Meet the construction corporation that’s “committed to building shareholder value by delivering innovative and cost-effective construction solutions.”
Minaean SP Construction Corp. (MSP) (TSX-V.MSP, Forum) is a Vancouver, BC-based general contracting company with international breadth. It is engaged in the business of providing general contracting to the construction industry with a specialty in light gauge steel Quik-Build systems. In addition, the firm also provides a variety of contracting services including consulting on large-scale construction projects, engineering, procurement, construction, and design-build capabilities in the residential, commercial, industrial, healthcare, and hospitality sectors.
The Market Herald’s Dave Jackson was joined by the company’s President, Chief Executive Officer & Director, Mervyn Pinto, to get investors up to date with this intriguing construction company.
TMH1: To start off with, Mervyn, can you tell us a little bit about yourself and the history of the company?
MP: Thank you for having me. A little background on myself. I got into business way back in 1985. After my studies in India, I started my life through adapting myself to a shipping career starting way back in 1967. I was nominated the youngest master, at the age of 25, of the Indian merchant navy in 1975 and there onwards after my sea career in 1984, I started my business career through ship management, ship acquisition, and operations…building a company from the scratch owning and operating about 15 ships. I initiated the expansion of the company into oil spill cleanup operations, fishing & trawling in partnership with a Norwegian group until I migrated into Canada in 1994. Later on, while settling down in Canada I took a call to get out of shipping and take a break looking toward diversifying into a different sector. Based on my affiliation towards India and the outcome of seminars and meetings with the Canada India Business Council, promoting housing business in India, I founded the company Minaean International Inc. with a few partners in 2000 to start developing the Quik-Build (patent pending) construction systems for launching into developing countries globally starting with India which was in need of in excess of 20 million homes.
That initiated our interest to lay down the path in developing the light Gauge steel construction system, a quick build system, patented as VESTA Quik-Build and took the company public in 2003. By 2007, we had contracts with the Shell Petroleum and various other large corporations for constructing modular buildings, modular bus shelters, schools, and affordable housing in India in a strategic partnership with India’s second largest conglomerate TATA Group which laid the foundation for setting up three manufacturing plants for design and assembly of modular units. The company’s growth was on track as the business in Canada and USA grew simultaneously as well. Unfortunately, the company had to scale back due to the recession in 2008/2010 and shut down the plants due to cancellation of orders and change the business model altogether to develop projects through Canadian government support in global markets.
The government-to-government sole sourcing business model is only promoted in Canada which supports Canadian corporations in developing and executing projects by negotiating directly with the government of certain target markets, such as Africa, Asia, and Central/South America where the governments are unable to go through a tendering process to meet all their obligations to the public and lean towards borrowing from export credit agencies established by governments like Government of Canada, UK, Denmark, etc.
We were successful in taking that new approach to develop government-to-government contracts and that’s where India is one of the major contracting groups that came forward to negotiate the acquisition of the controlling interests of the company. The 155-year-old Indian conglomerate with annual revenues exceeding $7 billion – a general / EPC contracting and engineering, procurement, and construction company. The group Shapoorji Pallonji – a general contracting of multi-sector infrastructure projects which involves hospitals, universities, stadiums, malls, smart cities, et cetera, etc – took a stake in 2016 and support MSP as its affiliated subsidiary. The parent company having subsidiaries leading the execution of contracts engaged in the construction of roads and highways had been nominated for being one of the ten largest corporations for construction of ports in the world and the largest EPC in the renewable sector in the world. So, with the support of a parent with such a large bandwidth in infrastructure and construction, Minaean is poised for a major growth not only in Canada but globally through its government-to-government contracting model.
TMH2: Can you update our investor audience and your Minaean shareholders on any new company developments, especially the update on the development and construction of your hospital project in Zambia?
