Admission to AIM (4049R)

TIDMTEL

RNS Number : 4049R

Teliti International Ltd

03 November 2011

3 November 2011

Teliti International Ltd

("Teliti" or "the Company")

Admission to AIM

Teliti International Ltd, the IT services business, is pleased to announce that its admission to AIM and dealings in its ordinary shares commences today. The Company's ticker is TEL.L.

The Directors consider admission to AIM to be an important step in Teliti's development and one that will enhance its credibility and stature in the industry, both in Malaysia and internationally, thus enabling the Company to implement its strategy of further market penetration in Malaysia and subsequently across Asia and the Middle East.

The reasons for admission are as follows:

   --    to provide the Company with a flexible financial structure for future growth; 
   --    to maintain a high level of transparency and corporate governance within the Company; 
   --    to assist in recruiting, retaining and incentivising skilled employees; and 
   --    to enable the Company to access a wide range of investors. 

The Company has three subsidiaries: Teliti Solutions, Teliti Services and Teliti Datacentres. Teliti Solutions and Teliti Services are both debt free and profitable. Teliti Solutions generates income from its core service offering, the provision of IT software solutions specialising in SAP software, and Teliti Services was established as an IBM products and services reseller and is one of the first few Bumiputera Mainframe Systems Integrators in Malaysia. Teliti Solutions and Teliti Services have made significant progress in building sales and business relationships, and have an existing customer base including the Government of Malaysia ("GOM"), government-linked agencies and private sector clients operating within industries ranging from oil and gas to financial services. The third subsidiary, Teliti Datacentres, has been set up to construct and operate a state-of-the-art datacentre, which will offer both existing and new clients full datacentre services that include communications connectivity, uninterruptable power supply, distribution building utilities and environmental services that are all necessary to ensure a continuous environment for customers' equipment.

The Directors believe that the demand for fully-integrated datacentre services within the Asia Pacific region, Association of South East Asian Nations ("ASEAN") countries and the Middle East, coupled with an established client base and underpinned by the Company's professional and specialised staff, will provide the Company with an additional service that will appeal to its existing clients as well as new clients both locally and internationally. Such belief and expertise has been endorsed by the GOM who have identified datacentres as a key economic driver in its Economic Transformation Programme ("ETP"), and appointed Teliti Datacentres as one of three contributors to such a programme.

The Company has 23,530,000 ordinary shares in issue at an admission price of 55p giving it an implied market capitalisation of GBP12.9 million.

Daniel Stewart and Company Plc is the Company's nominated adviser and broker.

Commenting on admission, Haji Mohamed Nasir, Chief Executive of Teliti, said: "We believe our listing on AIM will enhance our profile and visibility with customers and partners, particularly in our key growth markets in the ASEAN countries, and improve our ability to raise additional capital should this be required. The Company is already well-positioned to benefit from the anticipated growth in the IT services market through its strong presence in Malaysia, quality of customer base, bespoke service offering and experienced management team. We are particularly excited about the completion of our datacentre and are confident about our future prospects in this fast growing market."

Enquiries:

 
 Teliti International Ltd 
 Hj Mohamed Nasir Abdul Majid, Chief 
  Executive Officer                       [phone] 
                                         -------------------- 
 Rosmida Din, Chief Financial Officer     [phone] 
                                         -------------------- 
 
 Daniel Stewart and Company plc (Nomad 
  and Broker) 
                                         -------------------- 
 Antony Legge, James Felix                [phone] 
                                         -------------------- 
 
 Luther Pendragon 
                                         -------------------- 
 Harry Chathli, Claire Norbury, Alexis 
  Gore                                    [phone] 
                                         -------------------- 
 

Notes to Editors

Market Opportunity

Malaysia has one of the fastest growing economies of the ASEAN countries, which is expected to continue at 5.3% for 2011 and 5.5% in 2012. Similarly, Malaysia is one of the fastest growing ICT markets in Asia, with the sector contributing 9.8% of GDP in 2009, which is expected to increase to 10.2% by 2015.

This growth is being facilitated and encouraged by the GOM, which regards Information Communications Technology ("ICT") development as an important strategic driver for enhancing the competitive position of the Malaysian economy and intends to establish the country as a global multimedia and ICT hub. The government has invested heavily in creating the Multimedia Super Corridor ("MSC") to attract international investors to Malaysia's ICT industry as well as implementing a number of programmes to encourage the adoption of broadband and other ICT processes within the country.

