GKE Corp to invest $9.7m to build China cement plant, raise $7m from proposed placement

SINGAPORE - Logistics solutions company GKE Corp's wholly owned subsidiary, Wuzhou Xing Jian Readymix Co (Wuzhou), will invest 48 million yuan (S$9.7 million) to construct a ready-mix cement plant in Cenxi City, China, the group said on Monday (May 6).

Wuzhou, which manufactures and supplies ready-mix cement products, entered into the construction agreement with the municipal government of Cenxi City on April 25, 2019.

The government will lease about 25 mu (about 16,667 square metres) of land with a tenure of 50 years to Wuzhou for the plant, at a price to be determined through a bidding process.

Construction of the plant is expected to take about 15 months after the land use rights is officially granted to Wuzhou.

The project will be funded through internal resources and issuing 100 million new ordinary shares at S$0.07 per share to three investors - two GKE Corp employees and one private investor. The proposed placement will raise S$7 million.

The placement price is a 2.8 per cent discount to the volume-weighted average price of S$0.072 for trades done on the group's shares on May 3, 2019, when the agreements for share issuance were signed.

In total, the three investors held 6.6 per cent of the group's shares prior to the placement, and will hold 18.44 per cent of the group's enlarged share capital post-placement.

The share issuance will provide the group with S$6.95 million in net proceeds, of which S$5 million will be used for its expansion in China, and S$1.95 million will be used for working capital.

For illustrative purposes, based on the group's audited financial statements for its financial year ended May 31, 2018, the net tangible asset value of each share would dilute to S$0.104 from S$0.109, and the loss per share would be 0.4 cent instead of 0.46 cent post-placement.

The group said its first automated ready-mix cement plant in Wuzhou City, China, had commenced commercial production in June 2016 and is contributing positively to its earnings.

"The success of Wuzhou Xing Jian, which is one of the most advanced automated ready-mix cement plants in China, led to this expansion opportunity for the group to construct a new ready-mix cement plant to support the ongoing urbanisation plans in Cenxi City," said Neo Cheow Hui, CEO and executive director of GKE Corp.

Catalist-listed GKE Corp's shares closed down 5.26 per cent, or $0.004, at $0.072 on Friday.