Pakatan boost for technology firms
New government’s adoption of e-services set to benefit them
UNDER the new government, technology solutions providers are set to benefit, as the Pakatan Harapan-led administration is expected to accelerate its adoption of technology and e-services to boost efficiency and transparency.
In addition, its stronger commitment to open tender and greater resolve to address monopoly concerns in the country are expected to create a more competitive environment and improve opportunities for more players in the industry.
According to a fund manager, expectations are high that there could some new contracts up for grabs for technology service providers.
“We believe the new government will seek to improve its digital infrastructure as part of a greater initiative to enhance its service delivery to the public and lower cost, besides boosting the efficiency and transparency of the administration,” the fund manager explains.
“This could generate opportunities for local technology solutions providers further down the road,” he tells StarBizWeek.
In the immediate term, he points out, opportunity is seen as the government is getting ready to roll out the Sales and Service Tax (SST) system. The SST regime, which will kick in by September this year following the abolishment of the Goods and Services Tax (GST) last month, will likely require a new monitoring system, he says.
Of late, several listed technology solutions providers have gained some investor interest amid the positive outlook.
MyEG Services Bhd, for instance, has seen its share price gradually recover after having fallen to penny-stock level following the defeat of Barisan Nasional to Pakatan in the 14th General Election on May 9.
Yesterday, the counter gained 12 sen to close at RM1.24. MyEG Services Bhd, which is the dominant solutions provider for e-government services in the country, is generally perceived to be heavily reliant on contracts from the previous BN government. Among other things, MyEG provides the monitoring services for the GST system, which the Pakatan government terminated on June 1.
However, in an earlier interview, MyEG managing director and single largest shareholder Wong Thean Soon said the group stands ready to switch back to SST, as its system had been originally designed for the tax regime. He also expressed optimism that Pakatan-led government would continue using MyEG as the solutions provider for e-services given the group’s track record in providing highly efficient service at a competitive rates.
According to CIMB Equities Research, winning a contract to monitor the upcoming SST will be a re-rating catalyst for MyEG.
While many still see MyEG as a government concession, currently, only 20% of its revenue is derived from the e-government services.
Some 80% of MyEG’s revenue is derived from non-government-related products and services.
Meanwhile, Ace Market-listed Nova MSC Bhd is positioning itself to be a major player in e-government services in Malaysia.
According to Nova MSC chief executive officer Steven Chan Wing Kong, the group is currently in talks with the government and municipalities to be a service supplier of digital government and e-healthcare solutions.
He says the group to be a market leader in the digital government space in Malaysia within the next three to five years.
“Globally, digitalisation is becoming a norm, and the Government is now playing a catch-up game in adopting this new approach, which offers a faster and more cost efficient way of doing things. So we see a lot of opportunities in Malaysia,” Chan said at a recent media briefing. “We are already in talks with several government departments and municipalities to sell our solutions, but this will take time to gain traction, as we wait for the new government to provide greater clarity on its strategies and guidelines,” he added.
At present, Nova MSC’s operations are mainly concentrated in Singapore, which contributes about 98% of the group’s revenue for its financial year ended March 31, 2018. Its flagship Construction and Real Estate Network digital solutions has been used by the Singapore government since 2001.
The company, which has been named as one of the Top 20 small-cap jewels for 2018 by RHB Investment Bank, also has presence in Malaysia, Brunei, Indonesia, Saudi Arabia and Qatar, among others. Its shares have been actively traded in recent weeks.
Yesterday, the counter gained 0.5 sen to close at 17.5 sen, almost doubled from its closing price on June 1. The other technology solutions provider that has seen its share price almost doubled within two months is UCrest Bhd, formerly known as Palette Multimedia Bhd.
The counter gained three sen to close at 40.5 sen yesterday, compared with 21 sen at endMay. The Ace Market-listed mobile health and cloud platform developer and provider is also seen as a beneficiary of the trend towards greater digitalisation be it by the public or private sector. The company has successfully penetrated into Russia, and it is currently looking at deepening its presence in other Asian countries such as Singapore, Taiwan and China.
In November last year, UCrest saw renowned investor Brahmal Vasudevan, founder and chief executive officer of private equity firm Creador Sdn Bhd, emerge as a substantial shareholder in the company.
Despite the positive movement of some technology stocks in recent days, an analyst cautions investors against allowing their expectations running ahead of realities.
“The key to sustaining investor interest is to build a good track record of sustainable income... many of these small-cap stocks come with high risks, and some are vulnerable to speculative activity,” the analyst says.
“As we have seen in the past, some are more hype than substance, initially generating a lot of interest, but now fallen off investor radar screen,” he adds.