholdings of HRB.

5.4 Earnings
The Proposed Acquisition is expected to be completed in the second quarter of 2007 and hence is not expected to have any effect on the earnings of HRB for the financial year 2006. Nevertheless, the Proposed Acquisition is expected to contribute positively to the earnings of the HRB Group in the financial year ending 31 December 2007 and in the future financial years.

5.5 Dividends
HRB did not declare any dividend for the financial year ended 31 December 2005. The Board has not deliberated on the dividend payment for the financial year ending 31 December 2006. Any dividend to be declared and paid by HRB in the future will depend on, amongst others, the profitability and cashflow position of the HRB Group. The Proposed Acquisition is not expected to have any material effect on the dividend policy of the Company.

6. RISK FACTORS

The Proposed Acquisition is subject to various risk factors which, amongst others, are as listed below:

6.1 Political, economic and environmental considerations
MMGSB has clients in Malaysia and overseas such as Hong Kong, Australia, Canada and the Middle East. Any adverse developments in political, economic and regulatory conditions in Malaysia and the said countries where MMGSB markets its products, or sources its suppliers, could materially affect the financial and operational condition or the overall profitability of MMGSB. Other political and economic uncertainties include the risk of war, expropriation, nationalisation, re-negotiation, or nullification of existing contracts, changes in rates of interest and methods of taxation, changes in import tariff policies and currency exchange controls.

Nonetheless, no assurance can be given that any change to these factors would not have any material adverse impact on MMGSB's business.

6.2 Business and operational risks
MMGSB is principally involved in the hot-dip galvanizing process, a process of applying a zinc coating to steel surfaces.

MMGSB is subject to certain risks inherent in its industry. These include, but not limited to, shortage of labour, availability of raw materials, increases in the cost of labour, fluctuations in foreign exchange, irrecoverable of debts, business and collection risk.

MMGSB seeks to limit these risks through, inter-alia, maintaining good business relationships with its customers and suppliers, providing better incentives and benefits to motivate and retain staff and tightening of credit control. Nonetheless, no assurance can be given that such measures will completely eliminate MMGSB's business risks.

6.3 Supply and prices of Raw Materials
MMGSB enjoys cordial relationships with its raw material suppliers and have over the years obtained good support from them. MMGSB is not dependent on any single supplier for sourcing its raw material, thus ensuring MMGSB of constant supply of raw materials, which in turn results in minimal disruption in its operations. The prices of raw materials eg. zinc tend to fluctuate and can be volatile. Higher cost of materials will affect the profit margin of MMGSB as the selling prices of the products could not be increased in tandem with the increase costs due to stiff competition coupled with inflated production and selling costs in the form of energies and logistics.

IIn view of the above, MMGSB will endeavour to do its utmost to manage the volatile situation of the raw materials for the coming years. However, there can be no assurance that any change to the factors, such as shortage of raw materials, will not have any material adverse impact on the supply of raw materials to MMGSB.

6.4 Competition
MMGSB faces relatively low competition from other companies in the similar business activity. The higher prices for raw materials resulted in many smaller businesses going out of business, while the employment of a more efficient method of production from Germany had resulted in a lower cost of production for MMGSB. Nevertheless, while MMGSB is constantly improving its operations to remain competitive, no assurance can be given that MMGSB will be able to maintain its existing market position in the future with the Proposed Acquisition.

6.5 Investment Risk
There can be no assurance that the anticipated benefits of the Proposed Acquisition will be realised, or that HRB will be able to generate sufficient revenues from the Proposed Acquisition to offset associated investment costs, or that HRB will be able to maintain uniform standards of quality and service, controls, policies and procedures.

