Highlights

• GP’s historical fate was very much correlated with the rise and fall of WiMAX technology. As WiMAX’s hype faltered, webe had been loss making since inception. However, with 4 new synergistic business pillars, there is an exciting journey ahead of GP which may be worth for a second chance.

• Pillar 1 - Hardware/Solution: supplies LTE devices to telcos supported by in-house capability. GP has succeeded to market its solutions with more than 65 deployments and the increasing trial projects signal great potentials of more deployments ahead. This segment to grow given that fixed wireless access (FWA) is strongly positioned as the alternative to fixed broadband.

• Pillar 2 - Communications: international voice wholesaler providing voice services to telcos and call centers. NGT launched prepaid calling card jointly-with SingPost in 2012 and currently has a 60k active sub base. It is aggressively exploring the opportunity to diversify into data wholesale and also mulling on asset light MVNO business proposal in Singapore targeting at migrant segment.

• Pillar 3 - Internet of Things: gained exposure into this new business after acquiring 22% stake in Yen Global which fully owned Atilze. Atilze plans to deploy LoRa networks in Malaysia, Indonesia and Thailand to serve IoT market. IoT’s application is limitless and multidimensional.

• Pillar 4 - E-services Platform: through WOL, GP will be the holder of BNM’s E-money license to offer financial services such as e-wallet and e-payment. This is expected to be complementary to its other pillars. Malaysia and Singapore’s digital payment transaction value is expected to grow at a CAGR of 22.1% and 16.5%, respectively.

• “Delusional” debt: the cumulative interest costs and EB can be offset against GP’s remaining webe shares upon maturity in year 2022. Hence, there is no apparent liability exposure and GP is effectively in a net cash position assuming that webe is no longer a core business pillar.

• webe has ceased to be an associate and GP will no longer required to equity account the share of net loss. Excluding webe, GP’s existing businesses are actually profitable.

• With a conservative assumption of flat core earnings of in FY16 and striking off the remaining net cash and market value of Yen Global, the current market capitalization of GP only implies an undemanding 5.5x PE for the 2 businesses.

Catalysts

• Robust growth prospects in all business pillars.

• Business integration and extract synergies to provide end-toend solution to customers.

Risks

• FOREX, regulatory and implementation risks.

Rating

• NON-RATED

• Positives – Huge potentials in new businesses, asset light.

• Negatives – Reputation risk.

Valuation

• SOP valuation of RM0.34

Source: Hong Leong Investment Bank Research - 9 Sep 2016