joint venture


What tools can Trump use to get US firms to quit China?

WASHINGTON, Aug 24 ― Hours after China announced retaliatory tariffs on US goods yesterday, President Donald Trump ordered US companies to “start looking for an alternative to China, including bringing your companies HOME and making your…

Tan Chong files claims against Nissan Vietnam

PETALING JAYA: Tan Chong Motors Holdings Bhd’s wholly-owned subsidiary, TCIE Vietnam Pte Ltd has filed a claim against Nissan Vietnam Co Ltd with the People’s Court in Hanoi, Vietnam for the repayment of a US$9.4 million (RM39.38 million) loan and interest.

Nissan Vietnam is a joint venture company between Tan Chong’s wholly-owned subsidiary ETCM (V) Pte Ltd and Nissan Motor Co Ltd, with each holding a 74% and 26% stake respectively in the company.

Tan Chong said the loan was extended as working capital to Nissan Vietnam and was subsequently disbursed to the joint venture company.

“On Aug 15, 2019 Tan Chong had issued a letter of demand to Nissan Vietnam for the immediate repayment of the loan together with incurred interests,” it said.

Nissan Vietnam failed to make the payment of the loan along with the incurred interest.

Hibiscus bumps up production with completed drilling in North Sabah

PETALING JAYA: Hibiscus Petroleum Bhd’s wholly owned subsidiary SEA Hibiscus Sdn Bhd has increased its aggregate gross production by 3,200 barrels per day with the completion of St Joseph infill drilling campaign in North Sabah.

According to Hibiscus’ filing with the stock exchange, the campaign saw the completion of three infill oil producers utilising triple splitter wellheads on the St Joseph Jacket‐A platform in the 2011 North Sabah enhanced oil recovery production sharing contract (North Sabah PSC) with minimal modifications to topside facilities.

The group said the project is expected to add life of field gross reserves of 2.77 million stock tank barrels.

SEA Hibiscus CEO Dr Pascal Hos revealed that the aggregate production results of 3,200 barrels per day have exceeded the group’s pre-drill expectations of 2,600 barrels per day.

“Our investment in the seven well drilling campaign is consistent with our objective to enhance production from the North Sabah asset and demonstrates that Malaysia is an integral part of our long‐term business strategy,” he said.

He added that the additional process debottlenecking activities are currently underway to reduce the backpressure on these new infill wells.

“This activity is expected to further improve the stabilised production flowrates of the newly drilled wells,” he said.

On March 31, 2018, the group assumed operatorship of the North Sabah PSC as a 50% joint venture working interest partner with Petronas Carigali Sdn Bhd.

The North Sabah PSC consists of four oil fields, namely St Joseph, South Furious, SF30 and Barton located in offshore Sabah, which collectively produces to the Labuan Crude Oil Terminal.

Empire Resorts deal to suppress sentiment on GenM further

PETALING JAYA: Despite Genting Malaysia Bhd’s (GenM) share price having plunged 15% since the acquisition of the controversial Empire Resorts Inc, Kenanga Research believes that the deal will suppress the stock sentiment further, hence downgrading it to “market perform”.

Citing that GenM’s valuation is still not attractive enough, it has revised downward GenM’s target price to RM3.20 from RM4.30.

This comes after GenM responded to a query on Bursa Malaysia, stating that the purchase of Empire shares from Kien Huat Realty III Ltd (KH) and a 51:49 joint venture between KH and GenM to privatise Empire should be able to resolve Empire’s present liquidity challenges.

The research house said although Empire is unlikely to be liquidated, GenM is paying a hefty price for the related party transaction acquisition, which saw its market capitalisation plunge by RM3.2 billion.

“In addition, the proposed acquisition is not merely on equity stake but involves capital injection for debt restructuring.”

Empire has said it may pursue a voluntary chapter 11 bankruptcy proceeding, if measures such as the joint venture privatisation bid are unsuccessful.

Under the deal, Kenanga has estimated that GenM will pay US$128.6 million (RM538.8 million) for 13.2 million Empire shares at US$9.74 per share and eventually, the joint venture will have to pay about US$53.6 million to take the company private.

