INGENCO (0034) - Ingenco stirs interest on entry of new shareholder

INGENCO (0034) - Ingenco stirs interest on entry of new shareholder

Saturday, 4 April 2015

THE entry of a new shareholder and a management shake-up has stirred interest in information technology firm Ingenuity Consolidated Bhd (Ingenco).

For starters, filings with Bursa Malaysia yesterday showed that Wong Eng Su, GD Express Carrier Bhd’s (GDEx) former chief operating officer, has been appointed as Ingenco’s new managing director (MD).

Wong emerged in Ingenco on March 23. He had resigned from the express carrier earlier this month after 14 years of service to “pursue other personal interests”.

Wong bought 9.22% from Ingenco’s former MD and shareholder Chin Boon Long, who resigned in February due to “health reasons and other personal commitments”. With this transaction, Chin and his wife, Chan Swee Ying, are no longer substantial shareholders of Ingenco.

The second key appointment in Ingenco was made a month ago.

Jeff Chong, Maxis’ former vice-president of Mobility Products and International Service, has been appointed as Ingenco’s new chief executive officer (CEO). He left Maxis in July 2013.

Then, on Thursday afternoon Ingenco director Lim Boon Hong sold 20 million Ingenco shares or 2.1% of the company’s paid-up capital for 17 sen each in an off-market transaction.

More mind-boggling, though, is the fact that the transaction price is almost a 100% premium over Ingenco’s market price of nine sen.

One cannot help but wonder what is going on in Ingenco.

It certainly triggers a sense of déjà vu.

Recall that three years ago, Ingenco’s Chin was under the spotlight when little-known Ninetology Marketing Sdn Bhd offered to buy 35% of Ingenco shares for 55 sen each. The offer was made to four Ingenco shareholders, including Chin. Back then, Chin held 29% of Ingenco shares.

Ninetology was Ingenco’s business partner.

Despite the unbelievable offer of 55 sen per share, Chin refused the offer, which would have made him RM90mil. Chin’s rejection caused the offer to fall through, as did the stock price.

Ninetology’s offer caused Ingenco’s stock price to surge to a multi-year high of 51 sen, when just a few months prior to that, it was hovering at the 10-sen level.

Ingenco closed at nine sen yesterday and was the most actively traded counter of the day.

The question remains as to what is Wong’s plan in taking up a stake in Ingenco? Also, it remains to be seen if he would emerge as the largest shareholder of the company.

The 44-year-old joined GDEx as a sales executive 15 years ago and was appointed director in 2013. In GDEx, he was in charge of the express carrier’s business operations.

While the purchase price of his 9.22% stake is unknown, assuming it was done at a market price of nine sen, this would translate to roughly RM7.9mil. That is a lot of money going into a loss-making entity. It is also presently unknown whether Wong is the buyer of the additional 2.1% from the off-market transaction.

When contacted by StarBizWeek, Wong said that he was unable to comment at the moment.

“I am now in a transition period. However, my official resignation from GDEx has been announced. My new endeavour is based on my personal interest,” he said.

Nonetheless, it is very likely that Wong’s presence would be in line with Ingenco’s plans to tap into the e-commerce services and courier business, something Chin had previously highlighted in 2013.

Chong, the new CEO of Ingenco, says that he joined Ingenco because he sees more opportunities than downside.

“In the telecommunications sector, there is a gap between the needs of the telco operators and the supporting companies. Right now, we want Ingenco to be that value-adding company for the telco operators.”

He added that broadly, Ingenco would focus on its Third Party Logistics (3PL) and Fourth Party Logistics segment for telco operators.

“This is something Ingenco can do because we already have the system and processes. Through this, we will be able to go for the big bidding exercises with the telco operators,” said Chong, who has been in the telco sector for close to two decades. He was with Maxis for more than 7½ years and DiGi for 10.

He explains that for the moment, the company would be growing organically.

While it would maintain its traditional distribution business, its new pillars would include its e-commerce platform, a focus on supply chain management, as well as being the fulfilment arm for telecommunications operators.

“Distribution is transactional revenue, and we know that is not sustainable. However, when we are involved in supply chain management, we get to generate recurring income. That is what we are looking to achieve for Ingenco,” says Chong.

Ingenco is an investment holding company involved in four core businesses, namely, business software solutions, systems integration and services, ICT hardware and software distribution and services, and telecommunications products and distribution services.

For the third quarter ended Dec 31, 2014, Ingenco made a profit of RM256,000 on the back of RM99.3mil in revenue.

Its net assets per share for the period was 10.24 sen.

In the first nine months, it made losses of RM13.4mil and a revenue of RM288.59mil. The company currently has cash of RM9.6mil. It has short-term borrowings of RM9.6mil and long-term borrowings of RM7.59mil.

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