Harvest Court unit to build properties for Sagajuta

KUALA LUMPUR (Nov 11): Harvest Court Industries Bhd has accepted an award to construct commercial and residential developments for Sagajuta (Sabah) Sdn Bhd, a property developer controlled by its new substantial shareholder Datuk Raymond Chan Boon Siew.

This comes a week after Harvest Court denied reports that Chan, who surfaced in the group last month, was in talks with the group for a potential asset injection.

Chan, who is Sagajuta managing director, recently acquired a 15.41% equity stake in Harvest Court and Sagajuta's shareholder Mohd Nazifuddin Najib took up a 1.59% stake.

In a filing with Bursa Malaysia on Thursday, Harvest Court said its wholly-owned unit, Harvest Court Development Sdn Bhd (HCD), would enter into a related party transaction (RPT) with Sagajuta after accepting a letter of intent on Tuesday.

Harvest Court said the non-binding letter of intent is for the design and construction of a 28-storey medium-cost apartment (950 units), double-storey shop offices (eight units), a common facilities podium and a five-level car park. They are part of Gold Tower, which forms Parcel 3 of Sagajuta's 1Sulaman project in Kota Kinabalu, Sabah.

The 1Sulaman project has an estimated gross development value (GDV) of RM500 million, which includes Gold Tower's GDV of RM173.35 million.

According to Harvest Court, the contract is subject to a maximum of RM129 million for a duration of 2½ years.

Harvest Court noted that it had no expertise in building construction but would rope in Sagajuta's team to undertake the project. HDC will undertake the superstructure, architecture, mechanical and engineering, and external works.

"The rational for HDC to enter the RPT is to take advantage of new business opportunities. The RPT is meeting the business needs of group at the best possible terms and is expected to generate positive recurring income for the group," Harvest Court said.

Gold Tower's gross and net profit margin are estimated at 13.41% and 10.06% respectively, Harvest Court said. It added that the capital requirement for the project is RM5 million based on monthly progress claims.

The Gold Tower project will be financed via a combination of bank borrowings and proceeds from the proposed rights issue and placement exercise, Harvest Court said.

However, the proposed rights issue with warrants announced in July will be utilised for Harvest Court's timber business.

Harvest Court expects to commence the project one month after obtaining shareholders' approval at an EGM next month. It noted that the project was proposed by Sagajuta and is subject to the finalisation of the contract agreement to be signed within two weeks from Tuesday.

Harvest Court said its board, excluding the interested directors, will deliberate on the RPT at a later stage. Its share price had surged from 40 sen on Nov 1 to RM1.45 on Wednesday. On Thursday, the stock closed down three sen to RM1.42 with 13.58 million shares traded.