Wednesday 16 January 2019

Prinsiptek Undertaking a RM2.1b Job?

Prinsiptek has entered into a JV agreement to build port, jetty, bulking storage tank, housing, oil palm mill and oil palm refinery for a consideration of RM2.13bn (Company announcement). Prinsiptek is a listed company with a market cap of RM38.4m. 

It raises the following doubts:

1. Who is the client?
2. Has the project been awarded to the JV? 
3. Why would the client award a RM2b job to a JV which will delegate the construction job to a small construction company?
4. Isn't non-payment risk by client too big for Prinsiptek to take? 
5. Does Prinsiptek have the technical capacity to build these facilities?
6. Would banks finance the working capital for the project?

It reminds me of Linear Corporation Berhad which secured a RM1.6b project in 2009. There were CG issues and the company was delisted in Nov 2012. 

Would be glad to be proven wrong in this case.

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