Will the ‘REV’ tablet turbocharge Cuscapi’s F&B business?

• F&B solutions expert pins high growth strategy on custom-built tablet
• Lofty projections and China upside has CIMB Research optimistic

CIMB Research recently initiated coverage of Cuscapi Bhd with an Outperform call on the potential earnings of the company it describes as Asia’s leading F&B (food and beverage) management system provider.
 
The confidence is premised on its twin belief that China will provide strong growth prospects to the company, while a customised tablet Cuscapi has spent 18 months developing will help transform it into a long-term recurring-income business, instead of its current software/hardware sales model.
 
The company, which has a presence in nine countries, is calling its customised tablet REV, for revenue. Its chief executive officer Her Chor Siong tells Digital News Asia (DNA) that the tablet represents the F&B solution provider’s attempt to move from the backend of the F&B business to the customer-facing front-end, where it will replace the print menu with a digital one.
 
But beyond being just a digital menu, REV will have various interactive features and will be connected to the Point-of-Sale (POS) and Kitchen Display System (KDS).
 
Developed inhouse with an R&D cost of US$1.23 million (RM4 million), the Android-based software was built by its 90-man software team in Suzhou with hardware design and product roadmap done out of Kuala Lumpur. The company worked with a Chinese manufacturer in Shenzhen to come up with the hardware specs and manufacturing.
 
Because Cuscapi wanted to integrate REV to other software systems used in F&B outlets it picked the Open Source based Android, and rooted the whole system to have control at the kernel level and not just at the app level.

“As a developer, we knew it was important to have full control over how the hardware and software behaved,” says Her (pic).
 
A five-country pilot is expected to be completed by September or October.
 
Behind the development of the tablet lies Cuscapi’s deep knowledge of the F&B business, which contributes 90% of its revenue. That knowledge of how restaurants work, coupled with the realisation that restaurants still do not know who their customers are and have poor loyalty programmes, led to the development of REV as the solution.
 
“They are still stuck in the brick-and-mortar world,” says Her.
 
But what about all those apps being developed to help merchants cultivate a closer relationship with their customers? Her is dismissive. “All those customer loyalty apps are half-baked.”
 
REV is not just a solution to a major pain point Cuscapi sees in its customers business. It also represents the company’s desire to move towards a high-growth strategy and live up to its mission to bring its F&B clients closer to their customers.
 
Her points out that its traditional POS systems business is a one-off sale to an F&B customer, with annual maintenance fees around 10% to 15%. “But offering them REV as a managed service will entail us taking a monthly fee from each F&B outlet.”
 
In previous media interviews, Her has been quoted as estimating that this could lead to as much as US$7.68 million (RM25 million) a month in revenue by 2015 – an eye-popping amount for a company that registered US$18.1 million (RM58.9 million) revenue in 2012. CIMB estimates revenue in 2014, the first full year that REV will contribute to earnings, to come in at US$27 million (RM88 million).
 
He shares the same US$7.68 million monthly projection with DNA, but stresses that it is a hypothetical calculation derived from charging US$2,467 (RM8,000) a month per F&B outlet, and with 40% of the outlets adopting REV.
 
The estimate is based on the current 8,000 table service outlets that Cuscapi is managing, with 3,200 of them adopting REV. Its customers consist of both quick service restaurants (i.e. McDonald’s and similar fast-food chains) of which, it has 12,000 outlets and the mid-tier table service restaurants of which it has 8,000.
 
Each of those 3,200 outlets will apparently be happy to share revenue and give Cuscapi a fixed monthly fee and a variable fee based on the extra revenue derived as there is no upfront cost to installing the REV tablet on each table; where it will be integrated into the POS system and the KDS.
 
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