FINANCIALLY weak MCM Tech-nologies Bhd is not keen to stay that way for too long. Even so, the company's officials are bold about not allowing the losses to weigh down its long-term goals.
It is not so much the profit performance (which is important) as yet, in our business. We will extract value at a later date, when the company is in a more comfortable position, says Soo Kim Wai, who is managing director of Arab-Malaysian Corp Bhd.
Arab-Malaysian Corp owns a 62.6 per cent stake in the recently listed business accelerator. The stake is held via Mezanine Capital (Malaysia) Sdn Bhd. Arab Malaysian Corp Bhd also has a 21.08 per cent stake in AMMB Holdings Bhd, the company controlling the fifth largest local financial institution, AmBank Bhd.
As Ben Lee, managing director for direct investments and properties for Arab-Malaysian Corp Bhd, points out, We are part of the Arab-Malaysian (Corp) group so we have been investing for a long, long time now. What we are doing is not a new animal to us, very simple brick and mortar investment strategies are used.
Mezanine Capital, according to Soo, has in fact been in the investing business for more than 10 years, grooming many companies for the purpose of listing.
He adds that the only difference between MCM Technologies and Mezanine Capital is that the former focuses specifically on technology concerns.
Considering the wealth of experience and financial backing available from Mezanine Capital and AmBank, the outlook for the company should be good.
Lee explains, The real test at the end of the day is in monetizing a company, (and) MCM Technologies has monetized nearly everything (all the companies in its bandwagon).
More importantly, Lee says the company has created a strong base that will not create a drain in cash flow or require too much expenditure.
As it stands, MCM Technologies has 12 companies under its stable. The company's plans include listing some of them, and perhaps even selling one or two or even forming an alliance to float the companies.
To date, a number of MCM Technologies investee companies, companies that have received assistance, have already been listed or are looking at being listed.
Cyber Village Holdings Ltd is listed on the Singapore based Sesdaq, while IATIA Ltd is listed on the Australian Stock Exchange.
The company focuses on three broad areas of business healthcare technology, software solutions and integration, and edutainment, a term for interactive education and entertainment services. It further classifies all investee companies under four phases, either under build, expand, operate or reshape, depending on yardsticks like how long the company has been in operations.
Some of our investee companies are start-ups, so we expect losses in the first two years (of operations), these are categorised under the build category. We then have those companies which have established portfolios, and established credibility; here we look at expanding the business portfolio, expanding geographically even, Soo says.
He adds that many of MCM Technologies' investee companies are new, and just venturing into their respective operations, still building on core competencies, perhaps among the reasons for the current losses registered by the company.
For the third quarter ended in December 2002, MCM Technologies posted a net profit of RM237,000 from RM438,000 in the previous quarter. However, sales rose from RM5.35 million to RM7.55 million.
Over the nine-month period, the company incurred a net loss of RM47,000 from a RM14.76 million turnover.
There are mixed opinions among the analyst fraternity covering the stock, with some expecting the company to return to the black in the next financial year ending in March 2004, while others expect it to do so in the current year ending in March 2003.
An analyst from Mayban Securities who covered the company during the initial public offering period says the company will take about five to seven years to rake in profits.
It will take time for MCM Technologies to show positive earnings. Under the overall market conditions, it should take between five and seven years for the (investee) companies to show positive results, the analyst tells BizWeek.
Soo resigned as MCM Technologies group chief executive officer in February this year. Michael Soh, who is no new comer in the technology sector, succeeds him.
Soh, formerly of Hewlett Packard Sales (Malaysia) Sdn Bhd, adds that the outlook for the company should be positive considering the many leveraging capabilities now available.
We are actually developing leveraging capabilities across the region, as an example, India has a lot of projects, and manufacturing can be done cost-efficiently there. Malaysia (will), on the other hand, be used as a centre for our banking activities, Meaning actually, we can assemble and go to market our product quicker, and our price will be more competitive in contrast to competitors', enabling us to go for a quick win basically, Soh says of the company's future prospects.
Obviously there are some pockets or gaps in our (business) model, we are, however, trying to plug the gaps, we are currently in discussions with two multi-national companies, specifically to fill up those gaps, Soh adds.
To date, MCM Technologies has invested in 12 companies including, among the more prominent ones Gamarapi Sdn Bhd, a company involved in the provision of managing and implementation services for the banking industry in the South-East Asian region.
Gamarapi was formed after MCM Technologies ventured with Singapore-listed PK Tech International Ltd.
Blue Star Infotech (Malaysia) Sdn Bhd which provides software development, application integration and application support, among others, was a tie-up between the company and Blue Star Infotech India, which is a listed entity on the Mumbai Stock Exchange.
MCM Technologies also has a 10 per cent stake in Bijitec Pte Ltd, a Singapore-based company, the owner of a technology patent Biji, which enables handwritten characters and line drawings to be captured, stored, displayed and transmitted.
Lee says MCM Technologies' latest venture into the biotechnology sector, via a 45 per cent stake in Nirwana Delta (Malaysia) Sdn Bhd, will possibly bear fruits in two years' time.
Based on market euphoria, biotechnology will be the next big wave, we have studied and followed the market for a long, long time, but we will be approaching it carefully, very structurally, Lee says.
MCM Technologies has also tied-up with Bio Millennium Consultancy Sdn Bhd to form Nirwana Delta.
Bio Millennium Consultancy is affiliated to Dr Abdul Reezal Latif, who spent some time in Massachusetts Institute of Technology in the US as a research fellow.
We have chosen a very safe platform, the product base, palm oil is locally obtainable, easily available and people know what they are consuming, as it is Vitamin E, commonly available and commonly used. It is not something new, or alien, which the general public may distrust.
The challenge is to move it regionally, if we are lucky we can tie-up with others and make a more regional and global product, Lee says.
Since its listing in October last year, the company's share price hit its 52-week high of 17 sen on Oct 8, the first day the shares were listed, and its low of 10 sen on Oct 14. MCM Technologies closed at 11 sen on Thursday.
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