6.6 Financing risk
The purchase consideration of RM13,500,000 for the Proposed Acquisition is expected to be satisfied via internally generated funds and bank borrowings. The bank borrowings are expected to be pegged to the base lending rate of the principal banker(s) which is greatly influenced by the directives from Bank Negara Malaysia and thus, the costs of the bank borrowings are expected to be affected by the changes in interest rates. Therefore, future fluctuations of the interest rates could have material effects on HRB's profitability. In addition, the funding for the Proposed Acquisition via internally generated funds is expected to result in depletion of the working capital of the HRB Group, which may adversely impact the operations and thus, the financial performance of the enlarged HRB Group. As such, the HRB Group will seek to mitigate the financing risk by undertaking prudent capital budgeting and maintaining a healthy debt to equity ratio. However, there is no assurance that the risk associated with the financing of the Proposed Acquisition will not have any material adverse impact on the profitability of the enlarged HRB Group.


7. ECONOMIC PROSPECTS AND OUTLOOK

The Board believes that the Proposed Acquisition is beneficial to the HRB Group, premised on the following:

7.1 The Global economy
The global economy continues to grow despite high crude oil prices and monetary policy tightening in major economies. Economic activities in developed countries continue to expand, with the euro area improving on the back of positive consumer and business sentiments, while in Japan, growth continues to firm up with further strengthening in business and consumer confidence. The United States ("US") economy is showing signs of moderation. Among developing economies, growth continues to be strong in China, India and other nations in Asia, supported by rising exports, investment and consumption.

For the year, world gross domestic product ("GDP") is projected to expand further to 4.9% (2005: 4.8%). The strong growth forecast could be impeded by several downside risks, notably, a further increase in crude oil prices and global interest rates, disorderly adjustments of the global imbalances- the diverging current account positions of the world's main economic regions-as well as heightened geopolitical uncertainties in the Middle East.

(Source: Economic Report 2006/2007, Ministry of Finance Malaysia)

7.2 The Malaysian economy
The Malaysian economy is expected to strengthen in 2007, despite a more challenging external environment. This optimism is underpinned by continued expansion of private sector activities, complemented by Government's pragmatic policies and strategies to diversify and promote the new sources of growth. Overall, real GDP growth is envisaged to expand at 6% in 2007 (2006: 5.8%), consistent with the growth targets outlined in the Ninth Malaysia Plan. Growth will continue to be broad-based with positive contribution from all sectors of the economy. With the encouraging economic prospects, nominal gross nominal product per capita is projected to rise by 7.2% to reach RM21,168 (2006: 9.4%; RM19,739), reflecting improvements in the well-being of the rakyat. In terms of purchasing power parity, per capita income is expected to increase by 6.7% to reach USD12,666 (2006: 11.8%; USD11,871)

(Source: Economic Report 2006/2007, Ministry of Finance Malaysia)

7.3 Manufacturing Industry
The MMGSB and its subsidiary, Malaysian Mega Galvaniser (Kuantan) Sdn Bhd ("MMGSB Group) specialises in the hot-dip galvanising process.

Value added of the manufacturing sector is expected to expand further, increasing by 7.3% in 2006 (2005: 5.1%), with production in the export-oriented industries contributing 63.6% to total output. The robust performance of the manufacturing sector is based on higher output growth of 8.7% registered in the first six months of 2006 (January to June 2005: 3.8%) and anticipated continued expansion in the second half. The strong growth during the period was due primarily to the double-digit growth registered by the export-oriented industries of electrical and electronics, petroleum products and textiles. While export-oriented industries grew by 10.9%, growth in the domestic-oriented industries moderated to 5% (January to June 2005: 1.9%; 6.9%). Sales value of the manufacturing sector also increased 8.9% to RM239.7 million (January to June 2005: 14.1%; RM220.2 million) during the same period, mainly due to the improvement in prices as well as higher output of some industries, including iron and steel; and petroleum, which led to capacity utilisation sustained at above 80% during the first half of 2006.

(Source: Economic Report 2006/2007, Ministry of Finance Malaysia)

8. PROSPECTS OF MMGSB

IIn tandem with the country's economic growth, the production of major iron and steel products during the Second Industrial Master Plan (1996-2005) ("IMP2") registered an average annual growth of 3.2 percent, from 9.6 million tones in 1996 to 12.7 million tones in 2005. The growth was attributed to the gradual increase of domestic demand, resulting from the economic recovery after the financial crisis in 1997. During the Third Industrial Master Plan (2006-2020) ("IMP3"), iron and steel will continue to remain important engineering and construction materials. Industries are not expected to substitute iron and steel with other competing materials such as platics, aluminium, glass and ceramics, on a substantive scale. In addition, the rise in the energy cost will have a lesse impact on the sub-sector, compared with platics, aluminium, glass and ceramics industries.

