MSM Malaysia Holdings Berhad Annual Report 2020

20 INVESTMENTS IN SUBSIDIARIES Company 2020 2019 RM’000 RM’000 Unquoted investments, at cost At 1 January 2,157,406 2,057,406 Additional investment in a subsidiary (Note 20(a)) - 100,000 At 31 December 2,157,406 2,157,406 Accumulated impairment At 1 January 828,806 391,134 Charged during the year (Note 20(b)) 27,362 437,672 At 31 December 856,168 828,806 Net investment in subsidiaries 1,301,238 1,328,600 (a) Non-cash transaction The cost of investment includes the conversion of a loan due from a subsidiary, MSM Sugar Refinery (Johor) Sdn Bhd (“MSM Johor”), to cost of investment in subsidiaries during the previous financial year. The Company’s intercompany loan to MSM Johor of RM100,000,000 was capitalised into an enlarged paid up capital of MSM Johor of RM130,000,000 by creation of 100,000,000 ordinary shares of RM1 each. (b) Impairment in subsidiaries Investments in subsidiaries have been impaired at the year-end as there is indication that the carrying amount will not be fully recovered. The impairment charge has been recognised based on a combination of the value-in-use and fair value less costs to sell methods using the following key assumptions: Value in use Key assumptions 2020 2019 Selling price, RM/MT 1,866 - 2,690 2,175 - 2,500 Raw sugar price, US cents/lbs 13.2 - 15.0 13.5 Sales volume, MT’000 498 - 671 41 Terminal value growth rate % 2% N/A* Pre-tax discount rate % 12% - 13% 9% * The value-in-use method is based on the assumption of cessation of one of the Company’s subsidiaries from July 2020 onwards. Fair value less costs to sell Included in the cash generating unit is the fair value less costs to sell for a piece of land of RM175,000,000 (2019: RM156,000,000). MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 196 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 CHAIRMAN’S STATEMENT DELIVERING VALUE MSM OVERVIEW MANAGEMENT DISCUSSION & ANALYSIS GROUP FINANCIAL REPORT