Zecon eyes another private placement exercise

KUCHING: Debt-laden Zecon Bhd is planning to undertake another private placement exercise to raise funds. It plans to place out up to 30 percent of the total number of the company’s issued shares. In disclosing this when releasing the results of financial year ended June 30, 2019 (FY2019) last week, Zecon has not, however, disclosed more details, like the timeframe, of the upcoming private placement exercise. On July 17, 2019, Zecon completed the placement exercise of 13.1 million shares priced at 25 sen each when the new shares were listed on Bursa Malaysia. The recent exercise raised gross proceeds of RM3.275 million, out of which RM3.195 million was set aside for the group’s working capital and the balance RM800,000 to pay for the expenses of the exercise. As at June 30, 2019, Zecon group had total borrowings of about RM614.9 million.

Zecon was in red ink, suffering group net loss of RM19.7 million on reduced revenue of RM372 million in FY2019. In FY2018, the group made a net profit of RM13.2 million on revenue of RM467.4 million. Loss per share stood at 15.06 sen from earnings per share of 10.34 sen year-on-year. In 4Q2019, Zecon incurred group net loss of RM10.98 million as group turnover shrank to RM79.9 million from net profit of RM33.2 million on revenue of RM202.1 million. Zecon attributed the decline in yearly revenue to lower progress billings on on-going projects, which include Pan Borneo Highway and Universiti Kebangsaan Malaysia (UKM) Children Specialist Hospital in Kuala Lumpur.

The group has incurred a one-off cost of RM8.2 million due to the refinancing of the children specialist hospital facility, the company said in explanatory notes to its financials. On prospects, Zecon said its group revenue is still expected to be derived from the Pan Borneo Highway project, the children specialist hospital project and its contract with Petronas Gas Bhd.

“The group’s business development unit is also actively participating in tender for new projects, particularly those in the state of Sarawak besides working on the internal development on the existing land bank,” it added. In updating on the latest progress on an arbitration over the dispute between Zecon and the federal government/Public Works Department (JKR) over the termination of the company as the turnkey contractor for the 300-bed Petra Jaya Hospital project here, Zecon said the Asian International Arbitration Centre (AIAC) has appointed Chu Ai Li as a new arbitrator on June 12, 2019 after an agreement was reached by all parties.

“The arbitration has given parties her schedule. Hearing is expected to begin on June 15, 2020 after claimant has served the statement of claim and respondent has filed the statement of defence. “Parties are to identify and appoint expert witnesses and the arbitrator wants parties to arrange a site visit (to the terminated hospital project) before the hearing,’ said Zecon.

Zecon had on Aug 21, 2018 served on the federal government/JKR the notice of arbitration claiming an amount of RM155.99 million. The construction firm has alleged that the project termination was wrong. JKR had terminated Zecon as the turnkey contractor for its failure to complete the project on time. Zecon has earlier obtained an injunction against the federal government to restrain JKR from liquidating the Bank of Guarantee for performance bond related to the project and amounting to RM24.75 million.