NetX proposes issuing shares to Macquarie Bank to raise funds for mobile payment exchange system development

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KUALA LUMPUR (June 16): NetX Holdings Bhd has proposed to issue and allot up to 500 million new ordinary shares to Australian investment bank Macquarie Bank Ltd at 5.1 sen per share or RM25.5 million that will be used to fund the development of a mobile payment exchange (MPex) system.

NetX said in a filing with Bursa that Macquarie Bank does not have any intention to seek the nomination of any person to the Board or the removal or replacement of any person from the Board or to participate in the management or decision making of the Company.

Pursuant to the conditional Subscription Agreement, Macquarie Bank has the sole discretion to subscribe for the Subscription Shares.

Based on the total of 1,251,106,066 issued NetX shares as at June 14, 2017, Macquarie could hold close to 40% if it subscribes to all 500 million shares but Macquarie does not intend to be a controlling shareholder of NetX.

Under the terms of the Subscription Agreement, Macquarie Bank is committed to subscribe to a minimum number of Subscription Shares of at least 12% of the traded volume of NetX Shares on Bursa Securities on the trading days within 12 calendar months.

NetX said the subscription shares will be issued at a price equivalent to 90% of the average of the daily volume weighted average price of its shares traded on the local stock market during the five consecutive days immediately preceding the relevant date that Macquarie sends a subscription notice to the group.

The group added that the proposed share issuance may be carried out in multiple tranches, whereby each tranche may be subscribed by Macquarie at any time within 24 months from the date on which the conditions precedent prescribed in the Subscription Agreement are satisfied.

Of the RM25.5 million gross proceeds expected to be generated from the exercise — based on an illustrative subscription price of 5.1 sen per subscription share — RM20 million will be utilised to develop and market the MPex system, whereas the remaining RM4.65 million will be used as working capital and RM850,000 as estimated expenses in relation to the proposed share issuance.

NetX’s principal activities include the provision of mobile payment systems in the form of electronic funds transfer at point of sale (EFTPOS), which is an electronic payment system involving electronic funds transfers based on the use of payment cards, such as debit or credit cards, at payment terminals located at points of sale.

With the rapid change in technology and the rise of e-commerce, the group said it intends to develop a proprietary MPex system that will allow users to conduct transactions both online and at the points of sale via multiple payment options.

“The unique differentiating factor of the MPex system is that users will be able to use the MPex system, be it in the form of a mobile application or a website, to make and receive payments for transactions using other popular and established payment services such as WeChatPay, Union Pay, Visa and MasterCard by scanning the merchant’s common Quick Response code at the counter,” it said.

NetX said it will be able to derive revenue from the MPex system via several sources such as merchant subscription fee for using the MPex system, transaction charges levied on the subscriber based on the transaction value, foreign exchange charges, if any, to the subscribers and referral charges levied on the merchant for every successful transaction.

“At this juncture, the company has identified a few popular payment services in Malaysia and China and is in the midst of discussing and negotiating with these payment services to establish a partnership,” NetX said.

The group also said it has identified the development of the MPex system as an opportunity to diversify its range of product and services, in view of the rapid growth of the e-commerce sector in recent times following the advent of popular online shopping and trading platforms such as Alibaba, eBay, Amazon, Taobao, Lazada and many more.

NetX’s executive director Steve Tan said the group intends to be “one of the key players mobilising and enabling this exponential mobile growth”.

“Macquarie coming on board symbolises their faith in us as a group and our product as the leading platform for this movement,” Tan said.

Once developed, NetX said the MPex system is expected to contribute positively to its earnings.

NetX closed up 9.1% or one sen higher at six sen, valuing the group at RM75.07 million.