Thursday 28 Mar 2024
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KUALA LUMPUR: Green Packet Bhd, which has been bleeding losses since the incorporation of its telecommunications unit Packet One Networks (Malaysia) Sdn Bhd (P1), expects operating income to turn positive by the end of this year by focusing on its software, devices and communication services.

This is excluding the one-off gain from the reduction of its 57% stake in P1 to 31%, following the entry of Telekom Malaysia Bhd (TM) last year, which saw the major telecommunications player injecting RM350 million for new shares in P1 for a 57% stake, while forking out RM210 million at the same time to buy exchangeable bonds from Green Packet.

In an interview yesterday, Green Packet (fundamental: 1.3; valuation: 0.6) chief executive officer Tan Kay Yen (pic) said the company is essentially “going back to its roots” and that his mandate in the next two to three years is “to focus on what we do best and grow our business — top line and bottom line — from there”.

Tan said he will put in “a lot of governance, organisation development and a lot of measurements” so that the group can, on a quarterly basis, get a good gauge of where it is. Last Octobert, Tan took over the helm from the group’s founder C C Puan, whom Tan described as an “out and out entrepreneur”.

Green Packet has not been profitable since 2007. It continued to make losses in the first six months of 2014, after changing its financial year end from Dec 31 to June 30. Boosted by the divestment of part of its stake in P1, Green Packet posted a net profit of RM121.62 million from July to September 2014, as the group had gained RM152.68 million from the dilution of its interest in the subsidiary. The group, however, saw a net loss of RM23.3 million from October to December 2014. 

Earlier this year, Green Packet changed its financial year end back to December again, hence it will have an 18-month financial period ending Dec 31, 2015 (FY15). As at Dec 31 last year, the total group accumulated losses stood at RM405.3 million.

With TM’s buy-in at P1, Tan said Green Packet’s balance sheet, in its latest quarterly result ended Dec 31, 2014, is already looking “quite healthy” without the consolidation of P1’s financials and that the group is returning to being an “asset light” technology company.

“In the latest quarterly result, the hard assets, the current and non-current liabilities, those are already very lean too, compared with last time. It was about RM800 million asset base previously. Right now, it’s a lot smaller, about RM300 million,” Tan added.

Tan also gave assurance that as Green Packet refocuses on being a technology company now, albeit with a foot still in telecommunications, it will invest more on research and development, and sales and marketing.

“That’s about it. The rest will be for headcount. There’s no heavy capex (capital expenditure),” he said. For the full year of FY15, Tan expects the group to show some profit, driven by its solutions and communications businesses.

“Solutions, in which we sell a lot of 4G devices, together with embedded software, have always been a profitable segment of our business. We also have the communications business, which has shown double-digit growth every year in terms of its top line. PAT (profit after tax) in the recent December quarter, was over RM3 million,” he said.

For the solutions segment, Green Packet provides devices such as pocket modems, USB dongles, indoor modems and outdoor routers. Its communication services consist of wholesale termination services as well as retail calling card services.

But because the size of these segments  is considerably smaller than that of its telco business under P1 previously, Tan said Green Packet is still likely to post losses, though reduced ones, in the “next one to two quarters”.

“But after that, we hope the two businesses will be able to cover this [losses in P1]. Today, we still own about 31% of P1 so we still have to account for the losses there,” he said.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on March 3, 2015.

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