Corporate manoeuvrings of TS Wong arouse interest

TheEdge Wed, Aug 24, 2022 02:00pm - 1 year View Original


BUSINESSMAN Wong Thean Soon, or better known as TS Wong, has been trading shares in the four publicly traded companies he has substantial stakes in, namely MyEG Services Bhd, Excel Force MSC Bhd, Cuscapi Bhd and MyTech Group Bhd.

He has been transferring shares from his investment vehicle, Asia Internet Holdings Sdn Bhd, to himself.

This has given rise to speculation of an impending corporate exercise involving his companies. The speculation heightened after S5 Holdings Inc’s plan for a reverse takeover of Ancom Logistics Bhd fell through in April.

MyEG has a 20% stake in S5 Holdings, which is perceived to be a key player in e-government solutions.

In mid-2020, S5 Holdings, which was seen as politically well-connected, was in the news as it was in the running to bag a circa RM1 billion National Integrated Immigration System (NIIS) contract. Its wholly-owned unit, S5 Systems Sdn Bhd, had put in several bids, partnering various companies, to secure the job, but it did not make the cut.

When asked what was the rationale for him to hold the shares directly instead of under Asia Internet Holdings, Wong, in an email response to The Edge, says, “The transfer exercise is just to streamline my investment portfolio.” His response has possibly poured cold water over a potential corporate exercise.

Wong boasts that his acquisitions are to ride the evolution to Web 3.0, which is the iteration of internet technology to be more open and transparent, where little authorisation is necessary.

He has a 31.06% stake in MyEG, 32.96% in information technology solutions provider Excel Force MSC, 14.69% in Cuscapi, and 32.02% in precision spring manufacturer, hotel and gaming operator MyTech (formerly Widetech (M) Bhd).

MyEG is the single largest shareholder in Agmo Holdings Bhd — a mobile app developer that will make its debut on the ACE Market on Aug 18 — with a 25.8% stake (see shareholding chart).

Wong explains: “I am just an investor, but these companies all share a common belief in the major disruption as all digital services evolve to Web 3.0. The impact of Web 3.0 will be similar to what we witnessed 20 years ago when we first started communicating via email and conducting e-commerce transactions. I would like to highlight that I have been investing in blockchain companies since 2016, so it’s a very long-term and consistent view.”


Late last month, he bought 15 million MyEG shares from Asia Internet Holdings, raising his direct shareholding to 12.28% from 11.68% in November last year, while his indirect stake (held via Asia Internet Holdings) fell to 18.78% from 19.7%.

MyEG’s share price hit a 52-week high of RM1.15 on Nov 23, 2021. However, the stock has fallen 24.5% since mid-November last year to 77 sen last Wednesday, giving it a market capitalisation of RM5.82 billion.

Earnings wise, the company has seemed resilient during the Covid-19 pandemic. It posted an annual profit of RM315.9 million for the financial year ended Dec 31, 2021 (FY2021), up 17.6% from RM268.65 million the year before.

For its first quarter ended March 31 this year (1QFY2022), MyEG chalked up a net profit of RM84.63 million versus RM76.28 million a year ago. Quarterly revenue came in lower at RM161.77 million compared with RM171.46 million.

To recap, MyEG has changed its financial year end twice. In 2018, it changed its financial year end from June 30 to Sept 30, and again in the following year, from Sept 30 to Dec 31.

Notably, none of the other companies in Wong’s portfolio are as big as MyEG in terms of profitability.

He has been the managing director of MyEG since March 2000 but he does not have any board seat in the other three companies. He was an alternate director at Excel Force to Datuk Norraesah Mohamad from February 2017 to September 2021. Norraesah was at one time his partner in Asia Internet Holdings.

In late July, Wong bought six million shares of Excel Force from Asia Internet Holdings, raising his direct shareholding to 18.23% or 101.98 million shares, from 15.37% or 85.98 million shares about a year ago. Asia Internet Holdings currently owns 14.73% or 82.4 million shares compared with 17.59% or 98.4 million shares previously.

