Stone Master signs HOA with Guangdong Be-Tech to diversify into security lock business

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KUALA LUMPUR (AUG 5): Marble and granite products manufacturer Stone Master Corp Bhd (SMCB) has proposed to sign heads of agreement (HOA) with China-based Guangdong Be-Tech Security System to diversify into electronic security locks business.

In a filing to the Bursa Malaysia today, SMCB (fundamental:0.15; valuation:0) said it proposed to sign a HOA with Guangdong Be-Tech, whereby the latter will grants exclusive agency rights to SMCB to undertake design and installation contracts under the brand name of “BE-TECH”, in relation to the products and services in Malaysia and Singapore, to be supported by the Guangdong Be-Tech.

The China-incorporated Guangdong Be-Tech is in the business of electronic security locks development, production, sales and services, and provides tailor-made security and access system solution to hotels, high end residential projects, offices, factories and all kind of buildings.  

The proposed HOA shall form the framework for future negotiations, which the parties anticipate to culminate within two months in a definitive agreement to be inked between the parties.  

According to the HOA, Guangdong Be-Tech shall provide SMCB with an assured profit guarantee of 30% of the gross contract value of the contracts procured by the SMCB.

Under the HOA, SMCB shall pay the sum of RM80 million one-time initial agency fee to Guangdong Be-Tech, while Guangdong Be-Tech shall provide SMCB with a one-time initial kick-off package in the form of the products & services for the value of RM65 million.  

The tenure of the exclusive agency shall be for a period of five years from the date of fulfilment of the last of the conditions precedent. The proposed contract to be executed is renewable and subject to performance of the contract as a whole, upon its full completion.

SMCB said: “The signing of the proposed HOA is a signal for the initiation of the revitalization of SMCB’s business and synergistic strategy.  

“The granting of the exclusive agency by Guangdong Be-Tech will sanction SMCB and its group to diversify and expand their current revenue base from the traditional business of granite and marble products, ceramic floor tiles and sanitary wares, which has since been highly competitive in the market.”

It further stated that the signing of the proposed HOA will add value to the group’s businesses and contribute to the further growth and development of the group.  

“SMCB is of the view that the proposed future transactions, if executed, will augment its business and ultimately deliver greater value to the shareholders of the company. The signing of the HOA augurs well for the company and is expected to have a positive contributions, going forward,” it added.

SMCB said the effect of the signing of the proposed HOA can only be determined upon the full completion of the execution of the definitive agreement and subsequently, the commencement of any commercial and/or marketing, as well as distributions activities between the parties concerned.  

In a filing to the Bursa Malaysia today, SMCB also proposed to enter into a separate HOA with Hong Kong incorporated Lion Legend Holdings Limited (Lion Legend), being a wholly-owned subsidiary of Frankfurt-listed Roy Ceramics SE, for the award of exclusive agency to undertake design and installation contracts under the brand name of “ROY” in relation to the products & services in Malaysia and Singapore, to be supported by the latter.

Lion Legend is in the business of developing, designing, producing and marketing high-end quality ceramics sanitary ware and bathroom accessories, and having the most advance fully automated robotic production facilities and processes which are able to provide the daily production capacity of two thousand complete sanitary bathroom sets.  

SMCB believed this will allow SMCB to move into high-end premium market and engage directly with developers, which will bring a much higher profit-margin and reduced risks on the default in payment.   

Lion Legend shall under this exclusive agency, provide SMCB with an assured profit guarantee of 30% of the gross contract value of the contracts procured by the agent.  

SMCB shall pay a sum of RM150 million one time initial agency fee to Lion Legend, while the latter shall provide SMCB with a one-time kick-off package in the form of the products & services for the value of RM130 million.   

The tenure of the exclusive agency shall be for a period of five years from the date of fulfilment of the last of the conditions precedent.

Shares in SMCB traded 2.5 sen or 9.43% higher at 29 sen as at 2.30pm, with 2.2 million shares having changed hands.

(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.)