Markets
PALETTE-WA to soar on Russian orders
Alan Voon,Alan Voon 
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THE shares and warrants of Palette Multimedia Bhd attracted investors’ interest earlier last week following a significant improvement in the company’s revenue and its promising venture into Russia. The share price of Palette and its warrant closed at 7.5 sen and 3.5 sen respectively on Aug 2.

Palette is originally a solution provider of broadband, wireless and networking products and services. It has in recent years diversified into mobile healthcare service via iMedic, a mobile healthcare cloud system that connects to multiple wireless intelligent medical or healthcare devices to doctors, caretakers or hospitals, targeting at helping doctors and specialists extend their medical services beyond the physical boundaries.

For the financial period year ended May 31, Palette recorded a revenue of RM5.71 mil with almost 86% of the amount achieved in the final quarter.

The surge in the last quarter was attributed to the sale of server and hardware-related products to Trade House Atlantis Ltd and CJSC Gollard which are associate companies of the RKSS Group, one of Russia’s largest telecommunication, networking and cloud system integrators.

Palette announced supply contracts worth RM4.07 mil in March to the above two companies. The deal was completed in the final quarter of FY ended May 2017.

With the jump in revenue, Palette managed to achieve a net profit of RM510,000 in the fourth quarter although it still suffered a full year net loss of RM950,000 as a result of losses suffered in earlier quarters.

In the notes accompanying its financial results, Palette stated that after the successful launch of iMedic in Malaysia, the company, in partnership with HSC Hospital, has started a patient recruitment campaign. In addition, development has started on the next phase of iMedic software targeted at smaller clinics and individual medical practitioners.

According to Palette’s latest media release dated Aug 1, its revenue is expected to jump several folds this coming financial year as the company has subsequently announced additional supply contracts worth a total of RM18.26 mil to Trade House Atlantis Ltd which are to be completed within the next 30 to 60 days.

This is higher than the company’s combined revenue for the last five years.

The company added that Russia has announced plans to develop its telemedicine business by targeting to have 25% of all its medical organisations to be able to provide telemedicine services next year and up to 10% of medicines to be sold online.

The country’s state parliament has also recently passed the legislation on online/mobile healthcare following which state insurance is paying for the online healthcare services. This makes Russia the first country in the world with legislation that insurance is paying for online healthcare.

PALETTE-WA is now trading at no premium. This makes the warrant a more attractive tool to participate in the share price’s growth.

If investors are bullish on Palette’s telemedicine and Russian growth story, PALETTE-WA should be considered ahead of the mother share as it is expected to outperform the mother share by 114% based on an effective gearing of 2.14 times.

The writer is CEO of Warrants Capital Sdn Bhd


This article first appeared in Focus Malaysia Issue 244.