The AGM started off with presentation by CFO, Daniel Chow. Besides on those charts showing the summarized performance of the company that can be found in the annual report, a few key take-away notes are as below:
- Software licensing grew from RM22.807mil to RM44.716mil and this will lead to higher maintenance sales in the future.
- There are approximately 45,000 developers in China and so far IFCA has more than 100 clients spreading across 15 cities. This including some big names like Wanda Group and Country Garden.
- IFCA’s future plan is to extend their client reach in China and to promote E-commerce to clients (property developers) with an objective to serve their customers (property purchasers).
Darren, who is Daniel’s colleague ran a presentation on E-commerce site which is named “Property 365”. It is a platform that links property developers & agents with property purchasers. This platform allows online booking and bank transaction. Basically a purchaser can select a location on the map displayed on the website or even circle a desired location on the map and new launches on the selected location will appear on-screen. Purchaser can hence select preferred project and view the details including layout (2D as well as 3D). Purchaser can proceed with unit selection then make a booking and followed by making payment. Once the purchase is completed, purchaser can trace billings as well as statements online.
Q&A session:
Below are the excerpt on Q&A session. Below are the questions that I asked in the AGM. My apology on the incompleteness of the Q&A as I can only recall with my memory. Next time I will bring a recorder for more complete sharing.
DC as Daniel Chow, CFO.
KY as Ken Yong, Executive Chairman.
1. As property sector has been slowing down, there are some developers are/will be facing cash flow problem. What is your plan to tackle this in terms of receivables? Based on your annual report, you made impairment of RM1.25mil. Does the company request bank guarantee from new customer?
DC: Impairment of receivables is common in any industry. We had to provide impairment last year because of isolated incident where this particular client in Sabah had changed in their management as well as shareholder.
KY: We don’t request bank guarantee from customers but we do request upfront payment of 30% from them before we start a job.
2. IFCA has been growing rapidly for the past 1 year. Do you have sufficient capacity to cater your growing numbers of customers and how do you maintain the quality of customer service?
KY: Yes we do face staff shortage recently and you might hear some complains from the customers in terms of customer service during this GST implementation period. We have our relationship manager whereby each of them servicing about 40-50 customers in their portfolio.
3. What is the progress in terms of identifying new customers in China and Indonesia for the year to date?
DC: We cannot engage customer in Indonesia until the acquisition is completed. For now, due diligent is ongoing and we will hold EGM when the time comes.
KY: We do not spend money to advertise on newspaper. What we do this we go on road show and organize seminars. This is how we start off in Malaysia and we do the same in China.
4. How confident is the board in replenishing the sales for software application of RM44.7mil and Hardware, networking & operating sales of RM13mil for FY2014 in FY2015?
KY: We are going to launch E commerce and in fact we have launched SAAS in May 2015. In terms of pricing we are still fine-tuning in as the some of the feedback that we collected is that it is too cheap. We are still working on the package.
Daniel Chow answered me individually that hardware sales are normally one-off and last year developers have the budget to do it. (Someone approached him and he left).
5. Historically, IFCA has changed CFO for 4 times in the span of 3 years. In 2012, from Mr. Lim Chin Fai to Jeannie Teh, and she left after 2 months, replaced by Mr. Daniel Chow. Then in Dec 2014 to Philip Woo and subsequently he left and replaced by Mr. Daniel Chow (again). IFCA also changed auditor in year 2011. It is hard to blame someone for linking the dots and have a bad impression on IFCA. How do you address this?
DC: I have been in IFCA for many years, and in 2012 I happily accepted to job as CFO. The thing is, my boss saw my potential in helping out in GST. In fact my sales in GST on individual basis is highest in the company. Hence my boss made a move to transfer me to Education & Training division. I left not because I was unhappy, but because my boss saw my potential and transferred me. Philip left was because he wants to focus in his own business.
KY: (sigh) It is not easy to be IFCA’s CFO you know. The CFO has to identify potential staff and also deal with hectic job at the same time. And yes we saw potential in Daniel as he is so good at talking at road shows. He not only bring sales to the company but profit as well. Hence we decided to move him from cost center to profit center. However, that move backfired when Philip left but I still think moving Daniel (to profit center) was a good move.
UHY (the auditor) is growing and we do not change auditor all the time. And we assure the shareholders that we do not cook books!
6. When are you going to launch SAAS and E-commerce?
KY: We have launched SAAS in May 2015 but still fine-tuning it. We are targeting to launch E-commerce by Sept 2015.
7. What is your planned Capex for FY15 and FY16? I noticed that you have spent RM2mil in your Q1FY15.
KY: Our budget for R&D is RM10mil per year. We have other products in the pipeline. For example, we are developing module for project marketing, as well as project budgeting. In our module, client can plan on project tasking as in who responsible for which task and so on. We also plan on contract module. We want to up-sale our product to our existing customers.
Other questions by other people:
How are you going to move from outright sale business model to recurring sales business model as this has not done before (by IFCA)? How are you going to sail through this transitioning period?
KY: Yes this is a transitioning period for us. Just to show you guys some numbers. For E-commerce and SAAS, the addressable market is this: For example, in Malaysia we have 2600 developers. To be more conservative we are assuming 2000 developers. With RM10k per month for the package, we have RM10k x 12 months x 2k developers, addressable market is RM240mil. Say if we manage to get 1k developers, it is RM120mil.
What was the reason for the plunge in share price from RM1.8 to RM0.78 in a span of 1 month?
