OUTSOURCING in Malaysia has advanced roughly midway between buzzword status and accepted business practice. It probably will not be long before local companies wholly embrace the idea of handing over chunks of their operations to outsiders to handle. One company that is eagerly looking forward to that day is Symphony House Bhd.
Scheduled to list on the Mesdaq market of the Kuala Lumpur Stock Exchange in the middle of next month, the service-based group has been assembled based on the fundamental strategy that it can offer other businesses a cheaper and more efficient way of running their backroom operations.
Symphony House's approach is to use technology to drive these outsourcing jobs. And it believes that it has an edge because its expertise and experience are in the fields of information technology (IT) services and corporate services.
“Organisations need to bring their costs down. Yet, companies are not taking advantage of outsourcing because they are not used to the concept. Some do it in a menial manner,” says group chief executive Datuk Mohamed Azman Yahya.
“This will change and we're well-positioned to capitalise when outsourcing takes off. We enjoy a certain advantage because of our teaming structure.”
Symphony House's two divisions are the Symphony Global Technologies group (SGT group) and the Signet group, each comprising three wholly-owned subsidiaries.
The companies' push into the outsourcing business works on two fronts. The SGT group focuses on the outsourcing of IT and business processes. This ties in with its business of systems integration, software development and consultancy.
According to Symphony Global Technologies Sdn Bhd CEO Jasmy Ismail, the SGT group targets clients such as statutory bodies, and players in the financial services, utilities and telecommunications industries.
It is a natural progression for the company to seek outsourcing deals with financial institutions because the two other SGT group subsidiaries, Symphony Xen Solutions Sdn Bhd and Xennet Pte Ltd, are plugged into the burgeoning wealth management market.
The two companies' main product is the Spectrum software suite targeted for the financial planning marketplace. Among its clients are United Overseas Bank (Malaysia) Bhd, HSBC Bank Malaysia Bhd and SBB Unit Trust Management Bhd.
Cyril Tan, CEO of Symphony Xen Solutions and Xennet, says the rapid growth in the local wealth management business will provide Symphony House with plenty of opportunities over the next three to five years.
“When we started, we were selling software and were going in at low prices. Now we're offering a range of services to help financial institutions set up wealth management divisions,” adds Tan.
The SGT group will hit another milestone soon when Symphony Global Technologies signs a deal with a government-linked entity to set up and manage a call centre.
There are also plans to go beyond Malaysia and Singapore. “We're franchising our technology across the region,” says Tan.
Jasmy adds that the company aims to make Malaysia its regional outsourcing hub. “We need economies of scale,” he says. “The real value is to go beyond Malaysia. The plan is to first build our base here.”
The Signet group, which traces its origins to the early 1960s, provides corporate secretarial, financial accounting, share registration and nominee services. It is widely regarded as a leading corporate services provider.
It has over 2,500 companies (including some 140 listed companies) as clients. Azman sees this as a good base to secure outsourcing jobs.
“We already do stuff such as the payrolls and secretarial work for these companies. It makes sense for us to do more backroom work. It's a good opportunity. The trick is to do as much as possible, and as efficiently as possible,” he explains.
Symphony House plans to expand the Signet group by securing more clients and offering more value-added services. It helps too that the Signet group will soon be the only corporate services player in Malaysia backed by a listed company.
“We're quite aggressive in our marketing. But it's a matter of service not pricing. We've been in the business the longest and we're the most efficient. We also plan to acquire other share registration companies,” says Azman.
Internal reorganisation is a key objective of Symphony House's five-year business plan. The aim is to streamline the company's two divisions so that there will be more seamless interaction.
One move will be to eliminate any duplication in the IT services group so that one of the subsidiaries can concentrate on marketing and, research and development. It will even be possible for the Signet group to outsource part of its corporate services work to the IT division.
Says Azman, “There'll be more integration as we go along. Over time, we'll see a lot of interaction. We're quite focused as to where we're heading.”
In the initial public offering, Symphony House will issue 30 million new shares – 20 million by private placement to identified investors, five million to directors and employees, and five million to the public. The shares will each have a par value of 10 sen and will be issued at an offer price of 50 sen.
This gives the Symphony House shares a price-earnings multiple (PE) of about 11 times. Azman points out that the average PE for a Mesdaq company is 13 times.
Azman rattles off a list of figures to justify the valuation. The company's after-tax profit growth is over 100 per cent. He describes its compounded annual growth rate as very good. The dividend yield is 5 per cent, “which is almost unheard of” for a newly listed company.
In addition, the returns on shareholders' fund and on net tangible assets are over 25 per cent and 50 per cent respectively.
“We want to provide value. From a qualitative standpoint, because we own intellectual property (that is, the software), we can build on it,” says Azman.
He adds that company's strength is also derived from the fact that it has strong independent directors.
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