December 03, 2011
If attention is what a company is seeking, then do something that will get heads turned.
Kuala Lumpur, 03 December 2011 - ACE-market listed eBworx Bhd did just that by posting a strong set of financial results to get itself onto the radar of investors after making its debut on the stock exchange in 2003.
The financial solutions specialist tripled its net profit for the third quarter ended Sept 30 to RM3.09mil, or 1.45 sen per share from RM1.02mil, or 0.45 sen in the previous corresponding quarter. Revenue for the quarter rose to RM13.2mil against RM8.2mil from a year earlier.
It is also noteworthy that for the first nine months, eBworx posted a net profit of RM8.6mil or 4.14 sen per share, more than double that of RM3.8mil or 1.67 sen achieved last year. Revenue stood at RM37.1mil.
Group chief executive officer Tan Suan Fong explains the improved performance and the in-built momentum within the company could mean a net profit of RM12mil on an annualised basis for its current financial year with revenue to hit RM50mil for the current financial year ending Dec 31, 2011.
He says the company currently has about RM30mil in cash reserve because of its strong operations, which has prompted the company to actively look to pay its maiden dividend to reward shareholders.
"Over the last three years, we've spent more than RM17mil on share buy-back purchasing some 33 million shares. We have also cancelled 11% of our shares in treasury," says Tan.
Asked on how soon will eBworx pay its maiden dividend, he says: "Typically companies declare dividend in the fourth quarter."
Its share buy-back has reached a maximum level but the company has no plan to take the company private. Not at this point of time."
He says there is still a lot of opportunities for the company to grow and the market is untapped.
Despite the strong performance, the company has yet to attract the following of analysts, investors and fund managers.
Acknowledging the lack in coverage and retail followers, Tan says the company will be transferring its listing to the Main Board of Bursa Malaysia next year to improve the company's profile as well as its "visibility."
"We aspire to go to the Main Board. We are looking at listing cost and we will make the move after announcing our fourth-quarter financial results," Tan says, adding that it does not have a timeline for the transfer nor appointed any investment banks to facilitate them. "It all subject to authority approval."
eBworx provides solutions in the financial services sector and its integrated suite of credit management solution and delivery channel solutions (cash management, internet banking, branch delivery) and trade finance solutions. Its main revenue stream comes from systems maintenance and enhancement services.
Despite its market capitalisation of over RM116mil, eBworx has track record that speaks for itself. The company has been able to record year-on-year growth for the past few years except during the subprime crisis in 2008 when its net profit plunge to RM2.7mil from RM9.6mil in financial year ended Dec 31, 2007.
Having learnt its lesson during the subprime crisis, Tan says the company has in the last three to four years focused on getting more recurring income business to provide eBworx with a buffer in hard times. The effort pays off as recurring business currently makes up some 60% of its revenue.
"Recurring income provides us with better payment terms as well," Tan says, adding that the model is a strategy that has propelled eBworx's growth.
"Our strategy is to target tier-1 banks that are going regional because that would help us cross-sell to their subsidiaries across the region," he says.
Tan explains that due to limitations on the number of branches local banks can set up overseas, some banks will be looking to strengthen their presence via mobile and Internet banking.
Locally, seven banks are its customers including anchor bank such as CIMB Group, Malayan Banking Bhd, Hong Leong Bank Bhd and Alliance Finance Group.
"Although most of the local banks are our customers, there are still a lot of opportunities to cross-sell our solutions. We will continue to focus on tier-1 banks. We still haven't tapped the full-market potential yet," Tan says.
Overseas, eBworx has presence in Thailand, Indonesia, Singapore, China and the Philippines. "We are selling our software to banks in China."
The company currently has a research and development centre in Malaysia and a development centre in Chengdu, China.
Tan says the bulk of the products are produced locally but some are outsourced to the development centre in Chengdu to tap on the workforce there.
Currently, overseas business contributes about 55% to its revenue.
Asked if it is risky to rely on one single industry, Tan says: "Yes and no." He says banks will be first to be affected if there is an economic slowdown. However, due to eBworx's focus on recurring income business, it still gets payment for the banks' maintenance and other works. The company spreads its risk by going overseas.
Commenting on its orderbook, Tan says the company has secured some RM70mil worth of jobs and it would be invoiced by end of next year. He says its projects usually takes one to two yearsto be completed.
eBworx is currently bidding for RM80mil to RM90mil worth of projects from existing and new clients. It is confident of securing a minimum of RM60mil to RM70mil, including RM10mil to RM20mil in maintenance fees. Tan says the company's selling point is its exposure to the financial industry. Although it has 300 employees, only five are sales personnel. "We are quite dominant in South-East Asia. Our competitors are mainly from the United States and Europe."
Tan also says the company does not require high capital expenditure for its operations. Some 80% of its expenses are mainly to pay its workers.
"This year, we are spending about RM4mil for research and development," he says.
Extracted from The Star Online 03 December 2011.
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