“In all, this deal is viewed as vital to Empire which needs fresh capital injection to restructure its borrowings given its poor cash flow generating ability being loss-making for the past 20 years.

The research house highlighted Empire’s latest 1H19 results showed a net loss of US$73.7 million against a net loss of US$155.4 million in FY18 along with a total payment commitment of US$112 million over the next 12 months or US$827 million over the next five years.

“Therefore, GenM’s commitment is not capped at only circa RM538.8 million.”

Based on Empire’s latest filing, its biggest outstanding debt is a US$520 million (RM2.17 billion) building term loans for the development of Resorts World Catskills which commenced operations in February 2018.

As of Q2 19, Empire has an outstanding term loan of US$504.7 million or US$688.5 million including interest payment for the next five years.

Assuming GenM has to bear 49% of this term loans, Kenanga said it may need to inject US$247 million for the debt restructuring.

The research house calculated that it will cost RM1.69 billion for GenM to own a 49% stake in Empire, eventually which includes the initial acquisition cost and the privatisation cost.

It said that GenM has no problems financing the acquisition given its cash position of RM5.56 billion as at Q1’19.

“However, the negative earnings impact in the near term could be significant as the 49% stake in US$155.4 million net loss, which accounts to RM320 million, 17% of GenM’s FY18 core earnings,” it said.

Damansara Realty returns to black with RM3.66m profit in Q2

PETALING JAYA: Damansara Realty Bhd (DBhd) posted a net profit of RM3.66 million for the second quarter ended June 30, 2019 after reporting a net loss of RM333,000 in the corresponding quarter of the previous year.

This was underpinned by the group’s joint venture development in Central Park, Johor Bahru.

Meanwhile, DBhd’s revenue for the quarter declined by 7.1% to RM68.93 million from RM74.23 million, due to lower contribution from its project management consultancy business as well as lower unit sales from its property project.

For the first six months of 2019, the group reported a net profit of RM5.46 million, a 287.8% jump from the RM1.41 million recorded in the same period last year, while revenue declined 3.6% to RM140.22 million from RM145.47 million.

Managing director Brian Iskandar Zulkarim said the group secured new contracts worth RM80 million for the first six months of the year.

“Currently, our tender book stands at RM313 million up to Q2 2019 with an exciting 26% success rate,” he said.

Moving forward, the group said that while its property & land development segment will remain the key profit driver in the long term, it will continue to be selective with development projects as the market recovers.

“We foresee integrated facility management segment to predominantly generate larger growth opportunities for DBhd, countering the effects of the softer property market,” it added.

George Kent takes MRCB to arbitration

PETALING JAYA: George Kent (Malaysia) Bhd has commenced arbitration proceedings on Malaysian Resources Corp Bhd (MRCB) following a difference of opinion with MRCB in the shareholders agreement dated June 8, 2015 entered into between both parties for the LRT3 project.

Under the terms of the shareholders’ agreement, George Kent and MRCB agreed to form a 50:50 joint venture (JV) company, namely MRCB George Kent Sdn Bhd to tender for, undertake and complete the LRT3 project from Bandar Utama to Johan Setia.

George Kent and MRCB have a difference of opinion in the interpretation of certain provisions of the shareholders agreement with regards to the options for securing of the financing requirements for the JV company.

George Kent does not expect any material financial impact by reason of the commencement of the arbitration proceeding other than legal cost to be incurred. No material operational impact is expected arising from the arbitration.

As at current date, the issued and paid up share capital of the JV company stood at RM10 million.

British beverage giant Diageo to market Cuban rum

HAVANA, Aug 13 ― A European subsidiary of British beverage giant Diageo Plc signed a joint venture deal with state-run Cuba Ron SA yesteray to market Santiago de Cuba Rum, in defiance of US efforts to dissuade investment in the Communist-run…

Kerjaya Prospek bags RM94.83m job for BBCC

KUALA LUMPUR: Kerjaya Prospek Group Bhd’s wholly owned subsidiary Kerjaya Prospek (M) Sdn Bhd has accepted a RM94.83 million job from BBCC Development Sdn Bhd for the Bukit Bintang City Centre (BBCC) development in Kuala Lumpur.