Over at Excel Force, its share price has shed 25% year to date to 44.5 sen last Wednesday, valuing the company at RM246 million. It raked in a net profit of RM3.03 million in 1QFY2022, lower than the RM4.01 million recorded a year ago, while revenue dropped to RM8.76 million from RM9.56 million.

In MyTech, Wong has a 30.02% direct stake, while Asia Internet Holdings’ stake has shrunk to almost 2% or 4.47 million shares. In October last year, Asia Internet Holdings’ stake was 20.16%, while Wong had a direct stake of 11.86%.

In March, he bought 13.35 million MyTech shares from his other vehicle, Distinct Rich Sdn Bhd, and 19.15 million shares from Asia Internet Holdings. Subsequently, the two ceased to be substantial shareholders.

Since November last year, MyTech’s share price has tumbled from a peak of RM1.316 to 37.5 sen in July. Soon after, the stock climbed sharply to 66.5 sen last Wednesday within a month, giving it a market capitalisation of RM150 million.

For its financial year ended March 31, 2022, MyTech returned to the black with a net profit of RM1.26 million compared with a net loss of RM2.19 million, despite lower revenue of RM10.7 million versus RM11.8 million in FY2021.

The ballooning accumulated losses of RM121.3 million do not seem to have dented Wong’s interest in Cuscapi. He surfaced as a substantial shareholder in the loss-making firm in early March this year with 7.73%, and doubled his shareholding in a span of five months to 14.69% currently.

Cuscapi’s share price hit a four-year high of 48 sen in March this year. Selling pressure emerged after that and the stock more than halved to 22 sen. It closed at 23.5 sen last Friday, giving the company a market value of RM226.77 million.

The company has been in the red for 10 years. For its nine months ended March 31, it suffered a net loss of RM2.54 million on RM8.15 million in sales. For the corresponding period a year ago, it incurred a net loss of RM10.03 million from RM7.65 million in revenue.

It is also noteworthy that Asia Internet Holdings ceased to be a substantial shareholder in information and communications company Heitech Padu Bhd in September last year.

Does Wong intend to rejuvenate Cuscapi as he sees opportunities in Web 3.0? It will be interesting to see what happens next.

 

Positioning for the next big thing

To say that Wong Thean Soon (better known as TS Wong) is low key would be an understatement. He owns substantial stakes in four public-listed companies as well as one that will be listed this week on Aug 18. However, the businessman has kept his plans and aspirations close to his chest.

Wong rose to prominence after he floated the shares of his flagship MyEG Services Bhd in January 2007, and has since ventured into a number of companies. MyEG’s shares succumbed to a strong selldown in 2018 after the 14th general election amid fears that it would lose its e-government contracts — its bread and butter.

Four years on, MyEG has survived the Covid-19 pandemic and the changing political landscape.

In an emailed response, Wong shares his views on how he will be seizing opportunities that arise from digital disruptions and the adoption of blockchain technology.

 

The Edge: From MyEG Services Bhd, you ventured into Excel Force MSC Bhd in 2016/17. What was it about Excel Force that prompted you to buy into the company? Similarly, what was the appeal of MyTech Group Bhd and Cuscapi Bhd?

Wong Thean Soon: All of these companies are essentially digital platform businesses, which is what I like to focus on. I believe all software and online platforms will undergo a major disruption when we evolve to Web 3.0 in the coming years and these companies can complement one another in building an ecosystem that will differentiate itself from competitors.

Excel Force is a very established provider of software systems for broking companies that we want to export to other countries. It was difficult to do so over the last 2½ years due to travel restrictions, but we are now actively pursuing this again, and we are making inroads in this respect.

Further down the line, we believe equities trading (like all other digital platforms) will evolve into Web 3.0 platforms, similar to how FTX is disrupting the equity trading business in the US.

Cuscapi has already invested in a locally licensed digital asset exchange, MX Global Sdn Bhd, together with Binance, the world’s biggest digital asset exchange. And together, we will be exploring opportunities to further invest in new Web 3.0 services and applications. Obviously, as the biggest player in the Web 3.0 space, Binance has access to all new and promising projects and we hope to partner them on some of these.

