Stone Master inks framework agreement with LBS Bina

by **Cals** Thu 12 Nov 2015, 23:32

Stone Master inks framework agreement with LBS Bina

By Chen Shaua Fui / theedgemarkets.com | November 12, 2015 : 8:07 PM MYT

KUALA LUMPUR (Nov 12): [size=16]Stone Master Corporation Bhd (SMCB) has signed a framework agreement (FA) with LBS Bina Group Bhd ([You must be registered and logged in to see this image.] Valuation: 2.40, Fundamental: 1.00) to offer their products and services coupled with interest free vendor financing services to LBS Bina for 18 months.

Pursuant to the FA, both parties are expected to enter into separate vendor financing agreement (VFA) in respect of suitable development projects, according to filings by SMCB and LBS Bina to Bursa Malaysia.

Tiles maker SMCB said that in tandem with the "One Belt, One Road" initiatives of the China government, SMCB has successfully tied up a new collaboration model with its China principals to provide their products and services with interest free vendor financing services.

The FA signed today shall form the framework that sets out in principle the pre-agreed terms and conditions upon which the VFA shall be signed between the parties during the availability period for selected development projects. This shall be classified as a specialist contract.

Under the FA, property developer LBS Bina shall engage SMCB as its direct contractor or nominated subcontractor in relation to the products and services for the selected development projects; and in either case, the contract documents shall stipulate direct payment of the contract sum by LBS Bina to SMCB.

Pursuant to the VFA, SMCB has decided to allocate a credit limit of up to RM300 million and be on standby for the application by LBS Bina for the selected development projects over the span of the availability period.

The parties shall establish a coordination committee to supervise and coordinate all the activities to expeditiously negotiate upon and to finalise the products and services to be used in specific projects.

SMCB said the FA allowed it to promote more effectively the various high-end premium products and services procured by SMCB under the existing exclusive agencies and will allow SMCB to engage directly with LBS Bina and its subsidiary, which is also a developer.

In addition, SMCB said direct engagements with a developer that is a public listed company will greatly reduce the risks of defaults in payment due to provisions of better and more secure forms of securities.

SMCB added that the terms on the profit guarantee of 30% of the gross contract value of the contracts procured by SMCB under the existing exclusive agencies already assures the profitability for any contract secured under this trade.

"Ultimately, the FA will help to favourably position SMCB towards enlarging its revenue base and profit.

"There is long-term benefit to accrue and good perspectives to be achieved in favour of SMCB and its Group," SMCB said.

Meanwhile, on the rationale of signing the FA, LBS Bina said that with more future projects in the pipeline, entering the FA is timely and in line with the group's financing strategy.

"It meets the group's operating cash flow plan as it is to be paid with favourable deferred payment terms of 60 months with no interest charges. Thus, it would contribute positively towards smooth project cash flow planning.

The FA would allow LBS Bina to have more options to select from as the FA allows it to have access to various high-end premium products and services at competitive prices, which were procured by the Vendor (SMCB) under its existing Exclusive Agencies, LBS Bina said.

Besides that, LBS added, a high level of service is also expected from the direct engagement with an established public listed company, which may include its capabilities to fulfill the contracted delivery time and the ability to quickly respond to its requirements. This in turn will potentially reduce the total development time and costs in managing the selected development projects.

Shares in SMCB closed 0.5 sen or 1.85% lower at 26.5 sen for a market capitalisation of RM24.3million, while LBS dipped two sen or 1.38% to close at RM1.43 for RM791.1million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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