Since selling its main digital video surveillance business last September, Hong Kong-based MultiVision has moved into the multi-billion-dollar sports lottery market in China. Glancing at the businesses it was left with after the sale - a Beijing city surveillance project, a stake in an intelligent-card-reader company, a video surveillance portal service for kindergartens and an online gaming portal service, all in China - leaves investors wondering what the new management's game plan is.
The few analysts still following the company are adopting a wait-and-see attitude, saying their recommendations are under review until they have met with the new management and studied the potential of the sports-lottery market in China. Also of particular interest are the payout date and amount of the special dividend that MultiVision has said it will distribute from the proceeds of the US$48.2 million ($1 approx US$0.60) sale to Nasdaq-listed Verint Systems.
A new management team was formed after former CEO Louis Mak and former president and chief operating officer Dennis Li left to join Verint, as part of the sale and purchase agreement. The current team at MultiVision consists of CEO Paul Gao, chief operating officer Eddy Tso and chief financial officer (CFO) Yau Ching Kan. Gao, 37, is the company's former CFO and Tso, 50, spent the last four years as general manager of Singapore-listed systems integrator Datacraft's operations in China and Hong Kong. Yau, 34, was a senior accountant with fund houses like Franklin Templeton Investment (Asia) and Franklin Resources Inc.
Gao tells The Edge Singapore that the plan is to ink exclusive arrangements with businesses that are oligopolists in their markets. "There will be less competition and... higher profits," he says. An example is the company's 51% stake in Beijing Telenet Information Technology (BTI), which supplies point-of-sale (POS) systems for sports-lottery operations in China. The industry is worth 30 billion renminbi ($1 approx five renminbi) but Dinesh Chandiramani, analyst at DBS Vickers, says POS systems presumably account for only a small portion of that. Another analyst with a local brokerage concurs, saying installing POS systems is not as exciting as getting one's hands on the lottery revenues itself.
The sports-lottery business in China is currently oligopolistic, with BTI being one of five POS system vendors qualified by the China Sports Lottery Administration. The stake purchase comes with a profit guarantee of HK$5.8 million ($1 approx HK$4.60) to MultiVision's financial year (FY) to March 2007 bottom line.
The company also has a city-surveillance project to install security cameras in 15,000 locations in Beijing before the Olympic Games in 2008. This project, which is under its subsidiary Huge Hill, is expected to bring in HK$100 million in revenue over the next three years. For FY2006, Huge Hill has given MultiVision a profit guarantee of two million renminbi.
Last Thursday, the company said its associate China-Vision Intelligent Card Reader Co had won a 30 million renminbi contract to supply 2,000 image-capturing systems to security bureaus in five China provinces. "We have been waiting for two years and it has finally [materialised]. China has decided to replace the first-generation identification card with the second generation," Gao says, adding that this business "will contribute a profit for FY2006".
The fourth business is in providing video surveillance portals to 30 kindergartens in China so parents can monitor their children via websites. Besides kindergartens, MultiVision also claims to be the exclusive provider of online gaming portal services to China Netcom. This business, grouped under Sino Gear Force, generates revenue through advertisements to its two million registered users. It will contribute a "minimal profit" in FY2006, says Gao.