Highest Returns to Shareholders over three years
Microlink Solutions Bhd - A beneficiary of digitisation push
When ACE Market-listed Microlink Solutions Bhd announced plans to transfer its listing to the Main Market on July 12, its market capitalisation had stood at RM608.93 million as its shares had closed at 57 sen. About one month later, the stock was hovering near 60 sen apiece, valuing the company, which develops software for the banking industry, at a little over RM641 million.
While this was some 11% below the 67.3 sen (RM648.9 million market cap) that it closed at on Feb 5, 2021, Microlink’s (adjusted) share price had jumped over 500% from 10.1 sen to 61 sen during the evaluation period of March 31, 2019, to March 31, 2022. According to the awards methodology, the gains translate into an adjusted three-year compound annual growth rate (CAGR) of 20.5% — the highest adjusted total returns among The Edge Malaysia Centurion Club member companies in the technology sector.
Returns were likely helped by a three-for-one bonus issue that was announced in June 2021 and completed in August 2021.
The gains also came as Microlink returned to the black with a RM0.9 million net profit in the fiscal year ended March 31, 2019 (FY2019), compared with a RM50.6 million net loss for FY2018. Net profit improved further to RM10.3 million in FY2020 and RM31.8 million in FY2021. For FY2022, however, revenue continued to grow but net profit fell by a fifth year on year to RM25.5 million, as taxes rose to RM8.77 million from RM1.4 million because more of its income was subject to tax, notes to its audited accounts show.
For the first quarter of FY2023 ended June 30, 2022, unaudited figures show net profit rose 1.7% to RM6.64 million from RM6.53 million in the previous corresponding period, on the back of a 28.4% jump in revenue to RM53.86 million from RM41.93 million.
Microlink is “optimistic on the outlook of the ICT industry, given the marked increase in the requirement for businesses to transform digitally and automate their operations” post-Covid-19, noting that businesses would “not only adopt new ways to continue operating or even change direction, but also create a stable and sustainable foundation for the foreseeable future”.
Citing MyDIGITAL’s initiative on expectations of the digital economy contributing 22.6% of the country’s GDP by 2025, Microlink told shareholders in its 2022 annual report that the environment “presents significant potential”, and that the group would “participate in and take advantage of opportunities presented in both the public and private sectors in pursuit of Malaysia becoming a digitally-driven, high-income nation and a regional leader in digital economy”.
Microlink also told shareholders that the group “had taken steps to counter the risks posed by the long lead time required to secure large-scale projects and has continued to focus on securing smaller-scale, quick-win projects to expedite deployment and subsequently invoicing and collection”, adding that it has been able to develop “re-usable or ‘white label’ solutions and consistently invest in new technology tools to enable quicker time-to-market, and minimise delivery risks”.
Last November, for instance, Microlink won a RM35.1 million project from the Road Transport Department (JPJ) to deliver an open system for the Automated Awareness Safety System (AwAS), aimed at improving driving behaviour and reducing road traffic fatalities by monitoring vehicle speeds, traffic light violations and driver behaviour along major highways as well as “accident blackspots”.
It is worth noting that software and applications developer Omesti Bhd (formerly known as Formis Resources Bhd) had a 49.2% stake in Microlink as at end-June, the latter’s 2022 annual report shows. On July 18, Omesti announced that it will treat Microlink as an associate and not a subsidiary as Omesti “no longer controls the board of directors of Microlink” following the change in the latter’s board composition.
When announcing its proposed Main Board transfer, Microlink said the move “will enhance the group’s reputation and will accord it greater recognition and acceptance among investors, particularly institutional investors”. Its board “remains optimistic about the group’s growth prospects” for the current financial year.