This article first appeared in The Edge Financial Daily on February 7, 2019

KUALA LUMPUR: Gunung Capital Bhd has received a letter of award (LoA) from Jendala Padu Sdn Bhd for a profit-sharing pilot project to improve the yield of the Pandan Land Bintulu Palm Oil Estate.

The deal is for six months from Feb 1, 2019 to July 31, 2019. Gunung Capital has the option to automatically extend the tenure for an additional tenure of up to 15 years by written confirmation to Jendala Padu.

“Gunung Capital shall perform the project management with the degree of professional skill, care and diligence expected of a consultant experienced in providing the same or similar services,” the group said in a filing with Bursa Malaysia on Monday.

The LoA also indicates that the memorandum of understanding inked on Jan 9 is deemed expired.

Based on the LoA, RM20 per ton of fresh fruit bunches harvested in a calendar month will be distributed to Jendala Padu, while the profit sharing distribution to Gunung Capital will be the project revenue minus the total of the distribution to Jendala Padu and project direct costs.

The project will see both parties develop strategies to improve the yield of biological assets on the land, which may also include commodity hedging strategies and other financial instruments to protect yields against commodity price fluctuations.

Gunung Capital expects the LoA to have a slight positive effect on its consolidated earnings and net assets for the financial period ending Dec 31, 2019 (FY19).

Gunung Capital shares rose 3.12% or one sen to settle at 33 sen on Monday, giving it a market capitalisation of RM77.94 million.