Nextnation Communication Berhad (0096)

Q2'06 Financial Result (Ended 31 October 06)
Another strong quarter financial result reported by Nextnation before X'mas holiday. However, there is no X'mas gift for the shareholders as the share price does not reflect the strenght of this company. As a result, it is within my scope for undervalued stock in Bursa Malaysia (Mesdaq).

Heavy selling pressure
Since it hit its high at RM0.78 recently, it has been started to slide consistently over a few weeks (closed at RM0.65 at the point of writting). As a 'loyal supporter' to this stock, I have been monitoring it almost everyday. I noticed that its under heavy selling pressure where the sellers were almost more than the buyers for all the time. No clear indication at the moment as there is no change to the major shareholders. According to the trending, it usually will close higher at the end of the day due to last minute buying (once again, I have no idea which party is doing this). If it opens at a higher price in early trade of any day, it usually will not be able to sustain it for long as many sellers start to sell it.

Overall Q2 result summary
It is not my intention compare Q2'06 result with previous year quarter result. As it operates in a high and fast growth environment, I would prefer to make a simple comparison between Q2 result and Q1 result.
Its revenue has increased from RM23m to RM27m, with an increase of 15.5%. Meanwhile, the net profit has an increase of 11.3%, from RM4.8m to RM5.3m. Everthing looks great but the revenue and net profit from Malaysia has decreased, with Q2: revenue of RM18.3m and PAT of RM5.2m vs Q3: revenue of RM16.9m and PAT of RM3.6m. I am not very confortable with this situation. By making a quick reference to last year Q4 result, their revenue and PAT were even higher, revenue of RM20.5m and PAT of RM6.4! It looks like the revenue in Malaysia has been dropping consistently over the quarters (approx 50% from last year Q4 to this year Q2).
No doubt, Nextnation continues to post higher revenue in Q2. It is mainly due to higher revenue and PAT from other countries. Yes, it is the first time it has managed to record a profit from other countries segment. How nice it will be if Nextnation is able to sustain their segment in Malaysia! For example, PAT of RM6.4m from Malaysia plus PAT of RM1.8m (Q2'06 result) will transform the profit to RM8.2m.

Future strategies

The Mesdaq listed Company has in recent months, announced a series of corporate proposals and acquisitions‚ including a bonus issue and share placement exercise‚ with the objective of building its strong market presence in the key regional markets. They are:

China: The subscription of 50% control in Often Reach Investments Limited. The Company also acquired 100% equity interest in Vision Phoenix Group Limited, which will be the holding company of a wholly-owned foreign entity to be incorporated in China, for the provision of the next generation mobile video streaming technology and high capacity value-added telecommunication services.

Middle East: A memorandum of understanding with Tawasul Telecom Co. LLC for collaboration in research, development, provision of Internet and wireless technologies and value-added services, related software and business ancillary.

Vietnam: The incorporation of Vinamob Venture Company Limited will allow Nextnation an entry into the world’s second-fastest growing economy in areas such as research and development of information technology, Internet and wireless Internet; design, production and provision value-added products and services for mobile and information technology.

Subsidiary - Ozura

Its wholly owned subsidiary - Ozura Sdn Bhd continues to make global presence for mobile games world. It has establised partnerships with Excite Japan Co. Ltd (Japan), AIS (Thailand's largest mobile operator), Mobile2win (India), Handygames (Germany), Info2cell.com (Middle East and North Africa), Indosat (Indonesia).
Ozura's CEO, Peh revealed that over the next 3 years, Ozura expects a boost in revenue of up to USD20m from global sales via these partnerships.

Websites

Here are some of the company's related websites:

http://www.nextnationnet.com
http://www.ozura.com
http://www.fonwar.com
http://www.milkmobile.com
http://www.friendx.com
http://www.popbunny.com

Conclusion

With its high growth potential and overseas expansion plan, it is worth to keep an eye on this stock!