Of particular importance is the datacentre industry. In January 2011, Prime Minister Najib Razak unveiled one of the projects of the GOM's Economic Transformation Programme as 'Positioning Malaysia as a world-class data centre hub', which aims "to grow the data centre space from 0.5 million to 5 million sq ft by 2020 and establish Malaysia as the preferred destination for regional data centre investors".

Teliti Datacentres

Teliti Datacentres Market Opportunity

In January 2011, the GOM announced plans, under the auspices of the ETP, to transform Malaysia into a high income nation by 2020. Such transformation will be underpinned by various government initiatives referred to as Entry Point Projects one of which is the government's aspirations to grow datacentre space from 0.5 million to 5 million sq ft by 2020. As a testament to Teliti Datacentres' commitment and expected expertise in datacentres, the GOM recognised Teliti Datacentres as one of three providers of datacentres that will help drive Malaysia to becoming a preferred regional location for datacentre services.

Teliti Datacentres Relationship with Cisco

On 28 April 2010, Teliti Datacentres entered into a memorandum of understanding ("MoU") with Cisco, within which Teliti Datacentres and Cisco set out the general basis of the working relationship and commitments between each party to work together to implement a datacentre ("the Datacentre") in Malaysia incorporating Cisco products and services and to promote the services to be provided by Teliti Datacentres therein (the "Datacentre Project"). Further to the MoU, Teliti Datacentres and Cisco executed a Strategic Collaboration Agreement ("SCA") on 28 June 2010 and 30 June 2010 respectively which forms the basis of a working relationship between the two parties.

The purpose of the SCA can be summarised as follows:

-- The parties express their collaborative intentions by setting out additional obligations specifically in relation to the joint marketing and design and business model scoping of the Datacentre; and

-- To formally recognise the complementary resources and contributions of each of the parties towards the further development of the Datacentre Project.

The Datacentre

The Datacentre will be a secure, fully-integrated, carrier neutral datacentre, located in the town of Enstek within easy reach of Kuala Lumpur. On completion it will have a total 120,000 sq ft of net lettable area, and as such, would be the largest datacentre of its kind in Malaysia and one of the biggest within Asia. The total cost of building the Datacentre, including the acquisition cost of the land, is estimated to be approximately RM 233.4. The initial phase, phase 1, which is expected to be completed by March 2012, will see the construction of the superstructure and the fitting out of 45,000 sq ft of net lettable area. The expected cost of this phase 1 is estimated at RM 187.4m of which RM 111m is funded by Affin Bank with the balance being funded by an intercompany loan with Teliti's parent, Teliti Computers Sdn. Bhd., and the utilisation of lease financing from Cisco. The design concept phase, construction of the earthworks and substructure were completed during the first half of this year, and the superstructure construction is scheduled to complete at the end of December 2011 with the Datacentre being operational at the end of Q1 2012. The intention is for the remaining 75,000 sq ft to come on stream over the following 12 months.

Designed around the evolving needs of clients, Teliti Datacentres intends to incorporate equipment and staff to levels of high availability (99.99 per cent.) with full services that include communications connectivity, uninterruptible power supply and distribution, building utilities and environmental services that are all necessary to ensure a secure, continuous operating environment for customers' equipment.

The Directors believe that the construction and operation of the Datacentre will be the foundation for Teliti Datacentres' business going forward - and the carrier neutrality and green building aspects will provide an additional competitive advantage to the business strategy.

The building will be equipped modularly with a net lettable area of 120,000 sq ft and so Teliti Datacentres will be able to provide new facilities immediately, should the demand arise. This will allow Teliti Datacentres to provide customers with the latest technology as each new stage is equipped as well as ensuring efficiency so that Teliti Datacentres will not be incurring costs for unused space.

On the back of the ETP public endorsements, Teliti Datacentres has started to target the current business partners and customers of Teliti Solutions and Teliti Services (e.g. IBM, HP, HDS and certain GOM agencies) which require datacentre facilities in Malaysia, and new partners that have been developed through an existing relationship that Teliti Datacentres has with Cisco.

The marketing phase is underway and is targeting infrastructure carriers and specific customer types. These customer types fall into five distinct categories and Teliti Datacentres expects to host these businesses:

   --    Telecommunication Carriers; 
   --    Internet Service Gateway Providers; 
   --    Disaster recovery facilities; 
   --    Outsourced business operations; and 
   --    Application service providers. 

