Something brewing in SMTrack

Tan Sri Lee Kim Yew

SMTRACK Bhd has never been profitable on a full-year basis since it debuted on Bursa Malaysia more than a decade ago.

The company has stayed under the radar for quite some time, but recent developments including the emergence of a property tycoon as a substantial shareholder and the possibility of a government-linked company (GLC) taking up equity in SMTrack have piqued investor interest.

For now, it remains to be seen whether these will lead the radio-frequency identification (RFID) solutions provider to better earnings in the future.

Nevertheless, ahead of these developments, the stock has woken up from a long slumber, skyrocketing by over 260% from just eight sen at the start of December 2021 to 29.5 sen.

The daily trading volume has also surged to a multi-year high in the past two weeks.

On Jan 6, the company told the stock exchange that it is in early stages of negotiations with a GLC and that no agreement has been reached yet.

The filing did not reveal the nature of the discussions, but SMTrack was responding to an article which claimed that the company could see a GLC taking a 10% stake in the former.

The article also said that the GLC’s interest was expressed in a letter which was addressed to SMTrack after a meeting between the representatives of the two parties.

The said article also mentioned a rumour that a prominent “Datuk Seri” would become another substantial shareholder of SMTrack.

However, SMTrack told the stock exchange that it is “not aware or been notified” about this.

Interestingly, just a few days earlier, billionaire Tan Sri Lee Kim Yew emerged as a substantial shareholder in SMTrack with a 5.05% direct stake.

He is the founder of The Mines Resort and Country Heights Holdings Bhd, which has interests in property development, health, hospitality and education.

In September 2020, Lee announced that he was stepping down from Country Heights to pursue his interest in cryptocurrencies.

Several months later, Lee established a blockchain-based investment bank called Golden Horse Investment Bank, reportedly to ride on China’s economic trend.

When contacted by StarBizWeek, Lee says that his entry into SMTrack is only for “passive investment” and that he will not take up an active role in the board of directors.

Interestingly, however, he hints about a potential collaboration between SMTrack and his existing businesses.

“I like it (SMTrack) for its technology focus.

“I took up the stake so that hopefully, the board will pay attention to me and what I do,” he says.

Lee declines to comment when asked whether he would raise his stake in SMTrack from 5% currently.

Beyond the changes in its shareholding, another interesting development is SMTrack’s growing involvement in the aerospace landscape, including into drones.

On Dec 27, 2021, SMTrack signed an agreement to buy an EHang 216 autonomous aerial vehicle for US$2.5mil from Hong Kong-based Strong Rich Holding Ltd.

“The rationale of the acquisition is to establish a business integration with Strong Rich to enhance SMTrack’s revenue,” the company said in an earlier filing.

On Oct 11 last year, SMTrack also bought a unit of Bombardier Challenger 601-3R aircraft for US$2.5mil from Flyjet Sdn Bhd, in order to expand its cargo carriage services.

The company’s venture into aviation began in 2019, when it purchased a 60% stake in Jakarta-based Citilink Aviation (M) Sdn Bhd for RM2.8mil.

Prior to the acquisition, Citilink had operated as a low-cost brand of Garuda Indonesia, the Indonesian national carrier.

SMTrack said the venture into aviation was necessary to reduce the dependency on its existing track and trace business.

It also said that it intends to expand its RFID solutions for airline operations such as baggage and ticketing.

SMTrack was listed on the Ace Market of Bursa Malaysia back in April 2011, at an issue price of 31 sen.

The company offers RFID solutions for various applications.

Using its RFID technology coupled with a tracking engine called SMTrack, it provides online track and trace solutions and platforms.

Among SMTrack’s solutions are secure trade, food and secured traceability, Near Field Communication (NFC), global positioning system (GPS) fleet management and RFID anti-counterfeit solution.

Its NFC solutions consist of three modules.

They are Smartag AirPay Server, which is a payment gateway linked to Celco e-payment system, Smartag AirBill Server, which is a billing server that tracks customer payment and transaction logs, and provides merchant portal login to view those payments, and Smartag AirPOS, which is a point-of-sales software.

SMTrack had previously said that its products are highly in demand due to its uniqueness in design and the fact that there are not many competitive products in the market.

Despite the high demand for its products as claimed by the company, SMTrack cannot even seem to churn out decent revenues, let alone profits.

For the three-month period ended Oct 31, 2021, the company recorded a net loss of RM1.2mil on the back of a RM283,000 revenue.

In August last year, SMTrack changed its financial year-end to Dec 31, 2021 from July 31, 2021.

This was the third time the company had changed its financial year-end in the past seven years.

A quick check on Bursa Malaysia’s website showed that SMTrack’s latest available full-year accounts were for the financial year ended July 31, 2020.

In the 12-month period, SMTrack posted a net loss of RM815,699 and a revenue of RM1.79mil.

Its cash holding as of end-October 2021 stood at RM2.05mil against zero borrowings.

Its total assets are worth RM56.05mil, while liabilities are RM10.64mil.

Late Friday, SMTrack announced the appointment of Datuk Lim Hwa Tat as executive director, following his emergence as a substantial shareholder with a 5.14% stake.

Lim, who is also managing director of Sersol Bhd, acquired 29 million shares in SMTrack in the open market on Friday.

SMTrack also appointed Datuk Seri Tan Choon Hwa as a non-independent non-executive director, after he raised his stake to 5.4%, from 3.16% previously.

Tan acquired 20 million shares in SMTrack on Jan 6 for 26 sen a share, also from the open market.