MOL Global to slow down on acquisitions this year

• 2015 will be a year for consolidating its financial back-end
• Aspires to be the ‘PayPal of South-East Asia’ in the long-term

AFTER a series of acquisitions over the past few years, as well as the ‘financial data errors’ incident which saw a delay in its reporting, MOL Global will have a smaller appetite for mergers and acquisitions in 2015.
 
“At our peak, we did like at least five acquisitions in one year, so we are going to slow down a bit in terms of acquisitions this year,” said MOL Global executive chairman Ganesh Kumar Bangah (pic).
 
“It’s like indigestion. The ‘error’ occurred because we ate too much. So what happens when you have indigestion? You stop eating for a while,” he told Digital News Asia (DNA) in an interview at his home in Kuala Lumpur last week.
 
“Nevertheless, we will still look at it [acquisitions] if the opportunity arises,” he added.
 
Last year was a milestone year for Ganesh and MOL Global. The company became the first Internet company from South-East Asia to be listed on the Nasdaq exchange, raising some US$169 million from the exercise in October 2014.
 
Unfortunately, its debut was not too impressive as it shares opened at US$10.75, or about 14% below their initial public offering (IPO) price.
 
After about one month it made its debut on Nasdaq, the company surprised investors by announcing that it would delay reporting its third quarter 2014 financial results, and that its chief financial officer Allan Wong had resigned due to personal reasons.
 
When it did release its third quarter numbers, the company informed investors that errors had been made on some financial data concerning its Vietnamese subsidiary Nganluong Joint Stock Company.
 
These errors occurred partly because Nganluong was reporting revenue from its payment on a gross basis, when MOL Global's accounting policy is to account for such transactions on a net basis, the company said then.
 
According to Ganesh, MOL Global will be putting more focus on “sorting out its back-office” this year, including linking the financial back-end system and implementing an SAP system, among others.
 
“We got to make sure that the reporting of all these companies and subsidiaries to the head office is done properly. You’ve got to consolidate them, link the financial back-end system, implement SAP, and link back reporting,” he said.
 
Ganesh said that the SAP implementation was already being rolled out even before MOL Global’s IPO, and was not just something that it began executing when the errors related to its Vietnamese subsidiary occurred.
 
“We already had it in plan. It was being executed – it was just that it hadn’t gone to Vietnam yet because it [the Vietnam’s business contribution] was not material then ... but it did become material because it was growing so fast,” he added.
 
He said that the consolidation of MOL Global’s financial back-end and its subsidiaries’ reporting is expected to be completed by the end of this year.
 
‘We tripped’
 
With the company reporting a net loss of RM17.91 million for the full year ended Dec 31, 2014 versus a net profit of RM18.67 million in 2013, it is no surprise that investor confidence in and sentiment on MOL Global remain on the downside. [RM1 = US$0.27]
 
Since its listing, its share price has been mostly on a downtrend. On April 3, it closed the week at US$2.19, which gives the company a market capitalisation of US$147.8 million.
 
During the period when MOL Global announced the delay in releasing its third quarter numbers, Deutsche Bank informed investors that it would “temporary suspend” coverage of MOL Global stock.
 
Having no research house covering MOL Global puts the company in a challenging position when trying to increase investor awareness.
 
Ganesh said he understands the importance of having more research houses covering MOL Global stock, but believes that the company will need to be patient about it.
 
“We tripped, now we got to climb back up. We need to start performing, so that analysts and investors can start to notice us again,” he declared.
 
He believes that the company is on the right track for growth this year, noting that the losses incurred in 2014 were mainly due to one-off expenses related to its IPO.
 
PayPal of South-East Asia
 
Over the longer-term, Ganesh said that he hopes MOL Global can grow to become the ‘PayPal of South-East Asia.’
 
To achieve this, MOL Global’s various products and offerings – comprising MOLPay, MOLPoints, MOLReloads and others – may eventually be merged into one product, he said.
 
“We foresee that this product will be the product used for payments across emerging markets, linking banks, credit card payment networks and physical payment channels,” Ganesh said.
 
This PayPal ambition would mean going head-to-head with the tech giant in various market segments.
 
“Where there is a big market, there is a lot of competition. I prefer to be in a big market where there is a lot of competition than being in a small market with no competition,” said Ganesh.
 
As far as gaming in South-East Asia is concerned, Ganesh said that MOL Global has established a strong foothold.
 
“We are the market leader by far, and games are where people are spending money on. So that will be the base for us,” he said.
 
Currently, those without credit cards who want to play online games like World of Warcraft, Dota 2 (Defense of the Ancients) and many others can purchase monthly subscriptions or special items for their games via MOLPoints. Gamers can buy these points using cash at convenient stores.
 
MOL Global also plans to grow its mobile games segment, which was a weak point in its financial performance last year – but which it had been trying to tackle for some time, according to Ganesh.
 
“It’s not that we woke up one day and realised that we needed to have a mobile presence. We have been trying to engage with the different mobile platforms for a couple of years.
 
“We are also in talks to be their physical payment option in South-East Asia,” he said.
 
If these talks are successful, mobile phone users would be able to purchase their mobile apps without having to own a credit card.
 
However Ganesh admitted that these talks may take time. “Central banks across emerging markets, as well as the mobile platform companies, work differently.”
 
Previous Instalment: Ganesh: MOL co-CEO move is for the ‘long haul’
 
 
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