Financial Highlights

The following table sets out a summary of the consolidated financial information of the Group for the Financial Years Under Review.

• ​The revenue increased from RM 5.435 mil (FYE 2019) to RM 16.525 mil (FYE 2022) this shows the company is expanding the market very quickly.​​
• The gross profit margin is consistently above 40% also means that the company has strong bargaining power over its products/services price. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin is in the range of 40% to 44%.
• The gearing ratio is 0 times, it is good if a company is under a low debt however, moderate leverage leads to better use of a company’s capital. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for the Financial Years Under Review are as follows:

According to the details, the top 5 customers are around 40%. The management mentioned that they are having 111 customers at FYE 2022. The sales of development of mobile and web applications are derived on a project basis, hence the company is not dependent on any one of its major customers and they may derive substantial revenue from different customers based on their investment budgets. In addition, following the completion of application development projects, the customers may engage them for any modifications, enhancements and/or upgrades to their applications if required, hence some customers may be listed as the top 5 major customers for consecutive years.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are around 83%. The top 1 supplier contributes 34.9% out of all purchase contributions. The main products and services sourced from these major suppliers were subscription and hosting services on third-party cloud computing platform(s), software licenses, application charges for Adobe and outsourced development services. This shows that the company will have strong bargaining power with the suppliers, however, if they are too dependent on a few suppliers they might face the risk when the supplier meets any operational issue.

Industry Overview

The size of the mobile and web app development industry in Malaysia and Singapore is represented by the sales revenue of mobile and web app development. The sales revenue of mobile and web app development in Malaysia increased from RM269.08 million in 2018 to RM514.21 million in 2021, at a CAGR of 24.09%, while the sales revenue of mobile and web app development in Singapore, increased from USD18.08 million in 2018 to USD37.01 million in 2021, at a CAGR of 26.97%.

The mobile and web app development industry is expected to continue on its strong growth trajectory, driven by digitalised consumer behaviour and attachment to mobile devices by the general public to perform daily activities, digitalisation of businesses as businesses are urged to undertake or accelerate digitalisation efforts for business sustainability in the changing business environment, continuous technology advancement which drives businesses to continuously adopt new or upgrade existing mobile and web apps, and the implementation of digital transformation initiatives by the Government of Malaysia and the Government of Singapore.

Source: SMITH ZANDER

Business strategies and prospects for AGMO HOLDINGS BERHAD

The Group intends to undertake the following business strategies:

1. The company intends to invest in a dedicated R&D division.
2. The company intends to invest in a dedicated sales, marketing and business development team.
3. The company intends to invest in a dedicated technical support and maintenance services division.
4. The company intends to establish a training and development centre to generate additional revenue and recruit new industry talent for the group.
5. The company intends to expand its regional presence by expanding into Singapore.
6. The company plans to continue expanding the mobile and web application development and digital platform-based services

MQ Trader View

Opportunities

1. Strong financial results. The company revenue keeps growing and the gross profit margin is still maintained above 40%.
2. Zero debt company. Although the company is not leveraged its capital, we believe zero debt is still better than over debt.
3. The management has a full plan to expand their business. For example, they intend to invest in the R&D division, sales, marketing, business development team, technical support, and maintenance services division. Furthermore, they also intend to establish a trading and development centre and also want to expand its regional presence by expanding into Singapore.

Risk

1. The company is dependent on the software team. The provision of mobile and web application development, as well as subscription, hosting, technical support and maintenance services, require the expertise of the software development team who are equipped with extensive technical knowledge as well as experience in various technology and software for application development such as Adobe Creative Suites, MarvelApp, Figma, C# .NET, VS Code, Visual Studio and other development toolkits
2. The project-based nature of the business and/or the timing of delivery may lead to fluctuations in the Group’s revenue, profit and operating cash flow. The Group’s inability to secure new projects and customers for these business segments in a timely manner will materially affect its Group’s overall profitability and financial performance.

Click here to refer back the IPO - Agmo Holdings Berhad (Part 1)

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