1. INTRODUCTION
The Board of Directors of Jiankun International Berhad (“JIB” or “the Company”) is pleased to announce that JKI Development Sdn. Bhd. (“JKI Development” or “the Developer”), a wholly-owned subsidiary of JIB, has entered into a joint venture agreement with Fivestar Development (Puchong) Sdn. Bhd. (“FDPSB” or “the Proprietor”) to develop a piece of freehold land owned by FDPSB held under individual title known as H.S. (D) 298325 PT 81833, Mukim Petaling, Daerah Petaling, Negeri Selangor (“JV Land”) into a new development comprising of inter alia three hundred seventy seven (377) units of service apartments together with facilities, amenities and infrastructure (“JV Agreement”).
2. DETAILS OF THE JOINT VENTURE
JKI Development and FDPSB have agreed to enter into a joint-venture project to allow JKI Development to develop the JV Land measuring approximately 8,132 square meters in area, by constructing a comprising of inter alia three hundred seventy seven (377) units of service apartments together with facilities, amenities and infrastructure at the sole cost and expense of JKI Development in accordance with the provisions of the JV Agreement (“Proposed Development”), the salient terms of which is outlined in Section 4 of this announcement. The estimated total gross development cost of the Project is RM147.20 million inclusive of FDPSB entitlement.
3. INFORMATION OF FDPSB
FDPSB is a company incorporated in Malaysia under the Companies Act, 1965 and its registered office at 16th Floor, KH Tower, 8, Lorong P. Ramlee, 50250 Kuala Lumpur and its place of business address at No. 39A, Jalan 16/155C, Bandar Bukit Jalil, 57000 Kuala Lumpur.
The authorised share capital of FDPSB is RM5,000,000.00 comprising 5,000,000 ordinary shares of RM1.00 each, of which RM2,600,000.00 comprising 2,600,000 ordinary shares of RM1.00 each have been issued and fully paid-up.
FDPSB is principally engaged in Property Development. The directors are Raymond Tan, Monteiro Gerard Clair, whilst the shareholder is Plenitude Frontier Sdn. Bhd. holding 100% equity interest in FDPSB.
4. SALIENT TERMS OF THE AGREEMENT
The salient terms of the Agreement are as follows:-
i) FDPSB agrees to grant JKI Development the exclusive right to develop, construct and complete the Proposed Development in consideration of the Proprietor’s Entitlement means a sum equivalent to twenty percent (20%) of the Gross Development Value (which Gross Development Value is estimated to be approximately Ringgit Malaysia One Hundred and Eighty Million (RM180,000,000.00) or Ringgit Malaysia Thirty Six Million (RM36,000,000.00) only, whichever is higher; and FDPSB’s Entitlement shall be paid in the following manner and subject to the terms and conditions herein appearing:-
(a) the sum of Ringgit Malaysia Seven Hundred And Twenty Thousand (RM720,000-00) only has been paid by JKI Development to FDPSB before the execution of the JV Agreement;
(b) upon execution of JV Agreement, JKI Development shall pay the sum of Ringgit Malaysia Six Million Four Hundred And Eighty Thousand (RM6,480,000.00) only to FDPSB;
(c) Units equivalent to Ringgit Malaysia Ten Million (RM10,000,000.00) only calculated at sale price to the public less five percent (5%);
(d) the sum of Ringgit Malaysia Sixteen Million And Eight Hundred Thousand (RM16,800,000.00) only shall be paid to Ambank (M) Berhad (“Existing Chargee”) from the progressive billings due and payable by the purchasers and/or the purchasers’ end financiers for purposes of redeeming the Units from the Existing Chargee. Any sum/repayment advanced/paid by JKI Development to the Existing Chargee for and on behalf of FSPSB shall be treated as forming part of the Proprietor’s Entitlement and as part of the amount stipulated in the JV agreement;
(e) the balance of FDPSB’s Entitlement, provided always that such balance shall not exceed FDPSB’s Entitlement and provided always that the redemption sum for the Units due and payable to the Existing Chargee has been fully paid, shall be payable to FDPSB within thirty (30) days after the issuance of the Certificate of Completion and Compliance.
