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AppAsia eyes turnaround with mobile app venture

This article first appeared in The Edge Financial Daily, on March 30, 2015.

KUALA LUMPUR: Previously known as Extol MSC Bhd (Financial Dashboard), AppAsia Bhd, which has been bleeding red ink since 2009 — except for a brief respite in its financial year ended Sept 30, 2012 (FY12) — has embarked on mobile applications with the hope of restoring its business back to health.

In a recent interview with The Edge Financial Daily, AppAsia (fundamental score: 1.65; valuation score: 0.30) executive director Wong Ngai Peow said the company is confident of seeing explosive growth in its applications business and mobile commerce, as more mobile phone users switch to smartphones, and that applications or business is a global business.

“Sometimes a small app (application) could garner big hits. If this [venture] turns out well, it will give good value to the company,” said Wong on when the ACE Market-listed firm would turn around, but declined to specify a time frame.

Wong, who took over the helm of the business in June last year, said, “We want to transform the company to be applications-focused.”

He said Extol MSC has been involved in computer software design and development, but the growth was not impressive previously and that AppAsia intends to change that.

The impact of the goods and services tax (GST) on April 1 would be minor to its business, he said, noting that AppAsia stands to gain because it is selling its mobile applications in US dollars.

Wong, together with Toh Hong Chye, who was appointed the company’s executive director on July 24 last year, are running the day-to-day business in AppAsia at the moment.

On when AppAsia plans to hire a group chief executive officer (CEO), he said the company is looking to fill the vacancy, but that it was not in a hurry to do so.

“We want to put the money into the [research and development] engine first and build up new infrastructure [for the mobile applications business].”

The company completed the renovations on its office at Megan Avenue 2 in Jalan Yap Kwan Seng here in January this year and has been recruiting new talents to develop its mobile applications ever since.

AppAsia offers ICT security products and solutions such as hardware and software security solutions and services, consultancy, forensic research, and training known as managed security solutions (MSS). The group also offers security-enhanced enterprise solutions known as secured enterprise solutions (SES). Both segments — MSS and SES —make up almost the whole of the group’s revenue now.

“These (MSS and SES) are still our businesses. They’re like fixed deposits to us,” said Wong, adding that the company is trying to optimise these businesses after three former directors of Extol MSC were voted out during an extraordinary general meeting (EGM) in June last year.

The company was embroiled in a shareholders’ tussle last year, which resulted in an EGM that saw the removal of its chairman Datuk Ahmad Ismail, together with directors Mohd Faizal Ahmad Mahidin and Megat Mohd Hazim Megat Aminuddin on May 28, on grounds that the trio were underperforming and for losses at AppAsia, which was still Extol MSC then.

In place of the three, Datuk Lai Wen Shian, Wong and Low Kim Leng were appointed.

In June, a High Court judge ruled in favour of Extol MSC shareholders that the removals of Ahmad, Mohd Faizal and Megat Mohd were valid and in force. The appointment of the new directors was also held as valid by the court.

The suit was brought on by four shareholders, namely Manjung Untung Sdn Bhd, Crystal Privilege Sdn Bhd, Wen Shian and Datuk Lai Wen Horng, who collectively owned not less than 10% in the company at the time.

In the aftermath, Extol MSC’s former CEO Mohd Badaruddin Masodi was terminated from his post on July 7 “due to absence from work without just cause or excuse.” Badaruddin had helmed the company since May 2011. Subsequently, he ceased to be a substantial shareholder after disposing of 3.06 million shares in the open market on July 10.

Then Datuk Rahadian Mahmud Mohammad Khalil, who is also the managing director of property developerMagna Prima Bhd (Financial Dashboard), was named the new chairman while Ng Kok Wah and Tan Fie Jen were appointed directors, together with Toh.

“I don’t see it as a hostile takeover. It’s just that when a company is not performing, the shareholders will be concerned. Shareholders always have the right to have the directors changed,” said Wong of the episode.

He also revealed that the company had to write off some expenses to clean up the balance sheet after that. The name change to AppAsia was then effected on Nov 17, 2014, to reflect the company’s plans to expand its business in mobile content and applications.

Having been in the IT industry for more than 15 years, Wong said his appointment was on the merit of his professional background. He only holds 3,000 shares or a 0.0001% equity interest in the company.

Moving forward, the company is now looking to expand its IT security business geographically, especially to Indonesia and Cambodia, said Wong.

The company completed a fundraising exercise on Jan 2 this year, with a rights issue of shares and warrants listed on the ACE market. It raised RM13.8 million, of which RM3.8 million would be used for research and development for new products while another RM8.3 million had been allocated for its working capital.

On Aug 26 last year, the company changed its financial year-end to Dec 31, 2014 from Sept 30, 2014. For its quarter ended Dec 31, 2014, Appasia’s net loss widened to RM2.32 million from a net loss of RM826,000 in 2013. Its revenue also more than halved to RM2.28 million from RM5.24 million, which Appasia attributed to a competitive and challenging industry.

The counter was picked as one of The Edge Research’s Stocks With Momentum on Feb 5 this year after having drawn much investor interest, which saw its share price rising 7.5% in two days to reach a 12-month high of 28.5 sen. It closed down half sen at 22 sen last Friday, translating into a market capitalisation of RM61.14 million.

 

Also available:

http://www.theedgemarkets.com/my/article/appasia-eyes-turnaround-mobile-app-venture