This article first appeared in Capital, The Edge Malaysia Weekly on June 2, 2025 - June 8, 2025

AHEAD of its June 3 transfer listing from the LEAP Market to the ACE Market of Bursa Malaysia, ICT Zone Asia Bhd (KL:ICTZONE) is clearing the air over a misunderstanding of its business model.

Managing director Tommy Lim is unfazed by the accusations that the company’s business is “too good to be true”.

“[Some] people called us a scammer because they couldn’t comprehend how a business dealing with depreciating ICT (information and communications technology) assets could offer consistent 10% returns. [In fact,] these depreciating assets are the exact reason our customers should lease from us,” Lim tells The Edge in an interview.

“[Some people] also fail to see the underlying tech-fin [technology financing] structure — we are not just a hardware supplier or a lender; we’re building a recurring, asset-backed ecosystem.”

Founded in 2000 by Lim and Datuk Seri Ng Thien Phing, founder of Main Market-listed SkyWorld Development Bhd (KL:SKYWLD), ICT Zone Asia started with trading of audio-visual equipment. It later evolved into a hybrid technology financing provider that blends ICT solutions with leasing, services and recurring revenue.

According to Lim, ICT Zone employs a three-tier asset lifecycle strategy. New devices are first deployed under long-term rental contracts for up to three years (M1 phase). After that, they are refurbished and rented out again for another two years (M2 phase). Finally, the devices are resold on ICT Zone’s consumer platform, www.komputermurah.my (M3 phase).“The revenue from each asset doesn’t stop after one cycle. In fact, our M2 and M3 phases contribute additional margin layers, helping us maintain profitability despite the depreciating nature of ICT products,” he says.

“Our monthly subscription model offers simplicity — one price per seat, per month — covering everything from procurement to technical support. That’s what drives customer stickiness and recurring income.”

Still, there are concerns whether refurbished hardware can attract market demand and provide decent profit margins. Lim believes that user experience and data itself are the two key factors, noting that certain products, such as MacBooks, can retain up to 30% of their value even after three years of use.

Assets with no residual value are fully depreciated within the first cycle to reflect conservative accounting.

Lim says the company deploys capital only after securing contracts under its “one-to-one” policy, to ensure that liabilities are backed by customer orders. With stringent client selection and monthly payment agreements, its default rate remains below 1%.

ICT Zone serves a mixed clientele, primarily government-linked agencies — which contribute more than 70% of revenue — as well as universities, small and medium enterprises and corporate clients from the energy sector and highway companies.

As its top five clients made up 77% of its revenue for the financial year ended Jan 31, 2025 (FY2025), the company is expanding its private sector presence to mitigate concentration risks. This move will be backed by RM1.5 million in initial public offering (IPO) proceeds allocated to sales and marketing.

ICT Zone Asia posted RM127.8 million in revenue and RM8.8 million in net profit in FY2025. Its unbilled order book stood at RM242.7 million as at April 15 this year, with a target to double this figure to RM500 million within three years.

It is raising RM30.8 million through its IPO — comprising 133 million new shares and 21 million existing shares priced at 20 sen each — valuing the group at RM159.1 million, or 21 times its FY2024 earnings.

Of the RM26.6 million proceeds from the public issue, RM21 million (79%) will be used to purchase about 4,000 units of ICT hardware and software to expand the company’s asset base; RM1.5 million (6%) will be for sales and marketing; and RM4.1 million (15%) for listing expenses.

The company applies an 80:20 capital structure rule — 80% bank borrowings and 20% equity — to scale up its leasing business. This means every RM1 of equity can support up to RM5 worth of financed ICT assets.

“Post-listing, our shareholders’ funds will hit RM100 million — comprising RM70 million in audited equity, IPO proceeds and earnings from 1QFY2026 — giving us firepower to fund up to RM500 million worth of ICT assets,” Lim says.

Proceeds from the offer for sale — representing 6.9% of the enlarged share capital — will go to ICT Zone Holding Sdn Bhd and Ng, both collectively controlling 72.85% of the company pre-listing. A six-month moratorium applies post-IPO, followed by a staggered release over three years.

A 2020 revamp of its shariah-compliant ICT Zone Venture scheme reshaped the company’s capital base, converting nearly 400 scheme holders into equity and irredeemable convertible preference shareholders — kick-starting its LEAP Market listing.

Looking ahead, Lim highlights that ICT Zone plans to strengthen its cloud services arm (via 58.25%-owned HaaS Techonolgies Sdn Bhd) and expand into the Internet of Things, smart automation and artificial intelligence-enabled hardware. Further, the introduction of neural processing units and demand for “as-a-service” models amid the digitalisation push also provide tailwinds.

The company aims to distribute up to 20% of net profit as dividends post-listing, according to its prospectus. “With a 35% [revenue] CAGR (compound annual growth rate) since our LEAP listing and a clear recurring revenue pipeline, we’re a growth stock — not a dividend play just yet. The ACE Market isn’t our final stop,” Lim says.

RHB Research and TA Securities, which have a target price of 30 sen and 24 sen respectively, point to ICT Zone’s comprehensive ICT offerings, wide supplier network and experienced management.

RHB estimates a 47.5% earnings CAGR from FY2025 to FY2028 and views the 7.9 times FY2027 price-earnings ratio as convincing, citing its record-high order book and recurring income model.

Tradeview Research, which has a target price of 29 sen, favours ICT Zone for its high-margin refurbished hardware business, cloud expansion and profit margin uplift post-IPO. 

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