Agmo Holdings Berhad (AGMO), the homegrown digital solutions and application development specialist, registered an amazing start on the ACE Market of Bursa Malaysia, with 16.3mil new shares oversubscribed by 120.2 times!
In 2011, AGMO successfully secured an investment of RM300,000 through the participation in a start-up investment programme, namely “Make the Pitch”. This leads the company to grow rapidly. Currently, MYEG is the single largest shareholder in AGMO, with a 25.8% stake.
What are the reasons that made this IPO a huge success? Let us discover together!
Background
AGMO was founded by the group CEO Tan Aik Keong, Low Kang Wen and Tham Chin Seng. AGMO is an award-winning mobile apps development firm, who serves multinational companies, government agencies and top brands. Their clients include 10 Fortune 500 Companies, top listed companies in Thailand, Singapore, Hong Kong, government agencies. Since its inception in 2012, AGMO has developed and published more than 100 mobile apps with millions of downloads worldwide.
AGMO has won multiple awards, like 6 times APICTA awards in 4 different categories, ASEAN ICT Awards, 2 times Asia Smart Apps Awards and WITSA Global ICT Awards.
The company made a debut on the ACE market of Bursa at RM0.80, representing of 207.7% over its IPO price of RM0.26.
Business Model
AGMO can be known as a digital solutions and application development specialist. The group’s solutions involve digitalizing their customers’ business operations through the development of mobile and web applications, provision of digital platform-based services, as well as provision of subscription, hosting, technical support and maintenance services.
Most of the AGMO’s customers are from large and medium-sized enterprises, such as Heydoc International Sdn Bhd, Big Pharmacy, Alpro Pharmacy, Honda, POS, PETRONAS, MDEC, UMW, etc. Each of its customer has its own applications function, the group also can help their customers to develop their own application functions.
1) Development of mobile and web application
Mobile and web applications designed to digitalise and improve a specific task or function of businesses and companies such as sales and marketing, customer service, warehousing and human resource, as well as to digitalise and improve consumers’ daily lives for communication and entertainment purposes, amongst others. AGMO businesses and companies are from multiple industries such as healthcare, logistics, oil and gas, automotive, financial services and government agencies.
2) Provision of digital platform-based services
This service is intended to their customers to perform different tasks such as hosting events and connecting to the customers, as well as for e-commerce related transactions, amongst others. These digital platform-based services are provided through mobile or web applications developed and owned by AGMO, and their customers are authorized users who can use the applications when given access by the group.
These platform-based services are provided to their customers on a subscription model and / or per-usage / per-event basis based on the pre-agreed rates with the group. AGMO has 4 applications under their provision of digital platform-based services, namely Vote2U, Eat2U, Agmo Health and Agmo Loyalty.
Vote2U is a RPV platform developed using blockchain technology to facilitate the organization of virtual AGMs and EGMs of public listed companies in Malaysia. It provides the services such as online voting for resolutions proposed by companies, as well as livestreaming and interactions between participants / shareholders and representatives from the companies. AGMO has hosted approximately 190 AGMs and EGMs for 101 customers comprising public listed companies, private and public associations, as well as REIT in Malaysia via Vote2U.
Eat2U is an online food ordering and delivery application that serves as a platform for restaurants seeking to expand their customer reach by listing their food and beverage offerings on this application.
Agmo Health is an online health consultation and prescription application that can be accessed by their customers (pharmacies) and users (patients). It can function as a mini-application integrated within their customers’ mobile application as an additional service offering. The revenue generated from Agmo Health is based on monthly subscription fee and transaction fee for each prescription issued by the medical practitioners, charged to their customers.
Agmo Loyalty is a customer loyalty application developed by their customers such as businesses and companies to enhance the loyalty of their customers (users). Customers are able to view their customers’ profile, purchase history and points collected, and their customers are also able to view the points available, as well as points collection and redemption history.
3) Subscription, hosting, technical support and maintenance services
These services are provided for a pre-agreed period typically ranging from 3 months to 12 months, thus generating recurring revenue to the group.
AGMO provides subscription and hosting services to their customers under 3rd party cloud computing platforms. The cloud computing platforms used by their group for their subscription and hosting services comprise Microsoft Azure, AWS and Huawei Cloud. Their subscription and hosting services for mobile and web applications are based on quarterly or annual basis and are subject to renewal by their customers.
AGMO has been registered as partners with Microsoft Regional Sales Pte Ltd for Microsoft Azure since 2012 under a Microsoft Partner Network Agreement entered into on 2 May 2012, Amazon Web Services, Inc for AWS since 2018 under a AWS Partner Network Agreement entered into on 5 Oct 2018, and Huawei Services (HK) Co, Limited for Huawei Cloud since 2021 under Huawei Cloud Solution Partner Cooperation Agreement and Huawei Cloud Partner Network Certification Agreement entered into on 28 Apr 2021, respectively.