MP: Zambia has gone on hold for quite a few years now as the IMF has withdrawn support due to its poor credit rating, a well-known fact globally. China practically acquired most of the interests in Zambia and Zambia’s borrowing went to a level where IMF would not permit it any further borrowing. So, Zambia went on hold, but our hospital projects in Cote D’Ivoire, a neurosciences hospital construction, and a multi-disciplinary 400 Bed hospital project in Peru which also went on hold due to pandemic issues are now getting revived. We are just negotiating on the signing of the MOU in Peru right now, which should be done in my opinion, within the next two weeks.
The most prominent project to be discussed would the construction of Industrial Park in Uganda while a trauma hospital in the same country is under discussion. So, on the hospital sector, I would say we are closer in Peru and Greece. The university hospital project in Greece was announced four weeks back and is gaining momentum. This 800-bed university hospital project to be executed on a P3 basis in Thessaloniki, Greece with government guarantees has been under discussion for over a year. We have now taken the support of the Canadian government in developing this project ton government-to-government model and is gradually gaining momentum. It’s a very prestigious project for the government of both the countries, as well as for Minaean moving forward.
TMH3: You’ve also recently announced a project study for the construction of your aforementioned university and students’ campus in Cote D’Ivoire. Can you update us on this and any other upcoming projects coming down the pipeline?
MP: Cote D’Ivoire University project has been under development since 2019-2020 and the MOU was signed. The parent company invested over USD$3 million to do the feasibility study to move ahead with the design drawings, etc, and in 2021 June, we submitted our first proposal. Unfortunately, by then due to the supply chain and inflation issues, the price offer was way above the budgeted figures of the government of Cote D’Ivoire, So, the company was asked again to renegotiate on the pricing. With the supply chain issues still causing major concerns to the whole industry even today and the problems are surmounting, we are negotiating with the government to scale down on the scope of work so that we can make the pricing work to enable us to start with the first phase of this 250 million Euro contract. The discussions are at a status quo but as the need for the govt. to establish educational institutions being immense – a decision is expected shortly.
TMH4: As part of the company’s business model, you’ve been able to obtain both sole-sourced and government-to-government contracts. Can you expand on the benefits of this kind of exclusive tendering for our investor audience?
MP: A sole sourcing model allows for negotiations between two governments without going through a tendering process. It allows Government of Canada to support the Canadian company on contract negotiation and with its guarantees towards efficient execution. As this allows the contracting government to bypass the tendering requirement (which needs to have capital upfront), it allows them to borrow under IMF guidelines and the Government of Canada is able to support the loan requirements through Export Development Canada. So many governments of developing nations choose to approach the governments like Canada for support in negotiating directly on a sole sourcing model where governments of Canada then get through their ECA, which is export development Canada, to provide for such export contracts and the government of Canada then is able to fund these projects on a long-term repayment basis, which could be 10 to 12 years with two years of moratorium on a nominal interest rate.
TMH5: Minaean is well known for its pioneering efforts in the manufacturing of light gauge steel components for the construction industry and modular metal buildings in India. Does this construction method transition easily to the North American market and if so, how?
MP: In fact, this system is very much adapted in North America. We started our division for steel framing construction here in Vancouver and since 2007 to 2011, have constructed about eight buildings in Oregon and three in Vancouver. It was considered a better alternative to wood framing construction system as the design allows you to go a few floors higher as also steel framing and modular buildings are more of a cookie-cutter model as you can manufacture them in the factory, ship them to the site and assemble them. It’s a Quik-Build system but again it has its limitation. It’s tough to go above ten stories. So about ten stories, then you have to go into a concrete system. So that’s where it suits certain needs of certain markets in certain areas. So that’s the benefit of this.
TMH6: For investors that may be new to opportunities in a publicly traded construction company, can you walk us through some of the inherent benefits?
