Changes at Palette Multimedia
The company is back in the black after three years of losses
Changes appear to be taking place in information technology company Palette Multimedia Bhd.
Unnoticed to many, the company is back in the black with its latest fourth-quarter results, hence also turning around for its full year to Dec 31, 2015.
These profits follow three consecutive years of losses.
For the fourth quarter to end-December 2015, Palette recorded a net profit of RM304,000 from a previous loss of RM5.32mil. For the full year, it swung back to the black with a net profit of RM2.18mil from a previous net loss of RM7.3mil.
On the back of its turnaround, the stock recorded its 52-week high of 7.5 sen on March 22. It had previously been meandering at the four-sen level for the better part of last year.
At its Thursday’s close of 6.5 sen, the stock is now trading at a historical price earnings ratio of seven times. The company is very small with a market capitalisation of only RM18.9mil.
So, is this a one-off event or are the better results the start of something new for little Palette?
New growth pillar
Palette’s existing and original business is that of a solutions provider of broadband, wireless and networking products and services.
The group has been embarking on the research and development (R&D) of the next-generation AMG (Access Management Gateway) since July 2010, which is used in the deployment of WiFi hotspots. Palette is currently marketing the existing AMG locally to telecommunications operators and also enterprises.
It expects to incur another RM1.5mil for R&D for this purpose this year.
Interestingly, though, while the turnaround in its core business is indeed a positive, Palette’s managing director and major shareholder Eg Kah Yee is more excited about the company’s new growth pillar – a new revenue stream via its digital mobile healthcare system called the i-Medic system.
Palette has been investing in building this system since 2013, and the fruits are now showing; to be precise, it will contribute in the next quarter onwards.
This is mainly because the i-Medic system has its maiden contract valued at US$500,000 (RM2mil) from Griffin International Pte Ltd for its mobile healthcare business.
Under the deal, Griffin has the exclusive rights to market the subscription of the i-medicTM (which is Palette’s mobile healthcare system) to doctors, clinics and hospitals in Chengdu, China, and also to market the healthcare management packages to patients globally.
Griffin specialises in providing the platform to insurance agents in China and also Singapore to market various insurance and financial products to high-net-worth individuals.
“There will be a revenue share of the healthcare management fees charged onto the patients between Palette, Griffin and the hospitals and doctors, therefore, the business deal is expected to contribute positively towards the earnings and net assets of the Palette group for the financial year ending Dec 31, 2016 and beyond,” said Palette in the announcement.
“The significant thing for Palette is that our business model is recurring. This will provide a steady and increasing stream of income for the company moving forward, as the number of doctors and patients grow. We have invested over RM10mil to set up our mobile health business over the last four years,” said Eg.
Eg added: “I am passionate about mobile health because at its present state, the medical industry is more reactive rather than preventive.
Whenever we go for a medical check-up and are told the news that we have a critical illness, it is usually already too late,” he said.
For the uninitiated, the iMedic system is a system used for mobile digital medicine which enables patients to take measurements of their vital signs (for example, blood pressure, oxygen saturation in the blood and electrical activity of the heart) with home wireless medical devices.
Data from these devices is transmitted to a Cloud (which is an Internet-based database) where doctors have access and can analyse such data at any time and any place via WiFi.
The most important aspect about iMedic is that it manages complete patient information because it includes radiology images such as CT Scan, MRI (Magnetic Resonance Imaging), ECG (Electrocardiography) and ultra sound images, among others.
This mimics the hospital information system in hospitals.
The other key thing is the telemonitoring – this is one of the most valuable functions of mobile health, as it entails the use of an electronic device to generate remote, real-time monitoring of medical conditions, facilitate disease management, and provide patient education.
Eg said that the business model will generate recurring revenue, as typically, once a patient with a disease has signed up to use the system, it is unlikely that they will stop using it.
“For example, once you have a stroke, you will want to be monitored not just for a year but for the years to come,” he explained.
Palette is now appointing distributors and franchisees to develop the market.
It presently directly partners the doctors or hospitals to use its system for their patients.
Eg said that there are two ways the i-Medic system generates revenue.
Firstly, it franchises the business with the platform to a franchisee in a specific territory with an upfront franchise fee.
Secondly, it gets paid a membership fee from each user who uses the system in the cloud. This system is tiered based on the level of monitoring the patient requires.
Eg is the single largest shareholder of Palette with an 18.87% stake. This is followed by UOB-KayHian Pte Ltd with a 12.82% stake.