DIGISTA (0029) - Digistar expects to turn around by end-2016
March 27, 2015 : 10:51 AM MYT
KUALA LUMPUR: Loss-making information and communications technology (ICT) service provider Digistar Corp Bhd is banking on recurring income that it expects to start streaming in from its various businesses from next year onwards to turn the company around by end-2016.
“Our businesses will help us return to profitability and we expect to turn around by the end of 2016,” Digistar group chief executive officer Datuk Wira Lee Wah Chong told reporters after the company’s annual general meeting yesterday.
“We can keep on doing ICT work but these contracts are not enough for us. We want recurring income and everything we have done has been about getting a steady recurring income for the company and its shareholders,” he added.
Besides the company’s core business of providing systems engineering and integration solutions for the audio-visual, broadcasting and security sectors, Digistar has ventured into construction, property development, central monitoring system (CMS) services, interactive pay TV and telecommunication businesses.
Despite the variety of its businesses, the company’s financial year ended September (FY14) still saw a net loss of RM5.65 million on the back of RM109.71 million in revenue. It continued its losing streak into the first quarter ended December (1QFY15) with a net loss of RM3.86 million and revenue of RM31.24 million.
Lee said the losses were due to bond interest expense for the RM280 million bonds it issued to finance the construction of the Malaysian National Technology Advancement Centre (MTAC) in Melaka for the government.
“We pay RM14 million to RM16 million interest for the bonds each year. That offsets any profit we make from our other operations,” he said.
Lee expects this to change at the end of next year as Digistar’s various businesses start to generate recurring income on top of its existing order book of approximately RM217 million. The company also has a tender book of RM350 million.
He said Digistar will have a “stable income” stream from its 15-year concession from the government to provide asset management services for MTAC once the RM240 million construction project is completed in July 2016.
Furthermore, its commercial development of The Imperial Heritage Hotel Melaka will be fully operational this year and Digistar is expecting the project to rake in RM25 million to RM30 million in revenue per annum.
Digistar (fundamental: 1.05; valuation: 0.6) is also going to continue the expansion of its CMS business and intends to grow its customer base by more than threefold to 20,000 in two years.
It is also in the process of acquiring three security solutions companies with a view to setting up three more command centres. Two of the new command centres will be located in Sabah and Sarawak, which will effectively expand the company’s footprint in the two states.
“The cost of monitoring one house and 1,000 houses in the same command centre is the same. Our goal is to acquire more customers and secure recurring income from them,” he said.
Digistar’s counter closed up half a sen or 2.22% at 23 sen yesterday, with a market capitalisation of RM104.88 million.
The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to theedgemarkets.com for more on a company’s financial dashboard.
http://www.theedgemarkets.com
March 27, 2015 : 10:51 AM MYT
KUALA LUMPUR: Loss-making information and communications technology (ICT) service provider Digistar Corp Bhd is banking on recurring income that it expects to start streaming in from its various businesses from next year onwards to turn the company around by end-2016.
“Our businesses will help us return to profitability and we expect to turn around by the end of 2016,” Digistar group chief executive officer Datuk Wira Lee Wah Chong told reporters after the company’s annual general meeting yesterday.
“We can keep on doing ICT work but these contracts are not enough for us. We want recurring income and everything we have done has been about getting a steady recurring income for the company and its shareholders,” he added.
Besides the company’s core business of providing systems engineering and integration solutions for the audio-visual, broadcasting and security sectors, Digistar has ventured into construction, property development, central monitoring system (CMS) services, interactive pay TV and telecommunication businesses.
Despite the variety of its businesses, the company’s financial year ended September (FY14) still saw a net loss of RM5.65 million on the back of RM109.71 million in revenue. It continued its losing streak into the first quarter ended December (1QFY15) with a net loss of RM3.86 million and revenue of RM31.24 million.
Lee said the losses were due to bond interest expense for the RM280 million bonds it issued to finance the construction of the Malaysian National Technology Advancement Centre (MTAC) in Melaka for the government.
“We pay RM14 million to RM16 million interest for the bonds each year. That offsets any profit we make from our other operations,” he said.
Lee expects this to change at the end of next year as Digistar’s various businesses start to generate recurring income on top of its existing order book of approximately RM217 million. The company also has a tender book of RM350 million.
He said Digistar will have a “stable income” stream from its 15-year concession from the government to provide asset management services for MTAC once the RM240 million construction project is completed in July 2016.
Furthermore, its commercial development of The Imperial Heritage Hotel Melaka will be fully operational this year and Digistar is expecting the project to rake in RM25 million to RM30 million in revenue per annum.
Digistar (fundamental: 1.05; valuation: 0.6) is also going to continue the expansion of its CMS business and intends to grow its customer base by more than threefold to 20,000 in two years.
It is also in the process of acquiring three security solutions companies with a view to setting up three more command centres. Two of the new command centres will be located in Sabah and Sarawak, which will effectively expand the company’s footprint in the two states.
“The cost of monitoring one house and 1,000 houses in the same command centre is the same. Our goal is to acquire more customers and secure recurring income from them,” he said.
Digistar’s counter closed up half a sen or 2.22% at 23 sen yesterday, with a market capitalisation of RM104.88 million.
The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to theedgemarkets.com for more on a company’s financial dashboard.
http://www.theedgemarkets.com
