Edaran in the cross hairs

TheEdge Tue, Jan 23, 2024 02:00pm - 3 months View Original


This article first appeared in The Edge Malaysia Weekly on January 15, 2024 - January 21, 2024

IN a span of four months — between early September 2023 and early January 2024 — information technology and telecommunications outfit Edaran Bhd snagged RM490.46 million worth of contracts from the government.

In response to the sudden change in its fortunes, Edaran’s stock hit a 20-year high of RM1.50 in intraday trading on Jan 4. It was trading in the RM1.36 band last Thursday, having gained about 170% since early last November.

The last time Edaran announced the securing of any contract on Bursa Malaysia was more than two years ago, in late December 2021, when it bagged a 12-month, RM41.34 million contract from the Royal Customs Department for the maintenance of hardware, server software and applications.

Then, on Sept 6 last year, the company secured a RM44.02 million contract to undertake the maintenance and support services for infrastructure equipment at the Administrative Modernization and Management Planning Unit (MAMPU) in the Prime Minister’s Department for 48 months. When this contract was secured, Edaran had a market capitalisation of a mere RM26.06 million.

Even at its close of RM1.35 last Thursday, Edaran’s market capitalisation was only RM78.2 million.

Meanwhile, a second contract worth RM89.88 million won on Nov 6 from the Ministry of Finance (MoF) is for the maintenance of hardware, software, network, integration and application for the Royal Customs Department for 48 months from 2023 to 2027. Earlier this month, Edaran bagged its third government contract — from the MoF again — worth RM356.56 million for the leasing of equipment and the mainframe system for information for 48 months.

A market source tells The Edge plainly, “Looks like [Tan Sri] Tajudin Ramli is back … Almost half a billion ringgit in jobs in just four months. It’s no joke, no small matter.”

The return of Tajudin Ramli?

Tajudin, via Kauthar Sdn Bhd, has an 8.17% stake in Edaran. Privately held Valiant Chapter Sdn Bhd, which controls 23.08% of Edaran, making it the largest shareholder, is said to be linked to Tajudin as well, via his extended family. Valiant Chapter is wholly-owned by an individual named Zamri Samsudin.

If indeed Valiant Chapter is linked to Tajudin, then his effective stake in Edaran would be 31.25%.

The only other substantial shareholder, apart from Valiant Chapter and Kauthar, is Unique Pyramid Sdn Bhd, the wholly-owned vehicle of Ruzila Ab Kadir, which controls 7.93% of the company.

Neither Zamri nor Ruzila has any role in Edaran. Valiant Chapter first surfaced in Edaran in 2004 with 18.11% equity interest; and Unique Pyramid surfaced in May 2008 with about 7.65%.

Tajudin’s son, Fazlan Azri Tajudin, is an executive director of Edaran and his younger brother, Datuk Bistamam Ramli, has been its CEO since end-May 2018.

Tajudin, who was closely associated with former minister of finance Tun Daim Zainuddin, controlled some giant companies at one time, including national carrier Malaysian Airline System Bhd (MAS); Technology Resources Industries Bhd, commonly known as TRI, which morphed into telecommunications outfit Celcom (M) Bhd; and Naluri Corp Bhd, which had an air transport business and hospitality business.

While Naluri was delisted at end-May 2008, after its assets were acquired by Atlan Holdings Bhd, Celcom was taken over by state-controlled Telekom Malaysia Bhd. Edaran, meanwhile, has generated no interest for many years now.

Tajudin, too, has kept a low profile since his fiasco at Malaysia Airlines Bhd. In 1994, the businessman’s Naluri acquired a 32% stake in MAS for RM1.79 billion, or RM8 a share, but faced great difficulty in running the national carrier. In 2001, in a controversial move, the government bought back the 32% stake in MAS from Naluri for RM8 per share, although MAS was trading at only RM3.68 at the time.

In 2002, MAS executives lodged a police report against Tajudin for allegedly causing the national carrier to suffer losses in excess of RM8 billion. In a nutshell, there was a lot of legal wrangling between Pengurusan Danaharta Nasional Bhd, which had come in to rescue MAS, and Tajudin. In 2011, however, all the suits against Tajudin were dropped.

Edaran’s financials

In its first quarter ended September 2023, Edaran made a net profit of RM271,000 on revenue of RM20.44 million. In the previous corresponding period, the company suffered a net loss of RM971,000 on sales of RM11.31 million. As at Sept 30, 2023, Edaran had accumulated losses of RM49.25 million and deposits with licensed banks amounting to RM4.04 million, and cash and bank balances of RM15.78 million, while on the other side of the balance sheet, it had short-term debt commitments of RM11.34 million and long-term borrowings amounting to RM6.82 million. This works out to net cash of RM1.66 million.

In its financial year ended June 2023, Edaran posted a net profit of RM2.02 million from revenue of RM69.43 million. In the past five financial years, Edaran suffered losses in FY2019 and FY2020. Net profit over the five financial years ranged from RM517,000 to RM2.51 million.

With its small balance sheet, how Edaran plans to undertake its recently acquired slew of contracts worth more than RM490 million remains to be seen.

While there is talk of a tie-up or partnership with Japan’s NEC Corp and also murmurs of a new shareholder coming in, these remain unconfirmed. Edaran’s CEO Bistamam and other officials did not respond to questions from The Edge. 

 

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