My EG Services Berhad Annual Report 2019

MY E.G. SERVICES BERHAD [Registration No. 200001003034 (505639-K)] 152 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2019 (CONT’D) 12. OTHER INVESTMENTS (CONT’D) Other investments stated at fair value are analysed into level 3 fair value measurement. The level 3 fair value of other investments have been determined using discounted cash flow approach performed by management based on the significant unobservable inputs. The details of significant unobservable inputs of material investments are as follows:- Investment in an entity engaged in online fashion boutique business (Entity B) Unobservable Inputs Relationship of Unobservable Inputs to Fair Value Sensitivity Analysis (Assume All Other Variables Held Constant) (aa) Revenue growth rates of 28% (2018 - 24%) Based on management’s experience and knowledge of market conditions of the specific industries. The higher the revenue growth rate, the higher the fair value. A 1% change in revenue growth rate would result in an increase/decrease in the fair value by RM177,000. (bb) Pre-tax operating profit margins of 50% (2018 - 30%) Taking into account management’s experience and knowledge of market conditions of the specific industries. The higher the pre-tax operating margins, the higher the fair value. A 1% change in pre-tax operating profit margin would result in an increase/ decrease in the fair value by RM1,440,000. (cc) Discount rate of 9% (2018 - 11%) Reflects current market assessments of the uncertainty in the amount and timing of cash flows. The higher the discount rate, the lower the fair value. A 1% change in discount rate would result in a decrease/ increase in the fair value by RM1,026,000. Investment in an entity engaged in providing debt collection system, telecommunication services, computer software, hardware and related accessories (Entity C) Unobservable Inputs Relationship of Unobservable Inputs to Fair Value Sensitivity Analysis (Assume All Other Variables Held Constant) (aa) Revenue growth rates of 15% (2018 - 20%) Based on management’s experience and knowledge of market conditions of the specific industries. The higher the revenue growth rate, the higher the fair value. A 1% change in revenue growth rate would result in an increase/decrease in the fair value by RM999,000. (bb) Pre-tax operating profit margins of 70% (2018 - 70%) Taking into account management’s experience and knowledge of market conditions of the specific industries. The higher the pre-tax operating margins, the higher the fair value. A 1% in pre-tax operating profit margin would result in an increase/decrease in the fair value by RM297,000. (cc) Discount rate of 14% (2018 - 28%) Reflects current market assessments of the uncertainty in the amount and timing of cash flows. The higher the discount rate, the lower the fair value. A 1% change in discount rate would result in a decrease/ increase in the fair value by RM574,000.