During the IMP3 period, the sub-sector is expected to expand its downstream activities to produce a wider range of higher value-added products to meet arket requirements. Based on the trends of imports and domestic consumption, there are opportunities for expansion and development in the production of heavy gauge galvanized coils, metallic coated coils and tubes of certain grades and specifications.

The implementation of various free trade agreements ("FTAs") by Malaysia with selected trading partners will produce a long term impact on investments and trade. The investment regimes of both Malaysia and FTA partners will be progressively liberalized. In respect of trade, market access through preferential treatment is the major potential benefit. The challenge for the local iron and steel manufacturers is to capitalize on the potential benefits from the FTA arrangement, by enhancing their capabilities to meet the technical requirements of the market. The Government will continue to promote investments in the production of iron and steel products with growth potential.

(Source: Third Industrial Master Plan, 2006-2020)

With the various initiatives and FTAs in place, the prospects of MMGSB in the hot-dip galvanizing industry appear to be positive. MMGSB is able to capitalize on its niche expertise to further increase in revenue, and consolidated its position in the market. The growth in the steel industry will have a positive spill-over effect on MMGSB.

9. INTEREST OF DIRECTORS, SUBSTANTIAL SHAREHOLDERS' AND PERSONS CONNECTED TO THEM

The directors and substantial shareholders of the Company, namely, Ong Chin Yet, Ong Chin Cheong and Kamarudin bin Md Derom, are also the Vendors and substantial shareholders in MMGSB. As such, they are deemed interested in the Proposed Acquisition as detailed in Section 2 of this announcement.

Therefore, they will abstain and will continue to abstain from all deliberations and voting on the relevant resolution pertaining to the Proposed Acquisition at the relevant Board's meeting of the Company and the EGM in relation to the Proposed Acquisition. Further, they have undertaken to ensure that persons connected to them will abstain from voting at the forthcoming EGM on the resolution pertaining to the Proposed Acquisition.

Save as disclosed above, none of the other directors or substantial shareholders of the Company and persons connected to them has any interests, direct or indirect, in the Proposed Acquisition.

10. DIRECTORS' RECOMMENDATION

Having considered all aspects of the Proposed Acquisition, the Board (save for Ong Chin Yet, Ong Chin Cheong and Kamarudin bin Md Derom) is of the opinion that the Proposed Acquisition is in the best interests of the HRB Group.

11. ADVISER

Public Investment Bank Berhad ("PIVB") has been appointed as the Adviser for the Proposed Acquisition.

12. INDEPENDENT ADVICE

Due to the interests of the directors and substantial shareholders of HRB as set out in Section 9 above, the Proposed Acquisition is deemed a related party transaction under Chapter 10 of the Listing Requirements of Bursa Securities. In compliance with paragraph 10.08(4)(b) of the Bursa Securities Listing Requirements, OSK Investment Bank Berhad ("OSK") has been appointed as the Independent Adviser to provide the non-interested directors and shareholders of HRB with an independent evaluation of the Proposed Acquisition as to whether the Proposed Acquisition are fair and reasonable so far as the shareholders are concerned and whether to the detriment of the non-interested shareholders of HRB.
The appointment of OSK is subject to Bursa Securities having no objection on the eligibility of OSK to act in that capacity.

13.  Departure from the SECURITIES COMMISSION's ("sc") Guidelines AND/ OR FORMAT AND CONTENT OF APPLICATION UNDER THE SC'S GUIDELINES ON ISSUE/ OFFER OF SECURITIES

To the best knowledge of the Board, there is no departure from the SC Guidelines in relation to the Proposed Acquisition.

14. Estimated TimeFrame for Completion of the Proposed Acquisition

The Proposed Acquisition is expected to be completed by the second quarter of 2007.

