PENANG undersea tunnel consortium member Zenith Construction Sdn Bhd could be exploring a possible joint-venture opportunity with ETI Tech Corp Bhd, in which AirAsia Bhd’s Datuk Kamarudin Meranun is a major shareholder.

“We have not ascertained the form the venture will take, but it is highly unlikely to be a reverse takeover,” Zenith Construction’s director Datuk Zarul Ahmad Zulkifli tells The Edge, shooting down market chatter of a possible RTO.

Be that as it may, any collaboration would be a lifeline for the loss-making Practice Note 1 company. “We are not limiting a potential partnership with ETI Tech to Zenith Construction because we have other businesses in construction and development,” says Zarul Ahmad, who is a director at 22 Malaysian private and public companies, including Zenith Construction.

Some of the companies are Consortium Zenith BUCG Sdn Bhd and CRCC Malaysia Bhd, both of which are involved in the RM6.3 billion Penang undersea tunnel project; Ewein Land Sdn Bhd; Ewein Zenith Sdn Bhd; Formis Network Services Sdn Bhd; Sparkle Option Sdn Bhd; and Lunch Cafe Sdn Bhd.

Consortium Zenith BUCG, of which Zarul Ahmad is also chairman, is a special purpose vehicle established in July 2012 to undertake the Penang undersea tunnel project.

Apart from Zenith Construction, the consortium comprises Sri Tinggi Sdn Bhd, Justeras Sdn Bhd and China state-owned conglomerates Beijing Urban Construction Group and China Railway Construction Corp.

Consortium Zenith BUCG will build a 12km dual carriageway from Tanjong Bungah to Teluk Bahang, followed by a 5km road and tunnel from Lebuhraya Tun Dr Lim Chong Eu to Ayer Itam and then a 4.2km road and tunnel from Lebuhraya Tun Dr Lim Chong Eu to Persiaran Gurney Highway. The final phase will be the 7.2km Penang-Butterworth link, of which 6.5km will be under the sea.

The consortium is currently conducting feasibility studies on the project and expects to complete them by next month. Work on the 20-year project is expected to start at end-2015 or early-2016.

There was considerable excitement in the market of the possible involvement of ETI Tech in the mega-infrastructure project when Zarul Ahmad’s son, Zarul Ikhwan Zarul Ahmad, was appointed as its executive director on May 16.

The stock jumped 25% in five days to 15 sen on May 19, a high not seen in two years. It has since retreated, closing at 10.5 sen last Thursday.

Zarul Ahmad says any collaboration with ETI Tech on the Penang undersea tunnel will come under China Railway Construction Corp (CRCC), with which Zenith Construction has entered into an engineering, procurement and construction agreement on the project. While it is not Zenith Construction’s decision to make, he says CRCC is open to partnering a local company.

However, it is not clear what role ETI Tech could play in the project. According to its website, it is an energy solutions provider involved in the R&D of intelligent battery management systems.

According to filings with Bursa Malaysia, Zarul Ikhwan is 30 and holds directorships with Beringin Waja Sdn Bhd — alongside his father — and Virgo Inspirasi Sdn Bhd. He handles a number of construction projects for Beringin Waja, such as the new Malaysian Embassy in Moscow, Russia, and several in Penang.

He was previously a front office/fleet assistant with Naza Ventures Sdn Bhd and had studied at Multimedia University, the International College of Music and Universiti Teknologi MARA.

In its financial year 2014 ended February, ETI Tech narrowed its net loss to RM9.7 million from RM56.32 million in FY2013. Revenue, however, tumbled to RM5.01 million from RM72.37 million previously. The smaller net loss was due to increased sales concurrent with a reduction in finance costs. Net assets stood at RM43.1 million as at February 2014.

Last Monday, a total of 20 million or 2.83% of the company’s shares were transacted off market at 12.5 sen apiece, nearly double the stock’s one-year average closing price of 7.7 sen. The shares were valued at RM2.5 million. It is unclear who the transacting parties were, but it is interesting to note that ETI Tech floated 70.63 million shares last Tuesday in a private placement at 10 sen apiece.

The following day, ETI Tech announced to Bursa Malaysia that its wholly-owned subsidiary ETI Tech (M) Sdn Bhd had received a letter of award for a contract worth RM70 million from Tulangis Maju Sdn Bhd to carry out project management works.

The job involves the design, construction and completion of 500 apartments in Kampung Kilat in Alor Setar, Kedah, under the People’s Housing Programme.

The project is expected to commence once the site is handed over later this month. The construction period is three years and the project will start contributing to the company from July 2015.

According to ETI Tech’s 2013 annual report, its two largest shareholders are Nor Ashikin Khamis and Siti Munajat Md Ghazali with a 4.81% stake each. AirAsia’s Kamarudin follows with 4.8%.

This article first appeared in The Edge Malaysia Weekly, on May 26 - June 1, 2014.