Friday, March 23, 2012

Nextnation: Can you spot what business it is in?

A friend of mine asked me to check out Nextnation Communication Berhad. Hence, as usual I took out the Annual Report, looked through its website, Googled etc. Read this - It claims itself as an end to end mobile service application provider providing connectivity to 500 mobile networks - that's so much I understand. Looked through the management report which can be found as below. I looked through the financials - nothing interesting except for that its receivables pretty high. Not much cash, some debts. From what I can see they have high administrative costs and costs of sales for a software company compared to its income. Capitalised quite a bit of their Development work. Note that capitalised development work totalled RM19 million for a company with around RM1 million profit.

From my count, for a company that has some 20 subsidiaries and 2 associates company, it is weird they have nothing to report. No segmental or business analysis?

Please read the statement from the management as below (bear in mind I have looked through several other Annual Reports - pretty much the same style of reporting, just changed the figures and in fact they used same template for reporting. Can someone spot what they do by reading the statement below? And can they please treat the reporting more seriously.

Sorry, friend, I can't do much for this company's analysis. And anything you can't decipher, don't buy. The company is pretty much going to move to and fro from profit to loss and loss to profit according to their whims and fancy at any given year to their liking.

From Nextnation's Annual Report 2011 (what crap they are reporting):
For the year under review, the Group recorded revenue of RM72.3 million, representing an increase of approximately 9.4% compared to the previous year. The higher revenue is certainly remarkable given the weak business sentiment caused by the prevailing global economic slowdown. The growth in revenue was mainly attributed to greater consumer demand for the Group’s mobile value-added products and services. Meanwhile, the profit before taxation of RM1.2 million recorded in the financial year under review is a major reduction from the previous year profit of RM3.6 million. This difference was mainly due to the Group obtaining an extraordinary gain of RM4.5 million from the disposal of subsidiary companies that was recorded in the last financial year, and also due to relatively lower amortisation costs incurred. Going forward, the Group is cautiously optimistic about its operations which include the expansion of higher margin businesses both locally and in overseas markets such as Vietnam, Thailand, Indonesia, USA and Europe. Much work and effort have been put in by the management team to expand its’ foreign businesses, which have much bigger revenue stream and profits as compared to the local market. While this is in the pipeline, the management is also mindful of the development of the current weak US economy and data which may have a negative spill-over effect over the global economic sentiment. We are hopeful that this scenario shall not be the case, and the global environment shall continue to provide an impetus for the future growth and profits of the Group.

Following the successful launch of various products and services in last financial year, the Group continues to improve its products and services to provide more features and higher value of services to users by launching new version of M2CEP and CCAM/CMAM Platforms to cater into different market needs, as well as to localize the platform to meet local regulatory requirement. M2CEP has been developed to utilize cloud computing to cater for increasing traffic as well as to increase the quality of service. Different connectivity module has also been developed to integrate with new mobile operator’s infrastructure. Besides, the Group has implemented IP Location based service on CCAM and CMAM Platforms, which enables the Group to target user based on user’s mobile operator as well as regional location. These new products and services are expected to positively contribute and enhance the Group’s performance and competitiveness.

The Group continues to put its main focus on the research and development (“R&D”) efforts as it believes that R&D is a key factor in ensuring its competitiveness in the evolving telecommunication industry and facilitate future growth. In line with the strategic direction of the Group, the R&D scope is emphasized on strengthening and upgrading its existing platform to support the latest mobile devices and technology, while developing and enhancing new and innovative products and services.

For the year under review, the total R&D expenses incurred was approximately RM5.3 million, representing about 7.3% of the Group’s total revenue. Save for the R&D in new products and services, the Group also continue to invest in training and development skills for the employees in its R&D and technical teams to encourage development of fresh and innovative technology.

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