KUALA LUMPUR (Nov 30): Sandakan-based Priceworth International Bhd may pay RM30 million, or 11.5%, less than the RM260 million purchase consideration for Forest Management Unit No 5 (FMU5), under a variation to the sale and purchase agreement (SPA).

In a statement today, the timber group said the discount is part of a cash option granted by the vendor of FMU5 — Transkripsi Pintar Sdn Bhd — in consideration of Priceworth agreeing to modify the payment schedule for the balance deposit of RM10 million and making an advance payment.

The lower cost of investment in FMU5 may enable the group to recoup its investment in FMU5 much earlier than anticipated, added Priceworth.

Priceworth said it may exercise the option from Nov 30 until the date the SPA is unconditional or March 31, 2018, whichever is later, by serving the option notice to the vendor.
 
"As part of the variation, Priceworth and the vendor have mutually agreed to extend the period for the fulfilment of all the conditions precedent under the SPA, to Feb 28, 2018 with an automatic extension to March 31, 2018.
 
"Furthermore, the vendor will have up to Nov 30, 2018 to procure the execution of a supplementary agreement to the Sustainable Forest Management Licence Agreement on the surrender of up to 13,000ha to the Sabah state government for conservation. The vendor may extend this period for another year to Nov 30, 2019.
 
“The variation was undertaken after taking into consideration the delay in the implementation of the proposed acquisition in light of the final Third Forest Management Plan (FMP3), the finalisation of which took longer than expected by the Parties,” it said. The FMP3 was approved by the Sabah Forestry Department in October.
 
Earlier this month, Priceworth said the market value for FMU5 has been raised by 15% to RM448.87 million from the previous valuation of RM390 million for the 10-year period from 2017 to 2027.
 
Meanwhile, Priceworth saw its net profit more than triple to RM1.13 million in the first financial quarter ended Sept 30, 2018 (1QFY18) from RM327,000 a year ago. This is on the back of a 40% year-on-year jump in revenue to RM41.15 million in 1QFY18.

Priceworth atributed the improved quarterly performance to an increase in sales revenue, which rose on an increase in production volume.

It expects contributions from timber harvested in FMU5 since September to have a positive effect on the operating results of Priceworth going forward.

Shares in Priceworth closed down 0.5 sen or 2.08% today at 23.5 sen, giving it a market capitalisation of RM281.71 million.