Bertam seeks shareholders' nod on JV deal for RM635 mil Sabah project

KUALA LUMPUR (May 23): Bertam Alliance Bhd is seeking shareholders' approval to ratify a joint venture agreement it inked with the owner of 17 parcels of agricultural land, measuring some 24.43 acres in Penampang, Sabah, to develop a residential project with an estimated gross development value of RM635.06 million on the tracts.

In its filing with Bursa Malaysia yesterday, Bertam said its wholly-owned unit Sepakat Heights Sdn Bhd first inked the JVA with the land owner, Jumat Laiyo, on Jan 8, 2015. At the time, Jumat was listed as a sub-lessor of the plots, as he was in the midst of acquiring them and the change of ownership was still pending.

Under the JVA — which was never announced to Bursa until yesterday — Jumat would lease these lands to Sepakat for 30 years at an annual rental of RM1.53 million, with an upfront payment for the entire 30-year rentals, totalling RM46 million.

The sum, said Bertam, has been paid for by May 4, 2016 and was funded internally, over a month before the land titles to all 17 plots were transferred to Jumat on June 30 that year.

The project involves development of 1,547 units of apartments with a built-up area of approximately 906 sq ft per unit, and comprises four 20-storey blocks one 17-storey block.

The project has a gross development cost of RM435.14 million. Bertam is expecting to reap a gross profit of RM199.91 million and a net profit of RM124.86 million from the project, over the next six years.

Bertam intends to fund the project through its own cash, or via debt or equity fund raising exercises.

The JVA also stipulated Sepakat would be entitled to 95% of the net profits from the development, while the remaining would go to Jumat.

Subject to the JVA ratification obtaining relevant authorities’ and Bertam shareholders' approvals, the development is targeted to commence in January 2019 and expected to be completed in December 2024.

"Should Bertam fail to obtain the requisite approval from its shareholders during the forthcoming extraordinary general meeting, the JV project will not materialise and Bertam will not be able to enjoy any potential benefits envisaged to be derived from the JVA.

"As a consequence of the above, Bertam will negotiate with Jumat to resolve the matters amicably. This include, among others, unwinding the JVA or to procure alternative party to replace Sepakat as the JV party for the project, such that Bertam shall be able to recoup its investment or minimise its losses incurred in relation to the said JV," it said.

The group said the JV provides it an opportunity to gain access to this land, which is situated within a rapid growth area, due to its close proximity of just 7.1km to the Kota Kinabalu city centre.

Bertam’s share price fell 1.5 sen or 3% to 48.5 sen yesterday, giving it market capitalisation of RM100.28 million.

Year-to-date, the counter has fallen by 17.8%, from 59 sen on Jan 4 this year. — theedgemarkets.com

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