News

1. INTRODUCTION

Prestariang Berhad (“Prestariang” or “Company”) is pleased to announce that Prestariang Capital Sdn Bhd (“Subscriber”), a wholly-owned subsidiary of the Company had on 5 September 2017 entered into a Subscription agreement (“Agreement”) with OpenLearning Global Pte Ltd (“OGPL”) and Adam Maurice Brimo, for the subscription of up to 5,000,000 new "A" Ordinary Shares (“A Shares”)  of OGPL and 3,069,578 convertible preference shares (“CPS”) (“Subscription”), for the purpose of venturing into the higher education cloud-based markets both domestically and regionally.

2. BACKGROUND INFORMATION

2.1 Information on OGPL

OGPL is a newly incorporated company under the laws of Singapore and as at the date of the Agreement, has an issued share capital of one (1) ordinary share of AUD1.00. As part of internal restructuring exercise pursuant to the Agreement, OGPL will own two wholly-owned operational subsidiaries in both Australia and Malaysia, namely Open Learning Global Pty Ltd (“OLGPL”) and OpenLearning Global (M) Sdn Bhd (“OGMSB”) (collectively referred to as the “OGPL Group”).

OGPL Group owns a leading-edge cloud-based SAAS (software-as-a-service) platform for learning management system (LMS) and massive open online courses (MOOC) known as www.openlearning.com. OGPL Group currently has revenue share agreements with 66 higher educational and vocational institutions across four countries and over 900,000 students worldwide. Its intellectual property includes an award winning, proprietary social learning platform and mobile application, which has been built from the ground up on solid educational foundations, as well as extensive knowledge, trade secrets and expertise in learning design and educational theory. It currently has a strong operating presence in Malaysia and has secured an agreement with the Ministry of Higher Education to set-up and operate the National MOOC Platform for Public Universities.

Upon the completion of internal restructuring exercise, OGPL shall have a paid-up capital AUD$ 5,189,487 and demonstrate characteristics of a high-growth company. They are undertaking a Series-“B” AUD$ 10 million fund-raising round, are currently unprofitable but anticipates to breakeven in 2018. It targets to achieve a PAT of AUD$ 9 million in 2020.

2.2 Adam Maurice Brimo

Adam Maurice Brimo (“Adam”) is the Founder and Group CEO of OGPL and holds a significant equity position in the OGPL Group. Adam has a Bachelor of Engineering (Software) and a Bachelor of Arts (Politics) degrees from University of New South Wales (“UNSW”) Sydney and is the 2011 Choice Magazine Consumer Activist of the Year and is a recipient of the prestigious UNSW Alumni Graduate Award. Adam completed his honours thesis at UNSW Sydney in partnership with National ICT Australia (NICTA) and was a member of UNSW’s Robocup team, which develops software for autonomous humanoid robots. He previously worked at Macquarie Bank and at Westpac Institutional Bank as a Senior Software Engineer. In 2017, Adam was named one of the Forbes 30 under 30 Asia in the Consumer Technology category in recognition of OGPL Group’s growth in Southeast Asia and its contribution to the higher education sector.

3. DETAILS ON THE INVESTMENT

3.1 Salient Terms of the Agreement

(a) The Agreement is conditional and subject to the fulfilment of the conditions precedent under the Agreement (“Conditions Precedent”). In the event any of the Conditions Precedent is not fulfilled (or waived in writing by the Subscriber) within 30 days after the date of the Agreement or such other date as agreed in writing between the Parties, the Subscriber shall be entitled to terminate the Agreement.

(b) The first tranche subscription shares of 3,000,000 A Shares and the 3,069,578 CPS shall be subscribed by the Subscriber on the first tranche completion date which shall be the first business day falling 14 days following the satisfaction (or waiver) of the last of the Conditions Precedent at the subscription price of AUD$ 3,000,000 (Three Million Australian Dollars) and AUD$1.00 in respect of the 3,069,578 CPS. After this subscription, the Subscriber shall have 10.714% interest in OGPL.

(c) The second tranche subscription shares of 2,000,000 A Shares shall be subscribed by the Subscriber on the second tranche completion date which shall be the business day falling fourteen (14) days following the Subscriber’s receipt of the management accounts of OGPL and its subsidiaries for the financial year ending 2017, at the subscription price of AUD$ 2,000,000 (Two Million Australian Dollars). After this subscription, the Subscriber shall have 16.67% interest in OGPL assuming there are no follow on Series B investors.

(d) Pursuant to the Agreement, the issued and paid-up share capital of OGPL will be increased to AUD$ 10,189,487 upon completion of the Agreement. The final equity interest of the Subscriber shall be determined based on a performance band that is if OGPL (including its subsidiary companies) achieving a consolidated profit after tax of AUD$ 9,000,000 for the twelve months ending 31 December 2020, the Subscriber will receive an effective shareholding of 14.28%. However, reduction in profits for the twelve months ending 31 December 2020 could see the shareholding rising to 24.3%.

(e) Pursuant to the terms of the Agreement, a conditional shareholders’ agreement between the Subscriber, OGPL and OLG Australia Investor Pte Ltd to govern their relationships as shareholders of OGPL and its subsidiary companies is entered concurrently with the Agreement.

(f) OGPL and/or its subsidiary companies shall enter into an exclusive arrangement with Prestariang via EduCloud for all countries where EduCloud has a presence in, to be based upon terms and conditions mutually acceptable as part of the Conditions Precedent.

