Kumpulan Perangsang Selangor Berhad : 45th Annual General Meeting Q&A, 7 June 2022

No Questions

• Has the company ESG vision and mission been achieved?

Answers

Our Mission and Vision together with the sustainability philosophy are parts of the credo that KPS hold at all times towards our sustainability journey. KPS ensured that all our sustainability initiatives uphold our vision which is to contribute to sustainable development by balancing the economic, environmental and social sustainability aspects of the business for the benefit of all stakeholders.'. KPS have put in place short-term and long term strategy, yearly performance indicators, as well as implementing initiatives and sustainability planning that support our sustainability mission, To achieve business and operational excellence through responsible consideration and holistic integration of the economic, environmental, and social risks and opportunities.

1. Was KPS involved and affected by the water pollution at Semenyih river? (news reporting dated 29 & 30 April 2022)
2. What are the lessons learnt from the Klang Valley water issues 20 years ago that took more than a week to recover?

• iii) Does company have high outstanding Indah water bills that will affect your financial ratios?
  iv) What is KPS's view on the current movement by the government on implementing waste management and is there any plan/project in place to enhance existing systems?

• Regarding sustainability policy, is there any chance of Andy Hall or lookalike posing problems to KPS or its subsidiaries?

1. The case of Sg Semenyih river pollution in April did not relate to KPS' operations, and none of our operations were affected by the disruptions.
2. Currently none of our operations are operating in water stress area. However KPS has been promoting responsible water management and initiatives towards water conservations. For example, Century Bond Bhd ("CBB") is currently practicing recycling of water in its operations.
3. KPS does not have high outstanding Indah Water bills and it will not affect our financial ratios.
4. Together with the climate action initiatives, there are momentum on circularity to better manage our resources and waste generation. KPS subsidiaries have practices on waste segregation and recycling system in place, which in the past have generated some cost savings. Part of the effort is, for example, optimising the use of paper resources, reusing the packaging boxes from our suppliers and reducing the scrap rate from production rejects. In line with our efforts to improve the circular economy, CBB is converting its carton trim waste into moulded pulp casings, which can be sold as an internal fitting that hold and protect the product inside its packaging.

Underpinned by uncompromising compliance standards, we have comprehensive principles throughout the organisation to ensure all best practices are adhered to. We proactively evaluate the risk factors and ensure coverage against our exposure. Our strategic and operational decision-making process continues to be strengthened through transparent communication and risk awareness across the organisation including regular engagements with our subsidiaries, while ongoing compliance with risk management processes are regularly reviewed.

• in addition to being loyal shareholder I'm also an NYDP of PIBG of a school in shah Alam and would appreciate if KPS conduct CSR program in our school.

• On social responsibility, is KPS willing to hire any LBGT as staff?

• How does KPS ensure that the recruitment and promotion standards were delivered correctly?

• Does KPS have knowledge sharing programmes with local institution or international bodies to enhance the process efficiency?

Request for CSR programme can be sent through email to irsc@kps.com.my or mail it to our office at 17th Floor, Plaza Perangsang, Persiaran Perbandaran, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia for our review and consideration.

Our HR strategy is to recruit best talents that could help drive the organisation towards greater heights. We look out for high potentials that has the drive and right skill sets to reach our aims and goals. Gender, diversity and personal lives preference does not stop us from recruiting talents for the organisation.

We have our standard operating procedures and policies implemented for all areas of HR including recruitment and promotion exercise. We promote high performance culture in which all recruitments and promotions are based on merit/ performance which is in line with our company's KPIs and targets. We have a good mix of age and gender and we value our employees' knowledge and experience.

We collaborate with local and international institutions on knowledge and technology exchange. This covers local institutions as well as corporate bodies ie. ACCA for KPS to be an accredited Employer for accountants. We are still looking out for more opportunities on technology exchange.

No Questions

Do the Boards and the management implement knowledge exchange

• programmes with education institutions and international bodies in relation to technological innovations?

Answers

We have initiated a collaborative effort with local institutions under our Sustainability Initiatives. In 2021, KPS Sustainable Challenge was launched in collaboration with UPM. Students from local universities are challenged to submit their ideas on a new product that can contribute towards sustainable environment. Outcomes from this competition were meant to actively promote sustainability innovative and foster collaboration between higher institution and industry player.

We continue in 2022 with an inter-varsity competition focusing on the development of eco-friendly innovative solutions to address sustainable paper/plastic production where we partner with Yayasan Inovasi Malaysia (YIM) and Yayasan Hijau Malaysia (YHM) for technical and content validation.

