FLOURISHING SUSTAINABILITY Guided by the same vision for more than 30 years, OIB Group is dedicated to creating communities that can last for generations. Founded in 1986, the Group has completed more than 24,700 development units that are recognised as epitomes of affordability and quality. OIB Group hopes to create long-term sustainability in each development for the well-being of every resident and the community at large. The visual of a tree with many pathways signifies OIB Group s determination for sustainable growth as the Group grows. Contents 02 03 04 05 07 09 10 12 21 Corporate Information Group Structure Corporate Profile Financial Highlights Profile of Directors Profile of Key Senior Management Chairman s Statement Management Discussion and Analysis Corporate Governance Statement 29 32 35 114 117 120 121 124 Enclosed Audit and Risk Management Committee Report Statement on Risk Management and Internal Control Reports and Financial Statements Analysis of Shareholdings Properties of the Group Development Land Under Landowner and Developer Agreement Notice of Annual General Meeting Additional Compliance Information Proxy Form
Corporate Information Board of Directors Dato Wira Lim Teong Kiat, JP Independent Non-Executive Chairman Tunku Mohamad Zulkifli Bin Osman Independent Non-Executive Director Mr. Low Kok Shen Executive Director & Chief Executive Officer Mr. Low Kok Aun Executive Director Mr. Low Kok Kean Executive Director Mr. Low Ping Kun Executive Director Mr. Low Kok Horng Non-Independent Non-Executive Director Audit and Risk Management Committee Chairman Dato Wira Lim Teong Kiat, JP Members Tunku Mohamad Zulkifli Bin Osman Mr. Low Kok Horng Remuneration Committee Chairman Dato Wira Lim Teong Kiat, JP Members Tunku Mohamad Zulkifli Bin Osman Mr. Low Kok Kean Nominating Committee Chairman Dato Wira Lim Teong Kiat, JP Members Tunku Mohamad Zulkifli Bin Osman Mr. Low Kok Horng 2 Oriental Interest Berhad (272144-M) Joint Company Secretaries Auditors Ms. Tai Yit Chan (MAICSA 7009143) Ms. Ong Tze-En (MAICSA 7026537) KPMG PLT Level 18, Hunza Tower 163E, Jalan Kelawei, 10250 Penang Tel: 04-238 2288 Fax: 04-238 2222 Corporate Head Office 34 & 35, Lengkok Cempaka 2, Bandar Amanjaya, 08000 Sungai Petani, Kedah Darul Aman Tel: 04-448 1018 Fax: 04-448 1019 Registered Office Suite 16-1 (Penthouse Upper), Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, 10050 Penang Tel: 04-229 4390 Fax: 04-226 5860 Registrar Boardroom Corporate Services (KL) Sdn Bhd Lot 6.05, Level 6, KPMG Tower, 8, First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan Tel: 03-7720 1188 Fax: 03-7720 1111 Principal Bankers RHB Bank Berhad Malayan Banking Berhad CIMB Bank Berhad Hong Leong Bank Berhad OCBC Bank (Malaysia) Berhad Stock Exchange Listing Bursa Malaysia Securities Berhad Main Market Stock Code : 5827 Stock Name: OIB Official Website www.oibgroup.com
Group Structure Oriental Interest Berhad 100% OIB Properties (K) Sdn Bhd 100% Cahajaya Timber Industries Sdn Bhd [MVW] 100% OIB Properties (KV) Sdn Bhd 90% OIB Construction Sdn Bhd 100% Sungei Lalang Development Sdn Bhd 87% Brilliant Alliance Sdn Bhd 100% OIB Services Sdn Bhd 100% Yiked Alliance Sdn Bhd 100% 100% 100% OIB Properties (CV) Sdn Bhd OIB Properties (C) Sdn Bhd Maxilux Properties Sdn Bhd 80% Myra Gardens Sdn Bhd 80% OIB Marketing Sdn Bhd 100% OIB Resort Sdn Bhd 100% OIB Properties (PRV) Sdn Bhd 73% Aturan Cemerlang Sdn Bhd 100% Central Kedah Brick Kiln Sdn Berhad [MVW] 100% Yiked Brilliant Sdn Bhd 100% OIB Properties (Meru) Sdn Bhd 52% OIB Properties (SW) Sdn Bhd 100% OIB Management Sdn Bhd 45% Prestasi Raya Sdn Bhd Subsidiary Company Associate Company MVW - In member s voluntary winding-up Annual Report 2017 3
Corporate Profile Incorporation Oriental Interest Berhad ( OIB or the Company ) was incorporated in Malaysia on 3 August 1993 under the Companies Act 1965 as a private limited company under the name of Oriental Interest Sdn Bhd. The Company was converted to a public limited company on 22 December 1993 and adopted its present name. The principal activities of the Company are investment holding and provision of management services. OIB was officially listed on the Main Board of the then Kuala Lumpur Stock Exchange (now known as Main Market of Bursa Malaysia Securities Berhad), on 18 October 1994. The OIB Group, which comprises of 15 subsidiaries and 6 sub-subsidiaries, is actively involved in commercial