In the stock market investors always over react to good or bad news. Many shareholders are worried about Jaks’ legal battle with The Star. Let me explain about Jaks’s purchase of The Star’s piece of land.
Jaks bought the Star's huge piece of land in Kuala Lumpur without paying cash but agreed to pay by building 1 office block and 1 condo block. Since Jaks did not pay any cash, it was required providing a performance bond of Rm 50 million issued by the Bank.
During the construction, The Star wanted Jaks to alter the condo block to an office block. Jaks had to stop construction work to get the architect to redesign and submit new drawings to the Authorities for approval. It takes a long time to get the approval of the new design. This delay costs a lot of money to Jaks. During the delay Jaks has to pay for all the construction equipment idling at the site, office administration expenses. Moreover, it cost a lot to change the condo to an office block. I believe Jaks has a strong case to claim for reimbursement for the additional cost.
At the meantime, The Star attempted to forfeit the Rm 50 million performance bond. With my long experience in the contract industry, I think Jaks has a good case to claim for reimbursement for additional cost. The high court hearing was scheduled on 11 May, but it has been postponed due to GE14.
Investors must remember that even if Jaks has to cough out the Rm 50 million, they should remember the ultimate aim in buying Jaks is the 1,200 MW power plant completion in about 1.5 years’ time to sell electricity to the Vietnamese government. Jaks will earn more than Rm 100 million per year for 25 years.
The price chart shows that the share price is recovering in the last few trading days.
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