MP: I would say, considering Minaean itself, the stock has been a penny stock trading on the TSX venture for years. So, the point what I’m trying to make here is one such contract, you can imagine what affect it’ll have on the stock. So, our mandate from our parent, which is headquartered in Dubai has the mandate to develop contracts of around a hundred million dollars in value plus, and as we speak today, we are developing negotiating contracts of a total value of about $1.6 billion. But again, it has to be understood that the larger the contracts longer the time it will take to close. As we all know, governments have their own priority…they all always take time in negotiations and prioritizing. After working for over four years, we have now one contract in Uganda, which is a construction of an industrial park – a $190 million US dollar contract – getting closer for execution. The draft contract is ready for submission and is likely so that we see to come through within the next year or two.
TMH7: Can you discuss the long-term strategy for the company moving forward into 2022 and beyond, and what retail and institutional investors should be looking out for?
MP: The reason we are developing an order book which is more than a billion dollars currently, is our parent…a large construction conglomerate has the ability to support on the execution front. With MSP’s mandate being securing the contract, the instructions not to be concerned over the value of the stock is loud and clear. The stock value will increase on its own as the company goes into revenues and gets into a profit center. So, the point what I’m trying to make here is that it is a long-term strategy that we have adapted and growth in multiples will follow. As I said, the parent is a 156-year-old corporation – a family-owned company handed down over generations, and they will be there for another century because of their business model. So obviously, they hand over their reigns to their next of kin and it goes on as the time passes by. it’s now the third generation now controlling the company and the fourth generation is ready to take over. So that is how we look at. It’s a long-term strategy and that’s what they want us to adapt. Yeah. Go for the big corporation, big contracts, develop them, take your time, nourish them, but make it worthwhile and go into execution and become profitable.
TMH8: I have to mention your stock has been on a bit of a roller coaster ride this past year. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s a good buy right now?
MP: I’m not an authority on that, the markets have been choppy, pandemic issues have played their roles, and issued contracts are getting canceled due to changes in pricing, etc. After experiencing the effect on two of our contracts our decision is to develop them to the offer stage and once the market settles down start contract negotiations. Our focus right now is to close one contract and get into execution which will have a major impact on the top and bottom lines, to achieve a target of at least $10 million-plus is what is good enough to take the company to the next level and that is what will help the company in develop further contracts and putting them more on a fast pace. What I need to stress upon is that we operate on a lean model with our monthly burn rate at a bare minimum because the majority of the costs are taken over by our parent and all the backend support for our construction business development process comes from there.
TMH9: Can you tell our audience a little bit about your corporate management and leadership team at Minaean, along with the experience and innovative ideas they bring to this space?
MP: As I said, the company is growing. One contract will have a major impact and the decision is to grow in terms of staff and costs without going into any borrowing. We have nil debt on our books and the parent keeps exercising their options to fund the company. This shows their confidence in the company’s ability to grow. Once the company has sufficient funds to lean on, it will resume the development of its cost-effective Cellular Light Concrete product which will be used for mass housing projects in developing countries moving forward. This product was put on hold and priority was given to developing contracts on a government-to-government model. The parent company has won awards for the construction of the palace of the Sultan of Oman, the flagstaff house parliament building in Ghana, which is still one of the ten best buildings in Africa.
TMH10: And lastly, Mervyn, if there’s anything I’ve overlooked, please feel free to elaborate.
MP: Thank you, Dave. As I mentioned we are engaged in the development of contracts in multi sectors based on the support from our parent. So obviously right now, we are also engaged in discussions of bridge projects in India, and Guatemala through our infrastructure subsidiary called AFCONS, they do mega bridges all over the world. They just secured a contract for construction of $650 million for a bridge project in the Maldives. So obviously as I said, our Sterling and Wilson, which is the subsidiary doing the renewable energy, is largest our world’s largest in such a contracting business. So, we have the support of all segments, and we have a mandate because being a Canadian corporation, having the support from the Canadian government as a general contractor for developing businesses on a government-to-government model, we have the opportunity to grow in different segments as we speak and move forward into our reasonably sized large corporation in the future.
For regular updates, visit minaean.com.
FULL DISCLOSURE: This is a paid article produced by The Market Herald.