Green Packet share price gains momentum, but is it making the right moves?

YTD, the stock has surged 61.3%, including a 31% jump in the past 5 days and 44% over the last 30 days

by NG MIN SHEN / pic by TMR FILE

GREEN Packet Bhd’s share price has rallied following management changes and financial technology (fintech) ventures, but analysts warn it’s too early to say if things will turn around at the telecommunications and technology firm.

The stock climbed 9.8% to 51 sen as at market close yesterday, marking its fifth straight day of gains, while the benchmark FTSE Bursa Malaysia KLCI fell 0.2% and the MSCI AC Asia Pacific Index added 1.2%.

Year-to-date (YTD), the stock has surged 61.29%, including a 31% jump in the past five days and 44% over the last 30 days, buoyed by the return of its founder and former CEO.

On July 1, the company said Puan Chan Cheong (picture), better known as CC Puan, has been redesignated as group MD and CEO from his previous post as non-ED, in a move targeted at expanding the group’s digital ventures.

Subsequently, Tan Kay Yen was redesignated to ED from CEO, while maintaining his post as CEO of Green Packet’s 80%-owned kiplePay Sdn Bhd, an e-payment issuer approved by Bank Negara Malaysia.

According to Green Packet’s statement on the management reshuffle, Puan will now focus on mentoring and growing the group’s key management personnel to boost digital start-ups, while Tan will be responsible for realising the group’s fintech aspiration amid rising e-payment trends in Malaysia.

“The stock price is testing a new year-high on the feel good factor of having Puan back in the driving seat. The optimism needs to translate into an actual turnaround in its financial fortunes for the price rally to sustain,” said an analyst at a local brokerage.

Last week, the group annouced kiplePay had signed a memorandum of understanding (MoU) with Bank Islam Malaysia Bhd to provide e-wallet services. The MoU is effective for two years from the signing date.

Green Packet was founded in 2000 by Puan as a provider of connectivity devices and solutions to telecommunications companies.

It was listed in 2005 on the Main Market of Bursa Malaysia, and previously operated mobile wireless operator Packet One Networks (M) Sdn Bhd (P1).

Following Telekom Malaysia Bhd’s (TM) acquisition of a 51% stake in P1 for RM350 million in 2014, Puan relinquished his role as group CEO to Tan and assumed the post of P1 CEO for two years.

However, it’s worth noting that the Malaysian Anti-Corruption Commission (MACC) is investigating the telecommunications giant’s acquisition of P1 for irregularities. The Malaysian Reserve reported on July 1 that MACC officers visited TM on June 13 this year to “seek certain information” regarding the acquisition.

For the financial year ended Dec 31, 2018 (FY18), Green Packet recorded a net loss of RM35.58 million against a net profit of RM34.34 million posted the year before, while revenue slipped to RM96.67 million from RM97.79 million in FY18.

Just six months earlier, after the group’s AGM in June 2018, Tan — who was then CEO — told reporters the group was aiming to return to profitability in 2018, underpinned by its core businesses of hardware solutions, communication services and the media business.

He also said double-digit topline and bottomline growth would follow in the medium-term, once the group’s investments into fintech, the Internet of things and the media segment begin contributing to group earnings.

The lack of a turnaround could be due to a contract dispute between Green Packet and MYTV Broadcasting Sdn Bhd.

On Jan 23, 2018, Green Packet said it had won a RM272 million contract to supply 3.6 million set-top boxes to MYTV, which is the licensee to develop and manage infrastructure and networks for the country’s digital terrestrial TV services as Malaysia migrates from analogue to digital broadcasting.

According to Green Packet’s exchange filing in March this year, MYTV ordered 1.6 million set-top boxes from the former.

The first batch of 200,000 units were supplied and delivered by Green Packet to MYTV in January last year, while the remaining 1.4 million units were to be supplied after shipment and delivery dates were agreed upon by both parties.

However, Green Packet said the agreement was terminated by MYTV in November last year, and is now claiming damages over the termination.

In response, MYTV has counterclaimed against the group for breach of contract. Green Packet said it’s denying and refuting all MYTV’s allegations of liability and claims for damages.

For the first quarter ended March 31, 2019 (1Q19), Green Packet continued to bleed as it posted a net loss of RM13.88 million, although this was a slight improvement from a net loss of RM7.05 million registered in 1Q18.

Revenue was lower at RM97.94 million in 1Q19 compared to RM106.55 million posted last year.