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Listed security companies see a solid growth outlook, given the prospect that demand for guards, equipment and training will increase because of rising national security concerns across the region.
Security is still a niche sector here, with three firms - Secura Group, IPS Securex and Advancer Global - listed on the Singapore Exchange. Their market capitalisations range from $64 million to $89 million.
Secura has been expanding its services in cyber security, where CEO Paul Lim sees strong potential for growth. Photo: Secura Group
But these small caps have big ambitions as they are in an "evergreen industry", said IPS Securex chief executive Kelvin Lim. The firm focuses on providing security systems and related IT solutions.
"Not a day goes by when there isn't a security incident reported somewhere in the world, so this is definitely a growing business even in (an economic) downturn… I'm confident that the security sector as a whole will be able to enjoy a 25-30 per cent growth rate," he told The Straits Times.
Such growth, if it came to pass, would be a major boost for IPS Securex, which posted an 18.5 per cent drop in revenue to $12.76 million for the financial year ended June 30, partly because of a delay in orders.
Homeland Security Research, an industry research outfit, has forecast a compound annual growth rate of almost 11 per cent for the Asia-Pacific homeland security and public safety market over the period 2015-22.
In Singapore, there seems to be a greater sense of urgency since a terrorist plot to attack Marina Bay was foiled in August.
"Since then, government agencies have sought advice from us regarding new security capabilities, such as 3D X-ray detection solutions," Mr Lim noted.
In August, the Ministry of Home Affairs awarded Ashtree International, a newly acquired security unit within the Advancer Global group, a multi-year contract to provide police defensive tactics training, said Ashtree managing director Matthew Yap.
This was followed by a contract last month that appointed Ashtree as a contractor for airside safety and security at Changi Airport.
"The public security agencies are very shorthanded, so they are quite reliant on private operators for personnel, training and consulting," said Dr Yap.
Advancer Global, which was listed in July, is better known for the domestic-helper services it offers under the Nation brand. To further build its 500-guard security division, it acquired Ashtree in August for $400,000.
Dr Yap hopes that Ashtree's specialisation in training and advisory will help Advancer Global create a complete range of security services, as integrated offerings are a decisive competitive factor.
Meanwhile, Secura CEO Paul Lim said there had been an increase of 30 to 50 per cent during the past 18 months in inquiries for the firm's services, which include unarmed guarding, cyber security and security consultancy.
Apart from the core revenue contribution from guarding services, he sees cyber security as a major growth area for the company, which was listed in January.
As a result, he and his team have been particularly busy with expanding Secura's services in this segment. In June, it acquired infotech firm Red Sentry for $2.7 million. The unit was last month appointed as a cyber consultancy and advisory partner of M1.
For the six months ended June 30, Secura reported a 76.1 per cent increase in revenue, while net profit rose over fivefold to $6.27 million. This growth was due partly to the acquisition of its private subsidiaries including Soverus.
Despite the potentially bullish outlook, investors have yet to share the executives' enthusiasm.
Of the three counters, Advancer Global has been the outperformer, rising almost 70 per cent since its debut to 37 cents at last Friday's close. Secura has slipped around 11 per cent since the debut to 22 cents, while IPS Securex - listed in 2014 - has dropped 41 per cent since the start of the year to 18.4 cents.
A gross dividend yield of less than 1.5 per cent might also be deterring investors.
IPS Securex's Mr Lim noted that the share price was affected by two rounds of stock splits. He believes that the share price movement is not doing justice to the company's regional potential.
"We draw only 5-10 per cent of our revenue from the Singapore market - the rest of South-east Asia is our main market. We are in talks to enter into a manufacturing partnership with a global security brand that will give us the exclusive rights to distribute in Asia."
(THE STRAITS TIMES)