KY: What we understand is that there were a few funds exiting Malaysia market. We cannot control share price. What happened was there were people shouting “run!!” and the rest started to run without knowing what’s happening. I also puzzled by the plunge. We rather focus on day-to-day business, our SAAS, as well as E-commerce. For instance, to make shareholder comfortable, we have to bring forward our plan to launch E-commerce. We had planned to launch it next year but now we have to bring it forward to somewhere in September 2015.
Just to give u another example, for SAAS, we are targeting smaller clients. For now, our system sale to our smaller client is in the range of RM70k to RM80k. But now we want to make from them RM70k to RM80 per year! Is it possible? With bundling of E-commerce and SAAS, It is possible! This is because smaller developers do not have budget to create their own E-commerce site. Those big developers and design their own but these smaller once don’t. Hence we can provide values here.
In terms of result, I can’t say much but all I can say is we will do better compared to 2014. Some people said that we are GST Company, but in fact we are not. We are so much more than just a GST Company. In fact, GST only contributed about 20% to our revenue.
DC: in terms of foreign shareholdings, as at 12 June, it was 16.48%. Compared to date of annual report in April, it was 2.8% drop.
How are you going to compete with companies like iProperty, Property Guru and etc who have been in the market for long?
KY: We are in fact in the market longer than them. We are in a unique position as our E-commerce platform will be able to integrate with our accounting system and this is our competitive advantage. What we want to do is up-sale our products and integrate our modules.
KY: Me as the captain of the ship, will assure you that we will sail through it. I am confident with Indonesia market once we complete our acquisition, it is a market with close to 290mil population and 5000 developers. Together with China market, we will perform well. Going forward, the emphasis is on the cloud, on-line world. We do not need to be as big as Alibaba, but want to be the Alibaba of property software company!
During the meeting, there was one lady commented on share price drop and “scolded” the board, saying that she just want to scold the board on behalf of her friends who lost money in IFCA. She then made a comment saying that IFCA has realized their one of two promises which is on distributing dividend and now how about the second promise which is when is IFCA going to main market?
DC: Currently we are focusing in completing our corporate exercise for Indonesia acquisition. We will have our EGM upcoming and after that we will need to talk to our advisor before any decision is made.
KY: What I can assure you is, it is still on track. We are looking at either end of the year or beginning of next year.
MY OPINION:
The Management
Overall, the management answered all the questions from the floor and this showed their sincerity. Ken Yong assured a few things which I think is very important. Firstly, he assured that management do not cook the books. He also hinted that this year they will do better than last year. The doubt on the company’s accounts and CFO issue also has been assured that it was merely on personal issue. DC is the MC for the AGM and I think he did pretty good job. He has good presentation skills. Everything (presentation) went smooth and his speaking skill is legit too. I can understand why Ken Yong moved him to profit center.
However, I have some reservation on the management as it is obvious that they do not know how to engage public relation and investor relation properly. I was working as investor relations for a short period of time and I understand that whenever there is a plunge in share price, investor relation department should pull out the shareholdings structure and investigate who has sold down the shares. Once the selling parties have been identified, the company should contact the investor/fund asking reason that they sell down. In this case, the board’s answer was they were not aware of who sold down beside some foreign fund exiting the country. To me, it is either the board has something to hide, or they are really bad in investor relations. Huge plunge in share price is sending negative signal to investor community as huge fluctuation in share price translate to higher risk. I also was told that IFCA has just hired Investor Relations Company as their advisor. In other words, they outsourced their investor relations department.
They also seen as inexperienced when handling the resignation of CFO. To recap, on 22 May, IFCA announced the resignation of Philip Voo from his position as CFO, without naming the successor. This sent a knee jerk reaction and share price dropped from 1.62 to 1.38. Good thing was they immediately rectify the mistake by naming the successor (Daniel Chow).
A shareholder who is experienced in investor relations that I met in the AGM told me that it is risky that Ken Yong put a timeline on transfer to main market. If there was any press in the room, he or she would pick it as a headline and would send the share price flying. Security Commission would clarity that no submission has been made from IFCA and share price could plunge. Bursa would issue another UMA to IFCA.
Future Plan
The E-commerce concept is impressive as it enables linking the developer with customers. Personally I think this will save time for both developer and purchaser. However, some big developers might still prefer having the crowd in their office as a marketing gimmick to show the public that their property is selling like a hot cake.
IFCA has the strength of integrating its new products to the existing ones. For instance, booking received will be linked to developer’s accounting module. This will definitely save time and cost. Ken Yong’s blue print is to integrate all the modules including accounting, costing, marketing, budgeting, contract as well as purchaser.
However, I think IFCA will hit speed bump on Q2 as one-off sales of hardware and software especially on GST related products have been almost fully recognized. As property market slowing down, I think it is a right move to launch SAAS and E-commerce as developers will tighten their belt and hold back capital expenditure. In longer term, I have confidence that IFCA will be a regional player in software solutions.
IFCA is still expanding. A cross check to jobstreet.com.my shows that IFCA Malaysia is hiring.1 There are 6 postings on the job hunting site and looking to fill up 25 positions. IFCA China’s website also showed that they are hiring but the number of position is not published.2
Conclusion
The board has cleared the air on a number of concerns including on the accounts as well as CFO, and in relations to their future plan. For me, my confidence has recovered 80% and remaining 20% which is the board integrity (their response on share price plunge). This 20% will determine whether I will hold this stock as long-term investment.
- http://job-search.jobstreet.com.my/malaysia/company/ifca-msc-berhad-jobs/
- http://www.ifca.com.cn/uabout/about7.shtml
Very detailed and excellent view! I was there during the AGM and I can say what I can recall here is simply impressive!
ReplyDeleteCorrection: what U* can recall
ReplyDeleteThanks for sharing it
ReplyDelete