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(Sharecast News) - Eco Buildings Group announced on Wednesday that it has agreed to establish a new Indonesian subsidiary backed by a $5m equity commitment from a local partner, as the modular construction company looked to capitalise on housing demand in the region.
The AIM-traded group said it would set up Eco Buildings Indonesia to target modular housing opportunities in the country, and had signed a binding memorandum of understanding with Messrs Cooper & Accors, a local partner comprising two executives with more than 30 years' regional experience in construction and finance.
Under the agreement, Cooper & Accors would invest $5m via an equity subscription for a 49% stake in the subsidiary.
The funding was intended to cover the full cost of installing a new production line in Indonesia, which the company expected to be operational by the end of the year.
"The launch of Eco Indonesia with MCA demonstrates the increasing global demand for our GFRG modular housing solutions and the effectiveness of our international expansion strategy," said executive vice-chairman Dr Etrur Albani.
"Indonesia is a region we have been actively targeting due to its scale and structural housing need.
"This binding MoU represents a material step forward in converting that opportunity into a local operating platform capable of delivering revenues and cashflows.
"Importantly, the structure is designed to accelerate progress while limiting funding demands on the group.
"MCA's commitment to fund the production line and provide the operational cash flows reflects both the scale of the opportunity and their confidence in Eco Buildings' technology and delivery model."
The company said the partner would also be responsible for the day-to-day operations of Eco Indonesia, including its manufacturing facilities, and would fund all operational costs, expenses and local cash flows, limiting funding requirements at group level.
Eco Buildings said the new production line would provide the scale required to support broader housing delivery programmes in the country and was consistent with its previously-stated geographic expansion strategy.
"We are excited to represent Eco Buildings Homes' GFRG building system in Indonesia," said Messrs Cooper & Accors in a statement.
"Indonesia's national target to deliver 3,000,000 affordable homes presents a significant opportunity for the deployment of a sustainable, cost efficient and durable construction solution aligned with the country's housing objectives."
At 1354 GMT, shares in Eco Buildings Group were up 9.85% at 17.74p.
Reporting by Josh White for Sharecast.com.