Systech plans to focus on organic growth

KUALA LUMPUR: Systech Bhd, whose share price has risen 58.7% year-to-date, said it plans to neither acquire or be acquired, but instead is focusing on growing organically.

In a recent interview with SunBiz, Systech CEO Raymond Tan (pix)said the group has no plans to pursue mergers and acquisitions (M&As) considering the characteristics of the technology industry which is deemed "high risk, high return".

"Not at this point of time, unless there's a good one, it is a very risky market, if you invest something that is off from the market, eventually you'll lose everything out," he noted.

Tan explained that the group will not tap into business it is not familiar with or not in line with the market trends.

"It's not that we don't want any M&As, it's just that we're very careful when it comes to M&As … The fundamentals of these acquisitions is high-risk high-return, but based on what we've done over the past 10 years, we're very cautious with regard to risk," he added.

Tan believes Systech will still grow, with the capability and expertise the team has in running daily operations.

"There is still (a lot of) room to grow (for the existing business), so I would rather focus on this," he said.

For the nine months ended Dec 31, 2014, Systech's net profit jumped 158.65% to RM2.92 million compared with RM1.13 million, thanks to higher contribution from proprietary software solutions and franchise software system segments.

Tan believes FY15 will be a record year for Systech, with a double-digit growth in earnings.

Systech received two unusual market activity queries, in a span of three months – once in November 2014 and another in January 2015.

"We've been hibernating over the past three years, so to me it's very much on our results and dividend payouts," he said when asked of increased investors' interest in Systech.

Filings with the stock exchange show that Tan owns a 56.94% stake in Systech.

Tan said the group is expecting to bag a sizeable contract from a public listed company for its security operation centre business, which is under the cyber security segment.

He hoeps the cyber security segment will contribute at least 30% to the group's topline for the financial year ending March 31, 2016 (FY16).

"But the bottomline will be less, about 10-15%, because the cost of hardware is high," he noted.

The proprietary software solutions and franchise software system are the largest revenue contributors, with 56% and 35% each.

He said Systech will build a strong foothold in the local market first, before expanding into the overseas market.

On the software solutions segment, Tan said it will be more on an organic growth, in particular the consolidation of its resources.

For the proprietary software solutions business, which is targeted at multi-level marketing customers, he said the group is looking to tap into the US market.

In order to grow the cyber security business, he said Systech needs to build up a good relationship with its business partners and IT conglomerates.

"Once we establish the platform, we'll continue the relationships with our partners…We've the people, they've the branding, so it's a good relationship," he added.

On challenges faced, Tan said the main concern is the lack of good talent within the industry, especially experienced programmers, hence the training and retention schemes have been set up to address those issues.

Systech's share price closed up 1 sen to 36.5 sen yesterday.