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JAKS: Questionable disposal of JSB 51% equity in JIC to ICD for consideration of RM1.00

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Official Complaint: Questionable financial/information disclosure on disposal of JSB 51% equity to ICD for consideration of RM1.00

Dear all,
I refer below on disposal of JSB 51% equity in JIC to ICD for consideration of RM1.00:
PROPOSED DISPOSAL BY JAKS SDN BHD ("JSB"), A WHOLLY-OWNED SUBSIDIARY OF JRB, OF ITS ENTIRE 510,000 ORDINARY SHARES ("SALE SHARES"), REPRESENTING 51% OF EQUITY INTEREST IN JAKS ISLAND CIRCLE SDN BHD ("JIC") FOR A TOTAL CASH CONSIDERATION OF RM1.00 ("DISPOSAL CONSIDERATION") ("PROPOSED DISPOSAL")
The Board of Directors of JRB (“Board”) wishes to announce that JSB, a wholly-owned subsidiary of JRB had on 29 September 2020 entered into a shares sale and purchase agreement with Island Circle Development (M) Sdn Bhd (“ICD”) in relation to the Proposed Disposal (“SPA”)
ICD was incorporated in Malaysia on 2 November 2000 under the Companies Act, 1965 as a private limited company and is principally involved in property development and management business. As at the LPD, the existing shareholders and directors of ICD are as follows:-
Chen Cheong Fat: 1,075,000: 65 %
Rasli bin Musamah: 575,000: 35 %
 
The Proposed Disposal is expected to contribute positively to the consolidated earnings and EPS of JRB for the FYE 31 December 2020. JRB Group is expected to realise a gain of approximately RM71.89 million from the Proposed Disposal against the audited NL of JIC as at FYE 31 December 2019 of approximately RM140.95 million, the details of which are as follows:
Audited NL of JIC as at FYE 31 December 2019: RM 140,953,953
Add: Disposal Consideration RM 1
Less: Non-controlling interests of JIC (49%): RM 69,067,437
Gain to JRB Group: RM 71,886,517
This announcement is dated 29 September 2020
 
Quarterly rpt on consolidated results for the financial period ended 30 Sep 2020
The Property Development & Investment division achieved a revenue of negative RM3.2 million for the current quarter. However, a higher profit before tax of RM129.3millionin the current quarter was recorded as compared to a loss before tax of RM17.9million in the third quarter of 2019. This was mainly due to the one-off gain arising from the disposal of the 51% equity interest in one of the subsidiary. The disposal resulted in a gain before tax of RM174.4 million and after taking into account the Non-controlling interest portion, the gain of RM89.0 is recognised by the Group. With the need to make RM30.5 million allowance for doubtful debts in the current quarter.
 
Quarterly rpt on consolidated results for the financial period ended 31 Dec 2020
The higher loss before tax for the current quarter was mainly due to:-
(i)             the reduction in revenue by 79% from the previous year’s corresponding quarter;
(ii)            impairment provision on good will of RM52.0 million;
(iii)           impairment loss on trade and other receivables of RM23.6million;and
(iv)           re-statement of the gain on disposal of the 51% equity interest in JIC, from RM174.4 million to RM89.1 million, where RM85.3 million is now allocated to the Non-Controlling Interest.
This division recorded a higher loss before tax of RM106.6million as compared to a loss before tax of RM28.7million in the fourth quarter of 2019. The Property Development & Investment division also had to re-state the gain on disposal of the 51% equity interest in JIC, from RM174.4 million to RM89.1 million, where RM85.3 million is now allocated to the Non-Controlling Interest.
Dear IR@JAKS,
I refer to your email dated: 3 Nov 2020 answering my questions on disposal of 51% JIC to ICD:
Dear Mr. Lee,
Please see our replies in red below.
Question 1: With the disposal of JIC, do JRB still have legal locus standi to counter claim suit for RM595 million against SMG, seeking damages for prematurely initiating the claim in bad faith when the Sale and Purchase Agreement dated 19 August 2011 (“SPA”) entered into is between STAR and JIC? Yes, as JRB is a co-plaintiff in the suit which is still on-going
 
Question 2: What will happen to the 50 million bank guarantee paid previously by JAKS to Star Media Group? Jaks is seeking to recover this amount and is part of the suit against the STAR as mentioned above 
 
Question 3: Please give detail what are inside: Please refer to the JRB’s 2019 Annual Report
Non-current assets: 144,366
Current assets: 127,165,593
Current liabilities: 268,263,388
 
Question 4: Please explain how JIC will settle this RM35.4 m with JAKS? Any amounts owing by JIC is to be settled in the ordinary course of business
 
Question 5: Is 50 million Bank Guarantees paid previously by JAKS to Star Media Group part of JIC current liabilities? Yes, it is a disputed performance liability with a corresponding amount of receivable in current asset
 
Question 6: Is JIC current liabilities involved bank borrowing guarantee by JAKS? JIC is no longer part of JRB Group. Nonetheless, JIC does not have any bank borrowings at the point of the completion of disposal
 