15. Documents available for inspection

A copy of the SSA is available for inspection by the shareholders of HRB at the registered office of HRB at Lot 506, Jalan Pelabuhan Utara, Bandar Sultan Suleiman, 42000 Pelabuhan Klang, Selangor Darul Ehsan during the normal working hours from Monday to Friday (except public holidays) for a period of two (2) weeks from the date of this announcement.

This announcement is dated 12 February 2007.

Commentaries:-

1. Revenue for the unaudited FYE ended 31 August 2006 increased by approximately 96% from the revenue for the FYE 31 August 2005 of RM18.82 million due to increase in sales and selling price.

2. The lower PBT for the FYE 31 August 2004 of RM0.57 million as compared to the PBT for the FYE 31 August 2003 is due to the increase of zinc prices.

Haisan Resources Berhad (“HRB” or “Company”) proposed acquisition by HRB of 750,000 ordinary shares of RM1.00 each in Malaysia Mega Galvaniser Sdn Bhd (“MMGSB”) representing 50% equity interest of the issued and paid-up share capital of MMGSB (“Proposed Acquisition”)
[12 April 2007]

Contents:

1. INTRODUCTION

The Board of Directors of HRB ("Board"), wishes to announce that HRB, had on 12 February 2007, entered into a conditional Share Sale Agreement ("SSA") with Ong Chin Yet, Ong Chin Cheong, Kamarudin Bin Md Derom and Goh Cheng Kum (collectively, the "Vendors") to acquire 50% equity interest of MMGSB comprising 750,000 ordinary shares of RM1.00 each in MMGSB ("Sale Shares") for a total cash consideration of RM13,500,000 ("Purchase Consideration").

2. DETAILS OF THE PROPOSED ACQUISITION

The Company proposes to acquire 750,000 ordinary shares of RM1.00 each in MMGSB representing 50% equity interest of the issued and paid-up share capital of MMGSB for a total cash consideration of RM13,500,000. HRB will acquire the 750,000 ordinary shares of RM1.00 each from the following Vendors as shown in Table 1.

2.1 Background Information on MMGSB
MMGSB is a company incorporated in Malaysia under the Companies Act, 1965 on 20 March 1996 with its registered office at Unit C-6-5, 6th Floor, Block C, Megan Avenue II, 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur.
MMGSB is principally engaged in the business of hot-dip metal galvanizing. MMGSB has a 100% wholly-owned subsidiary, Malaysian Mega Galvaniser (Kuantan) Sdn Bhd and its principal activities are metal galvanising and electroplating.
The authorised and issued and paid-up share capital of MMGSB are RM1,500,000 and RM1,500,000 respectively. For the financial period ended 31 August 2005, MMGSB's consolidated audited net profits and net assets ("NA") are RM668,831 and RM12,388,010 respectively.
A summary of the audited financial results of MMGSB for the past five (5) FYE are shown in Table 2.

2.2 Background Information on the Vendors
The background information of the Vendors are as follows:

1. Ong Chin Yet, a Malaysian, is a substantial shareholder and a managing director of HRB. He is also a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB;
2. Ong Chin Cheong, a Malaysian, is a substantial shareholder and an executive director of HRB. He is also a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB;
3. Kamarudin Bin Md Derom, a Malaysian, is a substantial shareholder and Executive Chairman of HRB. He is also a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB; and
4. Goh Cheng Kum, a Malaysian, is a substantial shareholder and a director of MMGSB. He currently holds 300,000 MMGSB Shares, representing twenty percent (20%) of the issued and paid-up share capital in MMGSB.

The number of shares and original dates of investment of the Vendors in MMGSB are shown in Table 3.

2.3 Basis of Arriving at the Purchase Consideration
The Purchase Consideration for the Proposed Acquisition was arrived at between HRB and the Vendors on a willing-buyer willing-seller basis after taking into consideration the following:

1. the earnings potential and the net assets of MMGSB; and
2. the profit guarantee from the Vendors whereby they warrant and represent that the profit after tax of MMGSB for the period 1 January 2007 to 31 December 2007 shall not be less than the sum of RM4,500,000 ("Profit Guarantee").

