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This article first appeared in The Edge Financial Daily on June 10, 2019

KUALA LUMPUR: ACE Market-listed Kronologi Asia Bhd expects to continue its strong earnings growth momentum for the remainder of FY19, driven by new products as well as market and customer-base expansion, according to its new chief executive officer (CEO) Edmond Tay Nam Hiong.

The company reported an 84% net profit jump for the first quarter ended March 31, 2019 (1QFY19) from a year ago.

Contributions from the group’s newly acquired information technology (IT) infrastructure subsidiary, Sandz Solutions (Singapore) Pte Ltd, will also help make FY19 another record year of earnings for the group, Tay told The Edge Financial Daily recently.

The enterprise data management and storage solution group has been charting new heights in terms of earnings almost every year, boosted by inorganic growth, since its listing in December 2014.

For FY18, Kronologi’s net profit climbed 34% to a new high of RM16.26 million from the previous record high of RM12.06 million for FY17, while revenue similarly rose 13% to the highest of RM163.07 million from RM144.4 million, on higher volume of sales recorded in Singapore and contributions from Quantum Storage (Hong Kong) Ltd, which it acquired in December 2017.

The group’s annual revenue and net profit have been growing at a five-year compound annual growth rate of 24% and 22% respectively. Its cash and cash equivalents stood at RM61.87 million as at end-March, while total borrowings were at RM34.81 million.

For FY19, it started the year off with a net profit jump to RM3.69 million for 1QFY19 from RM2.01 million a year ago — despite revenue falling 16% to RM32.5 million from RM38.76 million — as it enjoyed a higher gross profit margin of 28% against the 26% it recorded previously.

“Over the next six and nine months, we would have more services delivered to the market, related to what we do best, which is data — for example, data science, data analytics and artificial intelligence — [as] we are looking to add on (give more value to customers), so customers can get more from their data,” said Tay, who was just appointed CEO on April 1.

Tay, 48, is confident about the group’s prospects and said Kronologi’s services are very market-oriented and much “in demand” now to help its customers streamline their data use and management while staying focused on business and productivity.

“We are offering more services to customers. We have a strategy to sell more to the customers we have. The new services will also attract new customers,” he said.

For example, one new service the group is introducing is “on-premise as a service” or Opaas, which basically allows customers to store some data on-site. This is an area that the group expects to see demand growth mainly because most Asian companies do not like to store everything in the cloud, Tay said.

This service will be introduced via its seeding programme, which is Kronologi’s promotion that allows customers to try its whole suite of services for a period of between three and six months. The programme, introduced two months ago, has been received well by the market, Tay said, adding that the responses gathered also give Kronologi an indicator of where customers’ future interests lie.

Introduction of the group’s new services, said Tay, will be done concurrently in the markets where Kronologi is present. Besides its home base here, the group is also operating in Singapore, Thailand, the Philippines, Indonesia, India, Hong Kong and China.

 

Looking to raise stake in QCL

To further drive performance, Tay said the group plans to further develop its presence in markets like China, where it acquired a 16.67% stake in Quantum China Ltd (QCL) last November for US$3 million.

Besides offering its new services there, it is looking to raise its stake in QCL, though no definite timeline has been fixed for that. Tay also kept mum about how much more the group wants to accumulate.

As for its acquisition of Sandz, which was completed at end-April, Tay said the group would start recognising contributions to earnings from this subsidiary going forward. “The acquisition of Sandz would serve as an enhancement to Kronologi’s ‘as a service’ business and contribute positively to the segment,” said Tay.

Its “as a service” business is basically where it offers data management solutions on a subscription basis, whereby customers will not have to fork out a big capital outlay, own any equipment, or manage any manpower or maintenance issues.

Sandz provides IT infrastructure solution services in the Philippines through its subsidiary Sandz Solutions Philippines Inc. The RM75 million acquisition that was proposed last December came with a warranty from the vendors that Sandz would achieve a profit after tax of US$1.5 million for FY19.

Kronologi shares slipped half a sen or 0.94% to close at 52.5 sen last Friday, giving the group a market value of RM256.87 million. The stock has retreated over 11% in the past 12 months.

Compared with when it was listed at 29 sen apiece with a share base of 236.99 million, the stock has climbed 81% since, while its share base has more than doubled to 489.28 million.

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