Home is where the heart is for cloud services company Cloudaron Group Bhd. The Singapore-based company has picked Malaysia, the country where it started its journey, for a listing.
Cloudaron will be the first company to list on Bursa Malaysia’s newly introduced Leading Entrepreneur Accelerator Platform (LEAP) Market. The listing is slated for Oct 3.
Cloudaron’s founder and CEO Ong Chang Jeh tells FocusM that being the first to be listed on the LEAP Market will set the precedent for others. The management team is striving to ensure Cloudaron is profitable as this will boost investor sentiment on the LEAP Market.
Different from the Main Market and ACE Market that have greater regulatory requirements to meet, the LEAP Market provides small and medium enterprises (SMEs) a fund-raising platform with greater flexibility.
While the LEAP Market is a good avenue for SMEs to tap the capital market, many conservative and risk-adverse investors tend to shy away from technology-related stocks, which are normally listed on the ACE Market. Many of these tech companies face difficulties sustaining their businesses over the long run.
As for Cloudaron, its livelihood depends mainly on its ability to secure contracts on a timely basis as its core business is mainly project-based. Failure to maintain a strong and uninterrupted order book will likely have an adverse impact on its financial performance and prospects.
However, Ong is unperturbed as the company’s proprietary and vendor-sourced software solutions are sold on an annual licensing model tied with three- to five-year contracts. This will provide strong recurring revenue for the company.
“Going forward, we hope the bulk of our revenue will be from recurring income. We are planning and working hard towards this direction,” he adds.
He assures shareholders that Cloudaron’s order book is quite sizeable with RM18 mil worth of projects in hand.
Generating sustainable revenue and profit is crucial in helping Cloudaron deliver its targeted 20% dividend payout as disclosed in its information memorandum to investors. However, this is not a fixed dividend policy as the quantum of payout is subject to its financial performance, cash flow requirements and capital expenditure plans.
Upon listing on the LEAP Market, Cloudaron is expected to record a market capitalisation of RM85.27 mil based on the issue price of 11 sen per share.
All public companies incorporated in Malaysia with a clearly identifiable core business, or locally incorporated companies and SMEs with foreign operations are eligible to list on the LEAP Market.
However, investing in LEAP Market-listed companies is currently restricted to sophisticated investors who have net personal assets exceeding RM3 mil or with gross annual income of more than RM300,000. Corporations or partnerships with net assets of over RM10 mil may also invest in LEAP-listed companies.
Cloudaron’s clients are mainly enterprises, government agencies and companies in the education sector. They include Bank of Singapore, Sunway University and Monetary Authority of Singapore. With the experience it gained in the city-state, Cloudaron is seeking to expand further in the region.
“Asean has a 500 million population. With Malaysia and Singapore accounting for only about 35 million people, it does not make sense for us not to expand beyond our existing presence. Moreover, we can localise our offerings for local needs since we already have the platform.
“Even if we are an IT business, we need to understand that clients speak different languages and consume products differently. This is where the local team kicks in to assist,” explains Ong.
He adds that from the RM5.5 mil proceeds from the issuance of 50 million shares, over 40% or RM2.4 mil will be go towards setting up branch or representative offices in Indonesia and the Philippines. The shares were fully subscribed.
Cloudaron has made good progress in Indonesia via a local partner and reseller. This can be seen in its RM8.77 mil sales generated in the year ended March 31, 2017 compared to zero contribution in the previous year.
Nevertheless, Cloudaron’s revenue is still heavily skewed towards Singapore. In FY17, over 80% of its annual RM69.59 mil revenue came from the island-state.
Indonesia came second with 12.6% of total revenue and Malaysia trailed behind with RM4.42 mil worth of works completed.
Moving forward, Cloudaron plans to offer digital solutions to enable clients to move their businesses into the digital world seamlessly.
This will be the fourth pillar of business after its current activities in infrastructure and solution transformation, workspace transformation and cybersecurity.
Cloudaron had in the last two years acquired two Singapore firms – Pro-Datech Systems and iTwin Pte Ltd.
Pro-Datech provides virtualisation and security services and iTwin end-to-end file encryption, plug-and-play virtual private network and remote desktop services.
For the new venture, Cloudaron wants to help create a digital marketplace that will put production, distribution, marketing and consumer under a single platform.
To kick-start the digital solutions business, it has acquired 10% interest in Realtors8 Pte Ltd which specialises in creating solutions for next-generation web and mobile presence for real estate industry players.
“It is like an AI (artificial intelligence) that helps agents and enterprises on what to upsell and cross-sell. The same goes for insurance companies that rely on agents to sell their products. What we are doing is to put some intelligence in it, improving and automating the processes.
“We like the business and see broad applicability of such digital platform to other industries and countries,” says Ong.