Under the contract, Kerjaya will undertake main building works of a nine-storey retail podium, five-storey carpark and an LRT link bridge.

The project’s construction works will take 14 months from its scheduled commencement in August 2019 and targeted for completion by October 2020.

Kerjaya executive chairman Datuk Tee Eng Ho said this latest letter of award brings the group’s total contracts secured for this financial year ending Dec 31, 2019 to RM1.2 billion, achieving its internal target of RM1.2 billion.

“We are confident that we will be able to complete the project within the stipulated requirement and timeframe to the satisfaction of BBCC Development. The contract will increase our outstanding orderbook to RM3.45 billion which will provide an earnings visibility for the next three years,” said Tee in a statement.

In addition, there will be three commercial towers on top of the nine-storey retail podium. The height of the three towers will range from 34 storeys to 45 storeys.

The tendering for works on these three commercial towers is in the pipeline. Kerjaya will also be participating for these tenders.

BBCC Development is a joint venture company set up by the Employees Provident Fund, UDA Holdings Bhd and Eco World Bhd.

Report: Temasek cancels RM1.3b project with Penang

KUALA LUMPUR, Aug 8 — Singapore’s Temasek Holdings has cancelled an RM1.3 billion business outsourcing project (BPO) with the Penang government, New Straits Times reported today. The daily cited an unnamed spokesman for the Singapore sovereign…

Sell-off hits Genting Malaysia, Genting Bhd shares, RM4.38b in market cap wiped off

PETALING JAYA: Genting Malaysia Bhd (GenM) and Genting Bhd emerged as the top losers on the local bourse today after news of GenM acquiring loss-making Empire Resorts Inc for RM538.8 million.

Both stocks came under heavy selling pressure after the opening bell, with GenM slumping as much as 14.7% to a low of RM3.08 before closing 43 sen or 11.9% lower at RM3.18, wiping off about RM2.55 billion in its market capitalisation with 256.37 million shares traded.

Genting Bhd’s share price sank 47 sen or 7.1% to close at RM6.18 on 23.64 million shares done, slashing some RM1.82 billion off its market capitalisation.

In total, the two stocks lost RM4.38 billion in market capitalisation today.

Hong Leong Research said it is negative on the news in the short term as the acquisition price implies a premium to the book value (1.5 times 2018 price-to-book value) despite Empire still recording losses.

It also downgraded GenM to “hold” with a lower target price of RM3.79 from RM4.21 to reflect the risk of short-term earnings erosion associated with the loss-making acquisition.

Assuming Empire’s FY20 registers a loss similar to that of FY18, Hong Leong said the impact to GenM’s bottom line will be about RM283 million, which is about 23% of its FY20 earnings forecast.

However, it maintained the forecasts pending further clarity on the earnings outlook.

Empire incurred a loss of US$138 million in FY18, mainly due to the high start-up expenses incurred in the commencement of Resorts World Catskills (RWC). It posted losses of US$25 million to US$46 million in the preceding three years.

GenM has entered into a term sheet with Tan Sri Lim Kok Thay’s Kien Huat Realty Ltd (KH) to acquire a 46% stake in Empire for RM538.8 million.

Lim is the chairman and CEO of the Genting group.

GenM also will submit a preliminary non-binding proposal to acquire the outstanding 16% stake in Empire unaffiliated with KH at RM325.7 million. KH currently owns 84% equity interest in Empire.

GenM will then enter into a merger agreement with KH and contribute all Empire shares held into a proposed joint venture with GenM and KH holding 49% and 51% respectively.

Meanwhile, PublicInvest Research is maintaining its earnings forecasts and neutral call on GenM pending more details on the proposed acquisition.

“However, we feel that market may view a related party transaction negatively and we see risk of share price weakness following this announcement.”

The research house believes funding will not be an issue for GenM as it will be supported by its internally generated funds.

“On face value however, we are less enthused over the parent company’s tapping of GenM’s cash reserves on non-earnings accretive ventures.”

Empire is listed on Nasdaq and operates RWC, which is in Sullivan County, New York.

RWC started operations in February 2018 and features a 332 all-suite hotel, 1,600 slot machines and over 150 live table games. It also owns Monticello Casino and Raceway in New York.