1. On social responsibility, is KPS paying the CEO cum MD a reasonable pay and allowance, comparative with similar industry or business entities?
2. 1. Does the Company use AI technology in collecting debt and performing
3. accounting function?
4. 1. Will the PE ratio improve in FY2022?

KPS remuneration structure is comparative to the market within our industry. For KPS MD/GCEO, we have ensured that his overall package that covers salary, allowances and benefits are comparative to the market.

1. We are not using AI for debt collection but will consider exploring the practicality of using AI in accounting function.
2. The Group has no control over the share price performance and hence the PE ratio. We believe that KPS' fair valuation will be supported by its long term fundamentals.

Due to labour shortage in the region and the problem will last at least a couple of

1. years, has the Company considered implementing Industrial 4.0 to the manufacturing plants to be more cost efficient in the long run?
2. With rebranding exercise ongoing, any expect changes on the business segment or what is main activities ongoing under rebranding?

In mitigating the risk on labour availability, KPS and the Management of respective subsidiaries are constantly looking into minimising the dependency on foreign workers through incremental innovation, such as improving the efficiency of the manufacturing processes, as well as integrating where we can, efforts on automation in the production lines of our key manufacturing businesses such as Toyoplas Manufacturing (Malaysia) Sdn Bhd, Century Bond Bhd, and CPI Penang Sdn Bhd and King Koil Manufacturing West.

Our business strategy remains intact, basically to continue to enhance KPS strategic positioning, improve its ROE and continue to provide an equitable return to our stakeholders, all these whilst ensuring that we operate responsibly by addressing the risks and opportunities from ESG aspects.

As part of our strategic brand management, we are working on improving KPS strategic positioning in the marketplace and securing deserving recognitions from our stakeholders. We aim for the new brand identity to provide greater differentiation to our brand, enhancing customers' and investors' loyalty, ultimately KPS brand equity.

1. Is there any roadshow planned by KPS to brief and attract foreign institutions to participate in company's equity?
2. How did KPS increase its strength to compete in international market?
   The Management Discussion & Analysis provided useful information on the operations of the key subsidiaries and business segment of KPS. However, the profit contribution of these subsidiaries were not disclosed.
3. 1. Please disclose the profit/loss before tax of Toyoplas, CPI, Century Bond, King Koil and Aqua-flo.
   2. Please ensure such important information is provided in future annual reports as the profitability of the Manufacturing segment is not broken down for this purpose.

Yes, our IR team continuously engages with the investment community to enhance awareness and garner investors' interests in KPS. We proactively communicate and provide relevant information pertinent to the Group's strategic directions, business operations and performance to our shareholders in a timely, adequate, and transparent manner. The objectives of our engagement are mainly to increase awareness and understanding of the Group's strategy, business direction, and investment appeal.

Typically, KPS & its subsidiaries explore new international markets by tapping into their relationships with existing customers (most of whom are multinational companies with global presence) and leverage on these customers' expansion and growth plans to serve these markets. Subsequent to this, we will identify the growth catalysts and operational support to ensure sustainable growth in the coming years and where there is potential, we also consider expanding our footprint by setting up a local presence in these new markets.

1. The profit margins vary from industry to industry. In general, the net profit margin for our core manufacturing businesses range between 5% to 15%.
2. Thank you for the suggestion to breakdown the profitability for the manufacturing sector in our future annual report. We shall take that into consideration.

No Questions

Encik Fariz, on the issue of business sustainability (barring any new pandemic),

17 based on existing business (without any new business acquisition or ventures), what kind of growth rate is being targeted and what will be the actual rate achievable in the next 3 years?

Answers

KPS targets a mid single-digit revenue growth between 2022 and 2025.

18 May I know what is the net profit margin for the manufacturing businesses?

The profit margins vary from industry to industry. In general, the net profit margin for our core manufacturing businesses range between 5% to 15%.

19 Dear Directors and Management, with targeted ROE of 10%, does it mean KPS will at least double its net profit by 2025?

Barring any unforeseen circumstances, KPS targets a double-digit PATAMI growth between 2022 and 2025, which will shape the likelihood of the targeted ROE. The management will review and adjust the target annually depending on the risks, business prospects, outlook as well as the macroeconomic and social-geographic conditions.

In FY2021, the Company received a much reduced dividends payout from its subsidiaries of RM46.414 million vs RM208.754 million in FY2020.

1. What are the reason(s) for the huge decrease in dividends paid by its 20 subsidiaries.
2. Despite the lower dividends received, it is still lower than the total dividend of RM24.2 million declared & paid for FY2021. As such, there is ample room for KPS to increase its dividend payout in absolute terms if KPS sustains its performance for FY2022. The MD's comments, please.

