We refer to the query letter from Bursa Malaysia Securities Berhad dated 12 March 2014 and the Company's announcement dated 11 March 2014 pertaining to the above matter and hereby furnish the following additional information for public release:-
1. The LOAs were dated 11 March 2014.
2. The Contracts are awarded to Astral Supreme Construction Sdn Bhd ('ASC') through a direct negotiation method and is a total sub-contract based on back-to-back basis.
3. The salient conditions/terms of the LOAs are as follows:-
(i) The Contracts are based on Firm Price basis and no adjustment will be made to the contract sum and rates for any fluctuations.
(ii) The quantities shall be provisional subject to re-measurement upon completion.
(iii) Any supply of material on behalf shall be charged at 3% administration fee.
(iv) The defects liability period is twenty four (24) months.
(v) The liquidated and ascertained damages ('LAD') is RM28,500.00 per calendar day.
4. The description of the projects are as follows:-
(i) Project 1 - Proposed Design, Build and Deliver 500 Units of Flats and Other Related Works for "Program Perumahan Rakyat" ('PPR') Ayer Panas, Melaka.
Main Contractor: Permata Rebana Sdn Bhd
Contract value : RM48,000,000.00
Type of Properties: High rise building with ancillary building.
(ii) Project 2 - Proposed Design, Build and Deliver 600 Units of Flats and Other Related Works for "Program Perumahan Rakyat" ('PPR') Paya Rumput, Melaka Tengah, Melaka.
Main Contractor: Gemawan Bina Sdn Bhd
Contract value : RM57,000,000.00
Type of Properties: High rise building with ancillary building.
5. The piling work and earthwork have been completed by the main contractors.
6. Project 1 has received up to the Development Order Approval and Project 2 has received up to the Building Plan Approval. Both Projects are to comply with the Melaka Local Authority's One Stop Center (OSC) requirements but ASC scope shall be limited to assist main contractor to obtain the Certificate of Completion and Compliance issued by the Professional Architect.
7. Both are government projects managed by Kementerian Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan (KPKT).
8. Permata Rebana Sdn Bhd was incorporated on 4 May 1998 with its current authorised share capital of RM1,000,00.00 and paid-up share capital of RM750,000.00. It is a 100% bumiputra owned company and its principal activities are Building & Civil Engineering and Constructions. Permata Rebana Sdn Bhd is as Class A Contractor (Bumiputra Status) with Pusat Khidmat Kontraktor and CIDB Gred 'G7'. The current directors and major shareholders of Permata Rebana Sdn Bhd are Siti Salasiah binti Mohd Yunus and Hafizi bin Che Hamzah with their respective shareholdings of 412,5000 shares (55%) and 337,500 shares (45%).
Gemawan Bina Sdn Bhd was incorporated on 22 February 1982 with its current authorised share capital of RM5,000,000.00 and paid-up share capital of RM1,250,000.00.Its principal activities are construction of buildings and infrastructures. Gemawan Bina Sdn Bhd has the Bumiputra Contractor with Kementerian Kewangan Malaysia (MOF), Class A Bumiputra with Pusat Khidmat Kontraktor and Grade G7 with Lembaga Pembangunan Industri Pembinaan Malaysia (CIDB). The current directors and major shareholders Gemawan Bina Sdn Bhd are Mohd Hazli bin Abdul Rahman and Fazlihisam bin Husin with their respective shareholdings of 750,000 shares (60%) and 500,000 shares (40%).
9. The work undertaken by ASC is main contract works except for piling work and earthwork. The main building works inclusive of structure, architecture and mechanical and electrical works complete with all ancillary building, landscaping and infrastructural works.
10. ASC has a new key management with extensive experience in building construction and property development. The new key management has good business relationship with associates such as consultants, sub-contractors, suppliers and others.
11. The key management of ASC is as follows:-
| No | Name
| Designation
| Working Experience
| Experience/Knowledge
|
1
| Datuk Eddie Chai Woon Chet
| Director
| 8 years
| Has more than 8 years experience in building construction and property development.
|
2
| Wong Kwai Wah
| Director
| 30 years
| Has more than 30 years experience in financial planning and 20 years in property development.
|
3
| Bee Jian Ming
| Director
| 25 years
| Advise and strategize on the monetary and planning of all the handed over projects.
|
4
| Chan Yew Lung
| Project Manager
| 12 years
| Experience and knowledgeable to handle an achieve clients requirement in various type of project. Especially handed over the similar scale of KPKT project in Gua Musang.
|
5
| Lai Yeh How
| Contracts Manager
| 15 years
| Fulfil the role of coordinate and supporting Project Manager on the cost monitoring, contract administration, quantity surveying and etc related to building construction and property development.
|
6
| Lim Ngam Heong
| Site Engineer
| 18 years
| Involvement of value engineering, analyse clash management and construction management of the project.
|
12. Specific risk factors:-
(i) Key personnel - the Group is new in construction business and it will be subject to new challenges and risks. The Group will mitigate this risk by leveraging on the competencies and experience of certain directors namely Datuk Chai, Mr Wong and Mr Bee who have been involved in the construction and property development business.
(ii) Financing - the construction costs are to be funded through internally generated fund and bank borrowings, the gearing level of the Group will increase and any adverse movement in the interest rates may have a significant impact on the projects costs. Management will continuously monitor and adjust development and marketing strategies in response to changes in economic conditions and market demand and will ensure that the projects are carried out with due care.
(iii) Completion risk and delay in completion - the projects may not generate expected return due to various factors including increased in development and/or construction costs, unavailability of skill manpower, delay in completion of projects and obtaining approvals from the relevant authorities for the construction, inability to secure adequate funding for the proposed construction. The Group intends to mitigate the risk by supervising the progress billings and payments and manage its cash flow.
13. Financial commitments to undertake the projects is RM2.0 million to kick start subsequently the capital will be from the progress billings and payments from the main contractors.
14. The breakdown of the financial commitments:-
-Internal generated funds : RM1.0 million (50%)
-Bank borrowings : RM1.0 million (50%).
15. The profit margin is estimated at 8% of gross profit. The profit margin is based on the total cost against awarded amount from the projects.
16. With the smooth completion of the Contracts, the Group is expected to have diversification in operation by virtue of Paragraph 10.13(1)(b) of the Main Market Listing Requirements considering the Group is loss making. Following this, approval will be sought from the shareholders in due course.
This is announcement is dated 13 March 2014.
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