2.4 Sources of Funding
The purchase consideration shall be financed via internally generated funds and bank borrowings.

2.5 Liabilities to be assumed
The Sale Shares shall be acquired by HRB free from all charges, liens, options and encumbrances whatsoever and with all rights attaching thereto.

There will be no other liabilities to be assumed by HRB arising from the Proposed Acquisition.

2.6 Ranking of the Sale Shares
The Sale Shares to be acquired shall be free from all encumbrances and together with all rights and benefits attaching thereto and shall rank pari passu in all respects with all the other ordinary shares of MMGSB.

2.7 Other Salient Terms of the SSA
The other salient terms and conditions of the SSA are as follows:

1. Terms of payment
   
   • Upon execution of the SSA, HRB shall pay a sum of RM2,700,000 to the Vendor, being 20% deposit of the Purchase Consideration; and
   • The balance of the Purchase Consideration of RM10,800,000 shall be paid by HRB to the Vendor on Completion
     
2. The conduct of a due diligence investigation by HRB into MMGSB and its affairs, the results of which are satisfactory to HRB in its absolute discretion;
3. If any of the conditions set out in clause 4.1 of the SSA is not fulfilled or waived by either the Vendors or HRB within six (6) months from the date of this SSA or such extended date as may be mutually agreed between the parties, either party may rescind this SSA forthwith by written notice to the other party; and

Upon the rescission of this SSA, the Vendors shall immediately refund the Deposit paid by HRB and this SSA shall thereafter cease to have any effect and shall become null and void and neither parties shall have any further claims against the other save and except for any antecedent breach.

3. Rationale for the Proposed Acquisition

The Proposed Acquisition is expected to generate the following benefits to HRB Group:-

(i)   Complementary activities
The combined expertise of manpower will result in greater operational efficiency in terms of production for HRB, which will in turn result in greater cost savings for the Company. Further to that, the Proposed Acquisition will result in the consolidation of manufacturing processes such as in the provision of metal galvanising and electroplating services to the engineering division of HRB. This will complement the existing services of the engineering division. It is the intention of HRB for the engineering division of the Group to work closely with MMGSB to enhance the present activities of the Group.

(ii)   Greater cost savings

The Proposed Acquisition will also generate a greater economy of scale for HRB via cost savings and revenue synergies generated arising from the combination of similar activities of HRB's engineering division and MMGSB.

(iii) Capitalise on the growth of MMGSB

The Proposed Acquisition would provide the HRB Group an opportunity to participate in the growing business of hot-dip galvanising. MMGSB is involved in a niche market with established customer base. The prospects of the Company are further shown in Section 8 of this announcement.

4. APPROVALS REQUIRED

The Proposed Acquisition is conditional upon approvals being obtained from the following:

1. the shareholders of HRB for the Proposed Acquisition at the forthcoming EGM to be convened; and
2. any other relevant authorities, if required.

5. Effects of the Proposed Acquisition

The effects of the Proposed Acquisition on the share capital, NA, substantial shareholders' shareholdings, earnings and dividends of the HRB Group, are as follows:

5.1 Share Capital
The Proposed Acquisition is not expected to have any effect on the share capital of HRB.

5.2 NA
The Proposed Acquisition is not expected to have any effect on the NA or NA per share of HRB.

5.3 Substantial Shareholders' Shareholdings
The Proposed Acquisition is not expected to have any effect on the substantial shareholders' shareholdings of HRB.

5.4 Earnings
The Proposed Acquisition is expected to be completed in the second quarter of 2007 and hence is not expected to have any effect on the earnings of HRB for the financial year 2006. Nevertheless, the Proposed Acquisition is expected to contribute positively to the earnings of the HRB Group in the financial year ending 31 December 2007 and in the future financial years.

5.5 Dividends
HRB did not declare any dividend for the financial year ended 31 December 2005. The Board has not deliberated on the dividend payment for the financial year ending 31 December 2006. Any dividend to be declared and paid by HRB in the future will depend on, amongst others, the profitability and cashflow position of the HRB Group. The Proposed Acquisition is not expected to have any material effect on the dividend policy of the Company.

