ECS ICT Bhd, which hopes to reap the benefit from the implementation of the Goods and Services Tax (GST), is looking at mergers and acquisitions (M&As) in a bid to expand the ICT services segment.
Its managing director Foo Sen Chin (pix) said the company is in talks with a few Malaysian companies to embark on an acquisition plan, but nothing has been concluded as yet.
“There could be new business area namely services we’re looking at, but it might not be simple to grow as you need to have a new team, so we’re considering a right company to acquire,” he said.
The areas that the group is looking to enhance within the services segment include outsourcing services, managed services, data centre services and project management.
ECS ICT distributes a wide range of ICT products, with more than 4000 resellers, system integrators and corporate dealers. Its three main business segments are ICT distribution, enterprise systems and ICT services.
Analysts expect ECS ICT’s, which is seen as one of the beneficiaries of the implementation of GST, earnings’ to fall post its implementation period if it doesn’t seek new business opportunities.
Foo told SunBiz in an interview recently that the company is looking for opportunities with government departments like customs, for related systems to support GST collection.
“So we’re working with many partners who are supplying the systems and solutions to all these government departments. There’s an opportunity for us as they need to buy the server, network and storage,” he added.
Foo admitted however that its consumer is likely to suffer from the implementation of GST in the second quarter of the year as spending slows down.
“In this business, it will recover very fast because new models always come out…So, I’m not too worried about the effect,” Foo said, adding that more compelling models and features will attract more demand for devices like notebooks, tablets and smartphones.
As for the e-commerce segment, Foo pointed out that the firm plans to expand its reach by working with big resellers and retailers to offer its products online to customers next year.
“Many of our retailers do not have that portal or system to handle end users, so that would be our next plan,” he added.
Four strategic initiatives for the next few years are mobility, cloud computing, e-commerce and services.
He said the distribution of smartphones, which started a year ago, will make a “good contribution” for the group and the group is looking to distribute more brands of smartphones on top of over 30 brands it has right now.
Besides smartphones, other consumer-based products that it distributes include notebooks, PCs, printers and tablets.
Foo said over the past five years, the group has been growing the enterprise systems segment, which fetches higher margin. However, he sees more challenges in that segment as it needs sufficient technical and support from engineers.
According to Foo, ICT spending recorded a compounded growth rate of 5% per annum, with a market size of US$8 billion that yet to include the services segment.
“We always grow faster than that, and for this year, we can easily grow at double-digit,” he said, adding that it is underpinned by growing demand for smartphones and small tablets.
Foo expects the group could easily hit RM1.5 billion revenue this year, as the second half has always been better than the first half of the year.
ECS ICT’s net profit edged up 3.54% to RM12.3 million for six months ended June 30 versus RM11.88 million in the previous corresponding period, on the back of RM748 million revenue.
As at June 30, gross profit for the ICT distribution segment stood at 4% to 5%, whereas the enterprise segment was higher at 8% to 9%. On average, it made a 6% gross profit.
Its share price fell 3 sen to RM1.42 on Friday.