JEP Holdings

JEP Holdings: JEP signed a 30-year lease agreement for a land parcel at Seletar Aerospace Park for $10.6m and expects to boost production area by 80%. JEP's primary manufacturing facilities located in Changi, currently running at close to maximum capacity, will be relocated to the new 18,502.1 sm plot after the completion of construction work, targeted in 1Q2017. As part of the lease agreement, JEP will need to invest ~$28m over the next 3 years for the construction of a new building and to purchase new machinery for capacity expansion. The investment is intended to be funded through a long term bank loan. However, investors should take note that based on JEP's latest 1H14 results, net gearing is estimated to spike from 38.8% to a staggering 113%, assuming no changes in net cash. As a gauge, JEP has been digging into its cash pile over the past two years, averaging $8.7m each year, as the company was paring down its long term debt, as well as investments in capital assets. At $0.037, JEP is loss-making and valued at 0.96x P/B.