6. RISK FACTORS

The Proposed Acquisition is subject to various risk factors which, amongst others, are as listed below:

6.1 Political, economic and environmental considerations
MMGSB has clients in Malaysia and overseas such as Hong Kong, Australia, Canada and the Middle East. Any adverse developments in political, economic and regulatory conditions in Malaysia and the said countries where MMGSB markets its products, or sources its suppliers, could materially affect the financial and operational condition or the overall profitability of MMGSB. Other political and economic uncertainties include the risk of war, expropriation, nationalisation, re-negotiation, or nullification of existing contracts, changes in rates of interest and methods of taxation, changes in import tariff policies and currency exchange controls.

Nonetheless, no assurance can be given that any change to these factors would not have any material adverse impact on MMGSB's business.

6.2 Business and operational risks
MMGSB is principally involved in the hot-dip galvanizing process, a process of applying a zinc coating to steel surfaces.

MMGSB is subject to certain risks inherent in its industry. These include, but not limited to, shortage of labour, availability of raw materials, increases in the cost of labour, fluctuations in foreign exchange, irrecoverable of debts, business and collection risk.

MMGSB seeks to limit these risks through, inter-alia, maintaining good business relationships with its customers and suppliers, providing better incentives and benefits to motivate and retain staff and tightening of credit control. Nonetheless, no assurance can be given that such measures will completely eliminate MMGSB's business risks.

6.3 Supply and prices of Raw Materials
MMGSB enjoys cordial relationships with its raw material suppliers and have over the years obtained good support from them. MMGSB is not dependent on any single supplier for sourcing its raw material, thus ensuring MMGSB of constant supply of raw materials, which in turn results in minimal disruption in its operations. The prices of raw materials e.g. zinc tend to fluctuate and can be volatile. Higher cost of materials will affect the profit margin of MMGSB as the selling prices of the products could not be increased in tandem with the increase costs due to stiff competition coupled with inflated production and selling costs in the form of energies and logistics.

IIn view of the above, MMGSB will endeavour to do its utmost to manage the volatile situation of the raw materials for the coming years. However, there can be no assurance that any change to the factors, such as shortage of raw materials, will not have any material adverse impact on the supply of raw materials to MMGSB.

6.4 Competition
MMGSB faces relatively low competition from other companies in the similar business activity. The higher prices for raw materials resulted in many smaller businesses going out of business, while the employment of a more efficient method of production from Germany had resulted in a lower cost of production for MMGSB. Nevertheless, while MMGSB is constantly improving its operations to remain competitive, no assurance can be given that MMGSB will be able to maintain its existing market position in the future with the Proposed Acquisition.

6.5 Investment Risk
There can be no assurance that the anticipated benefits of the Proposed Acquisition will be realised, or that HRB will be able to generate sufficient revenues from the Proposed Acquisition to offset associated investment costs, or that HRB will be able to maintain uniform standards of quality and service, controls, policies and procedures.

6.6 Financing risk
The purchase consideration of RM13,500,000 for the Proposed Acquisition is expected to be satisfied via internally generated funds and bank borrowings. The bank borrowings are expected to be pegged to the base lending rate of the principal banker(s) which is greatly influenced by the directives from Bank Negara Malaysia and thus, the costs of the bank borrowings are expected to be affected by the changes in interest rates. Therefore, future fluctuations of the interest rates could have material effects on HRB's profitability. In addition, the funding for the Proposed Acquisition via internally generated funds is expected to result in depletion of the working capital of the HRB Group, which may adversely impact the operations and thus, the financial performance of the enlarged HRB Group. As such, the HRB Group will seek to mitigate the financing risk by undertaking prudent capital budgeting and maintaining a healthy debt to equity ratio. However, there is no assurance that the risk associated with the financing of the Proposed Acquisition will not have any material adverse impact on the profitability of the enlarged HRB Group.

