PETALING JAYA: The share price of Prestariang Bhd continued to fall on news that it is taking the federal government to court over the termination of its RM3.5bil contract, shedding another 4 sen or 9%.
The stock fell to a low of 46 sen during the day before recovering to close at 48 sen yesterday.
On the previous day, the stock had lost seven sen or 11.7% in a knee-jerk reaction to the announcement.
It was reported on Monday that Prestariang had named the government as defendant in a RM732.86mil legal claim in relation to the cancellation of the RM3.5bil national immigration control system (SKIN) project.
In a filing with the stock exchange, the group said its subsidiary, Prestariang SKIN Sdn Bhd (PSKIN) had decided to take the government to court after failing to reach a settlement following several rounds of negotiations.
This follows the government’s unilateral termination of the project by way of expropriation in January this year.
The sum it is seeking, Prestariang said, was calculated based on the contractual formula provided in the 15-year concession agreement (CA) it had entered into with the government back in August 2017.
PSKIN, in August 2017, had secured the 15-year concession to design, deliver, continuously maintain and provide scheduled upgrades for a new and improved immigration and border control system for the Immigration Department.
The new system was to replace the existing Malaysian Immigration System.
It was agreed that PSKIN would receive about RM3.5bil over the 15-year period.
However, the group, via a letter from the Home Ministry in December last year, was informed of the Cabinet’s decision to terminate the project, with the termination taking effect the following month.
The news sent the share price of Prestariang plunging close to six-year lows, hitting a low of 26.5 sen.
Since then, the share price recovered significantly, moving up to a high of 63.5 sen just last week.
News of the legal claim, announced on Tuesday, however, has once again impacted the stock.
CGS-CIMB Research said yesterday that the news was a negative surprise as it had previously expected both parties to come to an agreement on the compensation for Prestariang.
It added that the RM732.8mil compensation sought by PSKIN was much higher than its estimate of RM520mil, which is the net present value of the availability charges (similar to power purchase agreements).
“However, we do not have the finer details of the concession agreement,” the research house said.
At RM732.8mil, it said the compensation to Prestariang, which owns a 70% stake in PSKIN, would be RM513mil or RM1.06 per share.
The research house noted that based on the CA, the government is required to pay the full compensation amount by July 19, 2019.
“However, Prestariang’s legal case against the government of Malaysia may be a long drawn affair.
“We are also unsure if there would be any negative impact on its other businesses with the government, like the MLA3.0 project,” it said.
The MLA3.0 is a contract for the sale of Microsoft software to the government’s agencies nationwide, which runs from February 2018 to January 2021.