and residential property development as well as general construction and oil palm cultivation. Property Development and General Construction Over the past 32 years, OIB Group has established itself as a leading property developer, having completed numerous construction and mixed development projects, delivering more than 24,700 development units with gross development value in excess of RM2.4 billion. OIB Group has earned a strong reputation amongst buyers for dedication to its development projects and delivery of quality products, distinguished by creative yet functional design at affordable prices. Oil Palm Cultivation OIB Group is also involved in oil palm cultivation through two subsidiaries; namely, OIB Properties (K) Sdn Bhd and OIB Properties (SW) Sdn Bhd, on 826.26 acres of agriculture land. 4 Oriental Interest Berhad (272144-M)
Financial Highlights 5 Years Results (RM 000) Year Ended 30 June 2017 2016 2015 2014 2013 Revenue 247,934 233,119 219,662 97,663 83,695 Profit before tax 65,150 67,656 35,774 16,922 9,349 Taxation (15,623) (16,010) (9,580) (3,975) (2,361) Loss from discontinued operations (1,035) Profit for the financial year 49,527 51,646 26,194 12,947 5,953 Attributable to: Owners of the Company 38,506 40,153 19,988 9,210 3,812 Non-controlling interests 11,021 11,493 6,206 3,737 2,141 Profit for the financial year 49,527 51,646 26,194 12,947 5,953 Revenue (RM 000) 2017 247,934 2016 233,119 2015 219,662 2014 97,663 2013 83,695 247,934 0 50 100 150 200 250 300 Profit 2017 65,150 before tax (RM 000) 2016 67,656 2015 35,774 2014 16,922 2013 9,349 65,150 0 10 20 30 40 50 60 70 80 Profit attributable to owners of the Company (RM 000) 2017 38,506 2016 40,153 2015 19,988 2014 9,210 2013 3,812 38,506 0 10 20 30 40 50 Annual Report 2017 5
Financial Highlights (Cont d) Financial Year Ended 30 June 2017 2016 2015 2014 2013 RM'000 RM'000 RM'000 RM'000 RM'000 (a) Key data of operating results: Revenue 247,934 233,119 219,662 97,663 83,695 Profit before tax 65,150 67,656 35,774 16,922 9,349 Profit for the financial year 49,527 51,646 26,194 12,947 5,953 Profit attributable to owners of the Company 38,506 40,153 19,988 9,210 3,812 (b) Key data of financial position: Paid-up share capital 144,872 144,872 90,545 90,545 90,545 Shareholders' equity 341,187 314,126 283,880 269,438 266,880 Net assets 411,211 375,368 342,698 324,401 327,102 Total assets 554,263 509,990 433,189 366,300 361,673 Total borrowings 80,337 83,250 39,320 - - (c) Financial indicators: Return on equity (%) 11.29 12.78 7.04 3.42 1.43 Return on total assets (%) 8.94 10.13 6.05 3.53 1.65 Gearing ratio (times) 0.24 0.27 0.14 - - Earnings per share # (sen) 26.58 27.72 13.80 6.36 2.63 Net assets per share ## (RM) 2.84 2.59 2.37 2.24 2.26 Net dividend per share (sen) 7.00 8.00 12.00 5.00 7.50 # Calculated based on weighted average number of shares in issue after adjusting for the Bonus Issue in FY2016. ## Equity attributable to owners of the Company after adjusting for the Bonus Issue in FY2016. 6 Oriental Interest Berhad (272144-M)
Profile of Directors Dato Wira Lim Teong Kiat, JP Independent Non-Executive Chairman Malaysian, male, aged 70 Dato Wira Lim was appointed to the Board of OIB on 13 December 2013 as Independent Non-Executive Chairman. Dato Wira Lim is a Fellow member of Institute of Chartered Accountants in England and Wales and has more than 40 years of professional experience in public practice as founding partner of Kiat & Associates. Dato Wira Lim also chairs the Audit and Risk Management, Nominating and Remuneration Committees. Tunku Mohamad Zulkifli Bin Osman Independent Non-Executive Director Malaysian, male, aged 53 Tunku Mohamad Zulkifli was appointed to the Board of OIB as Independent Non-Executive Director on 13 December 2013. He obtained his Diploma in Law and Advanced Diploma in Law from MARA Institute of Technology (now known as UiTM). Tunku is an active practicing lawyer with more than 27 years of experience in the legal profession, primarily in civil litigations specialising in construction laws, land and corporate matters. He is currently a partner of Messrs. Jin-Nge & Co, Advocates & Solicitors in Alor Setar, Kedah. Mr. Low Kok Shen Executive Director & Chief Executive Officer Malaysian, male, aged 39 Mr. Low Kok Shen joined the Board on 1 September 2016 as Executive Director and Chief Executive Officer. He graduated from University of Toledo, USA with a Bachelor