7. ECONOMIC PROSPECTS AND OUTLOOK

The Board believes that the Proposed Acquisition is beneficial to the HRB Group, premised on the following:

7.1 The Global economy
The global economy continues to grow despite high crude oil prices and monetary policy tightening in major economies. Economic activities in developed countries continue to expand, with the euro area improving on the back of positive consumer and business sentiments, while in Japan, growth continues to firm up with further strengthening in business and consumer confidence. The United States ("US") economy is showing signs of moderation. Among developing economies, growth continues to be strong in China, India and other nations in Asia, supported by rising exports, investment and consumption.

For the year, world gross domestic product ("GDP") is projected to expand further to 4.9% (2005: 4.8%). The strong growth forecast could be impeded by several downside risks, notably, a further increase in crude oil prices and global interest rates, disorderly adjustments of the global imbalances- the diverging current account positions of the world's main economic regions-as well as heightened geopolitical uncertainties in the Middle East.

(Source: Economic Report 2006/2007, Ministry of Finance Malaysia)

7.2 The Malaysian economy
The Malaysian economy is expected to strengthen in 2007, despite a more challenging external environment. This optimism is underpinned by continued expansion of private sector activities, complemented by Government's pragmatic policies and strategies to diversify and promote the new sources of growth. Overall, real GDP growth is envisaged to expand at 6% in 2007 (2006: 5.8%), consistent with the growth targets outlined in the Ninth Malaysia Plan. Growth will continue to be broad-based with positive contribution from all sectors of the economy. With the encouraging economic prospects, nominal gross nominal product per capita is projected to rise by 7.2% to reach RM21,168 (2006: 9.4%; RM19,739), reflecting improvements in the well-being of the rakyat. In terms of purchasing power parity, per capita income is expected to increase by 6.7% to reach USD12,666 (2006: 11.8%; USD11,871).

(Source: Economic Report 2006/2007, Ministry of Finance Malaysia)

7.3 Manufacturing Industry
The MMGSB and its subsidiary, Malaysian Mega Galvaniser (Kuantan) Sdn Bhd ("MMGSB Group) specialises in the hot-dip galvanising process.

Value added of the manufacturing sector is expected to expand further, increasing by 7.3% in 2006 (2005: 5.1%), with production in the export-oriented industries contributing 63.6% to total output. The robust performance of the manufacturing sector is based on higher output growth of 8.7% registered in the first six months of 2006 (January to June 2005: 3.8%) and anticipated continued expansion in the second half. The strong growth during the period was due primarily to the double-digit growth registered by the export-oriented industries of electrical and electronics, petroleum products and textiles. While export-oriented industries grew by 10.9%, growth in the domestic-oriented industries moderated to 5% (January to June 2005: 1.9%; 6.9%). Sales value of the manufacturing sector also increased 8.9% to RM239.7 million (January to June 2005: 14.1%; RM220.2 million) during the same period, mainly due to the improvement in prices as well as higher output of some industries, including iron and steel; and petroleum, which led to capacity utilisation sustained at above 80% during the first half of 2006.

(Source: Economic Report 2006/2007, Ministry of Finance Malaysia)

8. PROSPECTS OF MMGSB

IIn tandem with the country's economic growth, the production of major iron and steel products during the Second Industrial Master Plan (1996-2005) ("IMP2") registered an average annual growth of 3.2 percent, from 9.6 million tones in 1996 to 12.7 million tones in 2005. The growth was attributed to the gradual increase of domestic demand, resulting from the economic recovery after the financial crisis in 1997. During the Third Industrial Master Plan (2006-2020) ("IMP3"), iron and steel will continue to remain important engineering and construction materials. Industries are not expected to substitute iron and steel with other competing materials such as platics, aluminium, glass and ceramics, on a substantive scale. In addition, the rise in the energy cost will have a lesser impact on the sub-sector, compared with platics, aluminium, glass and ceramics industries.

During the IMP3 period, the sub-sector is expected to expand its downstream activities to produce a wider range of higher value-added products to meet arket requirements. Based on the trends of imports and domestic consumption, there are opportunities for expansion and development in the production of heavy gauge galvanized coils, metallic coated coils and tubes of certain grades and specifications.

