M3Tech enters new growth phase
Alan Voon 

THE shares and warrants of M3 Technologies (Asia) Bhd (M3Tech) attracted heavy investors’ interest recently despite the company posting a bigger loss in its latest financial year ended June 30.

This may be attributed to the company’s new range of products and services gaining traction as it enters a new exciting growth phase. The mother share price closed at 9.5 sen on Aug 30 while its warrant M3TECH-WA was last traded at 4.5 sen.

M3Tech was established in 1999 and was one of Asia’s leading premier mobile value-added services (VAS) provider with operations across Pakistan, Indonesia, Thailand and the Greater China region.

However, as consumers move away from traditional SMS, M3Tech’s core mobile VAS services suffered. The company’s profitability was affected, resulting in revenue drop and losses since FYE6/13.

M3Tech has nevertheless embarked on research and development of new products and services during the last few years with some of these products just being brought into the market.

In its financial year ended June 30, M3Tech recorded RM39.16 mil in revenue, a slight drop from RM41.09 mil achieved in the previous financial year. Net loss for the group widen to RM6.97 mil compared to RM5.93 mil in FYE6/16.

M3Tech has made provision for doubtful debts totalling RM4.38 mil as well as inventory writedown, among others. The company commented that it is unfortunate that prudent write-offs and provisions have clouded what has otherwise been a productive fourth quarter for the group with increased quarter-on-quarter turnover and revenue.

M3Tech has launched its “i3 series” platform comprising four different product offerings of various business solution services. The platforms are i3Display (providing interactive digital displays), i3Teamworks (providing business solution management software), i3Apps (a mobile app creator), and i3Tracker (a mobile tracking devices).

While the initial response was slow as M3Tech worked to enhance its offerings, these products are starting to contribute in a meaningful way. The company indicated that it has also carefully strategised an aggressive marketing campaign that will commence deployment throughout its subsidiaries in Q1FY18.

In recent times, the media has cited M3Tech general manager Kevin Ng for saying that the group is targeting to enter into more international markets as it believes prospects are better abroad.

Earlier this year, M3Tech partnered with Indonesia’s largest mobile operator Telkomsel to distribute its T-Bike Smart Assistant for Vehicles devices which allows vehicle owners to monitor, guide and control their vehicles directly from a smartphone (under its i3Tracker platform).

M3TECH-WA is currently trading at a premium of 52.7% which is not low for a warrant with two years to expiration.

Its theoretical valuation seems not as high as its implied volatility of 89.1% is only slightly higher than the mother share’s historical volatility of 85.6%.

Investors who believe in the longer term growth story are better off buying the mother share directly while short-term speculators can choose the warrant with an effective gearing of 1.56 times to enjoy higher percentage gain if the mother share rises in the short term.

The writer is CEO of Warrants Capital Sdn Bhd

This article first appeared in Focus Malaysia Issue 248.