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Soil Sub Technologies To Submit Study For Malaysian Township Project

Soil Sub Technologies (ASX:SOI) is moving ahead with its quest to become a Malaysian property developer after PJVD was asked to submit a Pre-Feasibility Study to the National Housing Company of Malaysia for the Penor township.

Malaysian based Platinum JV Developments Sdn Bhd (PJVD) in which Soil Sub has an option to acquire is the Principal Developer for a model township covering 500 acres at Penor.

Penor is located 15 kilometres south-west of Kuantan, the capital of the State of Pahang, Malaysia.

This clears the pathway for final construction contract negotiations.

Which is good news for Soil Sub as it stands to generate significant revenues and earnings from the contract over the coming years from development of the Penor township upon acquisition of Platinum JV Developments Sdn Bhd.

Following approval by the SPNB, it is then proposed that this study be submitted to the Ministry of Finance for final approval. The Prime Minister of Malaysia also holds the position of the Chief Finance Minister.

The SPBN reports directly to the Malaysian Ministry of Finance and is assisting PJVD to fast track the Penor Project.

Project background

PJVD has been awarded the project by Malaysian Prime Minister Dato' Sri Haji Mohammad Najib bin Tun Haji Abdul Razak as the Principal Developer for the township covering 500 acres at Penor.

The township planned for Penor is a significant one comprising 5,000 houses and associated infrastructure for a budget of RM 1.7 billion, around A$600 million.

It is anticipated that the rollout of this project will take place in phases and could ultimately lead to an upgrade in the quality of housing and a reduction in the total number houses which currently stands at 5,000.

This Affordable Housing Project could extend to the surrounding 1,500 acres (up to 20,000 houses at the Penor site in total. Infrastructure will be put in place to service 2,000 acres of land.

The contract will cover all infra-structure and housing (excluding public works) on a 500 acre site situated approximately 10 kilometres south west of Kuanta.

The Penor project represents the first phase of this Affordable Housing Project which is targeted at lower to middle income Malaysian citizens.

In October 2013, the Malaysian Government approved a budget of RM15 billion, around A$5.07 billion for Affordable Housing for 90,000 homes. The longer-term objective of the Malaysian Government is to build up to 1,000,000 low cost and affordable houses throughout Malaysia.

Revenue potential

Both the Terengganu and Penor Projects represent potential gross contract values in the order of A$800 million over a 4-5 year period with the potential to generate significant earnings according to Soil Sub.

PME Biofuels Mandate

The PME Biofuels Limited loan facility mandate provides Soil Sub with standby funding for the amount of up to $1.8 million to assist with SOI funding requirements for the progression of South East Asian projects including the Penor and KTCC projects.

The terms of this loan facility mandate are:

- Establishment fee of A$75,000 payable in shares of SOI;
- For any funds drawn down an interest rate of 18% per annum will apply payable on a monthly basis or as agreed, payable in shares of SOI.

RM Corporate Finance Mandate

Soil Sub has also executed a Mandate with RM Corporate Finance Pty Ltd, associated with Soil Sub chairman Guy Le Page.

The Mandate covers the following:

- Provision of advisory services relating to Soil Sub's South East Asian projects at a rate of $15,000/month (plus GST) payable in Soil Sub shares at the lesser of $0.004 or 10% discount to the 5 day VWAP before the end of every month of the Mandate.
- Performance fees:
- Listing Fee of 6% of the Enterprise Value of Soil Sub following the proposed acquisition of various company/companies engaged in property development in south-east Asia to be satisfied by the issue of shares SOI at the same price as the Prospectus for recompliance with Chapter 1 and 2 of ASX Listing Rules.
- A fee of 1.25% of the gross contract value (payable in SOI shares) will also be payable if the Company (or its controlled entities) is successful in executing a contract for the building or development project in Asia to a value of $50 million or greater. The Shares are to be issued at $0.20 per share (or the re-compliance share price, whichever the greater).
- A 6% fee will also be payable for raising equity pursuant to the recompliance in accordance with Chapter 1 and 2 of ASX Listing Rules.
- A 3% fee will be payable on debt raisings and a Lead Manager fee of $30,000 (plus GST) will also apply.

Analysis

With the submission of a Pre-Feasibility Study to the SPNB, for the Penor township by late August 2014 provides a milestone in Soil Sub's Malaysian property development pathway. The key is the endorsement by Malaysian Prime Minister.

Upon execution of milestones in August and in 2014/15, Soil Sub stands to generate significant cash flow from the phased rollout of this project.

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