This article first appeared in The Edge Financial Daily on October 16, 2017 - October 22, 2017

KUALA LUMPUR: Mobile services provider mTouche Technology Bhd’s stock has been on a roller-coaster ride this year following the announcement of a series of preliminary agreements, including a potential deal in Thailand to install and operate smart public phones, which it has said may bring in a whopping RM2.6 billion in advertising revenue.

The ACE Market stock jumped from a low of 13 sen in January by about five times higher to 64 sen in mid-July, only to plunge to 18 sen by Sept 13. As of last Friday’s close, the stock was at 22.5 sen, which gave the company a market value of RM31.44 million. The stock is now trading at a trailing 12-month price-earnings ratio of over 440 times.

Last Tuesday, the company sent out a statement, quoting an unnamed analyst, stressing that subscribers of its ongoing rights issue — which is to raise funds for, among others, working capital and regional expansion — potentially get to enjoy a handsome profit from the rights subscription, based on the closing price of mTouche shares that day of 24 sen, and warrants of 8.5 sen.

This came after the company said on Sept 8 that it has pushed the entitlement date of its six-for-two rights issue, priced at 20 sen apiece, to Oct 3 from Sept 14. The cash call, which comes with three free warrants with an exercise price of 20 sen, is to raise up to RM76.4 million — over two times its market capitalisation — if all its shareholders take up the offer and none of its outstanding warrants are exercised before that. At 20 sen apiece, the rights issue price is at a discount of 11% to its current share price.

In the meantime, the company has continued to announce potential ventures, the most recent of which is the joint development of an online-to-offline education hub “to promote the highest-level human experience” in education via technological innovation and the use of artificial intelligence. The Oct 2 announcement prompted a query from Bursa Malaysia regarding the nature of the proposed tie-up.

While mTouche investors are waiting for the company to deliver confirmed deals, executive director Tang Boon Koon told The Edge Financial Daily in an interview last week that the company is on the brink of closing the Thai deal, valued at some RM183 million, by the end of this month.

In April, mTouche signed a memorandum of understanding (MoU) with GIS Park to jointly develop, build, install and operate 10,000 smart public phones and Wi-Fi hub terminals for Thailand’s state-owned TOT Public Co Ltd. If the contract is secured, mTouche will get to take part in an eight-year concession, on a 30:70 basis with GIS Park to operate the terminals, which is expected to bring in the projected revenue from both physical and digital advertising.

“We have been in constant contact with GIS Park and TOT to finalise the contract. So far, the communications have been positive,” Tang said in the interview. If the job is bagged, development work is slated to start in April next year, he added.

The project is estimated to cost RM160 million. mTouche has allocated an initial investment of RM1 million to develop a sampling terminal for proof of concept, with further funding expected to come from a mix of bank borrowings and a corporate fundraising exercise.

“Considering the total development cost and the requisite funding required for the project, mTouche will likely invite other investors to participate in the project,” Tang said.

mTouche is also working on another deal it announced on Aug 28 after signing an MoU with MNC Wireless Bhd, which is the joint development of a digital technology platform for SPNB Dana Sdn Bhd, the financing arm of government-owned Syarikat Perumahan Negara Bhd (SPNB).

The platform will have, among others, mobile applications and an integrated payment gateway solution. The deal is conditional on MNC being appointed the technology solutions partner by SPNB Dana in the latter’s provision of financial support to homebuyers in SPNB’s affordable housing projects.

These potential collaborations all mark the company’s increasing focus on digital media, which it hopes will become the company’s core revenue contributor, said Tang.

This pivot to digital media is also seen in another tie-up with Advanced Platform Sdn Bhd, a local business software and platform development company, to jointly develop and market a digital media and infotainment platform in Southeast Asia and Hong Kong, from which it hopes to generate revenue from licensing fees. The first phase of the digital platform is slated to be launched by the end of this year, though the company has yet to reveal details as to the cost and funding of the venture.

There were some management changes at mTouche last year. The notable ones were the resignations of its acting chief executive officer-cum-chief technology officer and group financial controller, after less than a year in their posts. Their departure came just three months after substantial shareholder OSK Ventures International Bhd exited mTouche in March after selling off some 6% stake. No replacement has been announced to Bursa Malaysia as yet.

Tang said the team is now focused on restructuring and turning the company around, which will involve the disposal of unprofitable subsidiaries. mTouche’s 18-month financial year ended June 30, 2017 (FY17) recorded a net profit of RM941,155, on RM36.77 million in revenue. Previously loss-making, there was no comparison period as the company had changed its year end to June 30 from Dec 31.

“I don’t expect we can perform really well for FY18, but we can definitely continue to maintain last year’s performance,” said Tang. As he expects most of the company’s planned ventures to start generating revenue from July 2018, he anticipates a much better FY19 for mTouche.

Judging by the slew of announcements from the company this year, it appears that management is working hard to improve its earnings prospects. Nonetheless, most of these ventures are just in the early stages of discussions or are non-binding agreements. So, like it or are not, uncertainties abound.

There are two weeks left for the month of October, so let’s see if the Thai venture will materialise. But before that, shareholders will have to decide if they want to pump in more money by subscribing to mTouche’s rights issue. The last day for payment is Oct 26, while the rights entitlement will cease trading on Thursday (Oct 19).