Clearly the answers given then did not tally as what is reported in the Quarterly financial report and latest development. Hence please allow me to post the following question to the Board for clarification:
The disposal announcement dated 29 September 2020: JRB Group is expected to realise a gain of approximately RM71.89 million from the Proposed Disposal against the audited NL of JIC as at FYE 31 December 2019 of approximately RM140.95 million
Quarter end 30th Sept 2020 Financial report: The disposal resulted in a gain before tax of RM174.4 million and after taking into account the Non-controlling interest portion, the gain of RM89.0 is recognised by the Group.
Question 1: Please provide the Audited Financial report and Balance Sheet of JIC used for the disposal transaction?
Question 2: Why Quarter end 31th DEC 2020: The Property Development & Investment division also had to re-state the gain on disposal of the 51% equity interest in JIC, from RM174.4 million to RM89.1 million when Quarter end 30th Sept 2020 clearly stated: The disposal resulted in a gain before tax of RM174.4 million and after taking into account the Non-controlling interest portion, the gain of RM89.0 is recognised by the Group?
Q3: Allowance for impairment of receivables: RM 69,507,000: Of the impairment of RM 69,507,000 how much is from JIC?
Q4: Impairment provision on good will of RM52.0 million: How much is from:
JAKS Island Circle Sdn. Malaysia Bhd. (“JIC”)?
MNH Global Assets Malaysia Management Sdn. Bhd.(“MNH”)?
Fortress Pavilion Sdn. Bhd. Malaysia (“FP”)?
 
Thank you
 
Dear SC and Bursa,
Please investigate and make the finding and ruling on:            
1.     Had JAKS Board committed an offence of furnishing false or misleading financial statements to Bursa Malaysia under section 354(3)(f)(ii) of the Capital Markets and Services Act 2007 (CMSA) on disposal of JSB 51% equity in JIC to ICD for consideration of RM1.00?
2.     On 6 October 2020, the Company awarded 19,945,000 ordinary shares (“LTIP shares”) under the Restricted Share Plan (“RSP”) to selected employees / executives of the Company and book Restricted Share plan ("RSP") expenses: RM 17,053,000. Should SC and Bursa disallow LTIP/Free grants since every free grant will cause the company to incur losses as expenses and clearly free grant is not in the best interest of the company thus in breach of Company Act 2016: 213: (1) A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company?
3.     Please investigate is the JIC disposal to ICD benefited ICD directors: Chen Cheong Fat:65%, Rasli bin Musamah: 35% as both do not need to come up with their money to recapitalize JIC and after disposal JAKS write off JIC inter-company loans/advance as parts of Allowance for impairment of receivables: RM 69,507,000?
KUALA LUMPUR: Jaks Resources Bhd is acquiring a controlling 51% stake in privately owned property developer MNH Global Assets Management Sdn Bhd for RM93.2 million.The acquisition will enable Jaks to immediately gain access to MNH’s on-going mixed development project known as Pacific Place @ Ara Damansara in Petaling Jaya, which has an estimated gross development value (GDV) of RM938.31 million.MNH, which began developing the property in December 2010, is expected to complete it next year. The three-phase development consists of apartment buildings, shop offices, a retail complex and college accommodation. In a statement to Bursa Malaysia yesterday, Jaks said the purchase of the MNH stake is through its wholly owned subsidiary Harbour Town Sdn Bhd. The vendor is Island Circle Development (M) Sdn Bhd. Island Circle, whose two major shareholders are Chen Cheong Fat (65%) and Rasli Musamah (35%), owns 49% of Jaks Island Circle Sdn Bhd.
18 Mei 2004 — Wing Tiek managing director Chen Cheong Fat told a press conference after the company EGM in Kuala Lumpur yesterday that JAKS will take over Win Tiek Listing:
 
Looking at the long history dealing of JAKS with Chen Cheong Fat please investigate the disclosure:
None of the Directors, major shareholders and/or persons connected with them have any interest, direct and/or indirect, in the Proposed Disposal is an act of committing an offence in furnishing false or misleading information?
5.     I refer: None of my questions send in advance for JAKS year 2020 AGM was answered by the Board citing those questions fall into either of the following reasons:-
A.     in answering the questions, it would not result in a fair and orderly dissemination of information to the market as required under the Bursa listing rules.
B.     confidential and/or price sensitive in nature;
C.    involves speculation or matters that cannot be ascertained accurately;
D.    beyond the scope of shareholder communication;
E.     Inappropriate, unreasonable, or irrelevant and hence the Company is not obligated to answer the question; or
F.     Inaccurate interpretation or misunderstanding of the facts and matters and hence does not warrant a response from the Company.
Will Bursa and SC reprimand the JAKS Board? The Board act in bad faith in refusing to answer minority shareholder legitimate rights in questioning the Board, failure in protecting minority shareholder rights and in breach of SC Annual General Meeting Corporate Governance guideline:
 
Attachment: Email questions submitted in advance for JAKS 18th AGM and JAKS 18th AGM - Key matters discussed for your perusal.
 
Thank you
 
Best Regards
Lee Soon Sheng


 


 

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