of Science in Civil Engineering. Mr. Low KS has been involved in managing the day-to-day operations of his family business since 1999. He has more than 18 years of professional experience principally in property development and has successful completed many property development projects in Kedah. Mr. Low KS is a Director of subsidiary companies as well as several private limited companies. Mr. Low Kok Aun Executive Director Malaysian, male, aged 45 Mr. Low Kok Aun joined the Board of OIB on 13 December 2013 as Managing Director, and was re-designated as Executive Director effective 1 September 2016. He graduated from University of Toledo, USA with a Bachelor of Science in Civil Engineering. Upon his return to Malaysia, Mr. Low KA has been managing the day-to-day operations of his family business for more than 20 years. Tapping on his extensive working experience, principally in property development as well as manufacturing of construction and building materials, he was instrumental in the successful completion of many property development projects in Kedah. Mr. Low KA also sits on the board of subsidiaries and several other private limited companies. Annual Report 2017 7
Profile of Directors (Cont d) Mr. Low Kok Kean Executive Director Malaysian, male, aged 52 Mr. Low Kok Kean joined the Board of OIB as Executive Director on 13 December 2013. A graduate from University of Toledo, USA with a Bachelor of Science in Civil Engineering in 1988, Mr. Low KK has chalked up more than 28 years of working experience in managing businesses across diverse industries. He is currently managing his family business with particular interest in identifying new businesses, strategic planning and business development. Mr. Low KK also sits on the board of subsidiaries and several other private limited companies. Mr. Low Ping Kun Executive Director Malaysian, male, aged 62 Mr. Low Ping Kun was appointed to the Board of OIB as Executive Director on 13 December 2013. He ventured into business upon completion of his secondary education and possesses over 40 years of entrepreneurial experience. Over the years, he has successfully developed and managed diverse businesses from start-up, spanning various industries from property development and manufacturing of building materials to rubber processing and plantation. Mr. Low PK also sits on the board of subsidiaries and several other private limited companies. Mr. Low Kok Horng Non-Independent Non-Executive Director Malaysian, male, aged 47 Mr. Low Kok Horng joined the Board as a Non-Independent Non-Executive Director on 4 April 2014. Mr. Low KH graduated from University of Toledo, USA with a Bachelor of Business Administration degree in 1992 and has been involved in his family business ever since then. Mr. Low KH has garnered extensive experience in different industries ranging from manufacturing to property investment and property development. He also holds directorships in several private limited companies. Notes : Other than Mr. Low Ping Kun, who is a major shareholder of OIB, none of the Directors has any direct or indirect shareholdings in OIB. Other than Mr. Low Kok Kean and Mr. Low Kok Aun being siblings, none of the other Directors has any family relationship, as defined under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, with any other Directors and/or major shareholders of the Company. None of the Directors has any conflict of interest with OIB Group other than as disclosed in the notes to the financial statements. None of the Directors holds any directorship in other public companies. None of the Directors has been convicted of any offences, other than traffic offences, within the past 5 years. None of the Directors has public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 8 Oriental Interest Berhad (272144-M)
