Editor’s note: This is the latest edition in the “Company Notes Series”, where we periodically share our notes on companies we’ve studied in the recent past but currently have no vested interest in (we may invest in or sell shares in the companies mentioned at any time). The notes are raw and not updated, and the “as of” date for the data is given at the start of the notes. The first three editions in the series can be found here, here, here, here, and here. Please give us your thoughts on the series through the “Contact Us” page; your feedback will determine if we continue with it. Thanks in advance!

Start of notes

Data as of 24 July 2023

Notes on Azeus

Place of listing and timing of IPO; Location of HQ

A leading provider of IT products and services, Azeus was listed on the Main Board of the SGX-ST in October 2004.
Principal office: 22/F Olympia Plaza 255 King’s Road, North Point Hong Kong

FY2018 annual report

Azeus was the first company in Hong Kong to be appraised at the highest level (Level 5) of the CMMISW model in November 2003.
Azeus Products segment more than doubled revenue in FY2018 (financial year ended 31 March 2018), from HK$11.9 million in FY2017 to HK$24.4 million. Growth was due to the Azeus Convene” and AzeusCare SaaS (software-as-a-service) products, as well as professional services.
At the start of July 2017, Azeus was awarded the Standing Offer Agreement for Quality Professional Services 4 (SOA-QPS4), enabling the company to tender for various Hong Kong government IT professional services contracts of up to HK$15 million for the fifth consecutive term. Following which, Azeus successfully clinched a series of governmental IT projects from the Hong Kong Government, which amounted to over HK$133.4 million, which will be progressively recognised over the next two to ten years following their implementation in FY2019 and FY2020.
In the course of FY2018, Azeus saw its investment in the expansion of its global product sales team pay off. Azeus made good headway in acquiring new customers for the Azeus Products segment, which resulted in higher sales for Azeus Convene and AzeusCare. Azeus Products accounted for 23.8% of Azeus’s total revenue, compared to 12.1% in FY2017.
The Maintenance and Support Services segment was Azeus’ largest revenue contributor in FY2018, accounting for HK$46.0 million, or approximately 45.0% of total revenue. The segment registered a 13.7% decline in revenue from HK$53.3 million in FY2017 due to the expiry of a major maintenance and support outsourcing contract in the beginning of the year.
The IT Services segment, which recorded a lower revenue of HK$31.9 million in FY2018 compared to HK$32.7 million in FY2017, was 31.2% of Azeus’s total revenue. This was due to a decrease in sales of third-party hardware and software by HK$0.8 million in FY2018. Excluding the third-party hardware and software sales, Azeus was able to achieve the same amount of IT Services revenue as compared to FY2017.
Entering into FY2019, management believed that Azeus’ core business fundamentals remain sound and the company is in a good position to grow its business by building on the progress made last year, particularly for the products business which is an integral growth engine for Azeus in the years ahead.
Lee Wan Lik (managing director and founder) and his wife, Lam Pui Wan (executive director), controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 30 May 2018.

FY2019 annual report

In FY2019, Azeus delivered total revenue of HK$147.8 million, a 44.4% increase from HK$102.4 million in FY2018. The growth was mainly supported by increased sales of Azeus’s two proprietary SaaS products – Azeus Convene and AzeusCare under the Azeus Products segment – as well as professional IT services arising from the completion of higher value implementation service projects.
Revenue for the Azeus Products segment more than doubled to HK$49.9 million in FY2019 from HK$24.4 million in FY2018. As a result, the segment was 33.8% of Azeus’s revenue in FY2019, up from 23.8% in FY2018.
In September 2018, Azeus signed a contract valued up to £1.42 million with a local council in the United Kingdom for the supply, support and maintenance of a Social Care Case Management System with AzeusCare. The amount was progressively recognised over the next seven years of the contract. The contract win added to Azeus’s track record of public sector projects in the UK, signifying Azeus having been chosen as the preferred suite of IT solutions for social care in the country.
Professional IT Services revenue expanded 25.6% from HK$78.0 million in FY2018 to HK$97.9 million in FY2019. This segment is made up of two core business areas, IT services and Maintenance and Support Services, of which both performed well. Revenue from IT services increased 48.7% from HK$31.6 million in FY2018 to HK$47.0 million in FY2019 from the completion of higher value implementation service projects – its contribution to Azeus’s total revenue for FY2019 increased to 31.8% from 30.9% in FY2018.
Revenue from Maintenance and Support Services increased by 7.5% from HK$46.0 million in FY2018 to HK$49.5 million in FY2019, due to an increase in the number of projects in production and under maintenance period. The segment represented 33.4% of Azeus’s total revenue in FY2019.
IT Services is project-based and revenue can be lumpy; Maintenance and Support Services is a stable earner.
Entering FY2020, management was focused on growing stable recurrent revenue from the Azeus Products business segment. Management wanted to aggressively build and strengthen sales and marketing capacity to secure greater market share, as they saw Azeus Products business will increasingly serve as the growth engine of Azeus.
Lee Wan Lik (managing director and founder) and his wife, Lam Pui Wan (executive director), controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 31 May 2019.

