This article first appeared in The Edge Malaysia Weekly on July 21, 2025 - July 27, 2025

BARELY five months since its ACE Market debut, TechStore Bhd (KL:TECHSTORE) is eyeing its biggest contract yet — one that is at least double its current market capitalisation of RM100 million if it succeeds.

The contract is for the implementation of Prasarana Malaysia Bhd’s open payment system (OPS) for its Rapid Rail and Rapid Bus networks, the tenders for which are between RM200 million and RM300 million. The upper end of that range is about 25% of TechStore’s current tender book of RM1.2 billion.

TechStore acknowledges that it is a crowded market. It has joined hands with Spain-based Indra Sistemas SA to bid for the Prasarana job.

Another known contender for the project is Go Hub Capital Bhd (KL:GOHUB). It is not immediately known if EVD Bhd (KL:EVD), Infomina Bhd (KL:INFOM) and HI Mobility Bhd (KL:HI) have also submitted tenders.

Nevertheless, TechStore reckons that its partnership with Indra puts it in good stead because the Spanish IT and defence company has been Prasarana’s technology partner for more than a decade.

In 2010, Iris Corp Bhd (KL:IRIS), in a consortium with Indra, won the contract for the automatic fare collection (AFC) system for the Kelana Jaya and Ampang light rail transit (LRT) lines, for RM115.22 million.

In 2013, Prasarana awarded Indra the contract for the design, development and commissioning of a new integrated control centre for the KL Monorail, as well as for the Ampang and Kelana Jaya LRT lines.

Then in 2016, Indra — in a consortium with Rasma Corp Sdn Bhd — was chosen for the job to implement the ticketing technology for the Putrajaya mass rapid transit (MRT) line, worth RM154.41 million.

“This is account-based ticketing, so it basically meets the OPS objective. The software, the accounting base, they already have it. The only thing needed is the infrastructure. We have to get it ready and bring all this together. Indra is well known for that,” says TechStore managing director Eugene Tan.

A second round of tenders was called in February. The first round, which was conducted between March and May 2024, did not result in a contract being awarded.

The OPS is aimed at unifying fare collection across six existing rail lines, making payments interoperable with systems for debit cards, credit cards and e-wallets.

During the first round of tenders, Prasarana had a mandatory requirement — the companies bidding for the job needed to have at least three years’ experience in OPS technology, with successful implementation here or abroad. It also required the companies to have a minimum of three years’ experience working with banks’ clearing house and e-wallet service providers on the apportionment and settlement process, and be registered with Bank Negara Malaysia.

During a press conference on Prasarana’s 2024 annual report presentation in January 2025, Minister of Transport Anthony Loke was quoted as saying that the tender process was not fulfilled as the bidders were “still not satisfied with the evaluation”.

Prasarana’s second round of tenders closed on April 1 this year. This time around, there were three work packages up for tender, each representing a different level of complexity and outcome for the OPS.

The first work package was for the AFC transformation for Rapid Rail, which is for an OPS. Prasarana requires the system to be implemented at 30% of all automatic gates within 12 months and at 100% within 30 months.

The second work package entailed only the enhancement of the current AFC. For this work package, 30% of the AFC had to go live within 11 months and be fully completed within 24 months.

All bidders had to submit a proposal for the first work package. And while they did not need to submit a proposal for the second work package, it was recommended that they do so as well.

Then there is a work package for the transformation of Rapid Bus’ fare collection system. Prasarana requires the system to go live in the northern region within eight months of the contract being awarded and within 15 months for the central region.

Apart from these requirements for the three work packages, Prasarana also required the bidders to have had at least one successful implementation of an OPS in any city with urban public transport (rail and/or bus) locally or abroad. They also had to have a total cash balance of at least RM20 million and/or unutilised banking facilities for the last two years in their audited financial statements, as well as bank statements for the last two months or be supported by a corporate guarantee from the parent company.

The jobs are expected to be awarded in September or October this year.

The project is a critical first step in achieving the long-delayed Integrated Common Payment System (ICPS), a federal government ambition that dates back to 2015. This project would be the most serious attempt yet at realising that vision.

TechStore is no stranger to implementing systems for mass transit. It was involved in the Putrajaya MRT line, LRT3 and the much-anticipated Johor Bahru-Singapore Rapid Transit System (RTS) Link.

On Jan 31, 2024, Mass Rapid Transit Corp Sdn Bhd (MRT Corp) awarded the RM38.6 million contract for the design, construction, installation and completion of Malaysian agencies’ fit-out works at the Woodlands North Customs, Immigration and Quarantine (CIQ) facilities to TechStore.

“With RTS, we cover both sides — Malaysia and Singapore. It’s our first international railway contract and it’s a strong springboard for us to pursue more overseas jobs in the future,” says Tan.

TechStore was also awarded the contract for the AFC and electronic access control projects for the LRT3, worth a total of RM130 million. The group says it has been involved in six of the seven key subsystems in the railway transport industry. The subsystems are rolling stock and depot equipment, signalling, power, communication, AFC, information and communication systems, and computerised maintenance management systems.

“The only area we have yet to fully enter is rolling stock. But we’re looking for ways to build capability there too,” says Tan.

TechStore’s net profit margin has been declining since the financial year 2022, decreasing from 23% in FY2021 to 11.6% in FY2024. This indicates that the group has had to embark on competitive pricing strategies to secure new projects.

While acknowledging this, Tan explains that the declining margins were due to multiple factors, including early-stage government projects, foreign exchange volatility and pandemic-era disruptions.

“Some of these [were] awarded projects with lower double-digit [margins], so that’s why we averaged down slightly,” he says, referring to previous contracts that diluted overall profitability. The group’s strategic shift to the public sector also required an upfront investment of time and resources, which initially weighed on margins, he adds.

“This is a learning curve basically … increasing our cost,” says Tan, adding that the delay in project completion also caused some payments to be stuck. “Even we are running [ahead] to deliver all the technology. But if the project doesn’t go live … we will have money stuck there as well.”

In the first quarter ended March 31, 2025, TechStore reported a net profit of RM1.04 million on the back of RM14.01 million in revenue, which translates into a net profit margin of 7.4%.

Despite these headwinds, Tan is confident that margins will normalise and improve in the coming financial year, driven by new contracts that reflect updated pricing assumptions and stabilising supply chains. “I believe that 2025 will be a better year because it’s getting much more stable,” he says.

TechStore, which was listed on Feb 18 this year, closed at 20.5 sen last Thursday, 2.5% above its IPO price of 20 sen. 

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