3.2 Basis and Justification in arriving at the Consideration

(a) The consideration for the proposed investment was arrived on a “willing-buyer, willing-seller basis”, after taking into consideration the value of OGPL Group using among others; benchmark valuation on number of users against industry comparatives and applying a comparable trading multiple on exit valuation forecast.

(b) The Board is of the view that the consideration is justified in view of OGPL strategic position in the higher education market, which is synergistic and runs parallel to EduCloud purpose. In addition, the potential future earnings derived from the investment in OGPL Group does strengthen the proposition.

3.3 Liabilities to be assumed

There are no liabilities, including contingent liabilities and guarantees, to be assumed by the Subscriber in undertaking the Subscription.

4. SOURCE OF FUNDING

The Subscription will be funded through internally generated funds and is to be wholly satisfied in cash.

5. RATIONALE AND PROSPECTS OF THE PROPOSED INVESTMENT

The investment will allow Prestariang to leverage OGPL Group’s scalable cloud platform with over 900,000 users and to work alongside OGPL Group to establish a beach-front for EduCloud. EduCloud is a Prestariang initiative announced earlier this year on 12 January 2017 and aims to become a premium cloud-based service provider for the higher education market. EduCloud is expected to further expand the earnings base of Prestariang. OGPL Group represents a fast-track approach to realize synergy and efficiency quickly, as we both serve a similar customer base in the higher and vocational education sectors.

The quantum of digital disruption has magnified in recent times, and the education sector has not been spared. The need to leverage technology to create an unparalleled differentiator is key going forward, and OGPL Group has demonstrated the capability to prepare higher education institutions for this future. Prestariang’s success in serving universities and other educational-related activities including those of UniMy, will be further enhanced through the deployment of a cloud-based platform that will ensure speed of execution and meet the demands of the Fourth Industrial Revolution. This in turn will open the opportunity to expand regionally and provide a long-term sustainable income generating model while significantly increasing the value of Prestariang’s investment in OGPL Group. 

6. RISK FACTORS

6.1 Business & Industry Risk

OGPL Group competes globally with established and well-funded LMS providers, who have attempted to enter the markets in which OGPL Group operates and develop features and functionality that is similar that in OGPL Group’s platform. To mitigate this risk, OGPL Group’s strategy includes differentiation based on product, geography, sector and business model, thereby ensuring the uniqueness of OGPL Group’s offering and sufficiently entrenching the platform in its target countries and customers.

The higher education industry is undergoing significant disruption around the world, which is challenging traditional brick-and-mortar institutions in a similar way that the internet has impacted the media industry over the past two decades. Some of these higher educational institutions may struggle to survive, however, OGPL Group is positioned to enable these higher education institutions to adapt to these new requirements in a phased approach with solutions for blended learning, distance education and fully online degree programmes.

6.2 Rapid Technological Changes

OGPL Group’s proprietary cloud-based LMS and MOOC platform requires continuous development to ensure that it stays ahead of technological trends, remains in-line with industry best practice and takes advantage of new software libraries and frameworks. OGPL Group’s ability to attract the best engineering and educational talent, and fund ongoing development of the platform is an important factor in the success of the group. OGPL Group is currently at the forefront of the technological changes and the platform is architected such that new technologies, libraries, languages and frameworks can be used independently for different services, providing a low-stakes way of testing and deploying these technologies. 

6.3 Integration Risk (Between OGPL Group & EduCloud)

EduCloud will provide a range of enhanced educational services and capabilities, some of them will be required to be tightly coupled with OGPL Group’s SAAS platform. OGPL Group having had extensive experience integrating with third-party platforms has readily available industry standard protocols for single-sign-on and data transfer through existing APIs. Strengthen through both "equity participation" and "exclusivity commitment" allows both parties to evolve into a highly cohabited operating arrangement.

7. FINANCIAL EFFECTS OF THE SUBSCRIPTION

a) Earnings

The Subscription is not expected to have any material effect on consolidated earnings of the Prestariang Group for the financial year ending 31 December 2017.

b) Net Assets

The Subscription is not expected to have any material effect on the Net Assets of Prestariang Group for the financial year ending 31 December 2017.

c) Gearing

The Subscription will not have any effect on the gearing position of Prestariang Group for the financial year ending 31 December 2017.

d) Share Capital and substantial shareholder’s shareholding

The Subscription will not have any effect on the issued and paid-up share capital and substantial shareholder’s shareholding of Prestariang.

7. PERCENTAGE RATIOS

The highest percentage ratio applicable to the Investment is 10.55% based on the latest audited financial statements of the Company as at 31 December 2016.

8. APROVALS REQUIRED

The Subscription is not subject to the approval of the shareholders of Prestariang and/or other regulatory bodies.

9. DIRECTORS AND MAJOR SHAREHOLDERS’ INTERESTS

None of the Board of Directors and/or substantial shareholders of Prestariang and/or persons connected to the Board of Directors and/or substantial shareholders of Prestariang have any interest, either direct or indirect in the Agreement.

10. ESTIMATED TIMEFRAME FOR COMPLETION

Barring any unforeseen events arising from the fulfilment of conditions set in the Agreement, the Subscription is expected to be completed by 1st quarter of 2018.

11. DIRECTORS’ STATEMENT

The Board of Directors of Prestariang Berhad is of the opinion that the Agreement are in the best interest of the Prestariang Group.

12. DOCUMENTS AVAILABLE FOR INSPECTION

A copy of the Agreement dated 5 September 2017 and the Shareholders’ Agreement, will be made available for inspection at the Company’s registered office at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan during normal business hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement.

This announcement is dated 5 September 2017.