INTERVIEW: Pansoft to Benefit from Government-Led Industry Consolidation in 2010(Feb 12, 2010)

Feb 12, 2010, 14:10

by Hua Jinglei

Shanghai. February 12. INTERFAX-CHINA - Chinese government-led consolidation in several industries will create opportunities in a number of key sectors in China, Hugh Wang, Board Chairman of Nasdaq-listed Pansoft Co. Ltd., told Interfax in a recent interview.

China's State Council has supported a number of mergers and acquisitions (M & As) by state-owned enterprises (SOEs) in an effort to facilitate consolidation. The Council aims to cut over 200 SOEs down to less than 100 by the end of 2010, according to previous official statements.

Wang expects to see a major cross industrial move towards consolidation in 2010, especially apparent in major national industries like energy, metals, pharmaceutical and construction.

"SOE consolidation in the energy sector, especially among coal companies, will boost market demand for ERP software this year, directly benefiting Pansoft," Wang said.

According to Wang, instead of being negatively affected by the global financial crisis, Pansoft's revenues were instead boosted, as during the same time period, the Chinese government began to push consolidation. Thus, growing number of SOEs found it essential to cut operation costs during the consolidation process, thus increasing market demand for ERP.

In order to seize unexpected opportunities and increase market share, Wang plans for Pansoft to expand its business scope outside of the petroleum and petrochemical sectors to include the coal sector.

"We will enter the coal sector through acquisitions of software development firms which are already serving coal companies. We plan to allocate approximately $10 million toward future acquisitions," Wang said.

Pansoft has undergone internal restructuring, under which it further compartmentalized its existing business units and established a Hong Kong subsidiary to handle international investment and its overseas businesses.

The company reported total revenues of $4.9 million in 2009, an increase of 47 percent year-on-year, and a net profit of $1.9 million for the year, up 94 percent on an annual basis, according to financial figures released on Feb. 9.

"China's ERP software market is already mature and in a favorable market environment, I expect Pansoft's total revenues to increase by over 40 percent in 2010," Wang said.