Palette Multimedia Berhad (420056-K) (“Palette” or “Company”)
Half Yearly Research Report (2nd half of 2003)
AUDITED
Year Ended 31 December
/UNAUDITED
TurnoverEBITDA
Pre-Tax profit/(loss)
Net Profit/(loss) / 1999
RM’000
/ 2000RM’000
/ 2001RM’000
/ 2002RM’000
/ 2003RM’000
17,326516
431
431 / 21,714
1,365
1,122
972 / 28,677
865
432
432 / 18,738
548
28
5 / 27,606
593
(4,015)
209
Turnover
Palette and its subsidiaries (“Group”) recorded a growth of approximately 47% in its turnover for the financial year ended 31 December 2003 over financial year 2002, achieving a turnover of RM27.6 million. Palette’s turnover received a boost as the Group delivered RM14m of wireless notebooks as English teaching aids in schools.
Loss After Taxation
The Group recorded a loss after taxation for the financial year ended 31 December 2003 due to tough operating conditions and provision in diminution in value of inventories and expenses relating to the aborted proposal to acquire Quadtel Asia Pte Ltd amounting to approximately RM2 million and delays in orders from clients.
Utilisation of Proceeds
As at 31 December 2003, Palette had utilized approximately 76% of the proceeds raised from its Initial Public Offering (“IPO”).
The utilization of proceeds as at 31 December 2003 was as follows:-
Approved Usage of the Public Issue / Note / Proposed UtilisationRM’000
/ ActualUtilisation
RM’000
/ (Over)/UnderUtilisation
RM’000
/ %Research & Development
Working Capital
- Opening of sales
offices in Johor
Baru & Kuantan
- Opening of sales
office in Indonesia
- Opening of sales
office in Thailand
- Working capital for
higher sales
Estimated listing
expenses / (i)
(ii)
(iii)
(iv)
(v)
(vi) / 1,500
200
2,500
2,500
750
1,350 / 1,601
200
2,487
95
750
1,529 / (101)
-
13
2,405
-
(179) / (6.7)
-
0.5
0.0
-
(13.3)
Notes:
(i)The over utilisation was mainly due to the higher cost against the budgeted cost in acquiring software licensing for the R&D products as reported earlier.
(ii)The utilization was for the renovation and overhead incurred for Johor Baru and Kuantan sales offices as reported earlier.
(iii)The under utilisation was due to the different from the currency exchange against Indonesian Rupiah as reported earlier.
(iv)The expenses incurred were charged to the sales office on the proportion of time spend for running the sales office.
(v)The allocation of proceeds has been fully utilized.
(vi)The over utilisation was mainly due to the higher cost of advertisement and promotion abroad to promote Palette during the IPO as reported earlier.
Recent Developments
Letters of award were granted by MK Land Bhd to Palette on 8 November 2003 and 16 January 2004 to develop an ‘e-style township’ in Damansara Perdana which involved designing, installing, managing and operating a high speed wireless internet broadband network which provides content and applications. This could tremendously boost the Group’s revenues in view of the huge number of homes in the area. Additionally, Palette is actively marketing its Yellowspots product to other potential developers, enterprises, hospitals, hotels, Government departments and universities.
Essentially, Yellowspots enables a user of a wireless device such as a laptap or PDA to access the Internet broadband without any dail-up, plugs or wires in a hotspot. A hotspot is a zone or area with Wi-Fi equipment which enables radio signals to be transmitted up for wireless Internet access. Hence, a user can access the system for multimedia applications, VOIP or video-conferencing using any mobile device. The system involves integrating telcos, ISPs and other wireless operators to enable subscribers to roam across national boundaries. Currently, Yellowspots already operates in Malaysia, Singapore and Australia.
The product that the group offers under the Yellowspots brand is MobiletteTM Solution, the next generation of Authentication, Authorization and Accounting (AAA) RADIUS-based Server-Client system for user access control and management of the enterprise LAN and WLAN environment. This involves Radiance EE (Enterprise Edition), the AAA Server, and Access Management Gateway (AMG) and the client forming a complete authentication, authorization, accounting and execution system. Radiance is a RADIUS Subscriber Management System for public Internet protocol network access including wireless hotspots, broadband access, VoIP, Dial-Up and leased lines.
The Company signed a regional distribution agreement with Proxim on 25 February 2003, the world’s leading provider of wireless network equipment, to refocus into this fast expanding technology for the ASEAN region. The Group currently offers broadband and wireless products and services in Malaysia of which it is now one of the leading providers under the ‘Yellowspots’ trademark. Hence, Palette signed a RM5 million strategic partnership deal with NasionCom Sdn Bhd on 14 January 2004 to design and deploy Yellowspots technology on Nasioncom’s telecommunication network.
On 7 November 2003, Palette accepted a Letter of Award from TIME Systems Integrators Sdn Bhd for the supply of over 5,000 Palette Centrino wireless notebooks for use as teaching aid under the Science and Mathematics in English programme by schools valued at approximately RM22 million.
Future Prospects
The Board of Directors of Palette is of the opinion that the Group, barring unforeseen circumstances, with several projects in the pipeline, is expected to stage a turnaround in the financial year ending 2004.