21 Is there any plan to move Up Stream in the manufacturing business, such as research and development of new products, co-develop products with customers?

1. The total dividend paid from FY2019 to FY2021 were as follow: FY2019 - RM175.2 million

FY2020 - RM13.4 million FY2021 - RM24.2 million

The huge payout in 2019 was due to the special dividend paid from the disposal of SPLASH.

2. KPS is dedicated and committed to delivering financial obligations to shareholders and sharing the enterprise performance via consistent and sustainable returns to ensure continuous support and confidence by shareholders. In considering the level of dividend payment, we shall consider such factors as the level of available cash and retained earnings, the projected levels of capital expenditure, funding needs for future growth and working capital requirement. KPS Dividend Policy is based on minimum 30% of normalised core PATAMI. Therefore, our future commitment on dividend distribution hinges on several fundamental factors and financial metrics. For FY2021, the total dividend payment is expected to be RM24.2 million, or at 54.2% payout, equivalent to 4.5 sen per share.

With 4.5 sen dividend declared for FY2021, the yield would be 6.3% based on our share price of RM0.72 as at 31 December 2021.

King Koil - Our product development team is always developing new products to maintain King Koil's competitive edge in the market. The ongoing R&D frequently engages with suppliers and customers where new and updated collections are introduced to the market at least once a year. This ongoing development resulted in recent launches like the SmartLife line (adjustable Smartbeds incorporating Smartcell technology developed in South Korea), PureBliss (co-developed with latex supplier Talalay Global) and Natural (with feedback from key customers). King Koil also frequently tailors product designs and specifications for its customers seeking competitive advantage from product differentiation.

CBB - CBB has yet to have a solid plan moving upstream in the manufacturing supply chain. CBB is pathing way focusing to be an Integrated Packaging Solutions Provider to the original equipment manufacturers whilst enhancing internal capabilities and capacity in providing value added services to its customers.

Toyoplas - Toyoplas has moved up the value chain in recent years, serving its first box build project to a new customer in Indonesia in 2019, for which Toyoplas carried out full assembly of the final product in addition to manufacturing of the plastic parts in-house. Toyoplas intends to leverage on this new capability, by offering box build to existing and new customers.

CPI - CPI seeks to continuously improve its offering to its customers - as of current, R&D & products' design improvement have always been embedded in CPI's manufacturing processes e.g. advising on materials types/combinations used for productions, tooling design improvement in deriving the desired outcome while keeping wastage at minimum, etc. In addition to this, its capabilities also extend beyond just plastic injection moulding services, as it also offers more holistic solutions via box-building services i.e. full assembly of products. These serve as a further value-add to its services which help to maintain its competitive edge.

No

22

Toyoplas:

1. Are we seeing open book order/backlog order available to increase Vietnam utilization rate in FY2022? If yes, which quarter and estimate growth % for Vietnam revenue. Will this reduce China sales significantly due to customer relocating?

2.What is Malaysia utilisation as of Q1FY2022 and if workforce issue still persists?

3. Indonesia revenue increase YoY. What is main sector contribute by Indonesia plant? With 5G tele rolling in Malaysia, do we expect huge increase of Malaysia revenue at Toyoplas?

1. Due to the risk of shutdown of operations in China, particularly following the Shanghai lockdown in Q2FY2022, customers have requested for expedited transition plans to move production for more projects from Toyoplas China plants to Vietnam in the second half of 2022. This could result in at least 10% YoY growth in Vietnam sales for FY2022. In the long-term, sales in China is expected to be on a declining trend due to customers' risk mitigation and trade diversion strategy as aforementioned. Nonetheless, Toyoplas as whole will not be losing any customers as the diversion shall be contained within Toyoplas's other operating sites outside of China
2. Malaysia utilisation rate for Q1FY2022 is 36%. Yes, labour shortage still persists, but we had optimised our operations by reallocating our production workers from other divisions as and when required to optimise the processes to mitigate the shortage. Our current workforce is sufficient to meet our production demands and we already obtained the approval from Kementerian Dalam Negeri("KDN") for

1. workers in June 2022 to cope with expected uptick in orders in the second half of the year.

1. The increase in revenue in Indonesia was contributed by the Industrial Tools segment. 5G is one of the growth drivers for Toyoplas' Multimedia & Communications segment. However, our customers in that sector mostly serve the US consumer market. Hence, the roll out of 5G in Malaysia may not have a direct correlation to Toyoplas' revenue growth in future.