The initial focus of the business will be to service local and international organisations in Malaysia. In addition, multi-national organisations will be targeted as the Directors believe that these companies are increasingly considering Malaysia as a cost competitive alternative to host their business units compared with the more traditionally popular Asian countries. Consequently, local demand will be utilised to anchor the facility development, whilst the Directors expect international customers to drive the expansion and demand for highly-skilled services.

Teliti Datacentres Business Model

Teliti Datacentres' intention is to organise its services into three revenue streams: Basic Services (co-location), Managed Services and Application Services.

Basic Services will include a dedicated facility for customers; individual rack spaces; and private cages for customers to deploy their own server farms. Managed and application services will generally apply to equipment hosted in 19" equipment racks (which typically require 20 sq ft per rack inclusive of access space) or in customer suites/cages. Managed Services are priced on the basis of floor space utilised.

Additionally, there will be generalised costs associated with providing the services, such as the additional cost of accommodating the equipment (i.e. racks), the communications cabling required to monitor the equipment (i.e. LAN cabling per point), the actual hardware/software infrastructure (i.e. over 3 years) or the inclusion of continuous shifts of IT staff to perform the services.

Due to the size of Teliti Datacentres' proposed facility, Teliti Datacentres, unlike most datacentre providers, will be able to charge customers per slot rather than per rack (with each rack being comprised of slots). This will enable Teliti Datacentres to have a number of customers per rack as well as being able to accommodate, in addition to the large multinationals, smaller companies and start-ups by offering lower prices.

The Datacentre will initially generate revenues from rental of its environmentally-conditioned space. The business principle supporting this service reflects the high costs to supply and maintain these facilities and the economies of scale that a datacentre operator can achieve.

The Company is in advanced discussions for the pre-selling of forty (40) per cent. of the 45,000 sq ft net lettable area and expects these negotiations to be agreed during completion of construction of the Datacentre. As such, the Datacentre is expected to generate revenue as soon as it begins operations which the Directors anticipate to commence at the end of Q1 2012. Teliti Datacentres expects that the remaining sixty (60) per cent. of service space will be progressively occupied by other customers over the 12 months following the Datacentre opening. In addition, the Directors expect contracts for the Datacentre to have a length of 15 to 20 years, although they expect a small proportion of these contracts to be around 5 - 8 years in length.

Whilst the revenue generated by the initial rental of space is acknowledged to deliver relatively conservative margins (10-15 per cent.), it is a necessary service in order to capture a market share that can eventually be provided with higher margin services (70-90 per cent.) such as hosting, management and operation of customer information technology and telecommunications

equipment.

Teliti Datacentres Competitive Advantages

The Directors believe that the following competitive advantages exist:

   --    Teliti Datacentres' recognition on 11 January 2011 as a key partner under the ETP by the GOM; 

-- The Datacentres' construction will be based on the GBI of Malaysia, which will entitle both Teliti and its customers to tax breaks;

-- As the largest facility of its type in Malaysia and one of the biggest in Asia, Teliti will be able to offer a lot of space to multinational companies;

-- The facility will be carrier neutral, which, in the view of the Directors, will attract a greater customer base as it can offer clients a competitive telecommunication rate. Teliti will have flexibility in managing telecommunication demand and ensuring continuous service;

   --    Its competitive pricing by reason of: 

o low energy costs of Malaysia;

o charge per slot rather than per rack;

o the Datacentre will be purpose-built to ensure total security and that it can be built according to the GBI;

o the management team have industry-specific knowledge and skills for designing, building and operating datacentre facilities;

o political stability and good infrastructure of Malaysia; and

o Malaysia's membership of the OIC.

Teliti Datacentres Market Size and Growth

The Directors believe that the following growth markets exist:

-- Major customers and demand for datacentres is from the corporate sector, telecoms industry, financial services and the public sector;

-- Kuala Lumpur hosted the Data Centres Malaysia Regional Summit in January this year, which was a two day conference and show piece for the Malaysian datacentre market;

-- Over the next five years, the financial sector is expected to grow rapidly as Malaysia seeks to become a hub for Islamic banking and financial practices in accordance with Sharia law;

-- Multinationals have large information management requirements, which could be met by datacentres in the region;

-- Foreign companies currently constitute thirty (30) per cent. of customers for Malaysian datacentres, which is expected to increase by 2013;

   --    Commercial datacentre space is forecast to grow to 177,000 sq m by 2013; and 

-- The government is targeting 5 million square feet of datacentre space to be available in Malaysia by the year 2020.

