The proposed issuance of RM100 million Islamic Medium Term Notes facility and up to RM50 million Murabahah Underwritten Notes Issuance Facility/ Islamic Medium Term Notes Facility (“Finance Facilities”) has been assigned a long term rating of AID and a short and long term rating of MARC-2ID and AID respectively. The ratings of Medi Innovation Sdn Bhd’s (“MISB”) proposed issue reflect the strength of the company it is acquiring, Aesthetics Medical Pte. Ltd. (“AMPL”); the medical expertise of the existing team of doctors; assessment on the ability of AMPL’s founding doctors to meet the performance targets and the potential growth in earnings of the operations.

MISB, an investment holding company incorporated in Malaysia, is acquiring the entire shareholding of AMPL, a company incorporated in Singapore primarily involved in providing non-surgical aesthetic and cosmeceutical services. The purchase consideration for the entire stake in AMPL is SGD70 million whereby proceeds from the issue will be used for the purpose of facilitating the proposed acquisition; the transfer of aesthetic medicine technology from Singapore to Malaysia and the expansion of the aesthetic business and operations into Malaysia and the rest of the region. As part of the acquisition plan, the vendors of AMPL have agreed to achieve a performance target of not less than SGD10 million of profit after tax per annum for a consecutive period of three years beginning in the financial year ending 31 December 2005. The vendors will only receive SGD30 million of the purchase consideration on a deferred basis whereby SGD10 million is paid upon achieving the performance target each year. The proposed acquisition is further reinforced by a service agreement between MISB and the doctors whereby the latter continue to exclusively serve AMPL for a period of five years.

Based in Singapore, the core business of AMPL is to provide integrated medical non-surgical aesthetic and cosmeceutical services encompassing the areas of pharmaceuticals, cosmetics, nutritional supplements, anti-aging, lifestyle, beauty and looks enhancement. With growing demand for non- surgical aesthetic and cosmeceutical services, AMPL has also set up a Business-to-Business (B2B) model to tap into regional markets. This plan bodes well for MISB as the company will share the revenue of doctors who incorporate AMPL’s aesthetic services into their existing practice.

For the financial year 31 December 2004, AMPL recorded revenue of RM42.9 million with a relatively strong operating profit margin at 68.8%. However, operating profit margin of MISB is expected to dip slightly in FY 2006 due to one-off costs associated with the Finance Facilities and subsequently hover within the band of 63% to 68%. On a group basis, the average growth in revenue and profit before tax is anticipated to average at 24.7% and 29.2% respectively.

With the proposed issuance of the facility, debt to equity is expected to reach 2.5 times as at FYE 31 December 2006 with debt to equity tapering down in the subsequent years on the back of gradual paring down of borrowings coupled with steady growth in retained earnings. The relatively high debt leverage position of MISB at closing is partly mitigated by the SGD30 million retained in the stakeholders account and released annually upon achieving the performance target, failing which, the excess cash will be utilised towards reducing the outstanding MUNIF/IMTN.

AMPL’s cashflow position for FYE 31 December 2004 is relatively healthy with strong cashflow coverage due to the nature of the business whereby demand has been increasing on the back of very high margins and sales comprising consultant fees and product sales which are on a cash basis. Post acquisition, the group’s cashflow coverage will remain relatively moderate in the first few years strengthening gradually over the tenure of the issue.

Going forward, the Group’s expansion plans whether through acquisition or franchise in countries such as Singapore, Taiwan, Hong Kong, Indonesia, Australia and U.K will see the fruition of 50 clinics by the year 2009 with each new clinic targeted to grow at 20% per year upon the transfer of the AMPL intellectual property (“IP”) and product knowledge. Each franchisee is expected to contribute between 10% to 50% of total gross revenue while organic growth is forecasted to be 20% a year.