DECLOUT: Eyes listing for IT asset recovery and maintenance arm by 2016

kowya_vesmond4.14 DeClout Group CEO Vesmond Wong wants to offer a one-stop solution of IT asset recovery and independent maintenance services for MNCs. With him is ASVIDA Asia CEO Kow Ya (left) who oversees the Southeast Asia maintenance services market. Photo by Sim Kih

REFURBISHMENT and resale of used IT equipment is a mature industry in the US and Europe but it has yet to take off in Asia.

SGX Catalist-listed DeClout wants to be the first prime player in Asia for IT asset recovery and independent maintenance services --- using refurbished quality hardware.

“Pre-owned IT equipment is often less than a year old and works out to a savings of at least 30% to 40% for the end user,” said DeClout founder and CEO Vesmond Wong in an interview with NextInsight.

DeClout buys pre-owned hardware, tests it, and strips it down to its components. It subsequently assembles them according to customer requirements.

There's another key aspect of the maintenance service that DeClout offers.

Many companies use a myriad of quality brands, be it IBM, HP, Oracle Sun Systems, or Cisco. However original equipment makers do not directly provide maintenance for competing brands.

Here's where DeClout provides a useful one-stop solution to the big boys.

The cost-effectiveness of using pre-owned IT equipment has gained user acceptance and Mr Wong is hopeful of spinning this business segment off by the end of 2016.

In FY2013, DeClout’s IT asset recovery and independent maintenance services subsidiaries - Procurri LLC (based in the US) and ASVIDA Asia (based in Singapore) -- generated revenue of S$26.9 million or 37% of Group revenue.

DeClout wants to foray into China's market for IT asset recovery and maintenance services, where the market potential is high and the market is largely untapped.

It aims to raise S$10 million by the end of May to fund its globalisation plans.

A Hong Kong listing is ideal as it allows DeClout to retain a stake in the business and be close to China.

Nonetheless, Mr Wong is open to other spin-off alternatives.

To meet the listing criteria in Hong Kong, the spin-off company has to post revenue of at least HK$500 million (about S$80 million).

This means that from a base of S$26.9 million in FY2013, DeClout has to grow the segment's revenue at least 44% annually (CAGR) to S$80 million by FY2016.

Is such aggressive growth plausible?

Voyage Research analyst Liu Jinshu has forecasted that the Group will post net profit of S$4.6 million in FY2014, up 142% year-on-year.

In his report issued on 7 May, Mr Liu estimated DeClout’s intrinsic value at 35 cents, some 70% above its recent stock price of 20.5 cents.

Declout_stkpx_14.5 Declout's stock price (22 cents) has gained 91% since early Nov last year. Bloomberg data

Globally integrated advantage

DeClout has several M&A deals in the cards that will help it achieve segment revenues that meet Hong Kong listing requirements.

» It has invested S$12.88 million for a 51% stake in Tinglobal Holdings, a company based in the UK that deals in refurbished and reconfigured mid-range computer equipment including servers, storage, associated networking infrastructure, parts and services.

» It will invest S$3.5 million for 100% of Verity Solutions, a Malaysian multivendor maintenance and system services provider, by the end of this month (May).

Verity Solutions services customers in the telecommunications and manufacturing industries, as well as data centre providers and systems integrators across Singapore, Malaysia and Indonesia.

Procurri LLC, Tinglobal, ASVIDA Asia and Verity will be restructured under the corporate umbrella of Procurri Corp for the spin-off exercise.

Procurri Corp’s vision is to be a globally integrated services provider for IT asset recovery and independent maintenance.

Having a global footprint is an important competitive edge for Procurri Corpas MNCs prefer the convenience of dealing with a single party who can provide services at worldwide locations.

“We gain cost effectiveness by stocking inventory on a global scale,” added Mr Wong.

ASVIDA_14.5 Multi-vendor asset recovery specialists such as ASVIDA Asia buy, sell, rent and consign data centre IT equipment that include a wide range of servers, storages and networking products. The equipment comes from vendors such as HP, IBM, Oracle Sun Systems, Cisco, Dell, EMC, Fujitsu, Hitachi Data Systems and NetAppHe explained that infrastructure maintenance contracts of a global scale usually require hardware inventory that is of a much lower ratio compared to in-country contracts.

With a presence in 3 countries, ASVIDA Asia -- the Southeast Asia arm of Procurri Corp LLC -- is already able to support 19 countries in Asia Pacific by outsourcing and enabling IT services providers in the other countries.

ASVIDA Asia and Verity Solutions provide access to the Southeast Asian market.

When DeClout acquired 50.1% in Procurri LLC on 3 April last year, it gained exposure to the US market for IT asset recovery and independent maintenance services.

Through Procurri Corp, the stake in Procurri LLC was increased to 100% in January this year via a share swap.

Access to the European market has been gained with the recent acquisition of Tinglobal, Europe’s largest player for IT asset recovery and independent maintenance services.

To complete the circle, Mr Wong hopes to acquire system integrators or resellers with a leading network of end-user customers in China and in India.

The target company is likely to be a partner that DeClout has enabled for IT asset recovery and maintenance services.

“When we are big enough in a certain country, we will land by acquiring the partner that we have enabled,” he said.

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DECLOUT: Eyes listing for IT asset recovery and maintenance arm by 2016

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