Thursday 28 Mar 2024
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KUALA LUMPUR (Dec 22): Kobay Technology Bhd will enter into a fresh joint venture agreement (JVA) to develop medium-cost residential condominiums or houses with the surviving legal beneficiaries of two adjacent plots of land measuring 5.5 acres in Bukit Mertajam, Seberang Perai, Penang.

In a filing with Bursa Malaysia, Kobay said the death of the registered proprietors of the tracts had necessitated a court order from the Penang Syariah Court for a new JV agreement to be inked between Kobay and the beneficiaries of the proprietors’ estates.

The carbide tooling parts, fixtures and precision tools manufacturer, through its wholly-owned subsidiary Kobay Project Venture Sdn Bhd (KPV), had initially entered into a JVA with the proprietors of the plots in Feb 16 this year. The lands are located beside the electrified double track (EDT) railway and currently without direct road access as the frontage was acquired and occupied by the railway project operator to facilitate the construction works.

Kobay said today the revised JVA, among others, would require it to pay a balance of deposit amounting to RM1.96 million (total amount of deposit is RM2.5 million) to solicitors representing the beneficiaries of the landowners’ estates within two weeks of the unconditional date of the new JVA, and that the landowners’ estates shall be entitled to 42 condominium units with built up area of about 1,650 sq ft per unit.

Kobay will also have to obtain approvals from local authorities for an access road with a minimum width of 32 feet from the main trunk of roads leading to the plots of land.

The agreement is subject to transfer of the lands to beneficiary estates and consent from local authorities for the construction of the access road within a year, failing which the revised JVA will be extended by another year.

The revised JVA also calls for the beneficiary estates to grant an option to Kobay Technology to purchase the lands at RM11.8 million, with a 10% advance payment, after which the remainder will be paid in 6 months from the sale and purchase agreement (SPA), with one month extension at an interest rate of 8% per annum.

Kobay said the development could yield a gross development value (GDV) up to RM96.33 million in a high density development scenario and RM51.66 million in a low density development scenario, with expected profits to be gleaned at RM26.06 million and RM11.81 million, respectively, over three years, should the units be fully sold.

In view of the unfavourable market condition of the property market, it is likely that KPV will go for low density development to minimize the risk, though Kobay stressed that the actual size of the development would depend on the access road to be built and the EDT railway project.

“Kobay shall be fully responsible for the funding of the development project and the initial outlay of RM2.5 million will be funded by internal generated funds of Kobay and the subsequent development costs shall be funded by the project itself as the management is highly optimistic that the project should be able to be self-sustained,” it said.

Kobay said its property development venture is to reduce reliance on its existing manufacturing business, which is highly cyclical and dependent on the outlook of global electronic sector.

The JV is expected to contribute to the company’s earnings in the future, as the project is expected to commence by end 2017 and completed by 2020.

Kobay Technology closed 3 sen or 1.39% lower at RM2.13, with a market capitalisation of RM144.2 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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