JAKS falls 5.70% on possible RM50 million loss in dispute with Star Media

KUALA LUMPUR (March 15): JAKS Resources Bhd fell 5.70% this morning after a report pointed out that the company, which is in a  dispute with Star Media Group Bhd over the completion and delivery of a property project in Section 13, Petaling Jaya, could end up paying RM50 million in a worst-case scenario.

At 9.05am, JAKS fell 9 sen to RM1.49 with 682,800 shares traded.

In a report yesterday, Affin Hwang Investment Bank noted that JAKS is liable for the liquidated ascertained damages (LAD) for Tower A of the Pacific Star project, which the research firm estimates to be RM30 million based on the sale and purchase agreement (SPA) signed between JAKS and Star in August 2011 for the purchase of land for RM135 million and assuming that JAKS can complete the building before end-June.

“This is significantly lower than the corporate guarantee of RM50 million that Star had called on,” it added.

Under the SPA, Star is entitled to the RM50 million security fee in the form of a bank guarantee if JAKS fails to deliver Tower A on the stipulated date.

Affin Hwang said as JAKS has not made any provisions related to Tower A, it will have to absorb the cost in its profit and loss (P&L) should the court rule against its favour. — theedgemarkets.com

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