KJSB moving on

KJSB moving on

Halim Wahab

A KEEN investor would not miss the fact that Lityan Holdings Bhd has been

in the news of late. Call it investor relations on its part, as it is

evident that this information technology group is keen to portray that

things are indeed moving in the right direction.

In its heyday, Lityan was a favourite pick whose share price was chased

up to over RM20 pre-1997 crisis. Not any more. Now a penny stock, it is

almost out of investors’ radar due to its three consecutive years of

operational losses beginning FY1999.

In that year, the group saw a net loss of RM27.2 million from a net

profit of RM2.3 million in FY1998. The losses shot up to RM33.3 million in

FY2000 and a whopping RM110.4 million in FY2001. At the time of writing,

the FY2002 results are yet to be announced.

However, a new beginning may just be around the corner. Its executive

chairman Rahmat Harun, in an interview last November, pointed out that

Lityan had learnt from its past mistakes and that this could well be the

turning point for its business. `We are at the point of making a U- turn, a

return to profitability, a return to the black,’ he said.

For this to materialise, however, the ingredients have to be in place

and all three key business segments of the group, ie, network

infrastructure, system integration (SI) and e-business, have to deliver

their share of the bargain. In this aspect, there have been promising

developments in its network infrastructure and SI activities thus far.

Interestingly, Lityan started the year on a good note. Its wholly owned

SI subsidiary Konsortium Jaya Sdn Bhd (KJSB) executed an agreement on Jan

8, 2003 with the Malaysian Government for a RM48.5m SPEKS Roll- out Project

to provide a standardised accounting system for nine state governments.

KJSB general manager Ahmad Zaki Datuk Ahmad Maher says this followed the

successful implementation of the Sistem Perakaunan Berkomputer Standard

Untuk Kerajaan Negeri or SPEKS in the pilot states of Kedah and Perlis at

a cost of RM10.5 million.

Delivery of the project has commenced simultaneously in some of the

states and the whole project is scheduled for completion by 2004. The

states involved are Selangor, Melaka, Negri Sembilan, Pahang, Terengganu,

Johor, Perak, Penang and Kelantan.

`The project will last for two years, of which 75% will be implemented

and booked in this year,’ says Zaki.

In essence, it is primarily to supply, deliver, install, integrate,

test, train, commission and maintain the hardware, computer software and

the Standard Computerised Accounting System Application covering the

respective state treasuries and over a thousand Responsibility Cost

Centres or branches.

Although project-based, an important aspect of SPEKS is the potential

spin-off in terms of maintenance after the completion of the roll out

which will form recurring revenue flows to KJSB and the group as a whole.

KJSB is already generating some RM700,000 in maintenance revenue from

the pilot states and the potential for recurring income from the whole

SPEKS project is conservatively estimated at RM3 million to RM4 million a

year.

In fact, this was the main reason why Lityan had expanded into the

network infrastructure business in 1998. Back then, it had envisaged to

generate sustainable income apart from merely banking on project- based

revenues.

The group poured a lot of time and money into this area of business, but

the efforts have yet to bear tangible results although there has been much

progress. Among the main ones are the automatic meter reading (AMR)

project for Tenaga Nasional Bhd and installation of payphones in the

Philippines.

Lityan, in a pilot project, had provided Tenaga with 2,000 units of

wireless automatic meter readers to enable the utility company to control

power theft among large consumers. Tenaga is now aggressively looking to

curb power pilferage and reportedly would be allocating as much as RM2

billion over five years for this purpose.

In the meantime, KPSJ has been a main contributor to the group’s revenue

for the past two to three years. According to Zaki, KJSB accounted for

over 50% of the group’s revenue in FY2001, and as much percentage- wise in

FY2002. The target is to maintain the company’s contribution to the

group’s revenue for this year.

Zaki believes that KJSB will be able to achieve at least RM40 million in

revenue this year, of which a huge chunk would come from the SPEKS roll

out project and the SAGA accounting system.

Unlike SPEKS, which was designed for state treasuries, SAGA is for

government agencies. SPEKS is based on the cash accounting system, and

SAGA on the accrual accounting system. KJSB secured two new customers for

SAGA Version 3 last year, namely Lembaga Kemajuan Wilayah Kedah and

Lembaga Lebuhraya Malaysia.

Zaki is anticipating new customers to sign up this year, which will

bring in a minimum of RM10 million to be spread over one to two years. `We

will be making a presentation to our customers at the end of this month,’

he says.

What’s certain is that KJSB has not been taking it easy since the

economic crisis, as the company, according to Zaki, is quite well known

among government circles, especially in Putrajaya.

There, KJSB is involved in the Multimedia Gateway (MMG) system for

Perbadanan Putrajaya. The MMG enables the city control centre to centrally

monitor, control and manage the activities of the city.

Another is the ERMIS project or Enterprise Resource Management

Information System, which enables Perbadanan Putrajaya to standardise its

operation and procedures in areas of finance, accounting and human

resource. Both MMG and ERMIS currently bring in recurring revenues of

between RM1.8 million and RM1.9 million a year.

KJSB is well aware of the importance of `relationship building’ to keep

its existing customers happy. This would not only keep its rivals at bay,

but also open up cross selling opportunities.

Zaki foresees that KJSB’s current challenge is to increase margins by

controlling costs. To achieve this, KJSB is taking steps to enhance the

project methodology, educate customers through impact analysis and be ISO

compliant.

The company believes that its technical strength of 50 people, in

addition to about five key strategic partners, is currently adequate to

meet its business requirements.

Going forward, Zaki envisions KJSB as being synonymous with quality and

timely delivery. Towards this end, KJSB prides itself that it has not once

failed to deliver all its projects so far.

It appears that until the network infrastructure segment of the group’s

business takes off to its full potential, KJSB would continue to be the

bread and butter of Lityan and not relegated to the back seat as yet.

Copyright 2003

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