Radiant eyes brighter days ahead
Ace Market-bound IT company to focus on SEA expansion and higher margin businesses
FURTHER expansion in South-East Asia and a greater exposure to higher margin business segments will top the agenda of Radiant Globaltech Bhd, which is en route to a listing on the Ace Market next month.
The company, primarily involved in the supply of hardware and software aside from providing information technology (IT) maintenance services to the retail industry, believes that its two-pronged growth strategy will be key in diversifying its revenue stream.
To date, the MSC-Malaysia status company, which was founded in 1994, has several top retail names in its clientele, which include Giant, Aeon, Parkson, 99 Speedmart and Watsons.
According to research and consulting firm Smith Zander, Radiant Globaltech commanded about 20% of the market share in Malaysia’s retail technology sector in 2017.
Speaking with StarBizWeek, Radiant Globaltech managing director Paul Yap says that the firm’s main purpose of listing on Bursa Malaysia is to fund the company’s regional expansion.
“Nearly half of the proceeds raised from our initial public offering (IPO) exercise will be utilised for us to grow in the South-East Asia region, including our home market Malaysia. Apart from its domestic operations, Radiant Globaltech has also set its footprint in Vietnam and Cambodia, which are both booming economies.
“Currently, our overseas markets only contribute about 11.58% of our top line. With the upcoming regional expansion, we hope to strengthen the revenue contribution from abroad, apart from gaining a stronger top line from our Malaysian operations,” he says.
Apart from its operations in Vietnam and Cambodia, Radiant Globaltech also has its distribution offices in Indonesia, Philippines and Singapore, in collaboration with local partners in respective countries.
Yap says that these markets will also be given greater emphasis moving forward, in tandem with the group’s regional expansion plans.
“On top all these, we also hope to explore several new retail segments in our existing markets such as the retailers in airports. The food and beverage operators will also have our focus, although we have started to serve a large coffee chain in Malaysia,” he tells StarBizWeek.
According to Radiant Globaltech’s draft prospectus available previously on the Securities Commission’s website, the group plans to utilise 45.6% of its IPO proceeds for business expansion, within two years from its listing. About 30.59% will used to pare down the company’s borrowings, while the remaining is expected to be spent as working capital and to cover listing expenses.
As at end-June 2017, the group’s total lia- bilities stood at about RM11.03mil, representing a gearing ratio of 0.46 times.
Radiant Globaltech’s listing exercise will involve the public issue of 128.1 million of new shares, while 12 million shares will be placed out to identified investors through offer-for-sale.
The company will likely be listed on the Ace Market in July 2018, with its prospectus to be published next week.
Aside from its regional expansion objective, Radiant Globaltech also aims to restructure its business models by leaning more towards recurring income-driven and higher-margin business segments.
Yap points out that the software and IT maintenance services segments will be the key focus of the group over the long run.
At present, the hardware distribution business is the biggest revenue contributor for Radiant Globaltech, equivalent to three-quarters of its top line.
The balance comes from the software and IT maintenance services segments.
“Whatever we do in the software segments, every single sen will contribute to the profit. As for the IT maintenance services segment, it provides a recurring income stream to us.
“This strategy makes sense as these segments offers substantially-higher gross profit margins to the group, as compared to our hardware distribution business,” he adds.
Overall, the group has a gross profit margin of 40% from its operations.
Financial performance-wise, Radiant Globaltech’s net profit in the financial year ended Dec 31, 2016 rose by nearly 50% yearon-year to RM9.47mil.
Meanwhile, its revenue for the year was up by 16% to RM76.85mil as compared with RM66.4mil a year earlier.
When asked about his opinion on Radiant Globaltech’s listing at a time when the capital markets are rocked with uncertainties, Yap remains unperturbed.
“Volatility will come and go, but sound fundamentals will remain regardless. Given our journey of 24 years in the industry, we have extensive experience in doing business.
“Our company is in involved with the IT and retail sectors, both which will remain important and strong regardless of any economic shocks.
“We believe the investors will respond well to the group’s IPO exercise. As for the offer-for-sale portion, I have received good feedback from potential investors so far and I believe that our listing will also receive similar response,” he says.
On the potential impact of the ringgit’s weakness against the US dollar on Radiant Globaltech’s financials, Yap describes it as “slight yet not significant impact”.
The company currently imports the hardware for its distribution business from its principals in the United States, Italy, Japan and Taiwan. The transactions are usually denominated in US dollars.