Fajarbaru Venturing More Into Property Development

Saw the following announcement on Fajarbaru Builder last night. Since I had blogged on Fajarbaru recently ( A Quick Look At Fajarbaru Builder ), I thought it's best that I make this update.

Fajarbaru's share sale agreement with Potential Region Sdn Bhd. ( see file attachment posted on Bursa website: FBG - Potential Region Sdn Bhd (1).doc )

• The Board of Directors of Fajarbaru Builder Group Berhad ("FBG" or "the Company") wishes to announce that the Company had on 12 July 2010 entered into a Share Sale Agreement ("the Agreement") with the following parties (“the Vendors) to acquire 348,255 ordinary shares of RM1.00 each representing 49.75% the issued and paid-up capital of Potential Region Sdn. Bhd. (Company No. 229098-H) (“PRSB”) for a total consideration of RM16,000,000.00 (Ringgit Malaysia Sixteen Million) only (“the said Consideration”) :

A 16 Million acquisition.

And this was highlighted on Star Business: Fajarbaru to buy Potential Region

As you can see from the newspaper, it really doesn't say anything much!

• Tuesday July 13, 2010
  Fajarbaru to buy Potential Region
  
  KUALA LUMPUR: Fajarbaru Builder Group Bhd has signed a share sale agreement with three parties to acquire 348,255 ordinary shares of RM1 each representing 49.75% the issued and paid-up capital of Potential Region Sdn Bhd for RM16mil.
  
  In a filing with Bursa Malaysia, Fajarbaru said the parties were Datuk Chua Tiong Moon, Tan Hui Ngoh and Koh Koo Kee.
  
  “The proposed acquisition will allow the company to have full management and operational control over Potential Region,” it said. — Bernama

And if you read from the doc attached on Bursa website, it also doesn't say anything much!

For example, what exactly does Potential Region do? All Fajarbaru indicated was that Potential Region is a property development company. And obviously what kind of potential does it have (pun intended! :P )? What about Potenital Region's earnings track record? What kind of properties does Potential Region owns?

• 2. INFORMATION ON PRSB
  
  PRSB was incorporated in Malaysia under the Companies Act, 1965, on 16 November 1991. The authorised capital of PRSB is RM5,000,000.00 divided into 5,000,000 ordinary shares of RM1.00 each, of which 700,000 ordinary shares of RM1.00 each have been issued and fully paid-up.
  
  The principal activity of PRSB is property development.
  
  3. RATIONALE FOR THE SAID ACQUISITION
  
  The Proposed Acquisition will allow the Company to have full management and operational control over PRSB.

And incredibly in May 2010, Fajarbaru announced this: ACQUISITION OF INVESTMENT IN TEMASEK PERKASA SDN. BHD.

And the acquisition will cost Fajarbaru 15 million. Temasek Perkasa is also into property development. And like Potential Region, there is indication of the potential of Temasek Perkasa and neither does Fajarbaru provide to the investing public, the earnings track record of Temasek Perkasa.

Would you reckon that these are two dodgy acquisitions?

All we know is a whopping 31 million will be spent by Fajarbaru to purchase two property development companies. We don't even know what kind of properties these two property developers own.

Yes, I am truly disappointed with the lack of information.

Oh of course Fajarbaru could afford these two acquisitions since as per their last reported quarterly earnings, its cash balances totals more than 120 million, with no debts but surely if you are a minority shareholder, you would want to understand more about these two property developers Fajarbaru is acquiring.

And what's the implication of these two developments? Would we see Fajarbaru diversifying more into properties?

________________________________________________

Update 8:15pm

Fajarbaru answered a query from Bursa..

• 1. The net loss and net assets of Potential Region Sdn Bhd are as follows: Net Loss for the financial year ended 30 June 2009 : RM57,954. Net Asset as at 30 June 2009 : RM10,456,591
• 9. Part C of Appendix 10B of LR1. (a) 192 Individual Lots within PD Orchard Homestead Resort, Mukim of Si Rusa, District of Port Dickson, State of Negeri Sembilan Darul Khusus.(b) The properties comprise 81 units of orchard homestead lot (sizes range from 43,438 sq feet to 92,128 sq feet), 109 units of bungalow lot (sizes range from 8,130 sq feet to 25,961 sq feet), 1 unit of commercial land (188,364 sq feet) and 1 unit of agricultural land (435,606 sq feet) situated within Orchard Homestead Resort, Port Dickson, Negeri Sembilan Darul Khusus.

How? Worth 16 million?