Cuscapi pins hope on REV to revive interest

The companys F&B product using the tablet technology ,among others, enables restaurant diners to view an electronic menu and submit orders with minimal intervention.

Ajisen contract a morale booster for company

PETALING JAYA: Strong buffers put in place during good times have put Cuscapi Bhd in a better stead to weather the period of uncertainty that the company is facing at the moment.

The company is surviving through these times where losses have been incurred, and at the same time taking prudent steps to improve future profitability.

Cuscapi is involved in the information technology industry and caters mainly to the food and beverage (F&B) industry with their REV self-ordering tablets.

Tough times had seen the company hit with losses from financial years 2013 ended Dec 31 (FY13) to FY15.

The FY15 had seen the company’s losses widening to RM24.5mil while its first quarter for FY16 had also seen it continuing to register a net loss of RM3.6mil from a profit position of RM201,000 a year ago.

Interest in the stock also faded then when CIMB Research, the only research house to cover Cuscapi, ceased coverage on the company in February 2016.

CIMB Research, in their final note on the company, said that it ceased coverage on Cuscapi mainly due to the lack of positive catalysts for the stock, noting that the big break in China did not materialise then.

Cuscapi’s chief executive officer Her Chor Siong told StarBiz that the past three years had seen the company embarking on a “deliberate and substantial” transformation process.

“The investment we made in research, product development and pilot deployments over those three years, have enabled us to develop and fine-tune technology solutions that help F&B restaurant chains improve operating cost and achieve higher average revenue and sustainable value growth,” Her said.

“Our transformation is aimed at building a technology company that focuses on long term shareholder value and not on short term profits. The real value of REV comes from it being a platform that enables access to more than 100 million end-consumers per annum,” he added.

Cuscapi has a relatively clean balance sheet, with cash and bank balances of RM6.23mil, zero gearing and minimal short term liabilities.

Its current tax assets have grown to RM1bil from RM939.2mil a year ago with reserves of some RM16mil.

Its annual report says that its sales order book stands at RM27mil that includes recurring revenue up to 2018.

Recurring revenue

Her, who owns 6% of the company, said it plans to grow its recurring revenue base moving forward and will put its focus on this area.

“Our migration to a multi-year contract and subscription-based managed services business model has helped to give us more visibility in future revenues. It will continue to be the focus of our efforts in the coming year to secure more subscriptions and build on our recurring revenue base,” he says.

Cuscapi recently scored a small victory on this front when it secured a contract from Hong Kong-listed Ajisen China Holdings Ltd to exclusively deploy and manage REV self-ordering tablets for all of the client’s current and future restaurants China for a period of six years. The stock has gained some interest since then, with some buying activity seen on the news of this contract.

It spiked to an eight-month high by some 53% from its historical lows of 14.5 sen on sizeable volumes earlier in the week with a market capitalisation of RM61mil presently.

“The Ajisen contract will start contributing progressively as we implement the 25,000 tablets in Ajisen’s 634 stores in accordance with our project schedule. The implementation is expected to complete within 12 months,” Her said.

He noted that recurring incomes from their REV product will progressively increase over the next 12 months as it starts work on this contract. “We expect to achieve a maximum monthly revenue of approximately RMB3.5mil (RM1.7mil) per month upon completion of the implementation. Full impact of the revenue from this contract will be achieved in the third quarter of FY17,” Her says.

“We are confident that we can complete deployment and start managing the REV self-ordering tablets in all of Ajisen’s restaurant within the agreed schedule. We will also be ready to accommodate any further expansion of their restaurant network, beyond the current 634 stores,” he added.

If labour costs continue to rise, growth could be tapped in an industry that is still much reliant on human labour for F&B reservations, therein reducing overheads as less people would need to be employed eventually. The company also says the REV’s analytic function allows data collection on each customer’s preferences, which can be used to build brand connections and loyalty.

“It integrates perfectly into our ecosystem of restaurant management solutions, building on the strength of our transight solution suite, carina and our customer call centre to allow business operators to more efficiently manage their business and maximise engagement with diners, nurturing the growth of their business to deliver more value to our customers,” he says.

Moving forward, Her says this is just the start of more good things to come on this front and hopes to secure more contracts of such nature. “This contract is only the start of our targeted commercial deployment of REV in China and we’re looking at deploying 100,000 tablets and ultimately harness its wider benefits as effective media channel, which is why we are primarily targeting larger companies at the moment,” he says.

“We have already piloted REV with other customers in China for similar projects, and are currently in pilots with Pizza Hut, China’s largest table service chain restaurant,” he adds.

While the company is treading water today, the market seems to think that the Ajisen contract may just be the start of a turn in the company’s fortunes to help it tip the scales in its favour, more so in a country such as China with a population of over 1.35 billion people and where labour costs are on the rise.