Why investors are chasing this stock
SO just what is going on with Main Market-listed Excel Force MSC Sdn Bhd?
Some price action in the last few weeks stirred interest in this company that provides application solutions for the stockbroking and banking industry.
The stock is now up 51.26% on a year to date basis at RM1.80, giving it a market capitalisation of RM372.4mil.
What is with all that anticipation? It clearly isn’t about the company’s existing business, as the company reported a 34.13% drop in net profit to RM5.63mil on the back of a 11.1% decrease in revenue to RM22.47mil for its financial year ended Dec 31, 2016.
The stock now trades at a price earnings multiple of a whopping 66 times.
No doubt, its appeal lies squarely on the presence of some personalities within it – TS Wong and Brahmal Vasudevan.
Firstly, TS Wong, or Wong Thean Soon is the iconic managing director and single largest shareholder of MyEG Services Bhd.
MyEG has performed exceptionally well over the last decade – both in terms of its growth performance and share price.
While MyEG started out as a provider of e-government services with the provision of solutions that are related to the vehicle road tax and drivers’ licence renewal among others, it has successfully diversified into commercial solutions some three years ago.
Today, commercial solutions make up 70% of its group business activities.
Last month, MyEG announced its maiden foray overseas into the Philippines, where it will also provide electronic e-government services.
Share price wise, MyEG has been a top performer. It was first listed on the Ace market in Jan 2007 at 55 sen a share with a market capitalisation of some RM69mil. At today’s market capitalisation of RM7.21bil, the stock has multiplied by some 104 times.
Thus not surprisingly, Wong’s entry into Excel Force last year caused much stir. He acquired an 18.7% stake in Excel Force on April 26 via his vehicle Asia Internet Holdings Sdn Bhd.
Investors jumped in following that news, seeing Excel Force as a proxy both to MyEG and TS Wong.
A month after Wong’s entry into Excel Force, the stock hit a 52 week high of RM1.96.
“Why would TS Wong buy over the company if he wasn’t planning to do something a little bit more different,” questions an observer.
“TS Wong isn’t the sort of person who buys a company just to make some money.
“He would have something new and innovative in the works,” says the observer.
There is also savvy investor Brahmal Vasudevan, who has accumulated shares in Excel Force since Wong’s appearance, and now has a 7.64% stake.
Brahmal is the founder and chief executive officer of private equity firm Creador Sdn Bhd.
This would make it the second time Brahmal is buying into a Wong-controlled company.
Brahmal was previously a substantial shareholder in MyEG back in 2012, where he had made a handsome return.
Investors like Brahmal tend to excite the market with the stock he buys into.
Currently, Brahmal also owns a 5.79% stake in ICT training and certification provider Prestariang.
Last week Creador exited GHL Systems Bhd as the firm sold its entire 28.3% stake to London based private equity firm Actis. Creador had held the stake for more than three years.
Creador’s exit will generate a return of 2.8 times and an IRR of 40% in Malaysian ringgit terms.
Brahmal’s investments in the past have included Scicom (MSC) Bhd, IFCA MSC Bhd, Oldtown Bhd and Bonia Corp Bhd, all which have done relatively well.
EForce’s third-largest shareholder is Datuk Mohamed Nizam Abdul Razak, who holds a 8.07% stake.
Business still the same
Now while the major shareholders of Excel Force have changed, its principal activities remain in the development, provision and maintenance of computer software application solutions for the stockbroking industry.
Eforce is currently the market leader in Malaysia for the provision of financial services business solutions where it currently has approximately 90% of the stock broking Public Gallery Display System and 70% of electronic client ordering system market share in Malaysia.
The company was established in 1994 by Jeff Wang and his wife Sharon Sun. They listed the company on Bursa Malaysia in December 2004.
Notably, boardroom changes have taken place.
The appointment of Datuk Norraesah Haji Mohamad as the new executive chairman of Excel Force on Feb 10, 2017, is a sign that the company could be trying to replicate some of MyEG’s success.
Norraesah is also the chairman of MyEG.
She is replacing Jeff Wang, who has since been redesignated to managing director.
“Eforce maybe offering a new product leveraging on MyEG’s network,” said a market observer.
Wang, via his vehicle Exacta Co Ltd, continues to be the second largest shareholder of the company with a 10.48% stake.
It is still unclear what exactly Eforce is setting out to do, but sources say it is looking to be ‘disruptive’ to some aspects of the financial world.
Among the speculations on what EForce will do include getting involved in electronic insurance products to setting up high frequency trading platforms.
A statement by the company on Feb 2 did provide a hint.
Excel Force announced that it was collaborating with Ullink, a global provider of electronic trading and connectivity solutions to the financial community.
This strategic partnership will allow ExcelForce clients to leverage Ullink’s NYFIX global connectivity platform while integrating services and technologies of both parties.
Excel Force was looking for potential partners to significantly enhance and widen its clients’ trading connections with international exchanges and the global community. Following the partnership with Ullink, Excel Force clients will now be granted turnkey access to an extensive network of trading services with established connections to each trading partner.
Ullink’s NYFIX is a FIX based electronic trading community connecting over 1,600 buy-side and sell-side market participants, venues and trading services.
“We strongly believe that their NYFIX connectivity platform will boost the development and growth of our business by providing a significant competitive advantage to our clients,” expressed the management of Excel Force in a release.
Could this be the new growth driver for Excel Force moving forward? Or could it be something entirely different and more exciting?