ii) If there is any dispute as to the calculation of the Gross Development Value, FDPSB and JKI Development shall appoint an independent consultant mutually agreed upon by FDPSB and JKI Development to determine the Gross Development Value and the determination of such consultant as to the Gross Development Value shall be binding and conclusive on FDPSB and JKI Development. All cost and expense incidental to such audit/determination shall be jointly borne by FDPSB and JKI Development in equal proportion.
iii) In the event JKI Development fails to pay FDPSB’s Entitlement on the due date stipulated in the JV Agreement, JKI Development shall pay FDPSB late payment interest at the rate of eight percent (8%) per annum on daily basis commencing from the due date of payment situpated in the JV Agreement until the date of receipt of FDPSB of the aforesaid monies.
iv) All the costs and expenses after the date of JV Agreement incidental to the preparation, submission to and obtaining of the relevant approvals from the Relevant Authorities including all fees due to the surveyor, architect, engineer and solicitors shall be solely borne by JKI Development.
V) FDPSB shall deliver vacant possession of the said Land to JKI Development upon the execution of the JV Agreement free from all encumbrances (save and expect for the existing charge in favour of the Existing Chargee) squatters and/or any other unauthorized persons occupying the said Land to enable JKI Development to mobilize force plant machinery and equipment to commence earthworks, site works and such other works as JKI Development shall consider necessary for or in connection with the Proposed Development and the Infrastructure Works at its sole cost and expenses.
5. RATIONALE FOR THE JOINT VENTURE
The joint venture will give JKI Development and JIB to participate in high rise property development as well as contribute positive revenue and earnings in future.
6. RISK FACTORS
Below are some non-exhaustive risk factors that may be inherent in relation to the joint venture. JKI will seek to limit the impact of such risks, there is no assurance that any change in the factors as described below will not have a material adverse effect on the business and operations of the JKI Group:
i) Joint venture risk
In the event of a deadlock whereby the directors or shareholders of FDPSB are unable to reach a decision, further steps would need to be taken to resolve the deadlock. This may lead to a disruption to the development of the project.
ii) Political and economic consideration
Adverse changes in political, economic and regulatory conditions in Malaysia could materially affect the financial prospects of the joint venture project. Amongst the political, economic and regulatory uncertainties are change in the risk of economic downturn, unfavourable monetary and fiscal policy changes, introduction of new rules or regulation, changes in interest rates, inflation and taxation and political leadership.
iii) Construction cost risk
Adverse changes in construction cost could materially affect the financial prospects of the joint venture project such as increased prices in construction material, labour and construction overhead.
7. SOURCE OF FUNDS
The construction cost of the joint venture development project is expected to be funded via combination of bank borrowings and from the proceeds of the rights issue exercise by the Company on 31 December 2014. The exact breakdown of the sources of funding of the construction cost has not been finalised at this juncture.
8. FINANCIAL EFFECTS
8.1 Share Capital and Substantial Shareholders’ Shareholding
The Agreement will not have any effect on the share capital and substantial shareholders’ shareholding of JIB as it does not involve any issuance of new ordinary shares in JIB.
8.2 Net Assets per share and Gearing
The JV will not have any material effect on the net assets per share and gearing of the group for the financial year ending 31 December 2015. However, the future earnings to be derived from the JV are expected to contribute positively to the net assets per share of the Group. The future gearing of the Group will depend on the quantum of financing required for the project.
8.3 Earnings per share
The JV is not expected to have any effect on the earnings of JIB for the financial year ending 31 December 2015.
9. TIME FRAME
The JV shall commence on 28 July 2015 and the development shall within forty-eight (48) months from the date of FDPSB’s written notification to JKI Development that the building plan approval has been obtained from the Relevant Authorities.
10. APPROVALS REQUIRED
The JV is not subject to any approval from the relevant regulatory authorities nor the shareholders of JIB.
11. DIRECTORS AND MAJOR SHAREHOLDERS’ INTEREST
None of the Directors or major shareholders or persons connected with the Directors or major shareholders of JIB has any direct or indirect interest in the JV.
12. DIRECTORS’ RECOMMENTATION
The Board of Directors of JIB, after having considered all aspects of the Agreement, is of the opinion that it is in the best interest of the Group.
This Announcement is dated 28 July 2015.
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