Malaysian Business, April 16th-30th 2002
Stories by Joanna Sze
Despite the tech-bubble burst, YTL chieftain Francis Yeoh is a sworn convert to IT and its potential to add value to the group.
The latest baby in the YTL Group's fold is YTL e-Solutions Bhd, its technology arm. The company will be the first technology incubator and the largest company to be traded on the Mesdaq, which recently merged with the Kuala Lumpur Stock Exchange.
Despite the fact that technology stocks are no longer in vogue, YTL Group managing director Tan Sri Francis Yeoh Sock Ping is a firm believer in YTL e-Solutions' prospects.
His conversion experience? Some years back, at the height of the Nasdaq bubble, while sitting in front of a computer with the Amazon.com website on screen, he was amazed at how easy, quick and convenient it was for him to choose a book, pay for it and have it delivered to his door-step in a packaging of his choice (brown paper or floral prints).
'That stunned me,' he tells Malaysian Business. 'And the next time you click, they say "Welcome Francis Yeoh. The people who bought this book also bought other books like this ..." Isn't that fascinating? That represents forward thinking, preemptive thought.'
Since then, the way Francis and YTL Group viewed business has never been the same. 'That is one single event that brought home to me that customers want old Jurassic companies to service them like Amazon. They like the Amazon service.'
Today, the whole YTL Group runs on technology, and with YTL e-Solutions, most of the technology is developed internally. Thus, its contribution to the group is not just in ringgit and sen.
'It's a powerful technical contribution to our group,' says Francis. 'This section has backed up YTL's capability to do infrastructure business very well. It's a brain asset. It cuts through a lot of archaic thinking. It makes us understand where we can go fastest and how much not to pay for it.'
YTL e-Solutions currently has two incubatees – 70 per cent-owned Extiva Communications Sdn Bhd and 60 per cent-owned PropertyNetAsia (M) Sdn Bhd. Extiva, which develops and markets VoIP (Voice over Internet Protocol) telephony, reported a revenue of RM2.47 million in its first financial year, ended June 30, 2001. For the first six months of FY02, ended Dec 31, 2001, it recorded a pre-tax profit ofRM1.44 million on a turnover of RM4.22 million. PropertyNetAsia, which develops a property portal, has yet to show revenue due to the depressed property market.
YTL e-Solutions provides its incubatees, which have to stay with the company for at least five years, with 'business, entrepreneurial and management guidance, as well as infrastructure, technology, marketing, legal and accounting support.'
Sceptics have pointed out that by listing on the Mesdaq, YTL e-Solutions does not require to show a track record. Francis is unfazed by that. 'We're not a small company seeking big money on Mesdaq; we're a big company seeking small money,' he says. 'We're listing because it's the best way to exponentially multiply our business. How could a company like Extiva be killed because of no track record?'
For FY01 ended June 30, YTL e-Solutions, with a paid-up capital of RM100 million, reported a pre-tax profit of almost RM2 million on a turnover of RM4.4 mil- lion. For the first six months of FY02 ended Dec 31, 2001, it reported an increased pre-tax profit ofRM2.19 million on a turnover of RM5.99 million.
YTL e-Solution's initial public offer is unique in the sense that it is a restricted offer of 34 million RM1 shares at a 10 sen premium to YTL Corp's shareholders and a public issue of one million shares for eligible YTL e-Solutions' employees and directors. Post-listing, the company will boast a paid-up capital of RM135 million.
Unlike other Mesdaq-listed companies, YTL e-Solutions is on a better footing with good management. It is profit-generating and turnover is increasing. It is going for listing under sombre circumstances, unlike others that went public during the tech craze.
Given the current upswing in share prices of Mesdaq companies on the KLSE, YTL Corp shareholders look like they're in for a windfall.