Chuan Holdings (01420): Chuanlin and BuildStar signed a joint venture agreement to establish a joint venture

According to Zhitong Finance App, Sichuan Holdings (01420) announced that on October 16, 2024, Chuanlin (the company's indirect wholly-owned subsidiary) signed a joint venture agreement with BuildStar. The contracting parties have agreed to establish a joint venture with a paid-up share capital of SGD 10,000, of which each contracting party must inject a cash capital of SGD 5,000; and the contracting parties have agreed to provide a shareholder loan of SGD 1 million in cash.

According to the joint venture agreement, the contracting parties have agreed to establish a joint venture company. It will be a limited company incorporated in Singapore and will mainly be engaged in construction projects, including major upgrade projects. The proposed name for the joint venture is Chuan Lim — BuildStar JV Pte. Ltd. (It is subject to approval by the relevant government agencies in Singapore before it can be implemented).

The Group is mainly engaged in (among others) providing earthwork and ancillary services as well as general construction work in Singapore. Given that public sector projects have played a key role in driving the growth of Singapore's construction industry, and the government's significant investment in critical infrastructure (particularly in the electricity, transportation and housing sectors), the Group has been strategically focusing on higher-margin infrastructure projects and is actively seeking opportunities to establish strategic partnerships with companies with complementary skills and capabilities to bid for and execute public infrastructure projects. The establishment of a joint venture will integrate and utilize the Group's and BuildStar's expertise, advantages and business networks to strengthen the contractor's market position and competitiveness in the construction industry. The joint venture's initial business plan is to implement a joint venture project involving a public construction project to build a 5-story high substation building. The contracting parties will also seek further opportunities for cooperation in the construction of other construction projects through joint ventures where appropriate. The establishment of a joint venture provides the Group with a good opportunity to obtain more large-scale contracts from major institutions in Singapore through strategic partnerships with experienced construction companies, while improving capital efficiency and diversifying operating risks, thereby bringing maximum returns to shareholders.

Taking into account that the Group will establish a strategic partnership with BuildStar through the establishment of a joint venture company to create business synergy, which will help seize market opportunities, maximize capital efficiency and diversify operating risks; that the joint venture project will meet the Group's long-term sustainable growth goals; and that the capital commitment will maintain the Group's share ratio in the joint venture company, the directors believe that the proposed transaction (including its terms) under the joint venture agreement is fair and reasonable, carried out in accordance with general commercial terms, and conforms to the overall interests of the company and shareholders.