PETALING JAYA: Telecommunications and technology company Green Packet Bhd is showing signs of green shoots, and is optimistic of earnings turnaround by 2021, said a CGS-CIMB research report.
The research unit noted that Green Packet had inked an exclusive 10-year agreement in August with China’s Tencent to exclusively offer its cloud services in Malaysia.
According to global consulting and research firm, Analysys Mason, Malaysia’s cloud market is set to deliver 13% revenue compound annual growth rate (CAGR) from 2020 to 2024.
Green Packet will initially invest RM100mil for 600 servers that will go live by first quarter of 2021 and believes this will grow to 3,000 to 4,000 servers over the next four to five years with total investment of RM300mil to RM500mil.
Green Packet projects the business to contribute 30% to 40% of earnings before interest, taxes, depreciation, and amortisation (EBITDA) in 2022, with net present value (NPV) of US$82mil (RM339mil) over 10 years.
Also, Green Packet’s fintech business (in digital services) includes e-wallet (kiplePay), payment gateway and wallet-as-a-service.
CGS-CIMB Research noted that kiplePay has established itself as the leading e-wallet in the local public higher education sector (60% market share as of August), which it estimates at RM5.8bil in potential spending per annum.
The research unit said kiplePay is also working on further opportunities with Bank Islam and the National Higher Education Fund Corp.
In August, Green Packet wound up loss-making Singapore mobile virtual network operator (MVNO) business, VivoHub.
The company also divested its 10.3% fully-diluted stake in webe to Telekom Malaysia Bhd on Sept 7 for a full settlement of RM283mil, exchangeable medium-term notes issued to TM previously.
This saves RM20mil per annum in interest cost for Green Packet (from September 2020) and turned its second quarter 2020 net debt of RM252mil into proforma net cash of RM31mil.
The CGS-CIMB report said Green Packet’s business expansion will be funded by private placements and warrants.
Green Packet’s Tranche One private placement raised RM52mil in July. The company plans to raise another RM63mil to RM99mil via a Tranche Two private placement of 120 million to 190 million shares at 52 sen per share indicative issue price (similar to Tranche One) to fund working capital and cloud infrastructure investment.