Jaks will own 30% share of the 1,200 MW power plant for free
Koon Yew Yin 30 Sept 2018
You can see from Jaks’ announcements that the company had made share placement twice recently. On 22 March 2018, 50.7 million shares at Rm 1.39 per share and on 16 March 2017, 43.9 million shares at about Rm 1.40 per share.
The total amount is about Rm 132 million.
You can also see Jaks’ company announcements that on 13 June 2018 Ang Lam Poah, the CEO bought 50,000 shares, on 12 June 2018 bought 200,000 shares and on 8 June 2018 bought 550,000 shares from the open market.
The main objective for buying so many shares by Mr Ang Lam Poah, the CEO, all the institutional buyers of the placement shares and many other investors must be Jaks’ JV with the Chinese companies to construct the 1,200 MW power plant to sell electricity to the Vietnamese Government for 25 years.
The 3 Chinese National Banks must have studied the power purchase agreement before they are prepared to finance Rm 7.76 billion for the project.
During the construction, the Chinese JV partners pay Rm 454 million to Jaks and this sum of money is to be used as capital for owning 30% of the Joint venture. Moreover, the Chinese would undertake the construction and Jaks is not even required to lay a brick.
It is like the Chinese Banks is giving a profit guarantee to all the Jaks shareholders every year for 25 years when the JV sells electricity to the Vietnamese Government.
I wish to point out that Jaks will own 30% of the Joint Venture free of charge. Moreover, Jaks has an option to buy another 10% of the JV by using its share of the profit during the operation of the power plant to buy the additional shares.
Jaks also made about Rm 150 million profit from the sale of a large piece of land. Together with the Rm 132 million from the sale of placement shares, Jaks has a total of Rm 282 million which is used to complete the development of the land belonging to the Star.
Star owns a large piece of land of more than 6 acres in Petaling Jaya. Jaks joint ventures with its CEO Andy’s private company has a contract to build a high-rise office block in exchange for the land.
The land has approval for 2 office blocks in front and 3 condo at the back. Now the construction is completed and Star cannot forfeit the Rm 50 million performance bond. However, Star may have the right to claim damages for late completion.
The price chart shows that the price has been dropping from Rm 1.54 about 4 months ago its lowest at 83 sen. It has gone up to close at Rm 1.03.
I think it is a very good share to buy bearing in mind that its NTA is about Rm 2.20 per share without any valuation of the 30% of the 1,200 Mw power plant.