This article first appeared in The Edge Malaysia Weekly on April 3, 2023 - April 9, 2023
BINTAI Kinden Corp Bhd slipped into Practice Note 17 (PN17) status because it defaulted on RM109 million worth of financing facilities. The company attributes its financial distress to the Melaka government’s failure to take action to address payments owed arising from the Universiti Melaka (Unimel) project. The outstanding amount owed to Bintai Kinden’s wholly-owned unit Optimal Property Management Sdn Bhd (OPM) by Kolej Teknologi Islam Melaka Bhd (KTIMB) is RM49.8 million. KTIMB — the operator of Unimel — had awarded OPM a contract in early 2016 valued at RM121 million via a concession agreement to construct student accommodation.
MBSB Bank Bhd terminated Bintai Kinden’s role as the corporate guarantor for the RM109 million in Islamic banking facilities granted to OPM.
Consequently, it triggered the Main Market listing requirements pertaining to a default in payment by a listed issuer, its major subsidiary or major associate firm, and is unable to provide solvency declaration.
The company’s default on a loan raised eyebrows considering the sums that Bintai Kinden managed to raise over the past four years. Mechanical and electrical engineering services provider Bintai Kinden has previously been linked to the mass rapid transit projects in Malaysia and Singapore.
The company is among those that diversified into the healthcare industry during the pandemic.
According to filings with Bursa Malaysia, Bintai Kinden raised some RM89.77 million through four rounds of private placements between 2020 and 2022. On top of that, it has also raised RM20.19 million via the issuance of 190.5 million redeemable convertible preference shares (RCPS) to boutique fund management company OUD Asset Management Sdn Bhd.
In total, Bintai Kinden raised RM109.96 million fresh cash by issuing new shares and RCPS. The RCPS offers a yield of 4%.
But instead of sitting on a large cash pile, the company is heavily in debt, despite all the money it raised in recent years.
Its bank borrowings ballooned to RM147.26 million in the financial year ended March 31, 2022 (FY2022), nearly three times the RM57 million in borrowings in FY2018.
As at Dec 31, 2022, its bank borrowings had dropped slightly to RM135.10 million.
It is also worth noting that the company has been suffering from negative operating cash flow. Between FY2020 and FY2022, Bintai Kinden’s operating cash flow was in deficit of more than RM20 million each financial year.
Bintai Kinden spent the money raised on acquiring companies. In FY2022, it invested RM40 million in acquisitions plus “addition of other investments”, as the company stated in the annual report, compared with RM64 million, including RM32.89 million via share placement, that it raised during the year.
One notable investment is the acquisition of 100% equity interest in Johnson Medical International Sdn Bhd (JMI) for RM50 million in a bid to expand its healthcare business. Bintai Kinden settled the acquisition with RM26 million cash and the issuance of 58.54 million new shares at 41 sen apiece to the vendor, Yeo Eng Lam. Yeo has become the single largest shareholder in Bintai Kinden, despite only holding a 10.55% stake. The company’s shareholding is highly fragmented.
JMI is a medical engineering solutions provider focused on the manufacturing, supply and installation of operating theatres, critical care units and medical gas delivery systems, and the trading of medical equipment and supplies.
During FY2022, Bintai Kinden also acquired the entire stakes of two companies, namely Bintai Medical Solution Sdn Bhd and Bintai Biotech Sdn Bhd, for RM10,000 each. Bintai Medical Solution is principally involved in the provision of services in the distribution of medical equipment and operating business relating to wellness programmes, while Bintai Biotech is engaged in the provision of services in relation to the biotech industry.
Apart from acquisitions, the company had put down RM16.1 million for “additions of other investments”. However, the group did not provide any explanation for this.
Bintai Kinden continued to invest in FY2023. Its cash flow statement as at Dec 31, 2022, shows that its addition of other investments amounted to RM9 million, although its cash flow remained in deficit.
At the height of the Covid-19 pandemic in 2020, it ventured into developing a vaccine for Covid-19 through a partnership with a US pharmaceutical company.
Bintai Kinden also entered into a licensing agreement with US-based firm Generex Biotechnology Corp and its subsidiary NuGenerex Immuno-Oncology Inc, which granted Bintai Healthcare Sdn Bhd the exclusive rights to distribute, sell and commercialise Generex’s Covid-19 vaccine in Malaysia.
Ever since Bintai Kinden announced its foray into the vaccine business, its share price has rallied. From barely 10 sen prior to the vaccine venture announcement in August 2020, its share price leapt to RM1.39 in December 2020.
In 2021, the company signed another agreement to supply its cold chain boxes for the storage and distribution of Covid-19 vaccines, a venture that it said would contribute positively towards future earnings.
As the saying goes, the rest is history as the world has entered into the endemic phase.
Had the healthcare venture paid off, Bintai Kinden would not have been categorised as a PN17 company.
It is worth noting that Bintai Kinden’s former major shareholders pared down their stakes during the share price rally. Former executive vice-chairman Ong Puay Koon and his son Choon Lui, via their private vehicle Bintai Holdings (M) Sdn Bhd, disposed of 28.5 million shares on Dec 16, 2020, thereby reducing their stake to 9.43% from 21.39%.
Three months later on March 31, 2021, they sold another block of 31.69 million shares, thus ceasing to be substantial shareholders in Bintai Kinden.
The second-largest shareholder, Nusankota Development Sdn Bhd, also took advantage of the strong share price to sell its entire 14.4% stake, or 50.03 million shares, at the same time.
Nusankota Development got its stake back in March 2017, as it sold equity interest in OPM to Bintai Kinden. The deal was valued at RM10.01 million.
Assuming that Nusankota Development sold the 50.03 million shares at the close of 86 sen on Dec 16, 2020, its block of shares should be worth RM43.02 million.
The co-founder and former executive director of Aimflex Bhd (formerly known as i-Stone) Chan Kok San emerged as a substantial shareholder of Bintai Kinden via the acquisition of a 6.55% stake, or 25 million shares, at 50 sen per share in an off-market transaction on April 1, 2021, a day after the Ongs’ exit as major shareholders in the group.
Apart from Chan, kitchen furniture designer and maker Signature International Bhd emerged as a shareholder in Bintai Kinden with a 4.71% stake, or 18 million shares, in 2021, according to the 2021 annual report. However, Signature International might have sold its stake as it was not on the shareholder list the following year.
Bintai Kinden’s PN17 status seems to have prompted many questions, one of which is its ability to raise over RM100 million fresh cash although it is not a profitable company.
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