A FEW years ago, Julius Lim had thought that CompAsia Sdn Bhd would have attained its listing status at the turn of a new decade. Fast forward to 2020, that dream has been put on hold for another two years, maybe.
Plans have changed and Lim, founder and chief executive officer, says there is no rush.
“We feel that there are some businesses which we want to grow further before we look at listing. It’s still in our planning, probably in 2022. While it was an important milestone for us, we weren’t working just for the sake of listing. We want to make sure that we are in a good place.
“We do have the scale and we could list if we wanted to. But we want it to be at a time when we can get the best valuation when we go to market and these few businesses need to be developed further,” he shares.
He hopes to get more scale in its recently launched leasing programme and firmly establish its business-to-consumer (B2C) component to build a stronger foundation for the company.
CompAsia is possibly the largest integrated player in the used phone space in the region. Lim doesn’t know anyone else who is doing it like them.
When Lim started the company in 2012 to buy and sell second-hand computers, and later on mobile phones, he had focused on the business-to-business (B2B) market which gave him the immediate scale he needed.
But the consumer segment is becoming an important piece in ensuring that the company has better control over its collection and distribution of used devices.
“Our model now is B2B2C but we don’t want to be too dependent on our partners (in sourcing for devices). The B2C is still very small for us at the moment. What will be healthy for us is in the region of 80:20, 20% being the B2C, say, in the next one year.
“The challenge for the B2C segment, though, is the higher acquisition cost, which is why it won’t grow as fast as B2B. But B2C is still important and we are going to put emphasis on it.
“When you are doing a B2B2C like us, you don’t ultimately own the consumers. So for stability and long-term valuation of the business, the B2C piece is important for us.”
CompAsia has rolled out several services in recent times to get closer to the consumers. Two years ago, it bought a stake in India’s Instacash, an app that allows consumers to run a self-diagnostic test on their phones before offering them a price for the phone. Once the consumer accepts the offer price, CompAsia will arrange for pick-up of the device.
Instacash is currently used by major telcos and phone retailers in Malaysia for their customers to trade in their mobile phones.
Earlier this year, it launched a leasing programme with retailers to finance consumers to buy a new phone. This makes it more affordable for consumers while retailers will be able to sell more phones.
“At the same time, we get a margin on the financing. So instead of using a credit card, we lend you money to buy the phone. We have an app that assesses whether you qualify for the loan or not, and approve the credit immediately. This caters to people who don’t have access to credit cards or are unbanked.
“After 24 months, you have the option to upgrade, where we take back your old phone. So customers have the benefit of upgrading continuously, but with very little upfront payment needed. It’s a monthly payment scheme.
“Ultimately, what we want is to take back all these devices through Instacash or the leasing programme at the end of the lease. That’s when we resell these devices through our e-store. At the same time, we drive these customers back to our partner stores for new phones so they get repeat business,” Lim says.
This programme is expected to be a major revenue, volume and margin contributor for the group in the coming years.
Additionally, Lim is eyeing potential growth in Vietnam and Thailand where it set up office last year.
Notably, volume for new phones in these two markets far outstrips Malaysia’s volume thanks to larger populations. This will drive greater demand for CompAsia’s leasing and trade-in programmes there.
This will also contribute to higher collection and sales of its used devices.
The company has already launched these programmes with major retailers in Vietnam and Thailand. In addition to its presence in the Philippines, its foreign business is set to grow tremendously.
CompAsia is also looking at the Indonesian market but that has been put on hold for the time being given the situation with Covid-19.
While the sale of new phones globally have started plateauing in recent years, Lim says there is still a lot of room for growth in the used phone space.
“The used phone space is a bit different in that it is dominated by mom and pop shops. That’s where the opportunity for us is. A lot of it is in the unstructured space. We are in the structured space and the structured space is only a small percentage of the total used phone market.
“So it’s about how we introduce more professionalism into the trade, using more technology to change how things are done, how phones are traded and resold. We are really only at the tip of the iceberg in the used phone space,” he says.
He adds that although volume for new phones have plateaued, consumers will continue to change their devices every one or two years as mobile technology continues to evolve. For example, with 5G coming in, consumers will need to eventually switch to more suitable devices.
Despite slowing consumer demand, Lim says this has been a very good year for the company.
“It will be a record year for us. We already surpassed what we did last year in mid-August. Personally, I think we are good but not good enough.”
Also, with more consumers moving online, the company is well positioned to tap into this segment given that it has invested heavily in building its technology capabilities over the years.
This time around, Lim declines to reveal its sales numbers. But two years ago, he had noted that it was doing about RM300mil in sales, up from a revenue of RM85mil in 2017.
Although shelved for now, the IPO dream hasn’t diminished in any way. In fact, Lim is looking at opportunities on the Nasdaq.
“We aim to list in the US, like on the Nasdaq, because I think these international markets have investors who appreciate our type of business a lot more. So there will be better valuation as they have a better understanding of this type of business.
“We have always seen this type of trend in the US, where startups in a greenfield are always given the opportunity to raise funds aggressively in their markets,” he says.
But Lim emphasises that a listing exercise is not a be-all and end-all for CompAsia.
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