FY2020 annual report

Azeus’s flagship product, Azeus Convene, is a leading paperless meeting solution used by directors and executives in various industries, across more than 100 countries. Through its user-friendly and intuitive functionality, Azeus Convene has enabled organisations to conduct meetings in a convenient and efficient manner, by eliminating the time and cost required for printing large amounts of hardcopies. To ensure data security, Azeus Convene is equipped with advanced security features and end-to-end encryption. In addition, Azeus Convene offers 24/7 support to all its customers worldwide. The Group has also introduced a virtual AGM solution, AGM@Convene, in response to the shifting trend towards eAGMs as a result of the COVID-19 restrictions.
Azeus’s proprietary social care system, AzeusCare, has also been adopted by various local councils in the United Kingdom. AzeusCare is an integrated case management system that provides a wide range of solutions for supporting the delivery of services for managing and delivering social care for both children and adults. In particular, AzeusCare supports the delivery of the requirements of the UK Care Act 2014 with a comprehensive set of tools to manage both the case management and finance requirements under a fully integrated system.
Towards the end of FY2020, COVID-19 pandemic impacted countries across the world. Amidst the pandemic, management identified opportunities to boost the adoption of Azeus Convene and launched the electronic annual general meeting (“e-AGM”) product which is designed to enable listed companies to hold annual general meetings from multiple sites, while ensuring that the shareholders’ rights remain protected. Azeus experienced a very encouraging response from listed companies, enterprises, business associations and nonprofit organisations with the launch of e-AGM. In June 2020, approximately 60 customers conducted their AGMs using Azeus’s e-AGM solution.
Azeus achieved another year of record-high revenue in FY2020, mainly driven by the Azeus Products segment, which gained strong momentum during the year. Azeus Convene and AzeusCare continued to contribute a steady growing stream of recurring income as these products and their associated professional services were increasingly adopted and implemented by our customers. Azeus’s total revenue was HK$181.2 million, up 22.6% from FY2019. Notably, revenue for the Azeus Products segment surged 68.1% to HK$83.9 million in FY2020 from HK$49.9 million in FY2019, accounting for 46.3% of Azeus’s total revenue, up from 33.8% in FY2019.
As part of its expansion strategy, Azeus bolstered its sales force in the year to ramp up customer acquisition and increase penetration among existing customers. As a result, Azeus incurred higher selling and marketing costs of HK$23.4 million, an increase of 30.0% from HK$18.0 million in FY2019.
Professional IT Services revenue was largely unchanged at HK$97.3 million in FY2020. The segment comprises three business areas, System implementation and enhancement; Sale of third-party hardware and software; Maintenance and Support Services. For FY2020, System implementation and enhancement decreased by 22.9% to HK$36.2 million mainly due to fewer projects and enhancements secured during the year, while Maintenance and Support Services, which contributes a stream of recurring income, decreased by 8.5% to HK$45.3 million due to a decrease in the number of ongoing maintenance projects. The decreases were partially offset by a higher sale of third-party hardware and software of HK$15.8 million in FY2020 as compared to HK$1.5 million in FY2019, mainly attributable to the delivery and acceptance of an implementation project completed during the year.
In FY2020, approximately 70% of Azeus’s revenue was recurring in nature. Management wanted to build and expand sales and marketing capacity to secure greater market share and address the growing demand for IT solutions amid the accelerating rate of digitalisation globally.
In Azeus’s FY2020 AGM in August 2020, it showcased several key functions of the e-AGM solution, including live voting and an interactive video question and answer session.
Lee Wan Lik (managing director, chairman, and founder) and his wife, Lam Pui Wan (executive director), controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 31 May 2020.

