SCBUILD

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TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONS SC ESTATE BUILDER BERHAD ("SCBUILD" OR "THE COMPANY") - JOINT VENTURE AGREEMENT BETWEEN SC ESTATE CONSTRUCTION SDN. BHD. AND B.S CIVIL ENGINEERING SDN. BHD. FOR THE DEVELOPMENT OF A PARCEL OF FREEHOLD COMMERCIAL LAND HELD UNDER HS(D) 14970, PT819, BANDAR ALOR SETAR, DAERAH KOTA SETAR, KEDAH DARUL AMAN

SC ESTATE BUILDER BERHAD

Type Announcement
Subject TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS)
NON RELATED PARTY TRANSACTIONS
Description
SC ESTATE BUILDER BERHAD ("SCBUILD" OR "THE COMPANY")
-	JOINT VENTURE AGREEMENT BETWEEN SC ESTATE CONSTRUCTION SDN. BHD. AND B.S CIVIL ENGINEERING SDN. BHD. FOR THE DEVELOPMENT OF A PARCEL OF FREEHOLD COMMERCIAL LAND HELD UNDER HS(D) 14970, PT819, BANDAR ALOR SETAR, DAERAH KOTA SETAR, KEDAH DARUL AMAN
(For consistency purposes, the abbreviations and definitions used throughout this announcement are the same as those previously defined in the Company’s announcement made on 4 February 2019.)

Following the Company's announcement made on 4 February 2019 (“the Announcement”), the Company wishes to provide additional information to the Proposed JV and some revisions to the Announcement as follows:-

Section 1 – Introduction (Revision)

The land area shall be read as 79,069.13 square feet, instead of 79,069.13 square meter.

Section 2.3 - Proposed development on the Land (Additional Information)

The details of the intended Land to be developed are as follows:-

The gross development cost are approximately RM85.66 million. The expected gross profits to be derived from the Project is approximately RM7.34 million.

Section 3.7 – Consideration (Revision and Additional Information)

1. Section 3.7(1) should be rephrased as follows:-

“As at 31 October 2018, the Owner is indebted to the Developer in the sum of RM11,349,328/- (Ringgit Malaysia: Eleven Million Three Hundred and Forty-Nine Thousand Three Hundred and Twenty-Eight) only (“the said Debt”).

In consideration of the Owner having agreed to this joint venture, the Developer shall pay to the Owner the total consideration of RM9,000,000/- (Ringgit Malaysia: Nine Million) only (“the JV Sum”).

The JV Sum shall be satisfied by setting-off the said Debt to the extent of RM9,000,000/- (Ringgit Malaysia: Nine Million). Subsequent thereto, the Owner shall owe the Developer a sum of RM2,349,328/- (Ringgit Malaysia: Two Million Three Hundred and Forty-Nine Thousand Three Hundred and Twenty-Eight) only (“Remaining Debt”).”

2. The “total sum” referred to in Section 3.7(2) of the Announcement is the total consideration for the Project to be received by the Owner, which is equivalent to 20% of the estimated GDV of approximately RM93.0 million, i.e. RM18.6 million, and the details of the breakdown are as follows:-

(a) The JV Sum of RM9.0 million; and

(b) RM9.6 million of in-kind, in terms of units from the Project (upon completion of the Project) or in cash (upon commencement of the Project). The RM9.6 million is derived from 20% of the estimated GDV, i.e. RM18.6 million, less JV Sum of RM9.0 million.

​​The estimated GDV of RM93 million as disclosed in Section 2.3 of the Announcement is merely an internal estimation by the Developer.

The JV Sum will be settled by the Owner by immediate set-off of the said Debt owing to the Developer to the extent of RM9.0 million only.

The Remaining Debt of RM2.3 million will be off-set by the balance in-kind of RM9.6 million as stated in the rephrased Section 3.7(2)(b) above, i.e. in terms of units from the Project (upon completion of the Project) or in cash (upon commencement of the Project).

The JV Agreement did not clearly spell out the agreed terms on the "in-kind settlement upon the completion of the Project". The Developer will communicate with the Owner to rectify the JV Agreement.

Basis of arriving the JV Sum

The JV Sum of RM9 million was derived based on the negotiation and the willingness of the Owner to accept the immediate set-off of the RM9 million debt due to SC Estate Construction Sdn Bhd.

Justification

Based on the valuation report dated 19 November 2018, the market value of the Land is RM17.3 million and the negotiated amount for the immediate debt set-off is above 50% of the valuation of the JV land.

Method of Valuation

In arriving at the market value of the Land, VPC Alliance (Alor Star) Sdn. Bhd., the independent registered valuer (“the Valuer”) adopted the “Comparison Method” to arrive at the vacant land value. The Valuer has also adopted the “Residual Approach” as a cross check. The details of the method of valuation are as follows:-

(a) ​Comparison Method

This approach considers the sales of similar or substitute properties and related market date and establishes a value estimate by processes involving comparison. In general, a property being valued (subject property) is compared with sales of similar properties that have been transacted in the open market. Listings and offerings may also be considered.

(b) Residual Method

The residual approach entails an estimate of the gross development values of the proposed residential developments which would comply with the approved site layout plan, assuming they are completed. From this value, deductions are made for the various estimated costs of development, such as construction costs, professional fees, interest costs, developer's profit and other expenses, to arrive at a residual value that would represent the amount a prudent buyer would pay for the site.

Section 4  – Salient terms of the valuation report (Revision) – table

The provisional land area shall be read as 7,345.5646 square metres instead of 7,345,5646 square metres.

Section 6 – Prospect (Additional Information)

The benefit expected to accrue to the Company as a result of the Proposed JV is as follows:-

The Company may participate in building part of the affordable houses that have been announced by Malaysian Government to build 200,000 units of affordable houses from 2018 to 2020 under 11th Malaysia Plan and this JV will contribute to the profitability of the Company in the financial year ending 31 January 2020.

Section 8 – Funding (Additional Information)

The Company is still exploring the various methods of funding. Currently, there is no specific breakdown of the funding between its internally generated fund, external borrowing and/or bonds.

This announcement is date 28 February 2019.

 






Announcement Info

Company Name SC ESTATE BUILDER BERHAD
Stock Name SCBUILD
Date Announced 28 Feb 2019
Category General Announcement for PLC
Reference Number GA1-28022019-00099