Profile of Key Senior Management Ir. Lim Sian Peng Malaysian, male, aged 52 Ir. Lim was appointed as Chief Operating Officer of Construction Division on 1 January 2015. He is a member of The Institution of Engineers, Malaysia and a registered professional engineer of the Board of Engineers Malaysia. A graduate from University of Toledo, USA with a Bachelor of Science in Civil Engineering in 1988, Ir. Lim has more than 28 years of working experience in construction industry. Ms. Beh Suan Sim Malaysian, female, aged 57 Ms. Beh was appointed as Chief Operating Officer of Marketing Division on 1 March 2014. She rose from rank and file in the banking industry to her last held position as Regional Manager of MBF Finance Berhad in 1998 before embarking on property development sector. She held senior management roles in several property development companies for 16 years before joining OIB Group. Ms. Leow Chin Huey Malaysian, female, aged 47 Ms. Leow is a Fellow member of the Association of Chartered Certified Accountants and a member of the Malaysian Institute of Accountants. She was appointed as Chief Financial Officer on 1 September 2017. Ms. Leow has been with OIB Group since 2014 as Head of Internal Audit and Compliance before leaving the position to assume the role of Financial Controller in early 2017. She started her career in 1996 gaining experience with increasing responsibilities and seniority in audit, accounting and management consulting. She spent 3 years with one of the Big- 5 audit firms as Senior Manager before joining OIB Group. Notes : None of the Key Senior Management has any family relationship, as defined under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, with any other Directors and/or major shareholders of the Company. None of the Key Senior Management has any conflict of interest with OIB Group. None of the Key Senior Management holds any directorship in other public companies. None of the Key Senior Management has been convicted of any offences, other than traffic offences, within the past 5 years. Annual Report 2017 9
Chairman s Statement The financial year ended 30 June 2017 ( FY2017 ) was another success for Oriental Interest Berhad ( OIB or the Company ), despite the challenges that continue to roil the property development industry. We have been resolute in pursuing our focus on enabling affordable home ownership. Our skills and expertise, honed over the years, continues to give us the edge over our competitors and enable us to offer and deliver innovative development products that meet market demands and discerning tastes. On that note, it gives me great pleasure, on behalf of the Board of Directors of OIB ( the Board ), to present to you the Twenty- Fourth (24 th ) Annual Report of OIB Group for FY2017. FINANCIAL RESULTS This has been another solid year of performance with strong financial results for our investors. As FY2017 came to a close, OIB Group recorded a marginal 6% increase in revenue to RM247.9 million from RM233.1 million in FY2016 as affordable property segment has remained resilient in the face of yet another cyclical low and strict lending environment. Profit before tax ( PBT ) was a commendable RM65.2 million notwithstanding that it was 4% lower from RM67.7 million in FY2016. The marginally lower PBT was due to higher administrative expenses alongside expansion in headcount. Consequently, the total equity attributable to shareholders was able to grow to RM341.2 million (FY2016 : RM314.1 million). Property Development segment continues as the main driver for growth with revenue jumped by 21% despite PBT approximately the same, comparing with previous financial year. Segmental billings and PBT from Construction segment contracted by 48% and 66% respectively over the same comparative financial year owing to reduced contract works from external customers. Yield rate from oil palm cultivation has increased which resulted in increase in revenue and PBT by 34% and 51% respectively as compared to the preceding financial year. CORPORATE DEVELOPMENT In line with the direction and business strategy of replenishing and expanding its land bank at strategic locations within or near established areas to sustain future business development, OIB Group continues with land bank acquisitions focusing on the central and northern regions of Peninsular Malaysia. On 23 May 2017, OIB announced the proposed acquisition of 35.57 acres of leasehold land in the central region as well as 33.08 acres of sub-divided freehold land, 148.61 acres of freehold land and 5.03 acres of freehold land in the northern region for RM129.3 million ( Acquisitions ). The Acquisitions will enable the Group to scale up its property development activities in strategic locations with strong growth potential. These lands carry potential gross development value of approximately RM1.0 billion based on current development projections incorporating elements of apartments, two storey terrace houses and bungalows. The Board would be seeking the approval