Orion plans to return to profitability
CMMS provider to bank on acquisition of ICT firm ASAP
PETALING JAYA: Loss-making computerised maintenance management system (CMMS) provider Orion IXL Bhd is expected to return to the black in the financial year ending Dec 31, 2018 (FY18) following the proposed acquisition of information and communications technology company ASAP Bhd.
The acquisition of privately held ASAP, which is expected to be completed by August or September this year, comes with a profit guarantee of RM7.5mil per year, for two years.
Apart from that, there is also a RM15mil security in place, in the event that ASAP is unable to achieve the profit guarantee figures.
“With the combined expertise, technology know-how and client base of both companies after completion of the corporate exercise, Orion will target to work on specialised buildings, going forward.
“These specialised buildings include stadiums, hospitals, universities, and utilities buildings,” Orion co-founder and CEO Abdul Rani Achmed Abdullah told StarBiz.
Generally, both companies are primarily involved in the provision of software solutions for facility management services, though Orion liases with contractors while ASAP works directly with asset owners.
In addition, ASAP’s CMMS software is integrated to its client’s human resource and accounting departments, to enable cohesive management of resources.
“Orion was on a loss-making streak as we were more focused on educating the market on adopting CMMS.
“We entered the CMMS market in Malaysia when it was at the infancy stage and worked on building our market share,” said Abdul Rani, adding that the government and government-linked companies are the drivers of CMMS adoption, given that they are the largest owner of assets.
For the financial year ended Dec 31, 2016 (FY16), Orion posted a net loss of RM1.86mil, which widened from the previous financial year’s net loss of RM1.46mil.
Orion has been making losses since FY13.
To date, Orion is the only listed CMMS company on the Ace Market of Bursa Malaysia.
Based on an estimated market size of RM96.5mil in revenue for 2016, Orion and ASAP command market shares of 3.5% and 9% of the CMMS market in Malaysia.
Post-acquisition, Orion will be the largest CMMS provider in Malaysia and its asset size will increase by RM78.3mil.
Orion will finance the proposed acquisition of ASAP by way of RM39mil in cash, along with the issuance of new rights shares that come with free detachable warrants.
The rights shares, to be sub- scribed by the owners of ASAP, will be issued at 17 sen apiece, on the basis of seven rights shares for every two existing Orion shares held, together with one free warrant for every two rights shares subscribed.
The rights issue will raise RM3.5mil that is earmarked for working capital.
The purchase consideration of RM73mil was arrived at after taking into account ASAP’s net profit of RM5.85mil for the financial year ended June 30, 2016.
Based on this net profit figure, ASAP has a price-earnings multiple of 12.48 times.
In addition, ASAP has an orderbook value of RM11mil, which is deliverable in the first year.
ASAP CEO Mohamad Shaharul said the company was currently tendering for 20 projects, which has an estimated total contract value of RM11mil-RM15mil.
ASAP also has established a presence in Indonesia, and looks to venture into the Philippines market next.
“Currently, these two countries are booming in the region as more investments are being pumped in.
“There is plenty of potential in these nations, in line with the many up and coming assets as well as establishment of proper infrastructure, like broadband.
“This corporate exercise gives us the credibility, as a listed entity with its own products, to provide confidence to our foreign clients that we are not a company that will close down overnight,” said Shaharul.