Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 10 INVESTMENT IN ASSOCIATES Group Note 2023 2022 RM’000 RM’000 Quoted shares in Malaysia (a) 130,114 130,114 Unquoted shares (b) 94,527 90,790 Share of post-acquisition results and reserves (54,494) (63,953) 170,147 156,951 Less: Accumulated impairment loss (57,405) (55,133) 112,742 101,818 Share of net assets of associates 112,742 101,818 Quoted shares in Malaysia at fair value 82,223 74,433 (a) Quoted shares – Petra Energy Berhad As at 31 December 2023 and 31 December 2022, the fair value of the Group’s investment in quoted shares is based on Level 1 of the fair value hierarchy. The market value of the Group’s interest in quoted shares, representing its fair value as at 31 December 2023, was approximately RM82,223,000 (2022: RM74,433,000). This fair value is approximately RM30,331,000 (2022: RM27,087,000) below the carrying value, giving rise to an impairment indicator on the carrying value of the investment of RM112,554,000 (2022: RM101,520,000). As the fair value less costs of disposal is lower than the value-in-use of the investment, the Group has determined the recoverable amount of the investment using discounted cash flows expected to be generated from the investment. The calculations use pre-tax cash flow projections based on financial budgets approved by the Group covering a period of 5 years (2022: 5 years) based on past performance and management’s expectations of market development. Terminal value is estimated at the end of the 5-year period. Due to the uncertainty of the future economic condition, management developed the best, 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 all three scenarios and the probabilities of occurrence assigned required management’s judgement. The key assumptions used in the cash flow projections to determine the recoverable amount for the investment under the best, base case and worst case scenarios are as follows: (i) The revenue forecast is supported by management’s expected projects, which is in line with past performance records, future market outlook and management’s expectation of market developments. A reduction to the revenue forecast was applied for all three scenarios; (ii) Pre-tax discount rate of 18.5% (2022: 16.3%) was applied for all three scenarios, benchmarked against comparable companies at the date of assessment; and (iii) A terminal growth rate of Nil (2022: 1.0%) was applied across all three scenarios. The value-in-use is above the carrying value of the Group’s investment in quoted shares. As such, no impairment loss is deemed necessary to be recognised in the financial year ended 31 December 2023 and 31 December 2022. Integrated Annual Report 2023 220
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