KUALA LUMPUR: Singapore Post Ltd (SingPost) is buying into another Malaysian public listed company, Efficient E-Solutions Bhd, as part of its plan to pursue growth beyond its snail mail business and to expand beyond Singapore’s shores.

The 26.01%-owned company of Temasek Holdings (Pte) Ltd yesterday said its wholly owned unit Singapore Post Enterprise Pte Ltd is subscribing to 50 million Efficient shares in a private placement for some RM9.75 million or 19.5 sen a share, according to an announcement to SGX yesterday.

The transaction price of 19.5 sen, which valued Efficient at price to book value of 1.3 times, was at a discount over yesterday’s close of 22 sen.

The share acquisition would raise SingPost’s stake in Efficient to 71.24 million shares or 10.06% equity stake from 21.24 million shares previously, which SingPost previously bought on the open market.

It is understood that the deal is part of SingPost’s plans to make strategic investments to diversify its businesses portfolio in the region to reduce its dependency on the snail mail business.

Prior to the latest share purchase, SingPost has bought into the courier service firm, GD Express Carrier Bhd (GDex), holding 27.08% currently.

Efficient is involved in the outsourcing billing and document processing jobs from the banks in Malaysia. Its managing director Cheah Chee Kong is the largest shareholder, holding 17.85% equity stake, followed by Cheah Swee Sin Sdn Bhd (16.13%) and Beaufort International Equities Inc (10.92%).

Holding an equity stake in Efficient would enable the postal group to tap onto the former’s data and document processing (DDP) and electronic bill presentment and payment (EBPP) capabilities to explore the banking sector in Indonesia.

Besides the new share placement, SingPost had also entered into a non-binding memorandum of understanding (MoU) with Efficient concerning the proposed collaboration between the two companies in DDP business in Indonesia and other countries.

Under the MoU, it is contemplated that Efficient and SingPost will jointly invest in setting up of DDP business operations in Indonesia. In addition, both companies will jointly identify business opportunities relating to data and document management in other countries as may be mutually agreed in writing between parties.

SingPost and Efficient also may mutually agree to engage in discussions and negotiations with other potential investors or business partners in relation to the collaboration.

“Following the signing of the MoU, Efficient and SingPost will discuss in good faith the signing of a definitive agreement on the proposed collaboration in due course,” Efficient said in an announcement to Bursa Malaysia yesterday.

In terms of financials, Efficient doesn’t seem to stand out among the IT-based companies. The company’s net profit halved to RM2.16 million for 1Q ended March 31, from RM4.37 million a year ago. The sharp fall in profit was blamed on the significant lower revenue in services rendered for software application development, which carries a high profit margin, despite a higher revenue from services for DDP.

Revenue fell to RM14.92 million for the quarter from RM15.43 milliion in the same period last year. Earnings per share halved to 33 sen from 66 sen. Net asset per share was at 15 sen as at March 31.

For FY10 ended Dec 31, Efficient posted net profit of RM12.7 million or 1.93 sen per share on revenue of RM58.7 million.

SingPost closed unchanged at S$1.16 (RM2.85) yesterday with 693,000 shares traded.

SingPost has been building up its business in the Asia-Pacific region through a number of acquisitions recently, including buying equity stakes in cross-border mail and logistics firm Quantium Solutions and US technology company Postea Inc.

Indeed, it is learnt that the postal group had initially wanted to take over the ACE Market-listed GDex, which is the former’s direct rival, but its major shareholders were reluctant to sell. The recent stake increase from 5% to 27.08%, which was mostly acquired from GD Holdings International Ltd, gave SingPost a board seat.

GDex is competing with SingPost in the courier business in Singapore.

According to analysts, SingPost could have been impressed with GDex’s business model and did not rule out the possibility of some form of tie-up with the former, which may involve regional ventures in Laos and Vietnam, for example.

SingPost’s recent purchases of GDex shares were at 80 sen a share, which was based on a PER of 34.8 times FY10 ended Dec 31 earnings. Since the acquisition by SingPost, GDex’s share price has appreciated by 20%.

There was no trading in GDex shares yesterday. The counter last traded at RM1.03 last Friday, giving it a market capitalisation of some RM264.9 million.

GDex shares are trading at a historical PER of 41.37 times compared with its peer, Nationwide Express Courier Services Bhd at a PER of 31.34 times. GDex’s price-to-book value stood at six times while Nationwide’s was 0.6 times, 10 times lower than GDex’s.

This article appeared in The Edge Financial Daily, June 14, 2011.