Cover Story: The technopreneur investor

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on September 14, 2020 - September 20, 2020.
Cover Story: The technopreneur investor
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Lian Wah Seng’s passion for technology has led him to take on many roles in a variety of industries over the past 20 years. From IT entrepreneur to railway infrastructure provider and now chairman of a LEAP Market-listed company, Lian has spent the last two decades immersing himself in this sector, all while dabbling in angel investments along the way.

The 48-year-old even crossed the northern border into Thailand a few years ago, founding delivery start-up GoBike, which is today a thriving business. For all his entrepreneurship, however, Lian had always harboured ambitions to one day be part of a business that other investment analysts would write about, just as he did during stints in investment banking in the 1990s and early 2000s.

“I spent my time at Arthur Andersen in the 1990s going through the audited accounts of various listed companies; and, later, when I moved into investment banking as an analyst, I spent my days speaking to managers and founders of listed companies.

“I jumped from professional services into investment banking in order to get closer to businesses. Eventually, the natural progression from there was to strike out on my own, and to one day found or invest in a business that other analysts would write about, just as I once did.” Lian has spent the last 15 years or so running his own businesses, in addition to fielding pitches and making a number of angel investments.

He recently took a major step towards realising those ambitions when one of his investee companies, RedPlanet Bhd, made its debut on Bursa Malaysia’s LEAP Market. He invested in the geographic information systems (GIS) solutions provider as a cornerstone angel investor about three years prior and is now its chairman. Prior to listing, he held a little under 30% equity interest in the company. He has since trimmed his ownership down to 25% post-listing.

The company provides GIS solutions that are meant to assist customers with a variety of functions such as location search, navigation, logistics routing, customer targeting, as well as urban planning. These solutions are delivered through a combination of proprietary machine learning and artificially intelligent software, as well as modern hardware (Internet of Things-enabled devices).

Once the product is fully operational, the final delivery typically takes the form of a virtual dashboard, from which enterprise clients across various industries can generate insights based on geographically referenced data.

Although the company enjoyed a successful initial public offering (IPO) on Aug 4, it was originally meant to go public in March this year. The change in government and the implementation of the Movement Control Order (MCO) in quick succession put paid to those plans. On the business front, however, RedPlanet kept itself busy over the last six months.

“Some projects did slow down, but we actually put in large numbers of bids for contracts during the various MCO periods. In fact, we’ve observed more jobs available over the last few months compared to previous years.

“The MCO was a wake-up call for the markets. Businesses finally realised just how important technology was to continuity. As such, a lot of technology-centric tenders that in normal circumstances might not have been priorities were suddenly being expedited or fast-tracked. We’ve really had no issues with business continuity.”

RedPlanet was listed on the LEAP Market at 22 sen, a four sen premium on its offer price. The company, which is already profitable, was trading at 32 sen as at Sept 7. According to a recent filing with Bursa, the company in its second half ended June reported a RM1.08 million profit after tax on the back of RM6.27 million revenue. For its full financial year, the company reported a profit after tax of RM2.6 million on RM16.6 million in revenue. RedPlanet also declared an interim dividend of 0.75 sen per ordinary share. “Our profit after tax for the half and full financial years would, in normal circumstances, be higher but for the fact that we incurred various one-off listing expenses amounting to roughly RM247,000,” Lian clarifies.

For his part, Lian did not originally set out to invest in RedPlanet. He first got to know the company in his capacity as founder of GoBike and was speaking to them as a potential enterprise customer. At the time, GoBike was looking for the services of a mapping solutions provider. “I was introduced to RedPlanet by some former colleagues of mine,” he says.

In the course of learning about the company, Lian realised just how important its solutions would become in a few years. While mapping solutions such as Waze and Google Maps had already gone mainstream by then, enterprise use cases had not yet caught on in a big way.

“I knew that consumers would very quickly adopt mapping solutions as part of their daily lives and, from that point, it was only a matter of time before CEOs would use it as part of their businesses.

“Once a particular technology gains mainstream appeal, businesses would try to co-opt those technologies as a means to reach out to new customers.”

As recently as five years ago, it would have been very difficult to convince other businesses of the importance of GIS solutions. But that has all changed in the last couple of years, as mapping technology is now a ubiquitous feature of just about every smartphone in the market.

“Today, CEOs themselves regularly use map functionalities in the course of their daily lives, so they now have a much better appreciation for the value it brings to them and are now keen to add that value to their businesses.”

