Theta Edge has yet to secure big jobs but its share price runs ahead

TheEdge Tue, Apr 09, 2024 04:00pm - 1 month View Original


This article first appeared in The Edge Malaysia Weekly on April 1, 2024 - April 7, 2024

SEVERAL e-government service providers’ share prices have enjoyed a good run as they secured new jobs. One name stood out, however — Theta Edge Bhd — not only because of the steep climb of its share price, but also because this small-cap company has been associated with government contracts worth billions of ringgit. It has yet to announce the securing of jobs, though.

So far this year, Theta Edge’s share price has soared 75% to close at RM1.20 last Friday, valuing the group at RM141.6 million. Many are wondering what caused the powerful rally, as Theta Edge has no new contracts in hand.

Lembaga Tabung Haji is its largest shareholder, with a 27.28% stake, followed by Threadstone Capital Sdn Bhd, with 13.56%. Threadstone Capital is owned by Zainal Abidin Jalil, a former substantial shareholder of Dagang Nexchange Bhd (DNeX).

In terms of earnings, Theta Edge has little to shout about. It made RM9.58 million in net profit in the financial year ended Dec 31, 2023 (FY2023), up 26% year on year (y-o-y). The higher net profit was due to the more than doubling of its IT revenue to RM62.1 million, from RM24.9 million, as a result of revenue recognition for the Ministry of Education’s laptop leasing.

Its telco tower business saw gross profit contract 43.6% y-o-y, however, to RM9.87 million, probably because of the labour shortage in the construction industry.

However, Theta Edge is upbeat about exploring new growth as it embarks on a three-year transformation journey. In res­ponse to queries from The Edge, its CEO Datuk Nuraslina Zainal Abidin says the coming two years represent a criticial period for the group’s growth trajectory. 

“Our focus on strategic positioning, consortium establishment, capability building and monetisation of core products will drive our journey towards a market capitalisation of RM2 billion,” says Nuraslina. 

Theta Edge recently emerged as a company that is jointly proposing an autonomous rapid transit (ART) system in Johor Bahru (JB) with SIPP Rail Sdn Bhd, Mobilus Sdn Bhd and Lion Pacific. This comes after a consortium proposed a Light Rail Transit (LRT) system for the state’s capital city.

In March 2022, Ancom Bhd, Nylex (M) Bhd and LBS Bina Group Bhd announced to Bursa Malaysia that they had formed a consortium to propose the JB LRT project. Other partners were Sinar Bina Infra Sdn Bhd and BTS Group Holdings pcl.

Sinar Bina is 70%-owned by Datuk Avinderjit Singh Harjit Singh and 30%-owned by Datuk Mizan Yahya. BTS Group is the holding company of Bangkok Mass Transit System pcl, the operator of the BTS Skytrain and Bangkok Bus Rapid Transit.

It is possible that the ART system is being considered by Johor. In February, a 24-member delegation, led by the state’s Public Works, Transport, Infrastructure and Communications exco Mohamad Fazli Mohamad Salleh, went to Kuching for a test ride on the ART prototype vehicle. Also present during the visit to Kuching were Johor Public Transport Corp CEO Abdul Malik Ismail, Johor State Economic Planning Division secretary Dr Amirul Haffiz Ariff and other officials.

In January 2021, Mobilus, a 51:49 joint-venture between Ireka Corp Bhd and CRRC Urban Traffic Co Ltd, brought an ART unit to Johor for a bus pilot testing programme.

Earlier this month, The Edge reported that three companies — DNeX, HeiTech Padu Bhd and Theta Edge — were understood to have been shortlisted for the National Immigration Information System (NIISe). The contract involves the integration of data from 13 modules of the existing border control system.

Of the three shortlisted companies, Theta Edge is the smallest in terms of market capitalisation. DNeX is a RM1.09 billion company and HeiTech Padu is valued at RM202.45 million.

Meanwhile, Theta Edge is also said to be in the race to install a RM3.46 billion multi-lane free-flow (MLFF) toll system for toll roads.

A source says the company is in talks with toll concessionaires for the implementation of the traffic system. Another source says Theta Edge was also in talks with Weststar Aviation Services to bid for the project. Yet another source points out, however, that the highway concessionaires may not work with external parties for the project.

Nuraslina says Theta Edge is still looking for suitable consortium partners. 

Other contenders reported to be eyeing the MLFF project include Berjaya Group Bhd, KJS-SEP Synergy and a company linked to YTL Corp Bhd.

Theta Edge had previously been said to be buying  a 70% stake in Transit Acquirer Sdn Bhd (TASB) from the Ministry of Finance Inc (MoF Inc).  TASB is a special-purpose vehicle set up by MoF Inc in 2015 to undertake the integrated common payment system (ICPS) of the Klang Valley public transport systems operated by Prasarana Malaysia Bhd.

Nuraslina says, however, that the earlier arrangement had been put on hold by MoF Inc, and Theta Edge is now participating in Prasarana Malaysia’s tender for the open payment system. 

“This project promises to redefine public transportation technology. This innovation targets burgeoning cities that face transport issues and offers sustainable urban mobility solutions,” she adds.

The question is whether Theta Edge has the required technical capacity and financial resources to undertake these public projects, which it needs for earnings growth. 

 

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