Plastic products maker MP Technology Resources Bhd said it has agreed to buy a 10 pct stake in Hongkew Holdings Sdn Bhd for 20m rgt cash and also team up with the unit to build jointly a cement plant in Gua Musang in Kelantan state.
Hongkew is the owner of the 35 per cent completed cement plant.
In a statement, MP said the company and Hongkew will form a 40:60 joint venture firm, to be called SG Eastern Holdings Sdn Bhd (SGEH), to develop and run the plant.
At the same time, the partners will also assist SGEH to secure necessary funds for the revival of the cement project in Gua Musang.
Under the agreement, Hongkew will grant exclusive development rights to SGEH to develop, operate and manage the cement plant, as well as the usage of its lands for 50 mln rgt.
The 50m rgt will be settled through an issue of 50m redeemable preference shares of 1.00 each rgt in SGEH for the first 15 years of operation of the cement plant. The redeemable preference shares will be subordinated to the project loan to be raised for the construction of the incomplete 65 pct of the cement plant, which includes the building structure and equipment for two production lines.
MP said the construction of the cement plant is expected to commence some time in March and will take 30 months to complete, inclusive of the six months trial run period.
The company said the transactions marks its first foray into the lucrative cement industry and is expected to provide it with an expanded earnings base in the future.
"The return of investment from the proposals is virtually assured with the guaranteed sales of at least 900,000 metric tonnes of cement per the off-take agreements between Hongkew and YTL Cement," it said.
MP said the proposals will also allow the company, via its joint venture, to extract other mineral deposits from the said land and venture into the manufacturing for export market of construction-related materials, such as clinkers, pre-cast concrete piles, marble tiles and wall plasters.