for the Acquisitions as well as the proposed amendments to the Company s Constitution from the shareholders at the forthcoming extraordinary general meeting. On 25 April 2017 and 5 May 2017, OIB announced the buy-out of minority stakes of 1.16% and 0.25% in OIB Properties (SW) Sdn Bhd and Aturan Cemerlang Sdn Bhd, for a consideration of RM1.1 million and RM80,314 respectively. The additional investments reflected the Group s confidence in their activities with the Group being able to reap additional benefits arising from their future earnings. RETURN TO SHAREHOLDERS The Board strives to share the joy and rewards of excellent results with shareholders by good dividend payouts as a gesture of appreciation for your continued trust and confidence in the Group. Whilst doing so, the Board is always being mindful of the need to balance that with continued reinvestment in our business to deliver long term growth. Some of the conserved funds has enabled the Group to take advantage of acquisitions opportunities for future growth. At the same time, a prudent approach in cash management would help to keep the Group resilient in the current soft property market environment. On 7 August 2017, the Board has declared an interim single-tier dividend of 7 sen per ordinary share totaling RM10.1 million in respect of FY2017 (FY2016 : 8 sen) with payout on 30 August 2017. 10 Oriental Interest Berhad (272144-M)
Chairman s Statement (Cont d) CORPORATE GOVERNANCE The Board is committed to maintaining a sound corporate governance framework as the foundation for management of business and operational activities within OIB Group. Bearing this fundamental concept in mind, the Board, through the assistance of the Board Committees, practices a transparent and accountable reporting system with the management team which is interactive and conducive to constructive suggestions and discussion. The Board truly believes that this effort will help to sustain business growth and enhance shareholders value in the long term. These endeavours are stated in detail in the Corporate Governance Statement enclosed in this Annual Report. SUSTAINABILITY The Board and OIB Group is committed to sustainability as economic, environmental and social decisions made today will affect us now and in the future. We are guided by our twin corporate values of integrity and partnership. Whilst working towards a formal guideline for sustainability, the Board believes that it makes good business sense to address distinct needs in the workplace, environment, marketplace and communities where OIB operates. Business growth should go handin-hand with enhancing quality of life of our stakeholders be it employees or the society at large. This is evidenced by the various corporate social responsibility activities undertaken during the year that helped to create shared values for better engagements with its employees, community, stakeholders and the business at large. Some of the initiatives undertaken by OIB Group during FY2017 were : Proper planning of development projects together with being cognizant of environmental constraints and exploration of feasible opportunities to minimise adverse impact to the environment. Donations, including financial contributions, to various local charitable organisations. Construction of public amenities as well as participation in and support towards various community related schemes and activities promoted by local governments. Continuous improvement of working environment for betterment of staff welfare. The Group has always been supportive of a culture of diversity in age, gender and ethnicity and this is evident from the key senior management team right down to employee level. We have 236 full time employees with women accounting for 50% of total workforce. To encourage employees to pursue further education for career advancement through various financial aids. Alongside this, organising various talent development programs for continuous professional and personal development. These focused on enhancing their skills (including soft skills), professionalism and technical knowhow. Organise various sporting activities for employees to achieve balance between work and a healthy lifestyle. Compliance with various legislative and regulatory requirements in all areas of work particularly on supply chain, quality assurance, development and construction, occupational and health for the