PETALING JAYA: Mobile broadband and networking solutions provider Green Packet Bhd’s back-to-the-basics strategy appears to be paying off. The company, which returned to the black in the third quarter of the financial year ended Dec 31, 2016 (FY16) after years of bleeding red ink, had two years ago refocused its efforts on beefing up its original operations, namely, the solutions and communications segments. At about the same time, it sold off to Telekom Malaysia Bhd its controlling stake in Packet One Networks (M) Sdn Bhd (now rebranded as webe) where its broadband business was parked. Now the firm, which for the longest time was punished by investors for its decision to go into the heavy-capital expenditure broadband business service in 2008, appears to have finally regained some favour. It has also gained traction among institutional investors. Last month, Green Packet managed to place out 10% of its issued and paid-up capital to institutional investors, something that it had not done in at least the past five years. “We want to change our investor profile to majority institutional now that we’re back to profitability,“ chief executive officer Kay Tan told StarBiz. Green Packet’s stock, in the meantime, is up more than 28% since the beginning of the year. It last closed at 37 sen, giving the company a market capitalisation of RM280mil. While Tan declined to name the institutional investors which participated in the recent placement exercise, it is understood that they included firms like Hong Leong Assurance Bhd and United Overseas Bank. Currently, the single largest shareholder in Green Packet remains the company’s founder Puan Chan Cheong, better known as CC Puan, who has a 30% stake. Institutional investors, typically large, stable firms that tend to give the market some confidence about a particular stock, collectively hold a 20% stake in Green Packet. “We are talking to more of such institutional funds,” Tan said. He said moving forward, Green Packet’s focus would continue to be on growing its bread-and-butter businesses of solutions and communications. The solutions business, which supplies 4G long-term evolution (LTE) connectivity devices to global telecom companies, is enjoying a boom market with sustained accelerated growth of LTE network deployments globally, according to him. To ensure continued growth for the solutions business, the company has identified specific high-potential markets, where it builds a direct sales presence and establishes partnerships that will help it penetrate these markets more effectively, he added. For its communications pillar, Tan claims that Green Packet is amongst the fastest growing in South-East Asia with over 100 million minutes in monthly voice traffic and 250 clients in 30 countries. “Quick wins on this front include adding data on top of wholesale voice to grow the business without expensing much additional resources.” In its report on small and mid-cap companies issued to clients last week, Kenanga Research said the two core businesses of Green Packet - solutions and communications - are expected to record an organic growth of about 5% to 10% in FY17 with insignificant contributions from the Internet of things and fintech divisions, which are two fairly new segments that Green Packet has ventured into. “Nevertheless, in view of the current technology trends, Green Packet expects the two new segments to bear fruit in FY18 and contribute 20% to 30% to its earnings,” the research house said. Cautioning investors on possible delays in the rollout of Green Packet’s new products and expansion plans, Kenanga pointed out that the company was currently trading at a historical core FY16 price earnings ratio (PER) of 18.3 times. “Moving forward, expecting an organic growth of 5% to 10% coupled with sustainable margins, Green Packet could potentially record around RM15mil in net profit in FY17 followed by RM18mil to RM20mil a year later, implying forward PERs of 12.9 times to 17.2 times.” For FY16, Green Packet’s net profit stood at RM71.47mil, but this was mainly helped by extraordinary gains. Green Packet, which is in a net cash position of over RM80mil, was recently selected as one of RHB Research Institute’s 25 top Malaysian small-cap jewels.
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SHQuah
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Posted by SHQuah > 2017-04-17 10:04 | Report Abuse
Another round of dust and dry leave dropping.