Johor agarwood project – It has very good return 32% IRR and ROI 1.73 time and very safe to derive at this return (due to the structure of the deal where I lock in 4000 trees)
Facts of situation
XXX is a Malaysian company, principle business is to inoculate agarwood trees. 20% of the company is held by a Taiwanese. The rests Malaysians
XXX has secured the rights to inoculate more than 50,000 trees.
One of the projects is a 14,000 matured trees sitting on 3 titles of land in same area, of which XXX has secured the rights to inoculate and incur all cost but in return, will be entitled to 50% of the revenue.
XXX is shifting 4000 out of the 7000 trees into a company (Newco) where we are invited to invest.Approach
XXX will inoculate these 14,000 trees in method that is suitable for Taiwanese buyers, of which predominantly will use it for traditional Chinese medicine
These buyers have issued buying contract/obligation to products to be produced by XXX
The 14,000 trees will be harvested by 2016 or 2017 for these Taiwanese market
Projected return of the company will be RM 8 mil based on average harvest of RM 2,000 per tree
The Deal to Us
Investors will invest RM 1.55 mil for 50% of the Newco. Investors will get RM 1.5 mil worth of Redeemable Convertible Preference Shares and 50% paid up capital of Newco
Newco will pay RM 1.5 mil to buy 2000 trees.
XXX will inject 2000 trees for 50% ordinary shares of Newco
RCPS will be redeemed by RM 3.1 mil of the company’s profit.
Newco has 4000 trees to derive at this profit
Subsequently, 50% shareholding will be bought out by XXX at par
Verification of Taiwanese market – need a visit to Taiwan to see the Agarwood application market
Confirmation of acceptance of technology – verify with Taiwanese buyers
Verification of XXX owning the trees – need to vet the agreements
Identification of 14,000 trees – need to count the trees
Payment of 2% annual management fees and 20% of profit sharing to Capital
Will apply for Bio Nexus status for this company
If agreeable to invest, need to pay a 10% refundable deposit before visit to Taiwan
Investors can be syndicated from various people with minimum amount of RM 250,000 per investor