Reset at Orion IXL

Investors drawn to the stock after boardroom changes, capital exercise

With pre-election fever on the rise, many unknown little companies have started to hog the volumes list on Bursa Malaysia.

One such company is loss-making computerised maintenance management system (CMMS) provider Orion IXL Bhd, the company formerly known as CWorks System Bhd.

The penny stock has been up 29.17% or 3.5 sen since the beginning of this year. At its last price of 15 sen, the stock is however still down 23% on a one year basis.

Business wise, the company completed its corporate exercise in August and has since used the proceeds to acquire rival information and communications technology company ASAP Bhd for RM73mil.

The acquisition of ASAP is likely to put Orion back into the black this year, as the company has been bleeding since its financial year ended Dec 31, 2013.

But perhaps the reason why investors are currently interested in the stock is because of the changing of guards taking place in the company.

There have been boardroom and shareholding changes over the last few months.

There are also interesting politically-linked shareholders within the company.

Mohamed Nizam Abdul Razak, the brother of Malaysia’s Prime Minister Datuk Seri Najib Razak, has been a long time shareholder of the company. He has been in Orion, or CWorks, from the early days of 2005.

Back then Nizam was a substantial shareholder, holding above 5%, before subsequently reducing the stake over the years.

When Orion’s 2016 annual report was released last year, Nizam held 4.45 million shares, or a 3.34% stake, in the company as of March 31, 2017.

Then as of Nov 15, 2017, Nizam now has 11.8 million shares, although that stake has been diluted to 2%.

The dilution could likely be due to a rights issue exercise undertaken by the company to raise some RM79.2mil early last year.

Orion’s corporate exercise consisted of a renounceable rights issue of 465.85 million new rights shares, together with 232.93 million warrants on the basis of seven rights shares for every two exiting Orion’s shares.

This came with one free warrant for every two rights shares subscribed. The rights shares were priced at 17 sen.

As for Orion’s shareholding changes, there have been plenty of movements in the last few months.

In October, Orion’s co-founder and chief executive officer (CEO) Abdul Rani Achmed Abdullah ceased to be a substantial shareholder in the company, after disposing of a 6.34% indirect stake.

Orion non-executive director Yahya Razali has also been steadily reducing his stake in the company since October too. From a stake of some 24.38% in Oct, he now has some 12.2% as of Dec 22, 2017.

Another director, Adnan bin Zainol, has also been disposing his stake.

From a stake of 4.89% or 29.3 million shares, he has since been selling down his shares. On Dec 7, he sold 18.28 million shares via an off market transaction, leaving him almost with no more shares anymore.

Perhaps they were making way for new shareholders, one of whom is Orion’s new CEO, Mohd Shaharul Mohd Shariff (pic).

Another new shareholder appears to be ASM Mara Trust Management Bhd, which emerged with a 5.14% stake after it acquired 20.86 million shares on Oct 31, last year.

On the boardroom changes, executive director Tang Luan Kang resigned due to personal commitments on Nov 21.

Then on Dec 29, director Datuk Mohamed Ridzuan Nor Md also resigned for the same reasons.

Meanwhile, Shaharul was redesignated from his position of executive director to CEO on Nov 7, following the completion of the ASAP acquisition.

Shaharul was replacing Orion co-founder Abdul Rani Achmed Abdullah. Shaharul had been appointed executive director of Orion on Sept 18.

Shaharul was formerly the CEO of ASAP.

Notice of him first emerging as a substantial shareholder in Orion appeared on July 12 when he acquired 36.93mil shares or a 6.17% stake via the vehicle Genting Utama Sdn Bhd.

Another new shareholder appears to be ASM Mara Trust Management Bhd, which emerged with a 5.14% stake after it acquired 20.86 million shares on Oct 31, last year.

Questions now abound as to whether further new shareholders and management will appear soon.

Improving fundamentals

Business wise, Orion’s health appears to be improving.

Orion has been making losses since 2013, but is expected to turn around for its financial year ending Dec 31, 2018 (FY18), now that the ASAP acquisition has been completed.

That acquisition, which came with a price tag of RM73mil, comes with a profit guarantee of RM7.5mil per year, for two years.

ASAP made a net profit of RM5.85mil for the financial year ended June 30, 2016.

Following the acquisition of ASAP, Orion is now the largest CMMS provider in Malaysia and its asset size will increase by RM78.3mil.

In terms of balance sheet, Orion is looking better, with cash of some RM5.5mil and no borrowings.

In addition, ASAP has an orderbook value of RM11mil, which is deliverable in the first year.

For the nine months to Sep 30, 2017, Orion posted a small profit of RM241,000 from a previous loss of RM1.26mil. This was on the back of RM4.77 mil in revenue compared to RM2.39mil in the corresponding previous period.

In general, both ASAP and Orion are primarily involved in the provision of software solutions for facility management services, though Orion liases with contractors while ASAP works directly with asset owners. ASAP’s CMMS software is integrated to its client’s human resource and accounting departments, to enable cohesive management of resources.

To date, Orion is the only listed CMMS company on the Ace Market of Bursa Malaysia.

In an interview in July last year, Shaharul said the company was tendering for 20 projects, which have an estimated total contract value of RM11mil to RM15mil. It is also looking to establish a presence in Indonesia and Philippines.