Wah Seong Corporation Berhad Annual Report 2020

144 WAH SEONG CORPORATION BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 11 INVESTMENT IN JOINT VENTURES Group 2020 2019 RM’000 RM’000 Unquoted shares 165,241 165,429 Share of post-acquisition results and reserves (75,308) (44,843) 89,933 120,586 Less: Accumulated impairment loss (8,850) (8,959) 81,083 111,627 Share of net assets of joint ventures 81,083 111,627 Unquoted shares – Alam-PE Holdings (L) Inc. During the current and previous financial year, the Group reviewed the recoverable amount of its investment in a joint venture, Alam-PE Holdings (L) Inc. The Group has determined the recoverable amount of the investment using discounted cash flows expected to be generated from the investment. The discounted cash flows are derived using pre-tax cash flow projections based on financial budgets approved by the Group covering a period of 5 years (2019: 5 years) based on past performance and their expectations of the market development. Terminal value is estimated at the end of the 5-year period. Due to the uncertainty of the impact from Covid-19 pandemic, management developed the base case and worst case scenario of cash flow projections. Probabilities of occurrence were assigned to each scenario to arrive at a single set of cash flow projection. The assumptions used in both scenarios and the probabilities of occurrence assigned required management’s judgement. The key assumptions used in the cash flow projections for the investment under the base case and worst case scenarios are as follows: (a) An average vessel utilisation rate for 5 years of 63.0% was applied to the base case scenario while 61.1% average vessel utilisation rate for 5 years was applied to the worst case scenario (2019: 61.0%). The average utilisation rate is affected by the timing of vessels completing their dry docking. Most vessels were sent or completed their dry docking during the financial year ended 31 December 2020; (b) Pre-tax discount rate of 12.5% was applied for both scenarios, benchmarked against comparable companies at the date of assessment (2019: 12.7%); and (c) A terminal growth rate of 3.0% was applied to the base case scenario while 2.0% terminal growth rate was applied to the worst case scenario (2019: 2.0%). Based on management’s value-in-use calculation, no impairment loss is deemed necessary to be recognised for the financial year ended 31 December 2020 and 31 December 2019. Sensitivity The recoverable amount of the investment in a joint venture would equal its carrying amount if the key assumptions were to change as follows: 2020 2019 From To From To Pre-tax discount rate 12.5% 12.6% 12.7% 12.8% Growth rate for terminal value - - 2.0% 1.9% The recoverable amount is not sensitive to the growth rate for terminal value for the financial year ended 31 December 2020.