LONDON (ShareCast) - Many companies are postponing Aim quotations but one Malaysian business decided not to waste the effort already put in and join Plus-quoted instead.
There is no disgrace in a company trying to float and failing to complete the process in today's market. It has been a tough market for the past 12 months and even young businesses with a strong track record won't always convince shareholders to part with their cash.
Pulse Group is a Malaysia-based online market research fieldwork firm that was launched in June 2005 and has been profitable in each of its first two years of trading.
In the year to May 2007 the main business generated revenues of $1.3m and made a profit of $471,000. Pulse did move into loss in the six months to November (Frankfurt: A0S9N7 - news) 2007 but that was mainly down to one-off costs - including ones relating to the proposed Aim quotation.
The business is still growing despite the lack of new money to finance additional working capital.
Chief executive Bob Chua said that he was already aware of the Plus-quoted market. He held back for a few months and then decided to make the move to the junior market two months ago. He believes that being on Plus-quoted will enhance the credibility of his business.
Looking on the bright side, Pulse could use much of the work done on the Aim flotation for the Plus-quoted document.
Aim-quoted, Plus-focused investment company Evolve Capital (LSE: EVOL.L - news) had previously provided a £400,000 convertible loan to Pulse, which it converted at 4.5p a share. When Pulse floated on 27 June, Evolve subscribed another £100,000 for shares at 10p each. Evolve floated on Aim at the end of 2007. Its strategy is to invest in Plus-quoted companies or companies wanting to join the market.
Most of the money raised went towards the costs of the Plus-quoted flotation and £90,000 of costs relating to the attempt to float on Aim. Because Pulse is based in Malaysia, and the holding company is in the Isle of Man, the complications of its structure mean that flotation costs were higher than for a UK-based business. The remaining £90,000 is being invested in growing the business.
Since Pulse joined Plus-quoted on 27 June Evolve has sold 3.17m shares. That is effectively the free float in the shares so they remain tightly held. Evolve still owns 7.3% of Pulse, while management holds nearly 60%. Japanese venture capital company JAIC owns just over 30%.
Pulse is a similar business to Aim-quoted companies Research Now (LSE: RNOW.L - news) and ToLuna (LSE: TOL.L - news) but it is based in Asia. This is still a fragmented market and Pulse's wide range of research panels across 20 countries on the continent makes it number one in the region.
Pulse is keen to make acquisitions using its shares. It wants to widen its business geographically and extend the range of services it can offer. Asia will continue to be the focus of the business. Pulse's efficient tax structure could help it retain more of the profits made by any acquisitions.
Pulse is aware that in some markets it may be better to build up a business instead of buying.
At 11.25p a share, Pulse is valued at £10.3m. There is normally at least one trade in the shares each day so it is one of the more consistently active shares on Plus-quoted.
It is not surprising that, at the moment, even a rapidly growing business, such as Pulse, found it difficult to raise the cash it wanted to on Aim. Joining Plus-quoted enables it to use its quotation to finance organic and acquisitive growth.
Pulse hasn't raised as much as it originally wanted to but it will be able to come back to the market at a later date if it needs more cash. That is likely to have the additional benefit of increasing the free float of the shares.
Source: http://uk.biz.yahoo.com/080725/214/i3sn2.html
