KUALA LUMPUR: Prestariang Bhd says it is entitled to compensation following the government’s decision to terminate a RM3.5bil project with the Immigration Department.
Prestariang has a 70% stake in the project.
“The actual financial impact can only be ascertained once Prestariang SKIN Sdn Bhd’s (PSkin) negotiation and discussion with the government has been concluded,” it said in a filing with Bursa Malaysia.
The company revealed that its subsidiary PSkin had received a letter dated Dec 11 from the Home Affairs Ministry confirming the Cabinet’s decision to terminate the SKIN project by way of expropriation. The termination will take effect on Jan 19, 2019.
Prestariang, in August last year, had signed a concession agreement (CA) with the government for the implementation of an integrated and comprehensive core immigration system known as Sistem Kawalan Imigresen Nasional (SKIN).
The 15-year concession agreement was worth RM3.5bil.
“The company wishes to reiterate that PSkin is not in default of the CA,” it said. “PSkin is entitled to compensation in accordance with the formula set out in the CA and will enter into discussions with the government to settle amicably in the interests of both parties.”
The firm, however, conceded that the termination of the CA may have a negative impact on its 15-month financial period ending March 31, 2019.
“In respect of the obligations of Prestariang’s subsidiary, Prestariang Services Sdn Bhd, and its group of companies, these will be determined by the outcome of the negotiations with the government,” it said.
Shares in Prestariang plunged on Monday after StarBiz reported that the government had decided to terminate the SKIN project. The stock was last traded at 29 sen on Wednesday, its lowest level since October 2012.
Despite the project cancellation, Prestariang said the group had other existing contracts under its technology and talent divisions, which include software, training and education businesses.
“These businesses are expected to continue to be sustainable and viable. The company, therefore, will continue to focus on growing these existing businesses,” it said.
Based on the company’s current operations, “the board is confident of the group’s ability to continue to meet its existing financial obligations,” it said.
A local research house has estimated that Prestariang’s book value could drop to 26 sen per share from 32 sen if earnings from the SKIN project are reversed.
Prestariang has recognised RM156.3mil in revenue and RM56.9mil in earnings before interest and tax from the SKIN project since the third quarter of financial year 2017.