ORION (0079) Orion IXL Bhd bets big on small loans
Shaharul: This project was a steep learning curve for us, but we now have a good system and have put in a strong team behind it. We are good to go
SHAH ALAM: Last year, budding financial technology (fintech) firm Orion IXL Bhd got its first big break with a 15-year contract to provide end-to-end loan application solutions for the country’s top cooperative (co-op).
The system went live earlier this year, but like most new technologies, it had some glitches that needed to be ironed out.
Now, a second, more robust version of the online loan application system is up and running with 15 of the country’s largest credit co-ops on board.
“Income from the project has started to come in,” Orion’s group chief executive officer Mohamad Shaharul Mohamad Shariff told StarBiz when met at his office at Dataran PHB.
“This project was a steep learning curve for us, but we now have a good system and have put in a strong team behind it. We are good to go,” he said.
In October last year, Orion teamed up with Angkatan Koperasi Kebangsaan Malaysia Bhd (Angkasa), the co-op umbrella body, to develop the MyAzZahra online loan application platform.
Under the deal, Orion gets an effective fee of 1.275% on loans approved via MyAzZahra.
In 2017, credit co-ops in the country disbursed an estimated RM5bil in small loans to government employees.
Shaharul did not disclose the number of transactions processed through the MyAzZahra platform to date, but said that the company and its partners are embarking on a marketing campaign to promote the service.
“Our aim is to capture at least 25% of the market,” he said.
The MyAzZahra system, Shaharul said, is based on blockchain technology and big data analysis, with an in-house credit rating engine powered by artificial intelligence.
With the use of this technology, the loan approval time is reduced to two weeks compared with at least two months using the traditional manual application.
“The system is designed to reduce risk and operation cost for the co-ops, as well as to ensure that the process is transparent to everyone involved,” Shaharul said.
In the meantime, the MyAzZahra platform is being expanded into other financial services.
In April, Orion announced that it was working with Angkasa through MyAzZahra to provide a rent-to-own (RTO) fintech platform for co-op members to purchase property at Datum Jelatek, a condominium project in Ampang, Selangor.
This unique scheme is directed at government servants looking to purchase property in the city.
The MyAzZahra project, Shaharul said, will provide Orion with a strong recurring income base for the next 15 years.
And the company is taking its micro-financing fintech technology into the traditional banking sector.
Three months ago, Orion signed a memorandum of understanding with Small Medium Enterprise Development Bank Malaysia Bhd (SME Bank) to develop an alternative credit scoring system.
Under the preliminary agreement, Orion is to develop a financial-processing engine designed for SME Bank’s traditional small-loan business and to help create a micro-financing platform for small-medium enterprises (SMEs) to obtain loans.
“We are in the midst of finalising the terms of the agreement with SME Bank to deploy the system,” Shaharul said.
“We are targeting for the system to be up and running very soon,” he said.
The project, if it goes through, will provide the company with a new recurring income stream.
“The SME business is a bigger growth opportunity for us,” Shaharul said.
Orion’s exciting growth prospect is helping to fuel investor appetite for the stock, but concerns about execution risks have kept its share price in check.
In April, the firm raised RM17.8mil by placing out 108.2 million shares in the company at 16.5 sen each through a private placement exercise.
Part of the proceeds from the exercise was allocated as development cost for the SME Bank project.
This massive new issue increased Orion’s share base to 599 million units.
The stock was last traded at 14 sen on Friday.
CIMB Research, so far the only brokerage that tracks the company, last month said it expects Orion’s fintech division to drive its future earnings.
The Ace Market-listed company is projected to make a net profit of RM7.43mil on a revenue of RM21.75mil in financial year 2020 (FY20), up from an estimated RM4.5mil net profit on sales of RM7mil in the current FY19.
In its forecast, CIMB expects growth to accelerate in FY21 to RM14.4mil in net profit on a turnover of RM47.3mil.
This rapid growth will be powered by Orion’s expected strong loan application using the MyAzZahra portal.
Orion is scheduled to release its fourth-quarter results ended June 30 by the end of next month.
For the first nine months, the company made a net profit of RM3.85mil on a revenue of RM5.5mil.
As it is, the bulk of Orion’s income is contributed by its computerised maintenance management system (CMMS) through subsidiary ASAP Bhd.
Orion acquired ASAP in August 2017 for RM73mil cash. The acquisition came with a two-year profit guarantee of RM15mil.
The company’s latest quarterly results, however, showed a depleted CMMS order book with outstanding work almost nearing completion.
“Going forward, our focus is on developing our fintech business,” Shaharul said.
Armed with its own developed technology for co-op financing and credit scoring engine, Shaharul intends to take Orion overseas.
His first target market is Indonesia, where Orion has already partnered with PT Kirana Investama Nusantara.
With the partnership, Shaharul said the two companies would explore the possibility of deploying Orion’s automated platform and credit-scoring engine targeting SME and the micro-financing market in Indonesia.
The Indonesian market could potentially be a lucrative new market for Orion, but the company will need to deliver results at home quickly to meet near term market expectations.
http://www.thestar.com.my/business/business-news/2019/07/22/orion-bets-big-on-small-loans/
