GHL System Berhad Annual Report 2019

G H L S Y S T E M S B E R H A D 1 9 9 4 0 1 0 0 7 3 6 1 ( 2 9 3 0 4 0 - D ) 182 3. Details of the Proposed Shares Buy-Back (Cont’d) 3.1 Details of the Proposed Share Buy-Back (Cont’d) The actual number of GHL Shares to be purchased will depend on market conditions and sentiments of Bursa Securities as well as the retained profits and financial resources available to the Company at the time of the purchase(s). GHL will ensure that the purchase of its own Shares will not result in the Company’s public shareholding spread falling below the minimum public shareholding spread of twenty-five percent (25%) of its total Shares (excluding treasury shares). If the Board decides to cancel the purchased GHL Shares, the Company’s issued and paid-up share capital shall be diminished by the cancellation of the purchased GHL Shares. 4. Rationale for the Proposed Share Buy-Back The Proposed Shares Buy-Back will enable GHL to utilise its surplus financial resources to buy-back GHL shares. The increase in Earnings Per Share, if any, arising from the Proposed Shares Buy-Back is expected to benefit the shareholders of the Company. The purchased GHL shares can be held as treasury shares and resold on Bursa Securities to realise potential gain without affecting the total issued and paid-up capital of the Company. The distribution of the treasury shares as share dividends may also serve to reward the shareholders of the Company. 5. Source of Fund The Proposed Share Buy-Back, if implemented, will be funded through internally generated funds and/or bank borrowings, the proportion of which will depend on the quantum of the purchase consideration and availability of internal funds of GHL. In the event bank borrowings are required for the purchase of GHL Shares, the Board will ensure that the Company has the capability to repay the bank borrowings and the repayment will not have any material impact on the Company’s cash flow. 6. Potential Advantages and Disadvantages of the Proposed Renewal The potential advantages of the Proposed Shares Buy-Back are as follows: (i) the Proposed Share Buy-Back is expected to stabilise the supply and demand as well as the prices of the GHL Shares traded on Bursa Securities and thereby support its fundamental value and to maintain investors’ confidence in GHL; (ii) if the Shares are bought back as treasury shares, it will provide the Directors of GHL an option to sell the purchased GHL Shares at a higher price and generate capital gain for the Company. (iii) the purchased GHL Shares can be distributed as share dividends to reward its shareholders. The potential disadvantages of the Proposed Shares Buy-Back are as follows: (i) The Proposed Renewal can only be made out of retained profits of the Company resulting in a reduction of the amount available for distribution as dividends and bonus issues to shareholders; (ii) The Proposed Renewal will reduce the financial resources of the Company which may result in the Company foregoing better investment opportunities that may emerge in the future; (iii) The cash flow of the Company may be affected if the Company decides to utilise bank borrowings to finance a Share Buy-Back. STATEMENT TO SHAREHOLDERS IN RELATION TO THE PROPOSED RENEWAL OF AUTHORITY FOR THE COMPANY TO PURCHASE ITS OWN ORDINARY SHARES CONT’D