Sources MPay, Iris among 4 firms bid to manage Tourist Refund Scheme

by **Cals** Tue 21 Jan 2014, 17:05

Sources MPay, Iris among 4 firms bid to manage Tourist Refund Scheme

Business & Markets 2014

Written by Vasantha Ganesan of theedgemalaysia.com

Tuesday, 21 January 2014 15:00

AT LEAST four parties, two of which are listed on Bursa Malaysia, have submitted proposals to manage Malaysia’s Tourist Refund Scheme (TRS) and the outcome is likely to be announced after Chinese New Year, say sources.

The refund of the Goods and Services Tax (GST) to foreign tourists is crucial as Malaysia is working on establishing itself as an international shopping haven. A GST of 6% will be imposed beginning April 1, 2015.

Sources say the bidders have each tied up with an international group as the tender requires that the company, which will essentially build, operate and own the system, must have at least five years’ experience in tourist refund. And the majority stake of 51% in the joint-venture (JV) company must be held by a local.

Apart from ACE Market-listed ManagePay Systems Bhd (MPay), which made an announcement on Dec 9, 2013, that it had entered into a partnership with South Korea’s Global Tax Free Co Ltd (GTF) to bid for the deal, The Edge understands that the other listed bidder is ACE Market-listed firm Iris Corp Bhd, which is in partnership with Swiss-based Global Blue.

The other two parties are believed to be Salihin Consulting Group Sdn Bhd, which is in partnership with Innova Taxfree Group of Spain, and Islah Wawasan Sdn Bhd, which has formed a JV with Premier Tax Free of Ireland.

It is understood that the winning company could potentially make RM50 million in revenue in the first year of operation, and double that in 2019 (see “GST refund agent stands to rake in RM50 mil revenue” on Page 30).

For a company like MPay, raking in RM50 million a year would be an exponential growth from the RM7.27 million in revenue and RM120,000 in net profit posted in its financial year ended Dec 31, 2012. In the first nine months ended Sept 30, 2013, MPay posted a revenue of RM5.7 million and a net profit of RM517,000. As at end-September 2013, it had cash and cash equivalents of RM22.85 million.

The company’s market capitalisation as at Jan 9, 2014, was RM53.1 million. MPay has a 50% stake in the company bidding for the project — Managepay GTF Sdn Bhd (MPay GTF). Global Tax Free holds a 30% stake and eTRS GTF Systems Sdn Bhd, the remainder. Shares of MPay were down 5 sen last Thursday, closing at 14.5 sen.

In the case of Iris, should it be selected, the additional revenue stream in the first year would account for about one tenth of its revenue recorded in its financial year ended March 31, 2013, at RM537.07 million. It made a net profit of RM21.06 million.

In 1HFY2013 ended Sept 30, Iris’ net profit and revenue stood at RM14.99 million and RM265.27 million respectively. The Federal Land Development Authority recently emerged as Iris’ biggest shareholder. Last Thursday, Iris was the most active counter. The stock closed at 38.5 sen, up 5 sen after reaching an intra-day high of 40 sen. It had a market capitalisation of RM758.6 million as at Jan 9, 2014.

Meanwhile, a search with Companies Commission of Malaysia reveals that Salihin Consulting is controlled by Salihin Abang, while one share is held by Abdussalam Shokhawi. The company’s website says it provides services ranging from auditing to taxation, including creating awareness of and educating clients on GST, GST compliance and refunds and remittance.

Not much is known about Islah Wawasan, except that it was set up in November 2012 and it describes itself as being in the business of importing and exporting sand, hardware and products of all kinds as well as transport. Aznizah Mohamed and Sharifah Fauziah S Md Amin Aljeffri are shareholders, owning an equal stake of 49.99%. They are also the directors of the company. Zurina Rithwan and Mohd Sabri Abdullah hold one share each.

The Ministry of Finance had invited parties to tender for the TRS through an advertisement on Nov 8, 2013 and had initially set a deadline for end-November 2013. The closing date was later extended to Dec 12, 2013, and again to Dec 20, 2013.

A source tells The Edge that there will be two rounds in the selection process. In the first round, two candidates will be selected. These candidates will then have to make their presentations and possibly make site visits to see how the systems function. Those who attended the briefing were informed that there will be only one winner or approved refund agent. However, the source adds that the Customs Department could change its mind.

The tender requires that not only should the company be financially sound — have sufficient funds to cover two months’ worth of tax refunds — but also would have to invest in the systems.

The party appointed to handle the TRS will operate for five years, after which its contract will be renewed or terminated.

Bidders also had to propose a fee that they plan to impose on the foreign tourists and the government, if any, as well as the forecast tourist expenditure for the 2015 to 2019 period and the amount of GST to be refunded to tourists over the five years. In addition, they had to provide a forecast of their capital expenditure and operational expenditure for the five years.

The winning bidder is expected to have the entire system ready for rollout by July 2014.

This story first appeared in The Edge Malaysia Weekly Edition, on January 16 - January 22, 2014.