This article first appeared in The Edge Financial Daily, on May 30, 2016.
KUALA LUMPUR: NetX Holdings Bhd, which reported its third straight quarterly profit last Thursday after venturing into the electronic payment (e-payment) services space, is now banking on its tie-up with a technology firm in the United Arab Emirates (UAE) to tap the Middle Eastern e-payment market for further earnings growth.
The company on May 16 announced a tie-up with Rockville Technologies LLC after its subsidiary Payallz Sdn Bhd inked a technology collaboration agreement, which it had said could see it tapping a potential market of 7,000 merchants in the region over four years.
“One merchant does not necessarily lease or buy one [e-payment] terminal, but let us assume that each of them get one, and we make RM100 out of it monthly, we would have RM8.4 million annual sales,” said NetX executive director Steve Tan Sik Eek in a recent interview with The Edge Financial Daily.
Under the deal, NetX will provide Rockville the technology expertise for the development of the e-payment industry in the greater Middle East region. Rockville is a value-added services and solutions provider with operations in Pakistan, the UAE, Qatar, Kuwait, Bahrain, Sri Lanka, Afghanistan and Oman.
While the collaboration with Rockville will not result in any immediate payments of fees, NetX believes it stands to derive income from tie-up through subsequent revenue-sharing and joint-venture agreements to be established in each of the countries that Rockville operates in.
“Our products come with a real-time analytical platform, which allows our customers to keep track of their businesses from time to time. This is a feature that none of our competitors in Malaysia provides,” Tan claimed.
Tan was appointed to NetX’s board in April last year. He is also a director of Asia Bioenergy Technologies Bhd, which holds an 8.95% stake in NetX via Axiabio Capital Sdn Bhd.
“We came into the management last year, when the company was making losses. Now, we want to grow it with the new business we brought in. We aim to make e-payment the main revenue contributor of NetX,” he said, but did not stipulate a timeline.
NetX ventured into the e-payment business after it acquired Payallz for RM600,000 in April last year. Prior to that, NetX was primarily involved in the provision of turnkey solutions for network infrastructure.
While it remains to be seen if the e-payment venture, which makes up less than 2% of its business now, will pay off, the group managed to return to the black in the first quarter ended Sept 30, 2015 (1QFY16) — after enduring 14 consecutive quarters of losses — and has remained profitable since.
It posted a net profit of RM2.77 million in the subsequent quarter (2QFY16), against a net loss of RM310,000 in 2QFY15, while revenue ballooned to RM4.87 million from RM1.18 million. For the latest 3QFY16 results announced last Thursday, it reported a net profit of RM1.45 million, compared to a net loss of RM268,000 in the same period a year ago, as revenue climbed near five times to RM3.82 million from RM797,000 previously.
The earnings improvement seen so far was mainly due to higher revenue generated from its non-payment services segment, which has been seeing a jump in profit margin due to extensive product warranties and assurances given to customers.
Last Friday, NetX closed half sen or 14.29% higher at four sen, valuing it at RM21.89 million.