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Green Packet looks to new markets for expansion
Shalini Kumar 
Green Packet is focusing on financial technology and the Internet of Things
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Information and communications technology player Green Packet Bhd is looking at new markets abroad to expand the reach of its long-term evolution (LTE) products. According to CEO Tan Kay Yen, the group is eyeing the Middle East, North America and Europe.

The company also wants to leverage on products from its recent corporate acquisitions to spread its wings into other Asean countries.

Last year, Green Packet acquired a 20% stake in China-based Shenzhen Memo Technology Co Ltd (Memohi) for 10 million renminbi (RM6.5 mil). The transaction involved Green Packet’s wholly-owned subsidiary, Worldline Enterprise Sdn Bhd, subscribing for 250,000 new shares in Memohi.

Memohi’s core businesses are the sale of electronic products; provision of smart-home internet products and services; and over-the-top box for home.

 

New media devices

Green Packet’s core business is its solutions and communications services, for which it supplies 4G LTE connectivity devices to global telecom companies. It has offices in the United States, Taiwan, Hong Kong, Bahrain and Singapore.

 

Tan says the exchangeable medium-term notes (EMTN) issue will not impact the group’s cash flow

“Green Packet is also looking at upselling new media devices and platform developed by its associate company, Memohi, to its existing telecom customers in Asean,” Tan tells FocusM in an email response.

 

As a technology and communications company, Green Packet is primarily focused on three main segments – communications services; software and devices; and e-services. 

For its communications division, Green Packet is said to be among the fastest growing in Southeast Asia with over 100 million minutes in monthly voice traffic and 250 clients in 30 countries.

According to a Kenanga Research report in March, Green Packet’s solutions and communications businesses are expected to record an organic growth of about 5-10% in FY17 with insignificant contributions from the Internet of Things (IoT) and fintech divisions, which are fairly new segments that Green Packet has ventured into.

The two new segments are expected to yield results in due time. “Nevertheless, in view of current technology trends, Green Packet expects the new segments to bear fruit in FY18 and contribute 20% to 30% to its earnings,” the research house said.

However, the company’s communications services business recorded a 6% lower revenue of RM55.04 mil in the second quarter ended June 30, 2017 as compared to the previous year. This is mainly due to slightly lower international voice traffic to Indonesia and Myanmar.

The company’s software and devices business, on the other hand, registered 44% higher sales in the second quarter compared to the same period last year, mainly due to higher shipment to major customers in the Middle East. This helped to offset the drop in sales to domestic customers during the quarter.

 

Improved earnings

For the second quarter ended June 30, Green Packet narrowed its loss to RM5.5 mil from RM31.8 mil in the previous corresponding quarter. Revenue rose to RM82.7 mil from RM77.5 mil a year earlier.

The company attributed the loss to initial business development costs incurred for its new e-services business and finance costs accrued from the exchangeable medium-term notes (EMTN) which the group will issue over an eight-year period, ending in 2022.

During the company’s annual general meeting in May, some shareholders raised concerns over the interest expenses of the EMTN. Tan allayed the fears, explaining that both the cumulative interest expense (current and future) and the EMTN principal sum are notional in nature – meaning they are merely an accrued cost with no cash payments involved. 

“The interest expense for the latest quarter ended June 30, 2017, was RM4.1 mil. The cumulative interest expense and the EMTN principal may be settled via an exchange with Green Packet’s investment in Webe by 2022,” he says.

He adds this means there will be no impact on the group’s cash flow. At the end of the second quarter, Green Packet was in a net cash position of RM82.2 mil, or 11.4 sen per share.

 

E-services push

Green Packet is making a major push to improve its e-services segment. This follows the group’s recent acquisition of Mobiduu Solutions Sdn Bhd for RM4 mil.

Mobiduu is a mobile commerce platform targeted at helping merchants drive adoption of prepaid gift cards, loyalty, promotions and various other mobile payments.

“Green Packet will integrate Mobiduu’s m-Commerce platform with its existing e-Services platform. The integrated technology platform offers our end-users a complete experience and our potential business partners an integrated and simple go-to-market proposition in all our business units,” says Tan.

All this comes on the back of the group’s foray into the mobile payment solutions segment, for which it has been acquiring payment solutions providers, such as Webonline Dot Com Sdn Bhd. Green Packet bought an 80% stake in Webonline via its wholly-owned subsidiary, Packet Interactive Sdn Bhd, for RM9 mil late last year. Webonline operates a payment gateway and e-wallet service under the brand Webcash.

According to the group’s annual report, Green Packet is expanding its e-services platform, offering an additional focus on financial technology (fintech). One such solution is its e-wallet platform called Kiple, powered by Webonline.

“In line with our investment in Webonline, we have rolled out our Kiple application which functions as an e-wallet and payment gateway,” it says.

Kiple enables users to make electronic purchases and payments via the e-wallet. On the other hand, Webonline’s payment gateway facilitates a payment transaction by either debiting a user’s bank account, credit card or e-wallet.

 

Remaining invested in G3

Another business focus of Green Packet is the Internet of Things (IoT). This is the technology of integrating everyday devices – refrigerators, vehicles, security equipment, etc – to the internet, enabling users to send and receive data and control the devices remotely.

Last year, the company acquired a 22% stake in G3 Global Bhd (formerly known as Yen Global Bhd) for RM18.15 mil. G3 is a vertically integrated apparel manufacturer, wholesaler and retailer that also does its own designs and distribution.

“G3 is in the IoT business which has tremendous potential for growth and therefore Green Packet will continue to hold its strategic investment in G3 which is synergistic to our existing solutions business,” Tan says, when asked about the group’s plans for G3. He did not elaborate further.

The group’s shareholders seem to view Green Packet’s efforts to continue to improve its financial performance positively.

The counter closed at 34 sen on Sept 7, up 38.7% year-on-year from 24.5 sen previously. It
hit its 52-week high of 45.5 sen on May 2. 



This article first appeared in Focus Malaysia Issue 249.