This article first appeared in The Edge Financial Daily on October 1, 2018 - October 7, 2018

KUALA LUMPUR: Digital business operator PUC Bhd is pinning its hopes on e-commerce platform 11street Malaysia to be a game changer for the company in the integrated media and advertising space.

With 11street, the ACE Market-listed company can now offer its clients “a one-stop service” given that it already owns media planning and advertising agency RedHot Media Sdn Bhd and e-payment service provider Presto Pay Sdn Bhd, contended group managing director cum chief executive officer (CEO) Cheong Chia Chou.

“We got to know about this opportunity (11street) sometime end of last year, and thought it might be an interesting platform that we can leverage on to increase our reach. 11street is the solution to this whole challenge,” Cheong told The Edge Financial Daily in an exclusive interview recently.

In April, PUC announced that it would invest up to RM90 million for a 24% stake in open marketplace operator Celcom Planet Sdn Bhd, which operates 11street.

Five months later, the Chinese government-linked company made a partial acquisition of a 12.348% stake, forking out RM40 million which it raised from a private placement and internally generated funds.

According to Cheong, a 43 year-old Singaporean, PUC was given management control and made the preferred provider for marketing, technology and payment gateway services for Celcom Planet under the deal.

As such, he said the remaining RM50 million injection may not be necessary.

PUC’s partners in Celcom Planet are Axiata Digital Services Sdn Bhd and South Korea’s SK Planet Co Ltd.

According to Cheong, 11street today boasts product listings in excess of 13 million and has more than 40,000 merchants registered on the platform, which was established in April 2015.

The website claimed 13.5 million unique visitors as of December 2017, and six million downloads of its mobile app.

“What we are currently doing is bringing together our three businesses to be more tightly integrated, and that creates a comprehensive scope of services for our potential partners. Hardly anyone would say there is nothing that they can utilise us for.”

Clients can now advertise their products and services on its existing omnichannel marketing platforms (from social media influencers to vehicle wraps), have PUC help fulfil commerce by directing traffic to the online marketplace, and finish off with payment collections via its mobile wallet, Presto Wallet, which was launched last Monday.

The synergy allows PUC to enjoy better margins as it no longer has to engage multiple external agencies to meet its clients’ needs.

But as with many pure-play e-commerce businesses, Celcom Planet’s profitability has been a challenge. As at end-2017, the company had incurred cumulative net losses to the tune of RM393 million, and RM104 million in liabilities, after only three years of operation.

The company is working hard to change this and has started on several initiatives with no significant additional capital expenditure expected, Cheong said, in addition to looking for strategic partners for both 11street and Presto Wallet to add to its platforms.

“Our aim is to make 11street a profitable e-commerce [business]. We should not limit ourselves to growing it as a marketplace; we should expand services offered beyond just that and be more lifestyle-oriented.”

PUC entered digital imaging to divest RE business?

PUC also operates in two other areas: digital imaging and renewable energy (RE).

Last December, in a bid to diversify into digital imagery, PUC announced that it was acquiring a third of Pictureworks Holdings Sdn Bhd for RM52.8 million from the latter’s shareholders, which included Cheong. The acquisition came with a guaranteed profit after tax of RM14.8 million for financial year 2018 (FY18) and RM20.5 million for FY19, and is expected to contribute to at least a fourth of PUC’s net profit.

Achieving the targets could be a stretch. As at end-June, Pictureworks yielded a maiden quarterly profit of RM1.73 million for PUC through the provision of digital imaging at theme parks and attraction destinations in over 15 countries, including Singapore, Hong Kong and Japan.

As for renewable energy, under the feed-in-tariff programme, PUC currently operates a 1mw-capacity solar photovoltaic power plant in Kedah, which supplies energy to Tenaga Nasional Bhd at a fixed rate.

“The existing plant in Sungai Petani is live and ongoing. We do not have any plans to expand the renewable energy segment for the time being due to rates and market sentiments.

“We look at it as an investment. As with all investments, [the decision] to buy or to sell all depends on the right price,” Cheong shared.

‘Significant’ earnings growth on the horizon?

Last month, PUC announced that its latest quarterly net profit jumped more than five times year-on-year from RM417,000 to RM2.32 million for the second quarter ended June 30, 2018, while revenue spiked 62.5% to RM16.45 million.

Its cumulative first-half profit amounted to RM2.67 million from RM544,000 for the same period last year. Revenue was 71% higher at RM32.07 million.

“With the integration of all these platforms and partners lined up in the next few months, we are hopeful that the company’s top and bottom lines will be significantly improved in the next one to two years. We foresee the company’s future to be bright,” Cheong said.

The company’s share price performance, on the other hand, has been rather bleak.

Last Friday, the stock, which had been trading below 20 sen in the past three months, closed half a sen or 3.45% higher at 15 sen.

The penny stock achieved a 14-year high at the end of December 2017, when it climbed to 35 sen.