Friday 21 Jun 2024
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This article first appeared in The Edge Malaysia Weekly on May 13, 2024 - May 19, 2024

AFTER more than three years of being classified as an affected listed issuer, and having the trading of its shares suspended since April 26, cloud-based service provider AwanBiru Technology Bhd (KL:AWANTEC) learnt last Friday that the classification had been lifted by Bursa Malaysia Securities Bhd and the trading of its shares would resume on Monday (May 13).

It had been only two weeks since Bursa Securities suspended the trading of Awantec’s shares after the group failed to submit a regularisation plan, which typically involves the acquisition of a new business that results in a significant change in the business direction of the company or a fundraising exercise.

“[Bursa’s announcement] caught us by surprise too. Maybe someone finally realised we can self-regularise and don’t need M&A and fundraising after all, and that our business is viable and sustainable — the two main criteria for being listed,” says Awantec founder and major shareholder Dr Abu Hasan Ismail.

To recap, Awantec was classified as an Affected Listed Corporation pursuant to Paragraph 8.03A 2(a)(aa) of the Main Market Listing Requirements of Bursa Securities effective Jan 29, 2021, with the termination of its subsidiary Prestariang Systems Sdn Bhd’s membership in the Microsoft Partner Network on Jan 30, 2021.

Based on Awantec’s audited financial statements as at June 30, 2020, the revenue contributed by Microsoft products and services amounted to RM139.98 million, or 90.87% of the group’s consolidated revenue.

Awantec engaged with Bursa Securities to regularise its status. While the latter had requested for a regularisation plan, the group insisted it had a viable, profitable and sustainable business with growth prospects that warrant an exemption from submitting such a plan.

“There’re a few clauses as well … regularisation plan, that’s clause 8.03A (of the Main Market Listing Requirements). And that, like what Dr Abu mentioned, includes M&A and a fundraising exercise. But within that clause itself, there is a subclause saying you can go [for] self-regularisation. That is what we understand and that was advised by our advisers,” says Awantec CEO Azlan Zainal Abidin.

Maybank Investment Bank Bhd is Awantec’s adviser on the regularisation of its status as an affected listed corporation.

Under Chapter 8 of the Main Market Listing Requirements — Continuing Listing Obligations, under subparagraph 8.03A (5), an affected listed issuer need not comply with the requirement to regularise its condition if it is able to demonstrate to the satisfaction of the Exchange that its remaining business is viable, sustainable and has growth prospects. 

Awantec applied for a waiver from having to submit and implement a regularisation plan and to be lifted from its status as an affected listed issuer after considering the improvement in the financial performance of the group on April 8, 2024. It also applied for a six-month extension to submit a regularisation plan to the relevant regulatory authorities by Oct 13, 2024, if Bursa Securities did not approve the proposed waiver and lifting of its status.

What is a self-regularisation plan?

The loss of membership in the Microsoft Partner Network was indeed a big blow to Awantec, but it did not falter. Instead, in August 2021, its subsidiary Awantec Systems Sdn Bhd was elevated to Google’s Premier Level Partner in Malaysia.

The partnership with Google allows Awantec to be part of the government’s cloud framework agreement (CFA) signed in May 2022. The CFA is one of the main thrusts to drive the digital transformation of the public sector, especially by utilising the cloud network.

While Awantec managed to replace Microsoft with Google, it was not enough to stop the slide in its earnings. In the financial year ended June 30, 2023 (FY2023), the group made a net loss of RM6.25 million, its first loss after two consecutive financial years of profitability.

Awantec remains confident of its current business — the Google partnership, as well as being the provider of Skillsoft suites and other services to its clients. However, it must demonstrate that the business is profitable, viable, sustainable and has growth potential to avoid being delisted by Bursa Securities.

One of the ways to do this is to show profitability. Awantec has managed to register four consecutive quarters of net profit since the quarter ended June 30, 2023 (4QFY2023). In the quarter ended Sept 30, 2023 (1QFY2024), the group recorded a net profit of RM404,000, compared with RM44,000 in 4QFY2023.

Then, in the subsequent quarter, Awantec registered a net profit of RM781,000, a 93.32% jump from the previous quarter. In the quarter ended March 31, 2024 (3QFY2024), the group made a net profit of RM2.14 million, compared to a net loss of RM1.99 million in the previous corresponding quarter.

Does this mean that Awantec has met the requirement for self-regularisation? There is another aspect to self-regularisation though — the sustainability of its business. The group says it has already communicated how sustainable its businesses are to Bursa Securities.

“From a sustainability perspective, we’ve secured major contracts, and they are [long term] probably for four to five years. And these are the big ones. So, we’ve shown that. And from a growth perspective, if you look at our business now, it’s all cloud-based,” says Azlan.

“We’re doing analytics for Google, we are doing cloud transformation programmes for Google [for customers that use Google Suites]. From a talent perspective, we’ve got a learning management system.”

He adds that Awantec has embarked on a business transformation strategy, where it has started selling SAGE enterprise resource planning (ERP) software, as well as e-invoicing. An ERP platform is a type of business management software that integrates day-to-day business processes.

Awantec is already serving about 400,000 civil servants through Google Workspace productivity tools and students using the Google Classroom application. “We also provide Google Workspace services to five million schoolchildren,” says Azlan.

Awantec has also penetrated the commercial segment, to tap the cloud transformation and migration market. The group is pushing for AI services as well. “So we believe that the business is going to see quite a big growth,” he says.

Malaysia recently became the focal point of multibillion-ringgit investments in the data centre and artificial intelligence (AI) space. Names like Amazon Web Services, NTT (a global infrastructure and services company) and GDS (a developer and operator of high-performance data centres) have been investing in Malaysia. Then of course, there is Nvidia’s RM20 billion investment in data centres with YTL Corp Bhd (KL:YTL).

On May 2, Microsoft announced a US$2.2 billion investment in Malaysia for new cloud and AI infrastructure and on May 7, Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz confirmed that Google would invest in Malaysia.

“We know that Google is going to invest in Malaysia, so with us being the partner for the public sector, it creates a lot of opportunities for us,” says Azlan.  

Awantec shares were last traded at 25.5 sen each before the suspension, valuing the group at RM201.4 million. 

 

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