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Boustead Holdings Berhad ("bhb" Or The "Company") - New Contract Awarded

BackMay 04, 2006
1. INTRODUCTION
The Board of Directors of BHB ("Board") is pleased to announce that the Company's subsidiary, Boustead Building Materials Sdn Bhd ("BBMSB") had on 4 May 2006 been awarded a contract by Perbadanan Perwira Harta Malaysia ("Perbadanan Perwira"), a wholly-owned corporation of Lembaga Tabung Angkatan Tentera ("LTAT") to design, construct, equip, commission and maintain an army hospital for a contract sum of RM119,500,000 ("Contract").

Further details of the Contract are set out in the ensuing sections.

2. DETAILS OF CONTRACT

2.1 Particulars
The Contract involves the design, construction, equipping, commissioning and maintenance of a hospital of the Malaysian Army ("Army Hospital"). The Contract awarded by Perbadanan Perwira to BBMSB is a subcontract of a portion of the main contract for the Army Hospital awarded to Perbadanan Perwira from the Ministry of Defence, Malaysia vide a letter of award dated 23 October 2004 ("Letter of Award").

The Contract sum shall be paid progressively over the construction period of the Army Hospital pursuant to the Contract.

BBMSB shall perform all the covenants, undertaking and fully discharge all the obligations and liabilities pursuant to the Contract and the terms and conditions of the Letter of Award shall be incorporated as part of the Contract.

The period for the Contract is twelve (12) months from 4 May 2006 and shall expire on 3 May 2007.

Save for the Contract sum, there are no other liabilities to be assumed.

The Contract would be funded through bank borrowings and/or internally-generated funds.

2.2 Information on Perbadanan Perwira, LTAT and BBMSB

Perbadanan Perwira, established on 26 January 1984 in Malaysia under the Armed Forces Fund Board 1973 and wholly-owned by LTAT, is involved in building construction, civil engineering, project management, housing development and distribution of building materials.

The principal activities of LTAT are the provision of the superannuation and other benefits to the members of the other ranks in the Armed Forces of Malaysia and to enable the officers in the service to participate in a saving scheme and to promote socio-economic development and to provide welfare and other benefits for the retiring and retired personnel of the armed forces.

BBMSB was incorporated in Malaysia on 5 July 1995 under the Companies Act 1965 and is involved mainly in the distribution of building products and construction.


2.3 Risk Factors
(a) Supply and price of building material and transportation costs
The recent increase in oil prices has resulted in higher building material prices and transportation costs. As such, there can be no assurance that there will not be any further increases in oil prices in the near future and that any such increase would not result in a further hike in building material prices and transportation costs which would correspondingly translate into lower profit margins for the Contract.

(b) Political, economic and regulatory considerations
Any adverse developments in the political, economic and regulatory factors may materially and adversely affect the financial prospects of the BHB Group. Amongst the political, economic and regulatory uncertainties are the risks of war, riots, global economic downturn, changes in political leadership, expropriation, nationalism, re-negotiation or nullification of existing sales orders and contracts, unfavourable changes in interest rates and methods of taxation and currency exchange rules and contracts.
Whilst the Board continues to take effective measures such as prudent financial management and efficient operating procedures, there is no guarantee that there will not be any other changes in government policies or regulations that may be unfavourable to the BHB Group.


(c) Delays in delivery of the completed hospital
The timely completion of the project is dependent on many external factors such as obtaining the regulatory approvals as scheduled, weather conditions, availability of construction materials, equipment, labour or financing, and satisfactory performance of the sub-contractors appointed to complete the project. These factors may lead to interruptions or delay in the completion of the Contract.
Although the Company seeks to mitigate these risks through, inter-alia, efficient project management and maintaining a good relationship with its suppliers and contractors, there can be no assurance that these factors will not result in delays in delivery of the Army Hospital which would in turn have a material impact on the financial performance of the BHB Group.


3. RATIONALE FOR THE AWARD OF THE CONTRACT
The Contract is complementary to the construction activities of the BHB Group and is expected to contribute positively to the BHB Group's future earnings.

4. EFFECTS OF CONTRACT (i) Share capital and substantial shareholding structure

The Contract will not have any effect on the issued and paid-up share capital and substantial shareholding structure of BHB. (ii) Earnings

The Contract will not have any material effect on the consolidated earnings per share of BHB for the financial year ending 31 December 2006. (iii) Net assets

The Contract will not have any material effect on the consolidated net assets per share of BHB for the financial year ending 31 December 2006.
5. APPROVAL REQUIRED

The award of the Contract is not subject to any other regulatory or shareholders' approval.


6. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS
None of the Directors or major shareholder of BHB or any persons connected to them have any interest, directly or indirectly in the Contract, save and except for the following.
(i) Major shareholders' interests
LTAT is the major shareholder of BHB and is the holding company of Perbadanan Perwira and is deemed interested in the Contract.

(ii) Directors' interests
Y. Bhg. Gen. (R) Tan Sri Dato' Mohd Ghazali Hj Che Mat is the Chairman of BHB, and LTAT. Y. Bhg. Tan Sri Dato' Lodin Wok Kamaruddin is the Group Managing Director of BHB and the Chief Executive of LTAT.

The aforesaid Directors are deemed interested in the award Contract by virtue of them being persons connected with LTAT pursuant to the Listing Requirements.

Accordingly, the aforesaid interested Directors have abstained and will continue to abstain from all Board deliberations and voting at the Board meeting pertaining to the award of the Contract.



7. DIRECTORS' RECOMMENDATION
The Board, save for Y. Bhg. Gen. (R) Tan Sri Dato' Mohd Ghazali Hj Che Mat and Y. Bhg. Tan Sri Dato' Lodin Wok Kamaruddin who are deemed interested in the award of the Contract, after taking into consideration all aspects of the Contract, are of the opinion that the award of the Contract is in the best interest of the Company.


8. EXPECTED COMPLETION DATE
Barring unforeseen circumstances, the Contract is expected to be completed in the second quarter of 2007.


9. DEPARTURE FROM THE SECURITIES COMMISSION'S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES ("SC GUIDELINES")
To the best knowledge of the Board, the award of the Contract has not departed from the SC Guidelines.


10. RELATED-PARTY TRANSACTION

In view of the interests of certain directors and major shareholders as disclosed in section 6 above, the award of the Contract is regarded as a related-party transaction pursuant to Paragraph 10.08 of the Listing Requirements of Bursa Malaysia Securities Berhad.


11. DOCUMENT AVAILABLE FOR INSPECTION
The Contract will be made available at the Company's registered office at 28th floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur from Monday to Friday (except public holidays) during business hours for a period of four (4) days from the date of this announcement.
We are constantly guided by our Group motto:
"A Tradition of Strength and Stability, A Vision of Growth and Excellence"