Artroniq Banks on Point-of-Sale Systems to Grow ICT Business

“We are quite confident that there will be positive results for the whole of 2021. With the opening up of more economic sectors, our revenue should grow 5% to 10% in 2022.” — Leong (Photo by Artroniq)

ARTRONIQ Bhd, formerly known as Plastrade Technology Bhd, has seen positive contribution from its information and communications technology (ICT) business. The focus will be on the expansion of its point-of-sale (POS) systems segment.

The venture into the POS segment in May 2021 has helped the company return to the black in the first nine months of 2021 with a net profit of RM5.11 million against a net loss of RM5.58 million in the previous corresponding period.

“We are quite confident that there will be positive results for the whole of 2021. With the opening up of more economic sectors, our revenue should grow 5% to 10% in 2022,” CEO Kenson Leong Seng Kin tells The Edge in an interview.

Artroniq’s top line grew 72.7% to RM188.86 million for the nine-month period in 2021 from RM109.33 million in the same period a year ago.

Its diversification into the ICT business started in December 2018 following the acquisition of EA Global Integrated Sdn Bhd.

Under the consumer business, it offers computer hardware, peripherals and accessories, before it expanded into the commercial business of supplying POS systems, which comprise barcode and automatic identification as well as data capture solutions for various industries such as manufacturing, logistics, retail and food and beverage (F&B).

While contribution from the POS segment is minimal, Leong sees more potential in this commercial business as it taps the economic recovery.

“Annual revenue from the POS segment is RM20 million to RM30 million. We expect to hit RM50 million next year, driven by our projects on hand. We are also in talks for more POS deals, as well as products related to the POS.

“As economic sectors have opened up, we can see a lot of potential, especially when dine-in is allowed. The opening of more outlets will give rise to demand for our products. Going forward, we will focus very much on the commercial side because of better margins. 

“We have a number of big clients, including café and food court operators as well as government agencies. We plan to have offices in Thailand, the Philippines and Indonesia given the potential in these countries,” says Leong.

He foresees the commercial business contributing 20% to the company’s profit from the current 10% to 15%.

He says the group has a huge network coverage with more than 400 resellers throughout the country, adding that it could provide the necessary support and after-sales service.

“Most resellers are software vendors for F&B and retail POS. They would install the programme in our hardware and then supply it to end-customers. We always work hand in hand with resellers for big projects because there are many customisation parts.”

At the same time, the change in the working and learning model also bodes well for Artroniq’s consumer business, though there was some supply chain disruption during the first Movement Control Order.

“We were able to manage the logistics and supply issues. I would say [the challenge] is more about handling the high demand because most people were working from home while students were having online classes. So, the demand for laptops surged,” notes Leong.

Besides Malaysia, Artroniq also distributes ICT products in Indonesia, Singapore, Hong Kong, China and the UAE.

“Although the market is competitive, we work closely with partners to run our marketing programme and offer high incentives. That is how we can attract customers to stay with us,” says Leong.

The group is on the lookout for mergers and acquisitions, especially peers that are involved in the POS business.

“Our priority is Malaysian companies, but if there is any opportunity in the overseas markets which can give us a good return, we would also consider it,” Leong says.

On the company’s proposed RM12.7 million private placement, Leong expects the fundraising exercise to be completed within this quarter, with the proceeds being utilised to fund its commercial business.

Artroniq’s inventories are kept at its warehouse in Glenmarie, Shah Alam. It is looking to sell its two plants — with a built-up size of 30,000 sq ft each — in Johor Baru, which were previously used to house its manufacturing operations involving polyethylene compound for wire and cable insulation and jacketing.

Owing to the challenging business environment, the manufacturing business ceased operations in September 2020, and the company changed its name a month later.

Founder Pua Kong Hoi is the largest shareholder of Artroniq, with an 18.68% stake, followed by Heng Kear Huat, who holds 17.98%.

Worth noting is that there was an attempt to oust four directors last April, but it did not succeed as the requisitionists failed to satisfy the condition precedent of having a collective 10% stake to convene an EGM.

Since then, there have been several boardroom changes at the group, with the resignations of Heng Chip Hian and Lam Kwan Siew, as well as the appointment of Tan Su Jin as executive director.

Artroniq’s share price has been on the rise from about 30 sen since November 2021. It hit a high of 64 sen on Jan 6 before paring gains to close at 50 sen last Thursday, giving it a market capitalisation of RM144.5 million.

As at end-September 2021, it had net cash of RM4.7 million, with RM3.2 million in gross borrowings.

This article first appeared in The Edge Malaysia Weekly, on January 17, 2022 – January 23, 2022.

Author: Lee Weng Khuen / The Edge Malaysia
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