This article first appeared in The Edge Malaysia Weekly on July 29, 2024 - August 4, 2024

THE tender committee for the National Integrated Immigration System (NIISe) project — aimed at integrating the border control system under various agencies of the Ministry of Home Affairs — is understood to have met last week and made a recommendation for the award of the project, sources familiar with the matter tell The Edge.

It is understood that another meeting took place late last week to further discuss the merits of the two final bidders — Dagang NeXchange Bhd or DNeX (KL:DNEX) and Theta Edge Bhd (KL:THETA) — but details had yet to surface at press time.

“What we know is an announcement of the winner is going to be made soon, there is some ambiguity as to whom to award it to, [also] there is a lot of lobbying going on,” one source says.

Meanwhile, sources familiar with the bidding for the NIISE project say DNeX’s bid is higher, at some RM1.1 billion to RM1.2 billion, in contrast to Theta Edge’s price of RM800 million.

It is understood that Theta Edge is looking to come up with its own border control system, while DNeX is looking to utilise a system currently in use by a number of countries.

Hence, the DNeX bid is pretty standard, with the product seemingly tried and tested. Theta Edge’s proposal, nevertheless, is considerably cheaper as the company is looking to develop its own border control system.

“The question is can Theta Edge come up with a system that works, or will there be variation orders or, in short, how will they or can they undertake such a mammoth task?” another source asks.

It is understood that Theta Edge was looking at hiring some of the key people from Heitech Padu Bhd (KL:HTPADU), which was one of three shortlisted entities for the contract with DNeX and Theta Edge. Heitech Padu is the incumbent with its Malaysian Immigration System or myIMMS, which was first used in 1993.

“This is how they [Theta Edge] hope to keep the costs low, hire those who know the system and upgrade it,” a third source familiar with the matter explains.

To recap, Iris Corp Bhd (KL:IRIS) was awarded the contract three years ago at RM1.16 billion, but it was terminated in August 2023.

With higher costs, coupled with the weaker ringgit against the US dollar, the value of the contract is unlikely to come down significantly, sources say. In March 2021, the ringgit was trading at 4.07 to the greenback, but now it is at 4.66. Other costs are also understood to have risen.

There is another important development at Theta Edge, where REDTone Digital Bhd (KL:REDTONE) has recently surfaced as a substantial shareholder. On July 10, REDTone acquired 600,000 shares in Theta Edge and nudged its shareholding to 6.4 million shares or 5.43%. Since then, REDTone has upped its stake to 11.64 million shares for 9.87% equity interest.

Theta Edge’s stock gained more than 400% from early February this year when it was trading at 60 sen apiece to hit a record high of RM3.22 on July 23. Since then Theta Edge’s stock has tapered off and finished last Friday at RM2.34, for a market capitalisation of RM276 million.

REDTone offers telecommunications and managed telco network services, Internet of Things and cloud business, smart farming and it also operates as a reseller of Starlink, an Elon Musk company which accelerates internet speed.

REDTone’s shareholders are businessman Tan Sri Vincent Tan Chee Yioun’s Berjaya Group which has a 40.79% stake, while Sultan Ibrahim of Johor, who is now the King, holds 17.34%.

From mid-January this year, REDTone’s stock gained more than 50% and hit a 52-week high of RM1.21 on July 15. REDTone’s shares have tapered off and finished last Thursday at RM1.09, translating into a market capitalisation of RM842.5 million.

If an award is made, this will be the third time the contract is tendered out. To recap, the NIISe contract was initially the RM3.5 billion Sistem Kawalan Imigresen Nasional (SKIN) project that was awarded to AwanBiru Technology Bhd (then known as Prestariang Bhd) (KL:AWANTEC) in August 2017.

In December 2019, the contract with AwanBiru was terminated by the Pakatan Harapan government. In April this year, AwanBiru was awarded RM231.55 million over the termination of SKIN but is appealing the decision as its claims were much higher at RM733 million.

Subsequently, during the Perikatan Nasional administration, Iris was tasked to take over the project in January 2021, and SKIN eventually morphed into NIISe, which was cheaper at RM1.16 billion in line with the government’s austerity drive.

However Iris’ contract was terminated in August last year for supposedly falling behind schedules and failing to meet deadlines. Iris’ contract was for a period of 54 months, from March 1, 2021, to Aug 31, 2025, and it received a year’s extension to Aug 31, 2026. Iris is also understood to be seeking legal recourse against its termination.

After the two high-profile terminations, the Home Ministry called for proposals to design, implement and maintain the NIISe project in mid-December last year and submissions closed on Jan 10.

Theta Edge earlier this month had made the news as the company announced it has received an offer letter with a “project value” of RM673.8 million.

Initially DNeX, Theta Edge and HeiTech Padu were said to be the three shortlisted candidates, but slowly it became a two-horse race. Interestingly, REDTone was one of the initial bidders but it dropped out of the race.

DNeX — which has technology, IT and energy businesses — has been operating the National Single Window, which involves providing e-services for trade facilitation, electronic customs-related transactions, duty payments and electronic document transfers. Among others, it also provides a one-stop global digital trade and logistics cloud service, operating a digital supply chain ecosystem.

For the first three months of its financial year ending December 2024, DNeX chalked up a net profit of RM14.46 million from RM309.82 million in revenue. At end-March this year DNeX had cash and cash equivalents of RM342.2 million, and on the other side of the balance sheet it had short-term borrowings of RM239.92 million and long-term debt commitments of RM12.44 million. The company had retained earnings of RM658.32 million as at end-March this year. DNeX’s cash flow from operations was RM79.8 million for the three months in review.

DNex finished last Friday at 41.5 sen per share, valuing the company at RM1.44 billion.

Theta Edge, a communications and technology company, has two other substantial shareholders other than REDTone — pilgrim fund Lembaga Tabung Haji which has 27.28% equity interest and Threadstone Capital Sdn Bhd, the vehicle of Zainal Abidin Abd Jalil and Haslinah Hassan, which has a 13.56% stake.

For its first financial quarter ended March this year Theta Edge suffered a net loss of RM2.92 million from RM16.55 million in revenue. As at end-March this year Theta Edge had cash and cash equivalents of RM37.84 million, and had no borrowings. The company had accumulated losses of RM37.4 million for the period in review. 

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