CYBERJAYA: ACE Market-listed SMTrack Bhd, formerly Smartag Solutions Bhd, expects to return to profitability in the financial year ending September 2015 (FY15) after posting losses since FY11, said chief executive officer Yow Lock Sen.
“The past is now behind us, and the future looks promising. I am optimistic that SMTrack will return to the black in FY15, driven by proposed ventures in the US, China and the Middle East which we will do through the mergers and acquisitions route,” Yow told a news conference yesterday.
“This time, we want to take a ‘quantum leap’ by pursuing the inorganic growth path, along with an organic growth strategy. We need to look at the world as our oyster,” he said.
Yow said between 80% and 90% of company revenue will be derived from its overseas expansion as he sees “lucrative business and ample opportunities” there.
“We foresee that 60% of our business will be derived from the upcoming operation in the US, while the remaining 20% to 30% will be contributed from our operations in China, Malaysia and the Middle East. We expect the latter to be announced soon,” he said.
SMTrack, which is controlled by its non-executive chairman Datuk Abdul Hamed Sepawi with a direct stake of 22.54%, fell into the red after its listing on April 18, 2011, in which it raised RM17.67 million.
The group’s net loss for FY13 widened to RM17.11 million from RM2.68 million in FY12 on higher administrative expenses and cost of sales. Revenue dropped 14% to RM1.16 million from RM1.34 million.
On Tuesday, SMTrack entered into a joint venture agreement with Michael Maragh and Marc Thomas to acquire 100% in MRH Capital Inc and 75% in California Bottling Co Inc via a share swap.
This was in exchange for 40 million new shares or a 14.69% stake in SMTrack’s 94.01%-owned subsidiary Smartag International Inc (SII), upon satisfactory completion of its due diligence on the two companies. SII is listed on the OTC Exchange in the United States.
“We don’t want to only sell our technology, we also want to be able to implement our technology in a real bottling plant, hence the acquisition. The project in the US is expected to have a sustainable margin and internal rate of return of 20% to 25% in the long run,” said Yow.
He said SMTrack plans to raise US$6.2 million (RM20.39 million) via the capital market for working capital purposes.
Last year, SMTrack raised RM4.54 million through a private placement exercise, which was used to develop its food traceability technology for its business expansion in China and Hong Kong.
On its foray into the Middle East, Yow expects to close a business deal to operate a secured-tracking fleet management service for a “major oil and gas player” that is linked to the government of Saudi Arabia.
“We are still finalising a few details for our proposed project in Saudi Arabia and will make the necessary announcement to Bursa Malaysia later,” he said.
This article first appeared in The Edge Financial Daily, on October 31, 2014.