Upbeat mood at Malaysia Debt Ventures
THE mood is upbeat at Malaysia Debt Ventures as it moves into its second year of operation after concluding a year capped by its success in breaking new ground in the local information and communications technology (ICT) sector.
The fund, which officially launched last September and signed its first loan the following month, has in the past 12 months played a significant role in helping local ICT companies draw world-class projects to Malaysia.
Among these is the RM60mil Aquawalk, a next generation aquarium incorporating multimedia edutainment facilities – a first-of-its-kind tourism attraction for Malaysia. MDV is to provide a five-year project financing facility of RM50mil for the development of the world-class aquarium, Aquaria, at the Kuala Lumpur Convention Centre (KLCC).
By bringing in Aquawalk Sdn Bhd, owned by New Zealand-based companies Aquawalk International Ltd and Capping Corp Ltd, local partners will get the opportunity to join international project partners to showcase edutainment content at the Discovery Zone within Aquaria.
Another is the Terra ICT (M) Sdn Bhd project, a joint venture between KLSE-listed Bintai Kinden Corp Bhd and Japan’s Terra Corp, which will make Malaysia a premier online game content distributor in South-East Asia. The company will set up hosting centres in Malaysia and the region and also come out with its own local game in its third year of operation.
According to MDV managing director/chief executive officer Jiro Suzuki, after having firmly laid its foundation, the RM1.6bil ICT fund is now poised for expansion.
It is looking to expand financing, the banking/lending business being a volume business. Suzuki said MDV was confident of achieving or even exceeding its target of disbursing RM800mil in loans by end-March 2004.
This works out to an average of 15 to 20 loan applications processed, with an approximate loan value of RM70mil a month. “We will try to reach breakeven volume this year and report a profit by the next fiscal year,” he told Starbiz.
As of Aug 29, it has disbursed a total of RM284mil to 20 companies out of the RM628mil in loans approved to 29 companies. The loan applicants include local and foreign companies from countries such as Japan, New Zealand, Britain and South Korea. As of the same date, MDV has processed applications worth RM1.436bil.
Suzuki sees the fund achieving profitability by the end of March 2004, before taking into account non-performing loans (NPLs). However, it would be “slightly in the negative” after NPL allowances, he said.
“We are lean and mean. We have a small operation of only 30 staff members and our cost of operation is very low,” he added.
MDV charges interest rates ranging from 5% to 6.8%, depending on the risk levels. As of Aug 29, two companies had fully repaid their loans and eight were in the midst of repaying.
He said most of the applications were still on track, but as there was a potential issue in one company, it had despatched a consultant to monitor the situation.
Suzuki said going forward, the fund had earmarked its five priority projects this year in its efforts to create opportunities in ICT.
These are the grid computing project with IBM Corp, the Aquawalk Project, the integrated seamless communication service project, the Phoenix project to attract a reputable card issuer to issue smart cards in Malaysia, and its first-ever international conference to put Malaysia on the outsourcing map, to be held in the second quarter of next year.
Suzuki said the grid computing project with IBM Corp was an effort to harness the idle processing power of PCs to create a super-computer and lease this extra capacity to small-sized creative and biotech companies in Malaysia which presently suffer from low productivity as they could ill-afford high powered workstations.
He said since leasing a supercomputer could cost at least RM10mil a month, combining the idle power of, say 10,000 PCs, could yield great processing power and yet reap great savings for the country. MDV was currently talking to customers in the creative and biotech areas and formulating a business model. It is also in discussions with project owners with financial capabilities.
“We want to transform the local creative industry into the best in the world. In time to come, Malaysian would be able to do creative work faster, more cheaply and more productively. Then we will get business from companies in Hollywood and Hong Kong,” Suzuki added.
On projects in the pipeline, Suzuki said MDV would be soon be closing a funding deal with a world-class producer of document viewers for personal digital assistants (PDAs).
He said the company had secured contracts with big consumer electronic manufacturers and was looking to move its operation to Malaysia.
He added that MDV was “moving fast” to close the deal, probably in a month.
On the role of funding in ICT, Suzuki said that the Government, in identifying ICT as the country’s next engine of growth, had developed the Multimedia Super Corridor and a host of incentives for companies.
But, he added, having a debt financier like MDV was like adding in the “final ingredient”. Citing the Terra ICT project, he said the company had initially looked at Singapore but turned to Malaysia when it was asked to raise its own funding.
“Having the MSC helps but money talks. They (Terra ICT) approached us and we gave them the funding.
“So money was the deciding factor,” he added.