This article first appeared in The Edge Malaysia Weekly on October 14, 2024 - October 20, 2024

Ireka Corp Bhd (KL:IREKA), a cash-strapped Practice Note 17 company, announced last week it had secured a four-year, RM1.07 billion subcontract job for Pan Borneo Highway Phase 1B. It involves the upgrading of the highway from Kampung Lumou Baru in Beluran to Kampung Toupus in Ranau.

This is huge, considering Ireka’s market capitalisation prior to the award was a mere RM78.59 million. So, the value of the contract is more than 13.5 times Ireka’s market value.

The main contractor is Gammerlite Sdn Bhd, a privately held Kota Kinabalu-based company. According to a search on its latest filings with the Companies Commission of Malaysia (SSM), Grammerlite is in the business of “undertaking contract and maintenance works”.

Data extracted from SSM reveals that Grammerlite suffered an after-tax loss of RM8.33 million on revenue of RM4.31 million for its financial year ended May 2022. The company, which has a paid-up capital of RM1.5 million, has been in the red in the last four financial years.

Its revenue, which has been declining steadily, was at its peak in 2019, when the company managed to generate RM22.58 million in turnover but nevertheless suffered an after-tax loss of RM2.52 million.

As at end-May 2022, Gammerlite had total assets of RM21.36 million, of which RM21.16 million were current assets. On the other side of the balance sheet, it had total liabilities of RM12.77 million,  of which RM12.74 million were current liabilities.

The company’s retained earnings have declined steadily from RM22.22 million in FY2019 to RM7.08 million in FY2022. Its working capital, as at end May 2022, was 

RM8.42 million, down almost 50% from a year earlier.

So, how Gammerlite secured such a huge contract to dish out is anyone’s guess.

Meanwhile, Ireka, in its announcement of the award, says: “There are no foreseeable significant risks other than normal operational risks associated with the project during the project period.”

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