1. Good morning dear fellows Board of Directors. May I know what is the utilisation plan for the sale proceed obtained from the sale of SPRINT highway?
2. How much growth potential / upside is there left for sales of treatment chemicals from Aqua-flo notwithstanding the fact that water is damn dirty in Malaysia?
   Q1FY2022 shows no revenue from Smartpipe Technology Sdn Bhd ("Smartpipe").
3. Last year AGM I recall the management stating discussions with Kedah state govt , any update on this and new discussion with other state governmental
   KPS being a "Selangor GLC" should be actively participating in the replacement of aged water pipes in the state of Selangor to reduce non-revenue water. However,
4. Smartpipe's revenue is only RM2.7 million in FY2021.
   What are the reason(s) for the lack of participation in the pipe replacement exercise?
   Encik Fariz, you previously told us during a previous AGM that you were personally
5. excited about Smartpipe going forward. This is no longer evident whether from business perspective or capex allocation. Why? Is this the end of the pipe (no pun intended)?
6. Can the Board/Management provide an update on the strategies moving forward for Smartpipe?
7. Is KPS getting any work at all from Rasau Treatment Plant?
8. Is there any mega project being awarded?
9. Has KPS won the flood mitigation projects that will be implemented from 2023 to 2030?
   NGC Energy reported a 32.6% in Revenue to RM740.186 million in FY2021. However, KPS's share of profits dropped to RM2 million in FY2021 from RM6.7 miilion.
10. 1. What are the reason(s) for the lower profits despite Revenue increased by 32.6%?
    2. Will NGC Energy be able to further grow its revenue and profitability in FY2022 in view of the current volatile energy prices?

The List of Group Properties (page 373 of AR) disclosed that KPS still retain its

39 property in Shah Alam where its existing use is "Office & Hotel".

1. Is this the property where Plaza Perangsang locates at Persiaran Perbandaran?
2. Is the hotel is operational and if not, what will be the intended future use?

The board will review and disclose the utilisation of the proceed upon the completion of the disposal. We will not rule out the possibility of the special dividend, but it will be subject to the Board's approval. We will disclose the relevant information in due time.

Sales of chemicals are usually higher during rainy season when the water is murky. As of 31 Mar 2022, Aqua-Flo secured RM55.6 million or 87% of the tenders value it participated in. Aqua-Flo is following up on the status of the remaining tenders while on the lookout for any new tenders.

Smartpipe has not secured any new project since the completion of the previous project . Hence, no revenue was recorded in Q1FY2022. The current administration of Kedah state decided that 'MBI Kedah' was not the vehicle to pursue any water related projects where dealings should be directly with Syarikat Air Darul Aman "SADA". With the political landscape change in Kedah, the current state ruling party is of the view that the non-revenue water (NRW) reduction programme should be led and driven by SADA being the state's water operator.

In alignment with KPS' strategic decision to focus on its core businesses, we are currently in the midst of framing the best possible path moving forward for Smartpipe. We will disclose the relevant information once the proposal has been approved by the Board.

Smartpipe's primary focus at this juncture is to ensure that existing projects, particularly Package-12, go through a smooth18-month Defect Liability Period (DLP) and obtain the Certificate of Making Good Defects ("CMGD") in Q3FY2023.

KPS participated in the pre-qualifying exercise but was not shortlisted.

Not at this time.

KPS-HCM did not participate in the tender for the flood mitigation project.

1. The reason for NGC recorded a lower share of profits was due to an increase in product costs, leading to lower gross profit margin during the year. Apart from that, lower other income from the sales of opposition cylinder also contributed to the decrease in share of profits during the year.
2. With the relaxation of the MCO enforcement, the volumes were on the up trend since Q3FY2021, especially in the Bulk segment, as industrial factories resumed operations in stages, as well as in the commercial segment where more restaurants and eateries open for business. Moving forward, NGC will continue to strengthen marketing efforts and to further penetrate the I&C segment. NGC will also continue the efforts to gain more market access for Domestic segment despite the volatility of energy prices.

1. Yes, the property is Plaza Perangsang
2. Pursuant to the Tender Exercise undertaken for the sale of Quality Hotel City Centre, Kuala Lumpur (QHCC) in 2019, the Lessee, Teraju Menang Sdn Bhd ("TMSB") has exercised its right to purchase the Property in June 2020. Subsequently the Sale & Purchase Agreement (SPA) between Perangsang Hotel And Properties Sdn Bhd and Aturan Lagenda Sdn Bhd (Subsidiary of TMSB) was executed on 9 July 2020. The sale was successfully completed on 14 July 2021.