This article first appeared in The Edge Financial Daily on May 29, 2017

KUALA LUMPUR: The wake-up call for firms on the importance of data protection following the recent worldwide ransomware attack and the growing number of small and medium enterprises (SMEs) is a boon to Kronologi Asia Bhd. That’s because its core business is providing data assurance and protection through systematic backup, storage and recovery of enterprise data.

“A lot of companies tend to be complacent when it comes to data protection. But the ransomware cyberattack [on May 12] served as a wake-up call for companies which have not gotten their act together,” Kronologi chief executive officer Philip Teo told The Edge Financial Daily in an interview.

Teo said the cyberattack has put the spotlight on data security and backup of data, which could drive more business for Kronologi.

Besides that, the “Alibaba” effect following the launch of the first Digital Free Trade Zone could drive more businesses for Kronologi as demand increases with the emergence of SMEs in the e-commerce space.

“With more companies, it would lead to more demand for data security, data storage, backup of data and recovery of enterprise data. For SMEs and smaller companies, it would be more expensive to maintain their own infrastructure for data storage. Thus, it makes more commercial sense for them to use services such as those offered by Kronologi.

“At the moment, the enterprise data management (EDM) services, which cater for smaller businesses, only contribute about 27% to the group’s segment profit and is not reflective of its potential. We believe this segment would grow on the back of the growing number of SMEs,” Teo said.

The main driver of Kronologi’s business comes from the EDM infrastructure technology, which provides the integration into its end customers’ information technology environment to provide backup, storage and recovery services of its end-user customers’ digital data.

For the first quarter ended March 31, 2017 (1QFY17), Kronologi’s net profit grew 48.8% to RM2 million from RM1.37 million a year ago on the back of a 78.1% increase in revenue to RM25.2 million in 1QFY17 from RM14.1 million in 1QFY16.

The better performance was mainly due to contributions from its recently acquired subsidiary, Quantum Storage (India) Pte Ltd, which is based in India. The group’s current major contribution comes from Singapore, followed by India.

Teo said while it is still early to gauge if the latest acquisition of Quantum would push India to be the main contributor for the group, he is optimistic that it will help drive its revenue and bottom-line growth in this financial year ending Dec 31, 2017 (FY17).

He noted that the challenge is to create awareness and urgency, especially among smaller companies, of the needs for data protection.

With the growing demand of services for data storage, protection and backup, Kronologi is looking to build a transnational network to support the growing demand. The group is mulling to raise cash either through borrowings, internal funds or capital market for expansion, said Teo.

The transnational network will enable backup data to be stored in facilities in other countries. It will be rolled out in stages from the second half of FY17 after the funding of expansion is being firmed up.

“We are still trying to firm up the best way to expand on this. It’s likely that more announcements on this will be made in this quarter,” Kronologi executive director Tan Jeck Min said.

On the back of this positive development of Kronologi, Teo said the group is targeting to double its revenue in less than five years. This is reflective of Kronologi’s historical performance where it saw a strong revenue growth at 22.8% compound annual growth rate (CAGR) as of end of last year. Similarly, Kronologi’s net profit has grown at a four-year CAGR of 13.6%.

While the growth path appears to be strong for Kronologi on the back of the big data growth, challenges such as the willingness of SMEs to invest in data protection, awareness of the importance of data protection and backup, as well as issues surrounding data privacy will continue to pose hurdles for the group.

The market has probably identified the growth potential of storage solution providers like Kronologi as it has witnessed a rally in its share price. Kronologi’s share price has risen by more than two times over the past one year and by 51.6% year to date to close at 47 sen last Friday, giving it a market capitalisation of RM124.4 million.