MSC company has invested US$8m over past three years
Hopes to leverage Philippine stock exchange win
TYPICALLY, press releases have to be taken with a pinch of salt as they inflate the importance of whatever news is enclosed but the June 5 announcement that hailed MSC-Status company N2N Connect Bhd’s deal in Manila as a landmark was just straight to the point.
It was a home-run deal for the ACE-listed N2N and its managing director Andrew Tiang due to the nature of the deal, not just the RM30 million (US$9.4 million) value of the deal over a five-year period.
In one swoop, N2N has managed to provide an exchange-wide online trading facility for the Philippine Stock Exchange (PSE). By extension, this means that the 125 active brokers out of 200 in the Philippines will have to use the Direct Market Access (DMA) platform deployed by their stock exchange authority.
(Picture shows, from l-r, Hans B. Sicat, PSE president and chief executive officer; Nicholas Chua, N2N business operations director; and Andrew Tiang, N2N managing director.)
In contrast, N2N, which has been in business since 2000, has 13 broking customers in Malaysia using its DMA. It pioneered online trading in Malaysia with its first version going live in 2001.
“We usually go broker by broker and as you can imagine, that is a long process with each broker having different requirements,” says Tiang.
N2N focuses on the larger brokers in Malaysia and on those smaller but aggressive ones. Tiang says: “We are suitable to work with brokers who are aggressive and want market share because we invest a lot in research and development (R&D), with the resulting innovation seeing new ways of doing things. Innovation is best used as an offensive tool, so it suits those who want to be aggressive and are hungry.”
A little known fact is how aggressive N2N is in R&D itself. Tiang estimates that it has invested RM25 million (US$7.8 million) over the past three years in R&D alone.
“Out of our120 staff, 80 are in R&D,” he says, pointing out that this makes it probably the only Malaysian-listed company where R&D makes up a majority of the headcount.
It would be remiss to categorize the PSE as aggressive. Progressive and in a hurry would be better. With very few brokers in the country using Internet-based systems, with no DMA platform the public cannot participate directly in stock trading.
But this deal with N2N is one where in essence “N2N will build a replica of ourselves” for the PSE to then offer the services to their brokers, says Tiang.
“In doing so, they have catapulted themselves to the forefront of online trading as we are transferring our knowledge to them besides offering the platform,” he adds.
“This is what technology can do for you, it is about leapfrogging,” he says, claiming that the DMA platform now makes the PSE among the most sophisticated stock exchanges in the region.
N2N has already been active in South-East Asia, securing a number of deals with securities companies. Tiang hopes this direct deal with a stock exchange authority will position N2N to win other direct deals in the region.
Some financial numbers for N2N show that revenue increased 53.43% to RM5.973 million (US$1.870 million) in the first quarter of its 2012 fiscal year (Q1 FY2012) from RM3.893 million (US$1.220 million) in Q1 FY2011 mainly due to implementation of its TC Pro application (the name of its product that PSE will be using).
Gross profit increased by RM1.310 million (US$410,000) or 53.34% to RM3.766 million (US$1.180 million) from RM2.456 million (US$770,000) while net profit was RM420,000 (US$131,682) reversing from a loss of RM1.172 million (US$370,000) in Q1FY2011.
Next: The lessons learnt from their Middle East expansion and how the cloud is playing a key role for N2N moving forward
N2N Connect inks Manila bourse deal