While consumers tend to use mapping solutions for more mundane tasks such as getting directions or finding locations, enterprise applications go much deeper and can bring significant value to companies in the right industries, Lian says. The company has a number of local and international clients, and operates primarily in the utilities as well as oil and gas sectors for now.

Photo by Patrick Goh/The Edge

Taking the example of an owner and operator of a large national electricity grid, Lian says that by using vehicle-mounted 360° cameras, it is possible, for example, to map out the spread and specific locations of various electrical substations, electrical poles as well as larger transmission towers.

The company could then use these initial insights to build a dynamic virtual map of all its assets. This could help the company reduce unscheduled downtime, predict potential points of failure, and even predict how exactly these failures could cascade through the grid. It could also allow for more cost-effective future construction and development projects.

Although RedPlanet is not the first company of its kind in Malaysia, Lian says it is arguably the most advanced, and quite possibly the first to also venture into the overseas market. The company has a client in Australia and is also in talks with an international agriculture business.

He says: “Although there are other geospatial companies in the local market, they tend to be involved in more ‘first order’ mapping functions, such as conducting survey projects on behalf of the Malaysian Department of Survey and Mapping.

“RedPlanet, on the other hand, is primarily involved in more advanced monitoring, controlling and analytics functions using GIS solutions.”

Interestingly, he also sees potential synergies with the asset management segment in this part of the world. In the West, and also Australia, there is already a well-established and comprehensive geospatial imagery and analytics supply chain, dedicated to providing geospatial insights to asset management firms looking to extract even more insights on portfolio companies or counters that they happen to be tracking.

Using near real-time satellite imagery, these companies deploy proprietary image capture and analytics functionalities, which are then able to identify oil exploration activity, hypermarket parking lot density, as well as subtle changes in crops that might indicate a need for additional watering or fertilising.

“This is a huge growth area for us. In fact, we are developing smart identification functionalities for live or pre-recorded video feeds. Right now, incorporating AI (artificial intelligence) and machine learning-based analytics into video feeds is a very specialised and relatively rare innovation. Once we build it out, we’ll be one of a small handful of players in the market with that proprietary function,” he says, adding that AI analytics is more commonly applied to still images and having video feed analytics will be a meaningful leap forward.

He provides an example of how this technology can be applied. “For instance, a grocery chain will soon be able to make a real-time ‘head count’ of all the people who walk through its doors, by integrating the solution into its video feeds. Insights like this could be highly sought-after by asset managers.

“We’re looking to use the funds we raised to carry out further research and development on our live video feed analytics. We are hoping to bring that functionality to market at some point in our next financial year.”

Technology as a personal aspiration

Lian has been attracted to technology for much of his life. He saw the unprecedented impact it would have on Malaysia as far back as the 1980s and early 1990s, before the Multimedia Super Corridor even existed. This was why he pursued a double major in accountancy and IT in Australia, graduating in the early 1990s.

For Lian, technology is the surest way to solve problems, whether as a founder or an investor. “I like to invest in a product or service that adds value to a particular ecosystem, in addition to being cost-effective and highly scalable. These are key features I look for in an investment prospect. As long as you can solve problems, the money will inevitably flow. So, that’s never the difficult part of the process.”

While he now fields many pitches to become an angel investor, Lian was first introduced to investing relatively early on in his career. After spending the first few years of his career at Arthur Andersen doing audits for listed companies, Lian decided he wanted to get closer to the capital markets.

“I moved into investment banking as an analyst in the mid-1990s and spent a total of about seven years in the industry. It was during these seven years that I began to understand and apply the classical principles of investment, that is, to always look to the stock’s fundamentals.

“It was actually here, where I spent most of my time writing reports and speaking to founders and management teams, that I realised I wanted to run my own business.”

After seven years in the industry, he signed off with a bang. “My last call was probably the most memorable. At this time, I was with OCBC Bank in Singapore, and I made a ‘buy’ call on a tech stock that went on to appreciate fivefold over the next 18 months. After that call, I left the industry for good, and came back to Malaysia, where I started my first business — an IT consultancy.”

Eventually, through his network of friends and colleagues, he began to field requests to invest in various businesses as an angel investor. Having mastered the art of evaluating company fundamentals, Lian was now ready to invest for himself.