FY2021 annual report

Azeus’s flagship product, Azeus Convene, is a leading paperless meeting solution used by directors and executives in various industries, across more than 100 countries. Through its user-friendly and intuitive functionality, Azeus Convene has enabled organisations to conduct meetings in a convenient and efficient manner, by eliminating the time and cost required for printing large amounts of hardcopies. To ensure data security, Azeus Convene is equipped with advanced security features and end-to-end encryption. In addition, Azeus Convene off ers 24/7 support to all its customers worldwide. The Group has also introduced a virtual AGM solution, AGM@Convene, in response to the shifting trend towards eAGMs as a result of the COVID-19 restrictions.
Azeus’s proprietary social care system, AzeusCare, has also been adopted by various local councils in the United Kingdom. AzeusCare is an integrated case management system that provides a wide range of solutions for supporting the delivery of services for managing and delivering social care for both children and adults. In particular, AzeusCare supports the delivery of the requirements of the UK Care Act 2014 with a comprehensive set of tools to manage both the case management and finance requirements under a fully integrated system.
Azeus recorded a 1.7% decrease in revenue to HK$178.1 million in FY2021, from HK$181.2 million in FY2020.
Azeus started to market AGM@Convene internationally and achieved success in Singapore, the Philippines and Hong Kong.
Revenue from Azeus Products increased by HK$29.3 million, or 34.9%, from HK$83.9 million in FY2020 to HK$113.2 million in FY2021, as Azeus made good progress in expanding its customer and revenue base. Azeus Products accounted for 63.6% of Azeus’s total revenue, compared to 46.3% in FY2020. Revenue from Azeus Products came from three proprietary SaaS products – Azeus Convene, AzeusCare, and AGM@Convene – and associated professional services.
IT Services, which includes three core business areas, System implementation and enhancement, Sale of third party hardware and software, and Maintenance and support services, recorded a 33.3% decrease to HK$64.9 million as a result of fewer projects and enhancements secured in FY2021. Revenue from Systems implementation and enhancement decreased by 47.7% to HK$19.0 million in FY2021 while revenue from Sale of third party hardware and software decreased by 96.2% from HK$15.8 million to HK$0.6 million, as the majority of the projects completed in FY2021 required Azeus’s customisation services. Revenue from Maintenance and support services remained flat in FY2021 at HK$45.3 million.
As management continued to invest in Azeus’ Products business segment, Azeus’s total research and development costs increased to HK$36.8 million in FY2021, 49.0% higher than in FY2020. Likewise, as Azeus pursued subscriber growth by expanding the sales teams, selling and marketing expenses increased by 36.3% to HK$31.9 million in FY2021 as compared to HK$23.4 million in FY2020.
Azeus’s management team respects shareholders’ rights. During Azeus’ AGM in August 2020, the company was probably the first Singapore-listed company to hold a virtual meeting in 2020 with a live Q&A and live voting. Exiting FY2021, management expected more listed companies to progressively follow its lead and improve their engagement with shareholders.
Management was cautiously optimistic about the outlook for FY2022.
Lee Wan Lik (managing director, chairman, and founder) and his wife, Lam Pui Wan (executive director), controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 31 May 2021.

