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SCICOM (MSC) BHD, which bills itself as a diversified business solutions provider, has progressed by leaps and bounds.

The company now has workforce of 3,000, including in its employees in other countries such as Sri Lanka, and its headquarters occupy 14 floors of Menara TA, Kuala Lumpur.

But this is not what Scicom founder and CEO, Leo Ariyanayakam boasts about. It is the fact that Scicom has grown beyond its call centre business.


We want to climb the value chain and become the business partner of our clients — Ariyanayakam. Photo by Kenny Yap

“We want to be in a ‘sticky’ business, so that the clients cannot live without us, so to speak. We want to climb the value chain and become their business partner,” Ariyanayakam tells The Edge.

“We have always wanted to diversify into new businesses and offer more specialised client solutions,” he tells The Edge.

While the provision of technical support services remains its core business, the company has also penetrated the education, government services and e-commerce segments.

In the outsourcing business, Scicom specialises in technical support and other troubleshooting services. It has a substantial presence in the airline industry — AirAsia X Bhd is a client — and just entered into a partnership with Khazanah Nasional Bhd to retrain Malaysian Airlines System’s staff.

Alongside numerous long-term agreements with 39 companies, including multinational corporations, about 50% of Scicom’s revenue from its outsourcing services comes from overseas.

It made a major breakthrough when it won a contract to process foreign student visa applications from the Ministry of Education (MoE) last year.  

“We handle everything that is involved in the visa application, from setting up the software solution to managing the processes, all of it in-house,” says Ariyanayakam.

Under the contract, the company puts up all the investment expenditure and, in return, Scicom is entitled to a percentage of the fees collected by the ministry for every new visa application, and renewal.

Ariyanayakam declines to reveal the amount of investment and potential earnings from the contract.

To put things in perspective, in 2010, the MoE reported a foreign student enrolment of 87,000 in public and private higher education institutions in Malaysia. Under the Economic Transformation Programme, the government intends to push foreign student enrolment to 200,000 a year by 2020.

The ministry charges RM1,000 for each new visa application, and RM140 for renewal. This is expected to provide steady recurring income for Scicom.

Affin IB Research anticipates that 47% of Scicom’s total earnings would be derived from the visa processing business by the financial year ending Dec 31, 2017, which would propel it into the same league as MyEG Services Bhd, another prominent e-commerce and government services provider.

Ariyanayakam believes that by establishing a track record in government services and the e-commerce sector, Scicom can replicate the same system in other countries.

“The visa processing job is a stepping stone into other emerging markets. As a reputable public listed company with a track record, the company would like to do something similar with other governments.”

A fruitful partnership with the MoE over the past decade has opened up new opportunities for the company.

“At the top of the value pyramid would be call centre agents specialising in fields such as financial analytics and software development, which are currently dominated by India. We want Malaysia to reach this stage, which requires education and vocational training,” says Ariyanayakam.

This explains the emphasis on its burgeoning education business, which is expected to be a huge revenue contributor beginning next year. The group also owns Scicom Academy and Scicom International College Sdn Bhd, both of which offer a comprehensive suite of fully accredited certification programmes as well as services-oriented courses.

The poor employability of Malaysian graduates, long a hotly debated topic, is solved by equipping them with the right skill sets and aptitude to enter the corporate sector, says Ariyanayakam.

“About a decade ago, the MoE asked us to retrain these graduates, and we took on the challenge. We identified 15,000 of them and their placement rate (into the general workforce) was 97%.”

The venture provided Scicom an opportunity to enter the government services segment, particularly in the integration of education services and the latest technology infrastructure.

In terms of financials, Scicom’s revenue over the past five years has fluctuated between RM122 million and RM145 million(FY2009 to FY2013), indicating a stagnant top-line growth.

This minimal growth could be due to the expiry of contracts and the timing of its new outsourcing contracts, the tenures of which tend to be highly varied.

Nonetheless, Scicom’s net profits have gradually improved since FY2010, indicating better margins. The group reported a net profit of RM14.85 million in FY2013, or a 67% increase in five years from RM8.7 million in FY2009.

Typical for a services company, Scicom is relatively light in assets and has low borrowings. Its cash balance of RM26.77 million as at June 30, 2014, constituted 31% of total assets of RM84.95 million. According to Ariyanayakam, the company’s many investments in new segments will be financed by internal funds.

Affin IB has pegged a target price of RM2.56 to Scicom, valuing the company at 19 times its projected FY2015 earnings, well below MyEG’s forward price earnings multiple of 30 times.

Scicom’s share price has fared well, gaining 159% so far this year. The stock jumped from 67 sen in early January to RM1.82 last Friday.

However,  earnings from its e-services and education businesses will only start to become apparent at the end of the next financial year. The company has also invested heavily in new fields that have long gestation periods, and it could take a while before these contribute prominently to its revenue.


This article first appeared in The Edge Malaysia Weekly, on October 13 - 19, 2014.

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