The implementation of various free trade agreements ("FTAs") by Malaysia with selected trading partners will produce a long term impact on investments and trade. The investment regimes of both Malaysia and FTA partners will be progressively liberalized. In respect of trade, market access through preferential treatment is the major potential benefit. The challenge for the local iron and steel manufacturers is to capitalize on the potential benefits from the FTA arrangement, by enhancing their capabilities to meet the technical requirements of the market. The Government will continue to promote investments in the production of iron and steel products with growth potential.

(Source: Third Industrial Master Plan, 2006-2020)

With the various initiatives and FTAs in place, the prospects of MMGSB in the hot-dip galvanizing industry appear to be positive. MMGSB is able to capitalize on its niche expertise to further increase in revenue, and consolidated its position in the market. The growth in the steel industry will have a positive spill-over effect on MMGSB.

9. INTEREST OF DIRECTORS, SUBSTANTIAL SHAREHOLDERS' AND PERSONS CONNECTED TO THEM

The directors and substantial shareholders of the Company, namely, Ong Chin Yet, Ong Chin Cheong and Kamarudin bin Md Derom, are also the Vendors and substantial shareholders in MMGSB. As such, they are deemed interested in the Proposed Acquisition as detailed in Section 2 of this announcement.

Therefore, they will abstain and will continue to abstain from all deliberations and voting on the relevant resolution pertaining to the Proposed Acquisition at the relevant Board's meeting of the Company and the EGM in relation to the Proposed Acquisition. Further, they have undertaken to ensure that persons connected to them will abstain from voting at the forthcoming EGM on the resolution pertaining to the Proposed Acquisition.

Save as disclosed above, none of the other directors or substantial shareholders of the Company and persons connected to them has any interests, direct or indirect, in the Proposed Acquisition.

10. DIRECTORS' RECOMMENDATION

Having considered all aspects of the Proposed Acquisition, the Board (save for Ong Chin Yet, Ong Chin Cheong and Kamarudin bin Md Derom) is of the opinion that the Proposed Acquisition is in the best interests of the HRB Group.

11. ADVISER

Public Investment Bank Berhad ("PIVB") has been appointed as the Adviser for the Proposed Acquisition.

12. INDEPENDENT ADVICE

Due to the interests of the directors and substantial shareholders of HRB as set out in Section 9 above, the Proposed Acquisition is deemed a related party transaction under Chapter 10 of the Listing Requirements of Bursa Securities. In compliance with paragraph 10.08(4)(b) of the Bursa Securities Listing Requirements, OSK Investment Bank Berhad ("OSK") has been appointed as the Independent Adviser to provide the non-interested directors and shareholders of HRB with an independent evaluation of the Proposed Acquisition as to whether the Proposed Acquisition are fair and reasonable so far as the shareholders are concerned and whether to the detriment of the non-interested shareholders of HRB.

The appointment of OSK is subject to Bursa Securities having no objection on the eligibility of OSK to act in that capacity.

13. Departure from the SECURITIES COMMISSION's ("sc") Guidelines AND/ OR FORMAT AND CONTENT OF APPLICATION UNDER THE SC'S GUIDELINES ON ISSUE/ OFFER OF SECURITIES

To the best knowledge of the Board, there is no departure from the SC Guidelines in relation to the Proposed Acquisition.

14. Estimated Timeframe for Completion of the Proposed Acquisition

The Proposed Acquisition is expected to be completed by the second quarter of 2007.

15. Documents available for inspection

A copy of the SSA is available for inspection by the shareholders of HRB at the registered office of HRB at Lot 506, Jalan Pelabuhan Utara, Bandar Sultan Suleiman, 42000 Pelabuhan Klang, Selangor Darul Ehsan during the normal working hours from Monday to Friday (except public holidays) for a period of two (2) weeks from the date of this announcement.

This announcement is dated 12 April 2007.

Commentaries:-

1. Revenue for the unaudited FYE ended 31 August 2006 increased by approximately 96% from the revenue for the FYE 31 August 2005 of RM18.82 million due to increase in sales and selling price.

2. The lower PBT for the FYE 31 August 2004 of RM0.57 million as compared to the PBT for the FYE 31 August 2003 is due to the increase of zinc prices.