Weaknesses
The current weaknesses of KTech are discussed below. These views are subjective but are considered relevant:
The company is not yet approved for recommencement of trading on the Stock Exchange of Thailand. This is causing a lack of ability to secure bank credit facilities and is very distracting for senior management. It appears SET approval has been achieved, and the projected timing for all regulatory approval is October 2015. However, the new investor on-sold approximately 65% shares of their private placement shares to other parties without silent period commitment. Subsequently, it has been determined that insufficient shares are available for a 55% lock up of share trading. It is considered some considerable time will be required to negotiate past this and this is expected to extend the time for recommencement of trading until December 2015;
The capital structure of KTech is currently reliant on equity capital. Of Bt 1,140 million raised for the company, Bt 530 million (46%) was spent on creditors to exit the Plan of Business Administration, Bt 150 million (13%) has been spent on investment in the Dr K subsidiary, Bt 327 million (29%) is held in project bonding, retentions and withholding tax. The remaining is barely sufficient to service current project requirements, particularly in view of further pressure due to performance default and delinquent clients.
This issue is further compounded as the major investor has advised that there will be no further financial support for the company;
KTech is yet to be fully recognised as having returned to the construction market. This has resulted in limited opportunities to tender for projects, which is compounded by a “below average” performance in securing these. Refer Annexure 1 for a detailed analysis of KTech’s historical performance in tendering and securing contracts.
Whilst the ‘back office’ functions are performing adequately, the driver of the business income, being the operations side, is inadequately staffed and is lacking significantly in capability, as evidenced by poor performance in terms of costs and quality of workmanship. This has been compounded by the departure of a significant number of senior construction personnel in the past 3-4 months;
In turn, this has caused senior management to adopt functions for which they have inadequate training and is skewing the workload such that the company is operating in a manner that is prohibitive to future growth;
Staff are currently concerned and nervous as to the company future and management intentions, and generally the company is having difficulty in fostering a contented environment. This is compounded by the fact that for old staff salaries are still outstanding from 2011 even though the company has exited the Plan of Business Administration and no payments have been made to staff for debts under the Plan.
It is considered the inadequate working capital and the lack of experienced operations staff are critical items requiring urgent attention.