DESPITE being a pervasive recreation worldwide, the business of online games is a little known industry in corporate Malaysia.

For iDimension Consolidated Bhd, the online games business is its turnaround plan that is already showing promise.

iDimension’s foray into this business is via its 80% ownership of IDB Interactive Sdn Bhd for which it paid a total of RM20mil in the form of cash and iDimension shares.

IDB has exclusive distribution rights for over 300 game titles from US-based Valve Corp for the Asean region. Valve is one of the biggest designers and publishers of online games the world over. Among titles IDB distributes are Counter-Strike, Dota2, Half-Life and Left 4 Dead.

iDimension first bought a 20% stake in IDB last June and subsequently increased that to 80% last month.

IDB had helped nudge iDimension back into the black since three quarters ago.

IDB reported a profit of RM2.03mil last year. In its first quarter ended March 31, 2014 alone, it hit a net profit of RM1.9mil, says IDB director and co-founder Stephen Ng.

“The main reason why IDB’s profits have gone up is because we (IDB) have completed the acquisition of the Online eClub Interactive Sdn Bhd, which in turn has bolstered our earnings.”

Online eClub was the original distributor of Valve’s games in this region since 2004.

Ng says that as a result, IDB will now contribute at least 50% to iDimension’s net profit from this financial year onwards.

He explains that based on iDimension’s 80% stake in IDB, the latter should contribute around three sen in earnings per share for iDimension for the financial year ending Dec 31, 2014 (FY14).

iDimension group chief executive officer Daniel Boo adds that buying IDB is iDimension’s transformation plan – to diversify beyond its current core business of developing software solutions.

“The online games industry is a sunrise one in this region,” he says.

Immediately on the horizon is IDB’s tie-up with Vietnam’s state-owned telco VTC Intecom for game distribution and payment gateway access.

“Our chairman will be going over to Vietnam next week to sign an agreement with the Vietnamese government for our game distribution and payment gateway access,” Ng says.

He explains that partnerships with telcos are strategic for IDB because of the heavy bandwidth consumption by online gamers.

While the Vietnam market is big for online games, it is tightly controlled by the government which discourages games that promote vice.

“There are good game titles. Ours are of the more education and entertainment sort,” Ng says.

Going forward, Boo says the strategy is to partner various telcos around the region to expand its reach in Asean. “We want to increase our number of gamers by selling the games through the telcos.”

The group is also in talks with the Indonesian telecommunications ministry for possible partnerships. To this, Ng says the group is exploring ways to manage its cash flow more efficiently.

Excluding Myanmar, IDB supports some 100 million gamers from the entire region. At peak hours, Ng says there are about 40 million active gamers.

IDB’s business operates mainly from the websites and where gamers can buy credit points from to play the games that IDB carries.

“There is a region lock for the credit points we sell, therefore gamers who play within Asean countries can’t buy credit points from other countries to play the games. They have to come to us,” Ng explains.

IDB buys credit points from Valve in bulk and resells them to gamers at a 15% profit margin.

Where Asean gamers buy credit points from Valve’s platform, IDB receives a 5% commission for it.

Ng adds that Valve has approached IDB to entrust the distribution rights for more countries, covering the Asia-Pacific region.

“They would like us to take on the rights for more countries and areas like New Zealand, Australia, Japan, Hong Kong and India which Valve has been monitoring from its US and European bases,” Ng says, adding that it was sign that Valve is comfortable with its partnership with IDB.

While the acquisiton of IDB promises to bode well for iDimension, what does iDimension mean to IDB?

Ng says in return, IDB is looking for iDimension to improve its online interface, payment gateway and customer service interface for the online games business. “We are also looking at how to integrate our platform with the telcos.”

Confident of the iDimension-IDB partnership, Ng is also keen on upping his stake in iDimension.

Post iDimension’s acquisition exercise, Ng holds less than 3% or 9.6 millions shares in the group which he attained through the recent acquisition exercise. He says he may look to buy more shares from the market.

The latest acquisition of 60% stake in IDB was satisfied through a RM10mil cash payment and an issuance of RM5mil worth of new shares.

Boo is currently the biggest shareholder in iDimension, with a 27.99% shareholding.

In the 2000s, iDimension’s business as an e-manufacturing solutions provider blossomed with the growth in the manufacturing sector, its niche being solutions for the semi-conductor segment.

When the semiconductor industry took turn for the worse in the past few years, iDimension was still a new kid on the block of public-listed companies having just gone for its initial public offering in 2011.

Seeing its niche business struggling with the slowdown in the global semiconductor industry, Boo decided they had to adapt to the times.

iDimension took its diversification seriously, tapping into other sectors with its expertise in software solutions.

“It is basically the same concept of ground-to-boardroom monitoring systems. We design detailed tracking systems for the plantation, airline and oil and gas sectors, as well as finance and payment systems for the education sector,” he says.

Among iDimension’s clients are Kuala Lumpur Kepong Bhd (KLK), AirAsia Bhd, Dialog Group Bhd, UMW Oil & Gas Holdings Bhd, Malay for Indigenous People’s Trust Council (MARA) and Universiti Kuala Lumpur.

Although Boo wants to focus on building the online games business with IDB, he says the company will continue to grow its software solutions business, in particularly for the plantation sector.

“We are the technology partner for KLK now and we will focus on this segment of the business because the Malaysian plantation market is big,” he says, explaining that iDimension’s solutions are able to track harvesting, workers, yield, tree condition, production and so on.

Boo says the profit margin for the software solutions is 10% or below.

The company does not have any government projects at the moment.

When Boo went on a hunt to acquire another business to boost iDimension’s balance sheet, “there were two criteria when we looked for a company to acquire,” he says.

“We wanted a non-project based business, and we wanted a retail element.”

iDimension’s software solutions business has always been a project-based one, where it’s clients are companies.

Boo says the entire work, billing and collection cycle is long and iDimension needs a business stream with faster turnaround time.

“We could have just acquired another software solution provider which would complement our existing business but that was not the point,” he says.

Acquiring IDB has proved to be a good move for iDimension, says Boo. Aside from distributing the games online and in hardcopy, IDB also sells game merchandise.

In its first quarter, the company recorded a net profit of RM531,000, compared with a net loss of RM433,000 a year ago.

“We’ve seen in our financial performance since the acquisition IDB’s potential, so we wanted increased our stake when IDB’s valuation is still attractive,” Boo says.

Yesterday, iDimension closed one sen higher at 17 sen. Its market capitalisation is RM59.1mil.

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