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Nextnation Communication Bhd was not a tiny fledgling company. It came to the market with a net profit of RM12.5mil in its financial year (FY) ended April 30, 2005. It was listed on Mesdaq in August that year.

Its net profit expanded 33% to RM16.7mil in FY06 and it completes its FY07 this month. For the first nine months of FY07, its earnings rose a further 33% to RM16.4mil, almost as much as the earnings for the whole of FY06.

In terms of revenue, it grew 60% to RM28mil for the first nine months of FY07 from the same period in FY06, which indicates it is successfully replicating its business model overseas. Nextnation, as its name suggests, is going places.

Its earnings growth, however, did not keep pace with its swift rise in revenue because additional costs were incurred in its expansion into Indonesia, Thailand and China. Even so, its net profit for the third quarter (Q3) ended Jan 31, 2007, rose 49% to RM6.4mil.

The acceleration of earnings growth in Q3 is believed to be attributable to contribution from its overseas markets.

Nextnation is set to post a net profit of over RM20mil in FY07, which would make it among the top five most profitable Mesdaq companies.

Maintaining its rate of annual growth, which looks achievable, the shares would be valued at a prospective price/earnings ratio (PE) of just about 6 times, which is a low price for a growth stock.

Additionally, there is a perception it is mainly engaged in developing games content which is channelled through mobile phone networks. Actually, the company develops software and invests in servers for data, including games, which are accessed on mobile phones.

It operates a tollgate for mobile data, and that lends it a higher level of business stability than companies that have to constantly develop popular new games.