KUALA LUMPUR: Nova MSC Bhd said its fundraising exercise, which was approved by its shareholders at an extraordinary general meeting (EGM) yesterday, is necessary to speed up market expansion plans, after the group spent its past few years extensively on research and development (R&D).

Founder cum group chief executive officer (CEO) Steven Chan Wing Kong said as at end-December 2018, Nova MSC had an order book of RM126 million, providing earnings visibility for the next two years.

Of these, some 70% were contributed by its e-government solutions segment, while the balance came from its smart healthcare applications segment.

In its financial year 2018 (FY18) ended March 31, 2018, about 95% of the group’s revenue was contributed by its business in Singapore, while the rest was from Malaysia.

“We started our business by developing our own software, both in the healthcare and e-government areas. We are not just resellers of products, so we have taken quite a number of years to develop and to get customers.

“All those years of raising funds were to support continuous R&D of our products. Now that our products are very much mature, our backlog has moved up. This shows the attractiveness of our products. We have to really push it to the international market, that is why we have this 30% placement,” said the 61 year-old Singaporean.

Chan was speaking to reporters after the group’s EGM here, together with novaHEALTH Pte Ltd CEO Lai Teik Kin. He said one focus area would be the Malaysian market.

Without divulging further, Chan said the group has seen an increase in engagements under the new business environment since the change of government.

At the EGM, shareholders voted in favour of the group’s proposed private placement of up to 30% of its issued share capital to investors to be identified later.

This round of exercise, expected to be completed by the third quarter of this year, will help Nova MSC raise proceeds of up to RM35.17 million. This marks the group’s fourth private placement in less than four years.

Of the total proceeds raised, some RM12.97 million will be used to fund expenditure of existing projects.

On top of that, the group plans to spend RM9 million each on financing the overseas expansion of its IT portal system FORNAX, which provides building information modelling-related documents submission, and for its strategic investment into complementary businesses in artificial intelligence (AI) and automation for its e-government and healthcare segments.

It also earmarked RM3 million for the repayment of bank borrowings, while the remainder RM1.2 million will be used to defray the placement’s estimated expenses.

According to Chan, besides shifting the group’s business model from project-based to lease-based in order to generate more stable and recurring income, the group is working on expanding its products into new territories.

This applies to FORNAX, as well as SELENA+, a system that utilises AI to perform automated image analysis of retinal image for early detection of diabetes.

The group is currently waiting for approval from Singapore’s Health Sciences Authority to begin the marketing of SELENA+ through its 42%-owned subsidiary EyRIS Pte Ltd. The system was jointly developed by the Singapore Eye Research Institute and the National University of Singapore.

Overall, Chan said the group is working on keeping the positive momentum going in meeting its turnaround target this financial year, having spent the past two fiscal years in the red.

For the first nine months of FY19 (9MFY19) ended Dec 31, 2018, Nova MSC registered a cumulative net profit of RM10.84 million, over five times the RM2.05 million it recorded in 9MFY18.

This was as revenue grew 45% to RM42.35 million, from RM29.18 million in the year-ago period, attributable to higher revenue recognised from its order book.