This article first appeared in The Edge Financial Daily on January 9, 2018

KUALA LUMPUR: Binasat Communications Bhd started the year with a bang. The ACE Market-listed counter surged 28%, or 13 sen, on its maiden trading day to close at 59 sen against its initial public offering (IPO) price of 46 sen yesterday.

The firm performance has made Binasat the third best performer on the first trading day among the new listings in the past 12 months.

The new kid on the block saw brisk trading with some 72.64 million shares changing hands, which is equivalent to 28% of its share capital of 260 million shares. The strong buying interest once pushed the counter to an intraday high of 65 sen, up 41% against its offer price.

Speaking to the media after the listing ceremony, the company’s CEO Zulamran Hamat said the firm has a positive outlook for the next two years.

“We are confident to grow our group revenue from all the sectors. This is in line with the telcos’ capital expenditure (capex), as well as the modernisation of the spectrum by the government, and their initiatives to expand the mobile coverage of the nation,” said Zulamran.

Binasat chief financial officer Steven Ng Kok Meng commented that capex from the telcos is likely to continue increasing.

“We believe that they (telcos) will not reduce investments as they have to cater to network expansion and coverage. We also see contributions from the Malaysian Communications and Multimedia Commission (MCMC), which is coming out with projects to sustain coverage in remote areas,” Ng explained.

Malaysia is the principal market for Binasat’s services, accounting for 98.7% of its total revenue in FY17, with the remainder generated from the provision of call centre services to a Hong Kong-based customer.

Binasat is currently in talks with potential partners in Vietnam, Myanmar and Laos, before it sets up a representative office in these nations by mid-2019, Zulamran said.

Analysts have noted the risk of overdependence on two of its major customers — Maxis Bhd and Huawei Malaysia — both of which account for nearly 76% of Binasat’s revenue in its financial year ended June 30, 2017 (FY17).

Zulamran pointed out that the company had made efforts to reduce the dependency, noting that the revenue contribution from the two customers had declined to about 70% from 90% previously.

However, he stressed that the absolute revenue generated from the two major clients have not declined although revenue from the duo account for a smaller portion of the group’s total.

For its first financial quarter ended Sept 30, 2017, the group posted a net profit of RM1.53 million on the back of a RM10.16 million revenue. It posted a net profit of RM10.02 million, 5.76 sen per share, for FY17 compared with RM7.16 million, or 4.12 sen per share, in FY16.