With MyTech, we are looking to capitalise on the difference in regulations between China and the rest of the world. In particular, China prohibits its entities/citizens to be involved in the issuance of cryptocurrencies and we are looking for opportunities where we can arbitrage this difference in regulation.

 

Are there any synergies between these companies?

All the companies have started the evolution to Web 3.0, which I consider to be the major technology disruption for the next 10 to 15 years. My observation is that tech platforms undergo a major disruption every 20 years — with the mainframe in the 1960s, followed by PCs in the 1980s and the internet in the 2000s.

Web 3.0, that is, decentralisation in blockchain, will be the seismic shift in the 2020s. There is a major difference between cryptocurrencies and blockchain as proven by the Chinese government, which has banned cryptocurrencies, but blockchain adoption is far more mature than anywhere else in the world.

Therfore, each of these companies is focusing on becoming an international player in different aspects of the upcoming Web 3.0 ecosystem, leveraging their respective existing market positions to roll out their unique Web 3.0 services. For instance, MyEG via Zetrix (100% owned by MyEG) will be the Layer 1 blockchain provider (the operating system of Web 3.0) and we will roll out e-government services using blockchain.

Cuscapi will provide the digital asset exchange and invest in start-ups in the ecosystem. Agmo will offer development services to help other companies evolve into Web 3.0, leveraging their expertise and intimate knowledge of decentralised applications (dapps).

 

Since you are an investor, is there a time frame for your exit? What are the criteria for you to enter and exit companies?

I do not have a time frame to divest from any of these companies for as long as we share a common goal, which is at present, of course, the evolution to Web 3.0. As mentioned above, I would like to highlight that I have been investing in blockchain companies since 2016, so it is a very long-term view. Conversely, if I no longer shared the common goal with the company, I would exit.

 

What are your plans for each of the companies, and how do you get the board to act on what you want from the companies, considering that you are on the board of companies you have invested in, except for MyEG?

First, it must be emphasised that the respective boards of these companies are composed of competent professionals with the requisite skills, experience and independence, who have collectively discharged their duties with integrity and professionalism in the best interests of all stakeholders. Therefore, they are not beholden to the wishes of any single individual, myself included.

I am a shareholder of these companies because we share common broad views on how things are going to evolve. I emphasise BROAD views because I do not get involved in the implementation. Generally, with regard to actual implementation, we generally look at what is happening in the US and China markets, and customise and improvise accordingly.

 

Also, now that the plan for a reverse takeover of Ancom Logistics Bhd via S5 has fallen through, what are your plans with S5? Are you in S5 for the long haul?

We obviously see value and synergy in S5 and, as with all our investments, we will remain invested as long as we share a common destination.

 

Is there more you would like to share with the investing public?

We have waited for a long time for the ‘next big thing’ since the last major tech disruption, that is, the mass adoption of the internet. My philosophy is that in tech, you can succeed only if you are very early or you have very high burn rates, and I choose to be the former.

We were actually very early with the internet back then and our online (e-commerce) services for JPJ were actually launched when Amazon started e-commerce. However, we were too focused on the domestic market in our early years.

But now, with Web 3.0, we are committed to establishing ourselves as a market leader internationally. Through our partnership with Xinghuo (China’s national blockchain operated by the Ministry of Industry and IT through Chinese Academy of ICT), we arguably have the most advanced blockchain platform technology and, today, the Xinghuo-Zetrix ecosystem is already the most active Web 3.0 platform globally, processing 94 million daily transactions on average.

Over the years, we invested in many companies, both listed and unlisted, because we believe these companies are important components to building a strong ecosystem. We do not invest with an exit strategy in mind, but we invest for access to technology or to strengthen our ecosystem. Of course, the multibagger returns on our investment are very much appreciated as well, but that is not the major consideration at the point of committing to the investment.

Web 3.0 adoption will accelerate in the next one to two years, and we believe the companies we are invested in will ride the growth trajectory to become significant international players.

 

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