FY2022 annual report

Azeus’s flagship product, Convene, is a leading paperless meeting solution used by directors and executives in various industries, across more than 100 countries. Through its userfriendly and intuitive functionality, Convene has enabled organisations to promote and uphold governance through a single secure technology platform to manage and conduct formal or structured meetings – physical, remote, or hybrid – and streamline the workflows around it. This results in a greater boost in productivity, accountability, and collaboration within and beyond the boardroom. To ensure data security, Azeus Convene is equipped with advanced security features and end-to-end encryption. In addition, Convene offers 24/7 support to all its customers worldwide. The Group has also introduced a virtual AGM solution, Convene AGM in response to the shifting trend towards eAGMs as a result of the COVID-19 restrictions.
Azeus’s proprietary social care system, AzeusCare, has also been adopted by various local councils in the United Kingdom. AzeusCare is an integrated case management system that provides a wide range of solutions for supporting the delivery of services for managing and delivering social care for both children and adults. In particular, AzeusCare supports the delivery of the requirements of the UK Care Act 2014 with a comprehensive set of tools to manage both the case management and finance requirements under a fully integrated system.
In FY2022, Azeus secured its single largest contract of over HK$1.0 billion for the implementation and maintenance of the Hong Kong government’s Central Electronic Recordkeeping System with its product, Convene Records, which was expected to further enhance Azeus’s recurring income stream. This was a show of confidence from the Hong Kong Government in the capability of Azeus in delivering “All-of-Government” large scale projects, and in the software products designed and developed by Azeus. An expected 75% of the total estimated contract value would be for the license and maintenance fees of the Convene Records software. The design and implementation work commenced in May 2022 – management expected a majority of the revenue to be contributed from FY2023 until FY2037.
- More details from other sources: The contract has a total implementation price of HK$633.9 million and the revenue from development, deployment and licensing would last from FY2023 till FY2027; the contract also has maintenance and support value for the system of HK$381.4 million and this maintenance and support revenue is expected to start in FY2027 and last 10 years.
Azeus recorded a 22.2% increase in revenue to HK$217.7 million, up from HK$178.1 million in FY2021, driven by strong growth from both its Azeus Products and IT Services segments.
Azeus Products, the company’s growth engine, continued to make good strides globally, as it expanded into more territories and added new product features and modules. Revenue from Azeus Products increased by 23.1%, from HK$113.2 million in FY2021 to HK$139.4 million in FY2022, and accounted for 64.1% of Azeus’s total revenue.
The IT Services segment grew revenue by 20.5% from HK$64.9 million in FY2021 to HK$78.2 million in FY2022, as Azeus secured more projects and undertook project implementation and maintenance work. More than 60% (HK$47.9 million) of this IT Services revenue was from maintenance and support services of existing systems which are long-term contracts. The recurring revenue from maintenance and support, which accounted for 22.0% of Azeus’s revenue in FY2022, increased by 5.7% to HK$47.9 million from HK$45.3 million in FY2021. Revenue from systems implementation and enhancement increased by HK$11.3 million or 59.5% to HK$30.2 million in FY2022.
Exiting FY2022, management thought Azeus was well-placed to capitalise on the opportunities ahead because of its strong product offerings and expertise in delivering sophisticated IT systems. Management also wanted to continue investing in and grow the Azeus Products segment. Management was excited about Azeus Products’ growth potential, with the growth of the flagship product, Convene, and new product offerings such as Convene Records.
Lee Wan Lik (executive chairman and founder) controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 1 June 2022 (the shares include those of Lam Pui Wan).
Lee Wan Lik’s wife, Lam Pui Wan, passed way on 6 May 2022
Lee Wan Lik stepped down as managing director and CEO on 15 March 2022 but remained as executive chairman.

