Investors can get lost with the flurry of corporate announcements and run ups by many penny stocks. However, the Heads of Agreement between Nextnation and PT Inovisi Infracom deserves to be looked at more closely. The more I asked around, the more I inquired, it seems this is a highly significant potential deal because of the smallish size of Nextnation and the reputation of PT Inovisi Infracom. The latter has a paid up 2.56bn shares and trades around 6,000 rp. That makes their market cap at US$1.7bn. Thats a RM5.3bn market cap company. Hence Nextnation may have snared a big fish here. Thats like an ACE company doing a deal with the size and heft of Gamuda, IJM or UEM Land.
The share price did not move when the HOA was announced, rightly so, because its an HOA. However, investors should take heart if they see significant activity in price and volume of Nextnation as that may indicate some concrete agreement being finalised.
Potential Impact: For the six months ended October 2011, Nextnation recorded a revenue of RM29.3m and net profit of RM3.6m, or an EPS of 0.84 sen. Annualised that you are looking at 1.68 sen EPS. Thus the current share price is about fair at around 11-12 sen as its NTA is around 15 sen a share.
The proposed project is expected to generate US$22.5m revenue over 3 years. Assuming a net margin of 20%, thats US$4.5m to the bottom line over 3 years, or RM4.5m net each year, around 50%-60% jump from 2011 earnings. I believe thats a minimum deal size considering the size and reach of PT Inovisi. This deal, if eventuate, could very well elevate Nextnation's fortunes up a few levels.
Why Do The Need Nextnation's Expertise?: Nextnation has its own proprietary platform called MINDCEP, which connects to leading mobile services providers. Looking further to their three core products: SMSJET is in mobile messaging gateway and a micro payment developer; SOHOMOBILE allows for content development tools, billing system and DRM tools; and mCOMMERCE SUIT has ready made modules for mAlert, mCRM, mERP and mLogistics. If you consider the above with what PT Inovisi is doing, there are a lot of synergies potentially.
More On PT Inovisi Infracom (from its annual report)
PT Inovisi Infracom Tbk is an integrated mobile IT infrastructure provider and the holding a diversified investment company with businesses which include telecommunications, mobile internet, media and e-commerce business. PT Inovisi Infracom Tbk is a local company engaged in mobile telecommunications infrastructure, which focuses its services and products range on telecommunication software and platforms, broadband and network applications and enterprise productivity and mobility to enhance mobile telecommunications networks. Inovisi also provides high capacity bandwidth infrastructure, cellular telephone operator service, business solutions, internet service provider, advertising and marketing.
Inovisi investment portfolio includes telecommunications infrastructure, social communication network, e-payment solution and online market. The Company’s e-commerce Division recently expanded to oil & gas, minerals, and industrial products and services. Investment Division handles project financing, seed capital and investment facilities, and corporate M & A activity Inovisi was initially established under PT Cipta Media Rekatama. In 2008, a restructuring has taken place and according to decision of Extraordinary General Meeting of Shareholders (EGMS) held on April 11, 2008, the company name was changed to PT Inovisi Infracom.
Having its shares listed on the Indonesia Stock Exchange since July 3, 2009, Inovisi has carried out some corporate actions including: Rights Issue I in May 2010 whereby the Company issued 782 million new shares, along with the issuance of 312.8 million Warrants Series I, raising a total proceeds of Rp97.75
billion, from which 100% were allocated for the acquisition of Code Wireless Group, a Singapore based investment company engaging in IT solutions and services.
In December 2010, Inovisi decided to increase capital without rights issue, which amounted to Rp580.5 billion. After this strategic corporate action, the company has gained two more subsidiaries namely Abundant Global Group and Great World Group.Abundant Global Group (which now changed its name to Petrol One Group) is a business group originated in BVI and is also the holding company of Talent Global Limited, a B2B e-commerce provider focusing on logistics and storage specifically for the oil and gas industry. Great World is a business entity incorporated in Anguilla, an investment company which consists of various background subsidiaries, among others, Ozura World Limited, an investment firm in HongKong designing social games for internet and mobile internet users.
By the end of 2010, Inovisi has owned 7 (seven) direct subsidiaries, namely, PT Chiron Max, PT Graha Tunas Makmur, PT Andaman Lestari Multikreasi, Fastlane Limited, Code Wireless Group, Abundant Global Group and Great World Group. In coping with the shifting in demand and the dynamic market movement, Inovisi continues to develop new business strategies to strive to become the leading diversified investment firm and mobile information technology infrastructure provider in Indonesia and beyond, by offering convergence infrastructure, architecture and cutting edge technology to drive business opportunities to all clients and partners.