Wah Seong Corporation Berhad Annual Report 2019

144 WAH SEONG CORPORATION BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 12 INVESTMENT IN JOINT VENTURES Group 2019 2018 RM’000 RM’000 Unquoted shares 165,429 159,358 Share of post-acquisition results and reserves (44,843) (24,060) 120,586 135,298 Less: Accumulated impairment loss (8,959) (8,930) 111,627 126,368 Share of net assets of joint ventures 111,627 126,368 During the financial year, an addition of RM6,177,000 in unquoted shares is in relation to non-cash transaction. Unquoted shares – Alam-PE Holdings (L) Inc. During the financial year, the Group reviewed the recoverable amount of its investment in a joint venture, Alam- PE Holdings (L) Inc. The recoverable amount was determined using value-in-use calculations. The calculations are based on discounted cash flows expected to be generated from the investment based on past performance and management’s business plan. The value-in-use calculations are mainly driven by the revenue growth rate, terminal value growth rate and discount rate, supported with sufficient maintenance capital expenditure. The discount rate reflects the current market assessment of the risks specific to the industry and is based on the cost of equity. The revenue growth rate takes into consideration the secured contracts as at 31 December 2019 and historical performance. The growth rate assumed for terminal value considers external macroeconomic sources of data and industry specific trends. The following table presents the key assumptions used to determine the value-in-use. 2019 2018 Average utilisation rate for 5 years 61.0% 81.0% Pre-tax discount rate 12.7% 11.0% Growth rate for terminal value 2.0% 3.0% Based on management’s value-in-use calculation, no impairment loss is deemed necessary to be recognised during the financial year. 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: 2019 2018 From To From To Average utilisation rate for 5 years 61.0% 60.2% 81.0% 75.2% Pre-tax discount rate 12.7% 12.8% 11.0% 11.7% Growth rate for terminal value 2.0% 1.9% 3.0% 2.2%