safety of our employees and delivery of quality developments to purchasers as well as embodying good corporate governance and accountability in all we do. PROSPECTS We believe that market demand for mid-range and affordable residential properties will remain strong due to growing number of urbanised youths and stable employment in Malaysia. The Group will be launching 3 new projects in the central region and several new phases of existing projects in northern region in the near future. These projects are expected to contribute positively to our results for current financial year and beyond. APPRECIATION Finally, on behalf of the Board, I would like to extend my heartfelt appreciation to the management team and employees for their tireless effort, seamless teamwork, commitment and perseverance in the execution of their duties in an efficient and responsible manner. We would also like to thank our shareholders, customers, business associates and the regulatory bodies for their continued strong support and confidence in OIB Group. Last but not least, personally, I would like to extend my heartfelt gratitude to all my fellow Board members for their wise counsel and invaluable support throughout the year. Dato Wira Lim Teong Kiat, JP Independent Non-Executive Chairman 20 September 2017 Annual Report 2017 11
Management Discussion and Analysis Business and operations Oriental Interest Berhad ( OIB or the Company ) was officially listed on the Main Board of the then Kuala Lumpur Stock Exchange (now known as Main Market of Bursa Malaysia Securities Berhad), on 18 October 1994. Following the conclusion of a Mandatory General Offer exercise by Jupiter Sunrise Sdn Bhd towards end of 2013, the new Board and Management had introduced new measures including adoption of a new corporate logo and internal reorganisation to streamline group structure. The OIB Group ( the Group ), which comprises of 15 subsidiaries and 6 sub-subsidiaries, is actively involved in commercial and residential property development as well as general construction and oil palm cultivation. As of now, property development contributes significantly to the Group s results. Objectives and strategies The Group is a leading player in the property industry with more than 24,700 completed units under its belt, and is often recognised as the developer that delivers affordable quality homes. Your Home For Generations epitomises our commitment to create communities for families that will last for generations and to satisfy all our homeowners desire for quality, comfort and value. OIB s vision is to ensure long term sustainability of all townships with the group s focus in development projects located in the northern and central regions of Peninsular Malaysia. With a strong focus on the mid-range and affordable segments that include collaborations under the SelangorKu & 1Malaysia Civil Servants Housing Scheme (PPA1M) initiatives, the Group is fully devoted to ensuring that any development undertaken are for people who are seeking for homes that last for generations, within a sustainable community and at affordable prices. Review of Financial Results Statements of profit or loss and other comprehensive income Revenue and profit before tax The Group recorded revenue of RM247.9 million and profit before tax ( PBT ) of RM65.2 million in the financial year ended 30 June 2017 ( FY2017 ) compared to revenue of RM233.1 million and PBT of RM67.7 million in FY2016. While revenue grew marginally by 6%, PBT was slightly lower by 4% due mostly to increase in administrative expenses in tandem with higher headcount. Segment Revenue 30 June 2017 (RM 000) 30 June 2016 (RM 000) Property development 216,117 178,304 Construction 26,867 51,307 Oil palm cultivation and others 4,950 3,508 Total 247,934 233,119 Property development segment was the main contributor to the increase in revenue, contributing RM216.1 million or 87% (FY2016 : RM178.3 million or 76%) of the Group s revenue. Construction segment generated RM26.9 million or 11% (FY2016 : RM51.3 million or 22%) of the Group s revenue. Revenue from the construction segment has decreased by 48% due to reduced contract works from external customers. A refocus on this segment has resulted in the Group securing additional RM69.8 million worth of contracts. Other segments, namely, oil palm cultivation and others also add to the Group s results. 12 Oriental Interest Berhad (272144-M)