The Directors believe that the following growth drivers exist:

-- Recent global macro-economic conditions driving large enterprises towards new models that will allow them to cut costs and improve performance whilst extending capacity;

-- Consumer and corporate banking growth in South East Asia leading to establishment of large support facilities including datacentres, particularly in Singapore and Malaysia;

   --    Availability of infrastructure and government incentives attracting multinational companies; 
   --    Lower cost of placing and maintenance in Asia; 
   --    Increased "virtualisation" of servers causing growth in "cloud" computing; 
   --    GOM requiring all its agencies to have disaster recovery facilities in place; and 
   --    Support by the GOM under the ETP. 

Teliti Datacentres Business Progress

Teliti Datacentres has established a regional marketing office in Singapore, which will initially provide marketing coverage in Singapore and Hong Kong. Expansion to other regions is intended at a later stage. In particular, Teliti Datacentres intends to take advantage of Malaysia's membership of the OIC and to target countries in the Middle East. In addition, Teliti Datacentres has entered into a contract to provide proof of concept whereby it can showcase the equipment and its models for future datacentres to potential customers ("Customer Experience Centre"). Such an exercise has already heralded results as Teliti Datacentres has signed up one customer for 286 sq ft of co-location space on a 2 year term at the Customer Experience Centre, which the Directors expect to transfer to the Datacentre when it becomes fully operational, and the Directors are in advanced discussions for the letting of approximately 19,000 sq ft and expect to sign contracts once the Datacentre is completed.

Teliti Solutions

Teliti Solutions has 30 trained SAP consultants working on several implementation projects. It focuses on the total implementation of, and consultancy services for, SAP-based applications. As a supporting consultant to SAP Germany, the Teliti Solutions team provides consultation on SAP ERP Solutions projects with core application design, configuration and customisation in accounting, logistics, human capital management, enterprise portal and business intelligence. The Company believes that Teliti Solutions is now one of the few Bumiputera Status SAP implementation partners in Malaysia.

Teliti Solutions is a certified services partner for SAP software and offers consultation and solutions in project management and other functional areas including financial, human capital management, manufacturing, procurement and inventory. Teliti Solutions generates revenue from the sale of the following products and services:

   --    Project management and project team consultancy for new projects and maintenance; 

-- Individual consultancy projects whereby the SAP consultant is assigned to the customer's project team;

   --    Offshore development under which overseas development projects are brought into Malaysia; 
   --    Outsourcing SAP systems for customers; 
   --    Providing ERP Solutions processes training; and 
   --    The sale of SAP licences. 

Teliti Solutions' consultancy services are charged at a per man day rate, on the basis of market rates in each region. The duration of contracts can vary and range from six months to three years depending on customers' requirements.

Teliti Services

Teliti Services is a reseller of IBM products and services. It specialises in IBM Mainframe and became one of the first few Bumiputera Status Mainframe System Integrators in Malaysia. Subsequently, Teliti Services diversified its product portfolio to include maintenance of servers and third party storage through business partnerships with major IT groups such as Hewlett Packard and Hitachi Data Systems. Its customers in Malaysia are mainly in the oil and gas sector, government-linked companies and agencies, banking and private sectors. Existing clients include Dewan Bandaraya Kuala Lumpur (Kuala Lumpur City Hall), Felda Prodata Systems Sdn. Bhd., Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Berhad (an Islamic insurance company in Malaysia), RHB Bank Berhad and Agrobank Malaysia. In the arena of IBM Mainframe, the Company has had long-term relationships with clients such as Lembaga Hasil Dalam Negeri (Inland Revenue Board of Malaysia), PETRONAS Malaysia (Petroliam Nasional Berhad, an oil and gas corporation) and RHB Bank.

Teliti Services has a highly experienced employee base - with some team members having careers spanning more than 20 years in the IT sector. The business has the capacity to provide leading system integration services by identifying, evaluating and managing the entire application deliverables for its customers.

At present, Teliti Services generates its income from the following sales and services:

   --    Hardware and software reseller; 
   --    System integration work and services; 
   --    Maintenance of system hardware and software; and 

-- Maintenance and enhancement of COMPASS application for Arkib Negara Malaysia (National Archive of Malaysia).

The sale of system hardware and software is mainly generated through tender bidding and direct sales with established customers. Teliti Services also enters into commissioning and after sales contracts with its customers.

This information is provided by RNS

The company news service from the London Stock Exchange

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