JAKS: investors must not buy in anticipation of future profit

Koon Yew Yin 31 Dec 2019

I made a big mistake in buying Jaks in anticipation of its future profit from its 2 X 600 MW coal power plant contract with the Vietnamese   Government. I am ashamed to admit that I lost a huge amount of money. 

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My sole purpose of writing this piece is to advise investors not to be misled to buy Jaks in anticipation of its projected profit from its coal power plant in Vietnam. Readers must remember that whether you buy or you sell does not affect me because I do not have Jaks. 

Jaks secured the contract to construct 2 X 600 MW coal power plant to sell electricity to the Vietnamese Authorities on 28 Oct 2010. Jaks could not start construction work for many years and it has been requesting for contract extension from the Vietnamese Government. Jaks finally sold 70% of the contract to China power Engineering Consulting Company (CPECC). 

As you know, the power plant construction is not completed yet and it has not reported any profit from selling electricity. Unfortunately, Mr Ooi Teik Bee has already circulated his projected profit recommendation to all his subscribers and followers. You should not buy Jaks now. You should only start to buy when it can show increasing profit for 2 consecutive quarters from its power generation in Vietnam. 

Even when the 2 X 600 MW coal power plant is completed, all the other ancillary construction works might not be completed to use up all the 1,200 MW electricity. All of a sudden, the Vietnamese distribution system might not be able to cope with the 1,200 MW of electricity supply. 

Mudajaya’s coal power plant in India

Investors should look at how the Indian Government distribution system in the delaying the actual completion Mudajaya’s coal power plant in India.    

Jaks is basically a construction contractor and a property developer. A few years ago, the CEO Andy Ang in joint venture with Jaks to undertake the development of Star Media’s 6 acres of the land in Petaling Jaya, KL. which has planning permission for 2 office tower blocks in front and 3 high rise condominium blocks at the back. All these 5 blocks of high rise buildings are sitting on a 4 storey under round car park. 

Since the JV did not pay for the land, it has agreed to give one of the 2 office blocks and Rm 50 million performance bank guarantee to Star Media. Up to date, Andy Ang and Jaks JV could not complete the  development project and the High Court has passed judgement for in favour of Star to forfeit the Rm 50 million performance guarantee. Moreover, Star and many other buyers are suing Jaks for the completion delay.  

Under the circumstances, I suspect Andy Ang has sold his share in the JV to Jaks which he did not require to call an EGM to seek shareholders’ approval. I also suspect, a large portion of this huge development are not sold. 

From my long experience in property development, I have not seen so many unsold properties in every town and city before. It will take more than 10 years to resolve this problem. In fact, property prices have been dropping continuously and many listed property development companies are selling their shares below their NTA. 

Investors must not forget that Jaks has another big financial problem in its Evolve Mall development. 

Investors must also not forget that bank interest charges can be capitalised and it is not shown in the profit and loss account. 

Investors must be careful and not to be misled by people who have no business sense.                    

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