Malaysian cloud player makes debut on London’s AIM

• Good start to Rapid Cloud International’s listing on London’s AIM exchange
• Banking on Indonesia, Thailand, Philippines for next expansion wave

MALAYSIAN software development and cloud service provider Rapid Cloud International Plc (RCI) was successfully listed on the London AIM (Alternative Investment Market) on Aug 14.
 
Comprising four subsidiaries – Emerge Systems (M) Sdn Bhd, Emerge Software Solutions (M) Sdn Bhd, Sharksurf Philippines Inc and Emerge Systems (Thailand) Ltd – RCI’s share performance rose consecutively over two days of trading, hitting a high of £0.79 as at press time (Aug 15). Its share price closed at £0.69 or 29% higher than its offer price of £0.54 on its debut on Aug 14.
 
[RM1 = £0.2]
 
Raymond Chee, managing director and majority share holder of RCI, said the higher-than-expected debut trading price was not anticipated and that company officials only expected a modest rise in share price on its first trading day.
 
“I’m pleased with the performance of the shares on the first day of trading [when it went up 29%],” he told Digital News Asia in an email. “It clearly shows there are investors who are interested in technology companies which are involved in the enterprise cloud computing sector based in South-East Asia (SEA).
 
“The group has a lot of growth potential and will leverage on its initial public offering (IPO) to expand into fast-growing countries such as Indonesia as well as to expand its offices in Malaysia, Thailand and the Philippines,” he added.
 
Established in 1999 by Chee and his cofounder Kenneth Cheng Ju Wan, RCI claims to have a scalable business with a base of over 36,500 customers, including small and medium enterprises (SMEs), government agencies, multinational corporations and large enterprises.
 
RCI provides a range of proprietary products, including core web and mobile site builders and e-commerce products, and also engages in software development projects for enterprises. It also offers infrastructure-, platform- and software-as-as-a-service (Saas) to its customers.
 
For its financial year ending 2012, RCI recorded an EBITDA (earnings before income, taxation, depreciation and amortisation) of RM4.3 million on the back of RM9.4 million in revenue.
 
It also recorded a compound annual growth rate (CAGR) of 25% between 2010 and 2012, while its income as a percentage of sales grew from 5% in 2010 to 39% in 2012, according to company filings.
 
Chee (pic) said that the higher-than-expected share price on the first [and second] day was bolstered by the company’s positive cash flow, zero debt and the anticipation of paying a regular dividend to its investors, something that many investors in the AIM market look for.

Futher aiding its strong financial performance is the fact that 68% of RCI's revenue comes from its SaaS business, which is developed in-house. This helps the company retain intellectual property rights, a fact which Chee said increases the group's profit margins.
 
When asked what were his near-term expectations in the coming months, Chee said he expects his research and development (R&D) team to continue to develop relevant web-based applications for its enterprise customers.
 
At the same time, Chee said RCI would also be actively looking into the possibility of strategic acquisitions within the region in order to complement its organic growth of its business in SEA.
 
According to company documents, the AIM listing has raised approximately £1million (before expenses), through the placing of 1,851,948 new ordinary shares at £0.54 per share.
 
The placing was arranged by Allenby Capital and First Columbus Limited and the number of ordinary shares in issue immediately after admission was 17,368,971, giving RCI a market capitalisation of £9.4m, the company said in a statement.
 
Company documents noted that the purpose of the IPO was to fund the growth in RCI’s business, and that the net proceeds of the placing will be used for geographical extension and expansion. This includes Indonesia, where the group does not yet have a local presence, as well as in Thailand and the Philippines.
 
Additionally, funds will be used to enhance RCI’s group sales and marketing teams, fund its investment in innovation and R&D, infrastructure expenditure and working capital purposes, the company said.
 
RCI counts amongst its customers Deloitte, BAE Systems, Canon, AmAssurance, AmBank, the Securities Commission of Malaysia and the Companies Commission of Malaysia. 

In 2011, local data centre player, CSF Group Plc was listed on London's AIM. The group designs, develops, maintains and operates data centres in Malaysia and Indonesia, with plans to expand to Thailand but its expansion plans has since hit a snag with the stepping down of its CEO Adrian Yong, ostensibly due to its poor share price performance on AIM. 

Next week: RCI's journey to get listed on AIM and its strategies going forward
 
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