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NIIS seen as game changer for Iris

IRIS Corp Bhd has snagged the much sought after contract for the RM1.16 billion National Integrated Immigration System (NIIS).

The contract, which has a tenure of 4½ years or 54 months, is likely to be a game changer for the company.

In a brief conversation with The Edge, CEO Shaiful Subhan clarified earlier speculation that the contract would be awarded to a consortium.

“It (the award) is just to us, Iris, but of course, we will have subcontractors and we are open to partnerships,” he says.

Shaiful was tight-lipped on the contract’s impact on Iris’ bottom line, saying only that, “It’s decent, we are still working on it”. Market talk, however, has it that the contract will mean margins of at least double digits for the company.

When asked about the possibility of Iris undertaking the maintenance of the NIIS as well, which could nudge up the overall value of the award, Shaiful says, “It’s too early to talk about it; we just got the contract. It (maintenance) is dependent on deliverables. We have to deliver on the contract.”

However, considering that the contract entails testing, designing, developing, supplying, delivery, assembly, integration, data migration and integrating the entire system, it is likely that Iris will end up doing the maintenance of the NIIS as well. Margins for maintenance contracts can go as high as 15% of the contract value a year, but without more details, it is difficult to pinpoint the quantum.

In addition, variation orders could increase the contract value, but this is conjecture at press time.

When asked if Iris would seek out similar contracts in some of the other countries the company is operating in, Shaiful’s reply is “of course”. Iris has implemented immigration, identification and passport systems in 34 countries across the globe. It was the pioneer in its field, having come up with the ePassport in 1998.

Shaiful says Iris is in talks with the Malaysian government over other contracts but declines to comment further as the talks are confidential.

The award of NIIS to Iris quashes initial speculation that the contract would be shared among several companies in a consortium.

Towards the end of last year, market talk had it that the NIIS pie would be split between Iris and MyEg Services Bhd, and possibly even politically well-connected S5 Systems Sdn Bhd, a unit of S5 Holdings Inc, which is undertaking a reverse takeover of Ancom Logistics Bhd.

Other than MyEG, some of the other companies Iris pipped include Scicom (MSC) Bhd and Dagang Nexchange Bhd. HeiTech Padu Bhd, developer of the incumbent Malaysian Immigration System or myIMMS — first used in 1993 — was another bidder.

Interestingly enough, MyEG has acquired a 10% stake in S5 Holdings.

The NIIS contract was scheduled to be awarded last August but was delayed several times. Under the former Barisan Nasional government, Sistem Kawalan Imigresen Nasional or SKIN, the forerunner of NIIS, was undertaken and it was valued at RM3.5 billion. SKIN was proposed by Prestariang Bhd, now known as Awanbiru Technology Bhd.

However, the Pakatan Harapan government scrapped the SKIN project in December 2019, and sought an open tender to award the NIIS contract, to cut costs. At RM1.3 billion, NIIS is more than 60% cheaper than SKIN.

SKIN was slated to replace MyIMMs, which has received flak for some time. The Auditor General’s report in 2015 said the system was “not up to mark”. In 2018, it noted there were no records of 214,398 foreigners exiting Malaysia since mid-April that year. Also, MyIMMs experienced 4,489 breakdowns from 2016 to 2018.

Meanwhile, the NIIS is likely to be a boon for Iris.

For the six months ended September last year, Iris suffered a net loss of RM5.21 million from RM46.36 million in revenue. For the corresponding period a year ago, the company chalked up a net profit of RM19.4 million from 144.71 million in revenue.

Iris attributed the dip in revenue and losses for the first six months of 2020 to lower deliveries of e-passports and cards in the current year compared to 2019.

As at end-September last year, Iris had cash and bank balances of RM71.27 million, with RM25 million in both short-and long-term borrowings. Accumulated losses amounted to RM291.28 million.

Nevertheless, things have been picking up for the company.

Last September, it secured a US$27.54 million (RM110.8 million) contract in India for 15 million e-passports. In November 2019, the company forged a partnership with Metropolitan Office Pte Ltd in Sri Lanka to collaborate and explore business opportunities in e-passport, automated border control and attendance management solutions in the country.

Iris is led by president and managing director Datuk Paul Poh Yang Hong and Shaiful, who have been at the helm of the company since July and October 2017 respectively.

Yang Hong’s father Dr Poh Soon Sim is a substantial shareholder of Iris with 12.65% equity interest. Other substantial shareholders include Datuk Seri Robin Tan Yeong Ching (son of tycoon Tan Sri Vincent Tan Chee Yioun), who has a 9.79% stake.

From mid-June last year, Iris’ stock has gained more than 230%. It closed at 43.5 sen last Friday, translating into a market capitalisation of RM1.32 billion. Over the past few days, it has been among the most actively traded stocks on Bursa Malaysia as speculation that it would bag the NIIS contract made its rounds.

http://www.theedgemarkets.com/article/niis-seen-game-changer-iris

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