Green Packet expects digital services to overtake its legacy businesses

This article first appeared in The Edge Malaysia Weekly, on May 11, 2020 - May 17, 2020.

Puan: Our target is for kiplePay to contribute 30% to the group’s Ebitda in three years

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AS the world is constantly evolving, businesses will also need to do so to keep up. Although Green Packet Bhd only ventured into the digital services business in 2017, it expects the fast-growing division to outperform both its solutions and communications legacy businesses as they have been “experiencing natural decline in margins”.

The international technology and telecommunications company is banking on digital services to provide significant growth even though it expects its legacy businesses to remain profitable and pivotal core segments, especially in these unusual times.

Back to helm the company since July last year, founder and group CEO Puan Chan Cheong expects the digital services segment to be one of three key revenue generators within three years.

Revenue from digital services, which comprise fintech and proptech, has grown 112% year on year, but has yet to make a significant contribution to the group.

However, that is about to change very soon as Puan says Green Packet is “future focused and has cut down on a lot of distractions and spent a fair amount of time identifying winners”.

He points to a few examples. kiplePay — the e-wallet business under the fintech segment — processed a gross transaction volume (GTV) of some RM260 million in 2019, more than double the RM115 million done in 2019.

It currently has 515,000 users and more than 5,000 merchants, and is aiming for RM1 billion GTV this year.

“We are on track to be earnings before interest, tax, depreciation and amortisation (Ebitda) positive next year. Our target is for kiplePay to contribute 30% to the group’s Ebitda in three years,” says Puan in a Zoom interview.

Rather than targeting the masses, Green Packet chose to be a university vertical specialist.

Following last year’s collaboration with Bank Islam — the official bank for the majority of public universities in Malaysia — kiplePay jointly launched kipleUNI with the bank in February. This partnership programme will drive financial technology adoption among students, universities and ecosystem merchant partners.

Already accepted by Universiti Utara Malaysia and Universiti Putra Malaysia, three to five other universities have agreed to start deployment of kipleUNI in the next few months, which would give the company 60% market share of the public university population.

“We will keep improving the features on the app to promote higher usage. Currently, the app supports zakat disbursement, fees and expense billing, facilities booking, cashless payment for in-campus retail and a selection of off-campus merchants and order at table,” says Puan.

The kipleBiz payment gateway, also under the fintech business, saw a surge in transaction value during the Movement Control Order (MCO). “We are on the right track powering niches for online-offline payment transactions. That is why we are so excited that Bank Negara Malaysia approved our white-label e-Wallet solution (essentially kiplePay).

“Now we can go for more verticals with a large customer base and high transaction volume. We have our eyes on sectors like retail, medical, direct selling and transport this year,” says Puan.

Coupled with its money-lending businesses, Green Packet’s interest in obtaining a virtual banking licence is not surprising.

 

Leveraging the new norm

As the Covid-19 pandemic has prompted an increase in the awareness of improved hygiene, Green Packet believes its proptech can help businesses.

kipleLive, its recently launched proptech flagship product, is an all-in-one system integrating AI facial recognition, cloud hosted services, FR thermal scanner, visitor management system, and a cashless smart parking solution. This is in conjunction with the “We Are Ready” campaign, which aims to get Malaysian businesses to embrace new norms to cope with the Covid-19 pandemic.

Puan projects a tripling in revenue from this segment alone this year as kipleLive is rolled out in townships and communities. “We’re doing good with some big-name developers already on the client roster,” he says. Paramount Corp Bhd is one of its partners.

“The market is sizeable — gated guarded, condos, offices, schools, retail, carparks — just any place that needs secure access, visitor management, billings and payments, personnel management, and so forth.

“In a very short period of time, our smart parking solution (kiplePark) won 42 parking sites and the property management solution (kipleHome) has been deployed in 100 sites.

“All that is left to do is to aggressively grow demand for our products and get them out to market fast,” says Puan.

The solutions for the proptech are frequently done in collaboration with its associate company G3 Global Bhd as well as SenseTime, says Puan. “I can confidently say we’re ahead in proptech product development,” he adds.

G3 Global, together with AI company SenseTime and China Harbour Engineering, are collaborating to establish Malaysia’s first AI park with an investment of US$1 billion over the next five years.

Despite the recent change in government, Puan says Putrajaya is still keen on the privately funded project, which he believes will help Malaysia to realise its Industry 4.0 goals.

“The concept is still in development, but the goal is very clear. We aim to put the nation on the fast track to becoming the regional hub for advanced technology. This project will definitely attract FDI (foreign direct investment), create home-grown innovations and develop future-ready talents,” he declares.

 

‘A blessing in disguise’

While the Covid-19 pandemic has turned the world on its head, the transition to working from home has been smooth for the company, given its foothold in telecommunications and technology.

Its solution and communication businesses have experienced a non-cyclical surge in increased customer premise equipment (CPE) orders and a higher demand for international data and voice traffic. Puan expects demand to plateau over time but to hover at a higher level than before.

“No one welcomes a pandemic, but this anomaly has become the big push towards digital. I was initially worried about coping operationally but thankfully, all the workplace practices put in place as part of an earlier internal transformation helped us maintain our tempo,” he says of “the blessing in disguise”.

He remains optimistic that Green Packet will see a turnaround by the financial year ending Dec 31, 2021, as its investments in digital services start to bear fruit.

Investors may be getting impatient even though the company managed to narrow its losses in FY2019 to RM43.69 million compared with RM59.69 million in FY2018, on the back of a 53% improvement in revenue to RM609.6 million.

 

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