Frankly Speaking: A deal built on sand?

This article first appeared in The Edge Malaysia Weekly, on May 12, 2020 - May 18, 2020.
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Ageson Bhd, formerly Prinsiptek Corp Bhd, recently caught the attention of investors after clinching a contract order for the supply of sand over 15 years to the tune of RMB44.8 billion (RM27.5 billion).

The contract was not its first, but the amount was substantially higher than the two earlier sand supply deals it bagged in April, which were worth US$26.6 million (RM116.77 million) and S$107.64 million (RM330.35 million) respectively.  Its share price surged as much as 25% on May 5 — the day after it announced the contract — and closed at an all-time high of 18 sen. At Friday’s closing bell, Ageson’s shares had eased to 17.5 sen.

Its  share price has been gradually inching up since March, following the emergence of new substantial shareholders Chin Kok Foong (18.62%) and Datuk Larry Liew Kok Leong (15.03%), both of whom hold executive level positions . During this period, it had also secured sand supply contracts from other companies.

Still, its latest contract is puzzling, given Ageson’s size.  Involved in property development, construction and general trading,  its earnings for the cumulative six months ended Dec 31, 2019, amounted to RM11 million on a revenue of RM21 million. At last Friday’s close, its market capitalisation was only RM102 million.

Questions abound as to how and from where Ageson is to obtain in Malaysia the river and sea sand needed to supply Guangzhou Kaishengda Industrial Co Ltd for a period of 15 years.

Last year, it was reported that Malaysia had banned the export of sea sand for environmental reasons. River sand can still be exported, however, but with the prime minister’s approval.

All eyes are now on Ageson and its new shareholders following the exit of its founder and non-executive director Datuk Foo Chu Jong, who ceased to be a substantial shareholder on May 4.

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