News blog

RapidCloud International

• BY: Andrew Hore |
• POSTED: 14/08/2013 |

Trading in the shares of Malaysian cloud computing services provider RapidCloud International got off to a strong start. 

RapidCloud raised £1m at 54p a share prior to its flotation and the share price closed the first day at 69.5p, which values RapidCloud at £12.1m.  House broker Allenby forecasts a 2013 pre-tax profit of MYR5.35m (£1.1m) and a tax charge of 6%, which equates to a prospective multiple of less than 12.

The 2012 pre-tax profit was MYR3.77m (£769,000) on revenues of MYR9.38m (£1.91m). RapidCloud has consistently grown its profit and generated cash over the past three years and this should continue. The strategy is to expand in Indonesia and, longer-term, into Singapore and Vietnam. This will require additional spending on marketing.

RapidCloud generates revenues from subscription-based services and from software developed specifically for clients but where it retains the intellectual property. The Malaysian cloud market is worth $65m but it is expected to double to $131m in 2015. The value of the Asia Pacific is expected to grow from $2.5bn to $5.6bn by 2015.

The main customer base of the subscription services is smaller businesses and this is a high volume business that has 36,500 clients. Services include website management and e-commerce. There is also an Infrastructure-as-a-Service (IaaS) operation which provides outsourced hosting services and virtual servers, where RapidCloud owns and manages the equipment.

The project-based software operations have less predictable revenues but contracts are of a much higher value.

In the five months to May 2013, revenues were 48% higher at MYR4m (£816,000). There has also been a cash inflow since the end of 2012.

There is a mixed attitude to Malaysian companies following the problems of data centre operator CSF Group and this explains the low rating at the time of the flotation. RapidCloud does not own data centres although it does install its own equipment in data centres.

RapidCloud raised £583,000 after cash expenses. Total expenses were £520,000 but some of these were paid in shares. Convertible preference shares worth MYR3.1m (£633,000) have also been converted into ordinary shares.

The pro forma net asset value is MYR14m (£2.86m), while pro forma net cash is MYR8.46m (£1.73m) and it is expected to end the year with around £2.5m. This is despite continued heavy investment in R&D for new products and to cover smart phones and tablets.

RapidCloud wants to supplement its organic growth by acquiring businesses that already have an infrastructure in new regional markets. This can be funded through cash and/or shares.

There are also plans to pay a dividend equivalent to 20% of after tax profit.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFAugust2013_47.pdf