As for after-sales services, AGMO provides complimentary technical support and maintenance services for a period of 2 months, after the applications go live.
The utilization of proceeds
* AGMO has raised a total of RM22.1mil from its IPO. The group has allocated RM9.5mil for research and development investments, sales, marketing and business development teams. The allocation is also for dedicated technical support and maintenance services division.
* AGMO will invest RM6.2mil in working capital and related capital expenditure to expand its mobile and web application development and digital platform-based services and set up a new office.
* Another RM2.54mil of the proceeds will be used to establish a training and development centre known as Agmo Academy, while RM0.7mil has been allocated for regional expansion to Singapore, and the remaining RM3.2mil for listing expenses.
Key Financials
In terms of revenue, AGMO revenue was mainly generated from the development of mobile and web applications with revenue contribution at 94.3%, 87.1%, 80.4% and 78.4% in the past 4 FYE2019 to FYE2022. The group’s revenue was mainly driven from Malaysia with revenue contribution of 84.2%, 76.7%, 80.8% and 87.5%, respectively.
From FYE2019 to FYE2022, AGMO’s revenue and net profit grew at 3-years CAGR of 44.9% and 40.5% to RM16.5mil and RM6.7mil, respectively. For your information, AGMO’s revenue growth in FY2021 and FY2022 were contributed by a new revenue stream from the provision of digital platform-based services segment. Revenue from this segment accounted for 8% and 7% of AGMO’s FY2021 and FY2022 revenue, respectively. It was underpinned by the launch of the group’s in-house remote participation and voting platform to facilitate the organization of virtual meetings, which involve online voting such as AGMs and EGMs.
1Q2023 Result Updates
AGMO recorded a total revenue of RM5.65mil in 1Q FY2023, which was mainly derived from the mobile and web applications development segment which contributed approximately 66.4% to the total revenue, followed by the provision of subscription, hosting, technical support and maintenance service segment (26.4%) and the provision of digital platform-based services segment (7.2%).
Malaysia market was the group’s main revenue contributor, which recorded RM5.06mil or 89.5% of the total revenue for 1Q2023, while Hong Kong and Singapore were the major revenue contributors from the overseas market in 1Q2023, which recorded revenues of approximately RM0.42mil and RM0.01mil, respectively.
AGMO is a net cash company. As of 30 Jun 2022, AGMO has a total of RM8.6mil of cash and cash equivalents. The group don’t have any borrowings and trade payables at the moment. The group has a strong cash flow from its operation which stood at RM2.2mil.
Prospect
* The Malaysian Digital Economy Blueprint (MyDigital) which launched on 19 Feb 2021 will accelerate the growth of the digital economy. The blueprint serves as a foundation for Malaysia’s transformation into a “regional digital pulse” by 2030. Meanwhile, in the Budget 2022, the Government of Malaysia has also allocated RM200mil to drive the businesses to digitalize business functions which includes the adoption of mobile and web apps. All these government’s initiatives bode well for the group.
The mobile and web applications development industry in Malaysia and Southeast Asia are expected to continue on a strong growth trajectory, driven by the increasing number of businesses digitalizing their operations in order to remain competitive. This will further strengthen by the initiatives launched by the Government of Malaysia to drive digital investments in Malaysia and to accelerate growth of the country’s digital economy.
* The group CEO Tan Aik Keong mentioned that they are going to enlarge its footprint in Southeast Asia by expanding into Singapore.
* By broadening its revenue stream, AGMO intends to build a training and development centre with training courses on subjects include artificial intelligence, blockchain, chatbot and mobile / web programming is targeted for commencement within the next 18 months. The set up will also allow the group to identify potential talents.
* AGMO has developed an in-house proprietary development framework, known as Agmo Genesis, which consists of multiple components embedding programmed coding of standard core functions that are commonly found in many mobile and web applications. This can help to increase their time and cost efficiencies during the development phase of the applications.
* Another interesting thing is AGMO is able to enjoy lower effective tax rate of 0% to 3% as its subsidiary, Agmo Studio has been granted full tax exemption on its statutory income from its pioneer activities from 11 Dec 2012 to 10 Dec 2022 under the MSC Malaysia status.
Fundamental Analysis
Market Capitalization: RM269.8mil
Number of Shares: 325mil
Earnings per Share: RM0.026
PE Ratio: 31.9x
Return on Equity: 47.3%
3-years Revenue (CAGR): 44.9%
3-years Profit After Tax (CAGR): 40.5%
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