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Saturday, January 27, 2018

Kronologi on course for solid year

Saturday, 27 Jan 2018
by toh kar inn

Recent selldown of shares could be due to profit-taking and stronger ringgit

KRONOLOGI Asia Bhd, a tech stock on Bursa Malaysia that performed spectacularly well last year, has been seeing some volatile price swings in its share price of late.

So is all well at the data management company, which enjoyed a two-fold rise in its share price throughout 2017?

Kronologi, which has a market capitalisation of RM267mil, ended 2017 at a price of 92.5 sen a piece, down from its 52-week high of RM1.28 just a month before on Nov 2, 2017.

The price had been gradually easing since the beginning of the year and a week ago hit a low of 75 sen a piece.

Then a filing revealed one of the sellers – it was the company’s own past executive chairman and co-founder Piti Pramotedham.

Piti had disposed four million shares of Kronologi into the market, leaving him with a balance of 31.54 million shares or a 9.62% stake in Kronologi.

It should be noted that when Piti resigned from his post and the board of Kronologi in September 2015, he held a whopping 53% equity of Kronologi.

That stake has been whittled down to under 10% via what is believed to be orderly divestments to various parties, including key management personnel at Kronologi.

But just as interesting is that despite the selling, there is no dearth of parties keen to buy into Kronologi, especially in light of its current weakness in its share price.

Tuesday and Wednesday saw strong buying of Kronologi shares, which nudged the stock to reach an intra-day high of 89.5 sen.

A total of 21.2 million Kronologi shares changed hands on those two days alone, equivalent to around 6% of the stocks outstanding shares.

And then late Friday evening, a stock exchange filing by Kronologi revealed that an off market deal involving 10 million Kronologi shares took place.

A dealer says that the buyer of the block is a new Singapore-based party buying into Kronologi, considering the company’s good earnings and growth prospects, coupled with the weakening in its price. Kronologi’s base of operations is largely in Singapore.

Kronologi is involved in the business of enterprise data management (EDM) infrastructure technology and EDM managed services. The company’s steady performance is noted.

Its nine-month earnings for the financial year ended December 31, 2017 (FY17) at RM8.63mil have already surpassed the FY16 full year earnings of RM7.43mil.

And going by the last two financial years, it tends to report a strong fourth quarter, If it does post a good fourth quarter, that would significantly boost its year on year growth for FY2017.

The counter presently trades at a 12-month trailing price earnings multiple of 18 times.

When asked about the recent selldown of shares, Kronologi acting CEO and chief technology officer Philip Teo says it could be due to profit taking and the strengthening of the ringgit against the US dollar, which has also impacted exporters in general.

“About 60% of Kronologi’s sales is denominated in US dollars, so the group tends to benefit when the US dollar strengthens against regional Asian currencies where it operates.

“Our former executive chairman (Piti) stepped down in September 2015 and had relinquished his duties in the group, but remained a substantial shareholder.

“Since we are a listed entity and our shares are freely traded in the stock exchange, we certainly have no prerogative to restrict anyone from selling their shares in the open market,” Teo tells StarBizWeek in an email reply.

As for the group’s plans to enhance its EDM solutions by incorporating artificial intelligence (AI) and additional analytics, Teo says those plans are still in the early stages.

Earlier this year, Teo had told the media that Kronologi is banking on AI for its next stage of growth. He said that company was looking at technologies such as facial recognition systems as key to helping it win more contracts and is seeking mergers and acquisitions in the AI sector,

Kronologi had recently revised the time frame to utilise part of the proceeds raised from its initial public offering (IPO) for another 12 months, until year-end.

“This will give us additional time to explore and keep up with state-of- the art technology for the continuous improvement of our EDM solutions,” he says.

Teo cited an independent market research report on the EDM industry in the Asia-Pacific region (excluding Japan) dated October 2017, which stated that demand for EDM solutions is expected to continue growing.

The report said this will be contributed by a growing number of enterprises in the region and their increasing requirements for storage capacity, as well as government initiatives such as the Digital 21 Strategy in Hong Kong and Innovation Economic Development Plan in Taiwan.

“With the acquisition of Quantum Storage Hong Kong last year, we now have a strong foothold in these two markets which we can use as a springboard to extend our footprint further.

“Specifically, our plan is to consolidate our businesses from the acquisition of Quantum Storage India and Quantum Storage Hong Kong, and reap the benefits of economies of scale with our presence in 10 locations across eight countries in South Asia,” says Teo.

While the group does not have any specific earnings targets for 2018, Teo is confident that Kronologi’s performance in FY18 will be better than FY17, barring any unforeseen circumstances.


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