M'sia's Cyber Village to raise S$3.4m in S'pore
Fairplay
By Michelle Tan,
Singapore.CNET.com Thursday, August 16 2001 10:22 AM
SINGAPORE--Malaysian e-business consulting firm Cyber Village Holdings
Ltd is looking south for help in funding its regional expansion.
Less than a month after getting the green light from the Singapore
Exchange, the company is issuing 16.16 million new ordinary shares at
S$0.21 each on the Stock Exchange of Singapore Dealing and Automated
Quotation Systems or Sesdaq.
Specifically, Cyber Village--the first Multimedia Super Corridor (MSC)
company to list outside of Malaysia--hopes to raise S$3.4 million for
"the purposes of synergistic business expansion through investments,
acquisition and/or joint ventures of businesses and technologies".
MSC is Malaysia's answer to Silicon Valley, where qualifying companies
can enjoy tax free status for up to 10 years, exemption from foreign
exchange controls, freedom for foreign investors to repatriate profits
and no restrictions on foreign ownership, among others.
At a press conference this morning, Cyber Village CEO and founder Tony
Pua reiterated his plans to strengthen his business in Singapore as
well as seek new opportunities in other markets like the Philippines,
Thailand, Hong Kong, Taiwan and Indonesia.
The company currently employs 91 staff in its operations in Malaysia
and Singapore, where it has a wholly-owned subsidiary, SparkMedia Pte
Ltd.
In the last fiscal year ended December, the four-year-old group
recorded total revenues of S$3.06 million. It also recorded its first
year of profit last year; net profit after tax was S$645,000 compared
with a net after tax loss of S$157,000 the previous year.
Its Singapore customers include Shell, DBS Bank, Credit Suisse Private
Banking, Far East Organisation and Singapore Telecommunications, while
its Malaysian customers include My2020.com of Berjaya Group, Optixlab,
the Internet incubator of Renong Group, Telekom Malaysia and
IslamiQ.com,
Opportunities for expansion, acquisitions When asked, Pua said he was
"very confident" of receiving the the full S$3.4 million from the
local issue, despite the economic downturn.
He pointed to the relatively small offering, which constitutes a
dilution of only 15 percent of the company's total enlarged share
capital, and noted that "funding is only a secondary objective (of the
listing)".
More importantly, he said "the listing exercise will enable Cyber
Village to strengthen its brand name and credibility as a leading
e-business consulting firm in the region".
The Oxford University-educated CEO and former Asean scholar also noted
that the lower valuation "cuts both ways...(as) it will be cheaper to
acquire strong strategic businesses and enhance earnings and
prospects".
According to him, the funds raised in Singapore, together with earlier
funding from Arab Malaysian Corporation Berhad (AMCORP), would give
Cyber Village a war chest of about S$5 million for its planned
acquisitions in the region. "We may also issue additional (equity)
capital should we need to."
Pua stressed, however, that there was no strict timetable for the
expansion. "We're only looking at opportunities at this stage...Our
strategy is to seek profitable, synergistic and reasonably-valued
businesses to acquire."
In the meantime, Malaysia continues to be a key market for the
company.
As of last year, roughly 72 percent of the group's revenue (and 90.9
percent of its net profit) for the last fiscal year came from
Malaysia, while 28 percent of revenue (and 9.1 percent of net profit)
came from Singapore.
"The (per head) cost of our Malaysian office is only 35 percent that
of our Singapore office," and with almost 91 percent of profits
accrued in Malaysia, the company is able to leverage on its tax-free
status to boost its bottomline, he added.
Bidding for business in Singapore, on the other hand, is very
competitive. "It's very hard to make reasonable margins" here compared
to Malaysia, even with Cyber Village's relatively lower cost base.
Pua claims that Cyber Village's monthly cost of operations stands at
just S$210,000 (looking at its operations from January to May this
year).
Looking forward, however, Singapore is expected to contribute more
significantly to the bottomline, when pricing (and therefore margins)
improve.
Among the Singapore competitors he identified were e-business enablers
Aretae Interactive Pte Ltd, Knowledge Engineering Pte Ltd, Latitude
Web Pte Ltd, and systems integrators Adroit Innovations Ltd, Frontline
Technologies Corp Ltd and National Computer Systems Pte Ltd.
Pua declined to disclose his targeted revenue for the year, but noted
that while he couldn't see the same rate of revenue growth (of 460
percent from 1999 to 2000), he expects the company to exceed last
year's turnover and profits.
Since May this year, the company claims to have secured about S$1.5
million, or 40 percent of last year's turnover. He is also optimistic
about the second half of the year, with the company already sending in
"S$7 million worth of proposals," most of which are for Malaysia.
At the same time, Cyber Village is moving his focus from small- to
mid-sized projects worth S$100,000 to S$200,000, to the mid- to
large-sized projects of S$300,000 to S$800,000.
So why not list in Malaysia? When asked this question last month, Pua
noted that the country's technology-related index, the Malaysian
Exchange of Securities Dealing and Automated Quotations (Mesdaq), had
restrictions on how a listed company can spend its funds.
"Mesdaq requirements indicate that a large portion of funds raised
from a listing exercise (must) be used internally...whereas Cyber
Village needs money for overseas expansion," he told
Malaysia.CNET.com.
"We also don't qualify for the Kuala Lumpur Stock Exchange (KLSE)
second board, as it only allows companies with a five-year profit
track record to list," Pua added. Cyber Village has only been in
existence for four years, and saw its first year of profitability last
year.
He stressed, however, that Cyber Village has not turned its back on
Malaysia, nor is it discounting the possibility of a dual listing in
the future.
For the local listing, 400,000 of the new shares will be offered to
the public while 15.76 million shares will be offered by way of
private placement.
The shares--with a price-earnings ratio is 29.8 times--will be opened
for subscription from today to August 22. Trading for the listed
shares is expected to start on August 24.
After the IPO, Pua would remain as the majority shareholder with 27.2
percent, followed by MCM Technologies Sdn Bhd (a subsidiary of
AMMCORP) and Asian Venture Fund with 18.8 percent each. The public
would own 15 percent while employees and associates would have 6.7
percent.
The issuance of public offering (IPO) will be managed by SBI
E2-Capital Ltd Ltd, a subsidiary of the Softbank Investment Group.