He tells Personal Wealth he has made three angel investments so far. His first — an investment in a merchant payment network start-up a decade ago — was a very exciting prospect, but one that came with painful lessons.

“I was excited about the product, but I learnt just how important it was for the founder to be highly resilient. A year after I made the investment, the founder walked away from the company, much to my disappointment. I came to realise that the founder is the most important factor when assessing early investment opportunities.”

While investing in the right founder is paramount, the experience with his first angel investment also taught him to be ready to step in and take on a more active role if the situation called for it.

This proved to be the case with another angel investment of his, called the AZTI Group. A railway safety solutions provider and software developer, Lian invested in the group about four years ago.

Had things gone to plan, it is quite possible that AZTI would have been listed ahead of RedPlanet. “We initially had ambitions to list AZTI in Hong Kong, not to enter the Chinese market as such, but more to gain access to the global investment community. But, with Hong Kong having gone through its own political upheaval over the last couple of years, we decided to shelve those plans.

“While the Chinese government has certainly put a lot of effort into supporting the Hong Kong capital market, the IPO pipeline seems to be pivoting to cater more to the mainland Chinese investor community, as well as Chinese companies.”

It was during this time that Lian came into contact with RedPlanet and decided to invest in it. He says this is the most hands-off he has been with a portfolio company and, predictably, it all has to do with the company’s founder and executive director, P K Senthil Kumar.

“Senthil is a long-time veteran of the GIS industry. His pedigree stretches back to the 1990s when he was leading GIS businesses out of the US. He came here in the early 2010s, and that was around the time he founded the entity that would eventually become RedPlanet Bhd. Both he and the wider management have an obvious passion for the business, in addition to possessing that all-important resilience.”

Moving up

While RedPlanet has not appeared on the radar of investment analysts just yet, Lian has big ambitions for his first listed portfolio company. He hopes to move the company into the larger exchanges once it has hit certain targets. “We would definitely like to ‘graduate’ to one of the larger stock exchanges, but that depends on our achieving a certain growth rate and profitability.”

So, why choose to list on the LEAP Market to begin with? Bursa’s third market, known as the Leading Entrepreneur Accelerator Platform (LEAP) Market, was launched in October 2017 to provide companies with fundraising access and visibility through the capital markets. It was meant to be a more cost-effective method to raise funds from qualified sophisticated investors. LEAP Market reporting requirements are also less onerous.

Over the last few years, however, many industry observers and players have often cited both the issue of low liquidity in the LEAP Market as well as the lack of a clear path to “graduate” to the other boards. In mid-August, LEAP Market-listed company Polymer Link Holdings Bhd announced an intention to delist, citing a prolonged lack of liquidity.

Lian remains undeterred, despite his belief that the LEAP Market due diligence procedures are not all that different from the secondary ACE Market. “[For the LEAP Market], you would have to hire lawyers for due diligence, and then an investment bank would have to sponsor your listing. They too will have their own international due diligence requirements. A company might probably be able to save some money — as there is no requirement to hire a reporting accountant — but not much. Our own listing costs eventually came up to roughly RM800,000.”

In the end, Lian decided to list on the LEAP Market, because of both his high conviction in the company as well as the fact that they were not under pressure to raise very much money to begin with. “We had originally thought of listing on the ACE Market but were not quite prepared to dilute our ownership too soon. The ACE Market requires a minimum share capital float of 25%, whereas the LEAP Market requires only a 10% float. At the same time, we did need to raise some funds, but not so much that we would have had to list on the secondary board. Additionally, we thought it would be helpful that prospective clients who looked us up would find that we are a listed company.”

Lian is not quite done with his angel investments, though. In recent weeks and months, he has fielded several investment requests from people looking to capitalise on the global obsession with health.

One healthtech solution he is particularly excited about comes from a US-listed company called Livongo Health Inc. The digital health analytics company has rallied more than 400% as at Sept 4.

“I was really excited about the company, but I ultimately didn’t invest because the counter rallied very quickly over the last few months.

“They developed a smart bracelet that diabetics can use. The bracelet runs frequent patient analytics that provides insights to both the patient and doctor. This allows patients to be much more targeted with their insulin intake.

“Usually, diabetics have to take insulin at very strict times and at particular intervals throughout the day. The analytics functionality could help patients save a lot of money. If a healthcare analytics solution like this were to be developed in Malaysia, it’s something that I would consider investing in,” he says.