Can new major shareholder turn Dataprep around?

ON Wednesday, a huge transaction of 270.54 million Dataprep Holdings Bhd shares exchanged hands in an off-market transaction.

Soon after this, the loss-making company announced a takeover offer from the founder of the diversified Widad Business Group (WBG), Tan Sri Muhammad Ikmal Opat Abdullah.

The businessman had bought over the entire 64.2% stake belonging to Dataprep’s major shareholder VXL Holdings Sdn Bhd, triggering the takeover offer.

Muhammad Ikmal forked out a total of RM43.2mil for this controlling stake purchase.

However, at the offer price of 16 sen per share, it was at a steep discount of 58.97% or 23 sen below Dataprep’s share price of 39 sen then.

Not surprisingly, Dataprep’s share price has adjusted accordingly, shedding 11.5 sen to end trading on Friday at 27.5 sen.

This marked a wipe-out of about RM46.35mil in the stock’s market capitalisation.

Prior to this sell-down, Dataprep’s share price had risen 169% year to date and the stock had even been queried by the stock exchange a few times for unusual market activity of its shares.

The transaction also marked the exit of Datuk Lim Chee Wah, the third son of the late Tan Sri Lim Goh Tong of the Genting group, from Dataprep.

Lim is the founder and president of the VXL Group of Companies, and has been on the board of Dataprep since March 2002.

He was formerly the deputy MD of Genting Bhd and joint MD of Asiatic Development Bhd.

With the exit of its longtime major shareholder, and the entry of a new diversified business group, it will be interesting to see if the company will be able to see a turnaround and return to profit under its new leadership.

Dataprep offers a full spectrum of ICT services to a range of customers across several industries, including the government, education, telecommunication and financial services and products.

However, the company has been loss-making for many years, and has attributed this to the lack of major contracts and few ICT business opportunities.

For the financial year ended March 31, 2017 (FY17), it reported a net loss of RM2.54mil, on the back of RM45mil in revenue.

In the previous year, it recorded a net loss of RM2.74mil.

In its first quarter ended June 30, 2017, its losses narrowed to RM65,000 compared with RM1.3mil previously.

Dataprep said it was looking to shift its focus towards the financial services and oil and gas sectors and would continue with cost-cutting measures.

It also noted plans to source for new ICT business opportunities in order to mitigate its losses for the current year.

As at June 30, 2017, the company’s cash and cash equivalents stood at RM22.6mil with RM5.3mil in borrowings.

So the question is, what is it about Dataprep that attracted the businessman to launch the takeover?

Also, what is Muhammad Ikmal’s background?

Since Muhammad Ikmal formed WBG in 2002, the company has diversified into areas such as integrated facility management, construction, operations and maintenance, mechanical and electrical services, property development, education, media and ICT services, hospitality and oil and gas. As the group executive chairman of WBG, Muhammad Ikmal has seen the group expand over the years to include two institution of higher learning – Widad University College and Widad College.

According to the group’s website, the businessman had also once served in the Malaysian Armed Forces.

However, there is no information provided yet on the earnings of WBG.

Muhammad Ikmal, who hails from Kedah, is seen to have shared a good relationship with the late Sultan Abdul Halim Mu’adzam Shah Ibni Almarhum Sultan Badlishah, who was also King from 1970 to 1975 and 2011 to 2016.

Sultan Abdul Halim passed away last month at the age of 89.

The businessman had received honours from the late Sultan during several occasions, and had named the Sultan, who was King at the time, as the first chancellor of the Widad University College.

Sultan Abdul Halim had also conferred WBG with the right to use the “Royal” in all its businesses as seen in the Royal Widad Hotel, Royal Widad Specialist Center, Royal Widad Tourism Center and Yayasan Royal Widad. Acording to the announcement to the stock exchange by Dataprep, Muhammad Ikmal, together with his wife, Puan Sri Jamilah Mahamad Isa are the ultimate offerers of the takeover, being the directors and ultimate shareholders of Wardah Communication Sdn Bhd, which acquired the stake.

WBG is the holding company of Wardah Communication, which is primarily involved in printing and publishing.

Muhammad Ikmal owns 95% of WBG, while his wife owns the remaining 5%.

In the filing, Dataprep also noted that the offerers intended to maintain the company’s listing status. With the transaction, WBD gains control of a public-listed company and with Muhammad Ikmal’s vast experience in various business segments, including the media and ICT segment, it could present an opportunity to turn around the loss-making Dataprep.