FY2023 annual report

Azeus has developed:
- Convene – the board portal software that enables directors and executives with best-practice meetings to achieve better corporate governance
- ConveneAGM – a virtual/ hybrid AGM platform with live voting, live Q&A, and zero-delay broadcast that transforms the landscape for shareholders and members’ meetings through physical, remote or hybrid AGMs
- Convene in Teams (CiT) – a Teams-based meeting solution that seamlessly integrates with Microsoft 365 for a better leadership meeting experience in Teams,
- Convene ESG – an end-to-end reporting software that digitises the Economic, Social and Governance (“ESG”) reporting journey of regulated companies to comply with the mandated local standards and global frameworks.
- Convene Records – a document management solution that automates the management of electronic records and documents, and facilitates information sharing in the organization; the product includes a configurable workflow management feature for approval process, and supports the filing, retrieval, distribution, archiving and version control
- AzeusCare – an integrated case management system that provides a wide range of solutions for supporting the delivery of services for managing and delivering social care for both children and adults. In particular, AzeusCare supports the delivery of the requirements of the UK Care Act 2014 with a comprehensive set of tools to manage both the case management and finance requirements under a fully integrated system. It has been adopted by various local councils in the United Kingdom.
Azeus recorded a 16.2% increase in revenue to HK$252.9 million in FY2023, from HK$217.7 million in FY2022, driven mainly by growth from the Azeus Products segment. The Azeus Products segment benefited from Azeus’s marketing efforts, increased its presence in more countries, and expanded its product offering.
The HK$1.02 billion Central Electronic Recordkeeping System (CERKS) project – lasting over 53-months – moved into the deployment phase in FY2023 and management expected it to contribute to the product business in the coming years.
Azeus Products accounted for 69.3% of Azeus’s total revenue in FY2023. Revenue from Azeus Products increased by 25.8% from HK$139.4 million in FY2022 to HK$175.3 million in FY2023, mainly attributable to the revenue contribution from Convene and Convene Records under the CERKS contract.
IT Services, which include two main core business areas, system implementation and enhancement and maintenance and support services, saw a marginal decline of just 0.8%, from HK$78.2 million to HK$77.6 million. Within the IT Services segment, revenue from systems implementation and enhancement declined by HK$0.7 million or just around 2.3% to HK$29.5 million in FY2023 from HK$30.2 million in FY2022, while the recurring revenue from maintenance and support increased by HK$0.2 million or 0.4%, to HK$48.1 million in FY2023 from HK$47.9 million in FY2022.
Exiting FY2023, management thought Azeus was in a favourable position to capture potential opportunities, given the company’s strong product offerings as well as the competency in delivering sophisticated IT systems. Management also wanted to continue investing in and growing the Azeus Products segment. Led by the flagship product – Convene – and the rollout of new product offerings such as Convene Records, management expects growth within the Azeus Products business. Coupled with the expected rollout of the secured service segment projects, barring unforeseen circumstances, management is optimistic on Azeus’s overall growth and outlook in FY2024.
Lee Wan Lik (executive chairman and founder) controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 20 June 2023 (the shares include those of Lam Pui Wan).

Segmental data (Azeus Products and IT Services)

Recurring revenue comes from Azeus Products and Maintenance and Support (Maintenance and Support is grouped under IT services)

Historical financials

No dilution as share count has remained unchanged
Has always had earnings payout ratio (100% payout ratio in past two financial years)
Balance sheet had always remained robust
Net profit appears to have hit inflection point in the past 3-4 years

Geographical revenue

Can see that all regions have grown a lot over time. Is this due to Azeus Products?

Product quality for Convene

In all the rankings seen below, for board management software, Convene scores pretty highly (either a leader, or nearly a leader)

2021 ranking by Software Reviews

2022 ranking by Software Reviews

2023 ranking by Software Reviews

Board management software score by Software Review as of 2023-07-25

Competitive landscape by G2.com (Convene is in red circle)

User score by G2.com for Convene on 2023-07-25

Management

Lee Wan Lik, 61, is the executive chairman and founder of Azeus. His late wife, Lam Pui Wan, was an executive director until her passing on 6 May 2022.
Lee Wan Lik controlled 24.73 million Azeus shares, or 82.44% of total shares, as of 20 June 2023 (the shares include those previously held by the deceased Lam Pui Wan)
Michael Yap Kiam Siew, 62 is the CEO and deputy chairman of Azeus. Served on Azeus’s board since September 2004. Became executive director and deputy chairman on 20 April 2020; appointed CEO on 15 Mar 2022. Michael Yap does not have any meaningful stake in Azeus shares
As shown in table below, management’s compensation is not egregious

Quick thought on valuation

At 24 July 2023 stock price of S$8.20, Azeus has market cap of S$246 million.
Azeus Products alone has trailing operating profit of HK$76 million, which is around S$12.9 million. Market cap of entire Azeus is 19 times operating profit of the Azeus Products business alone.

Questions on Azeus

What was Azeus Products’ annual client retention rate from FY2017 to FY2023? Convene’s website mentions that “99% clients renew every year”, but no timeframe was mentioned.
What was Azeus Products’ annual net-dollar expansion rate (NDER) from FY2017 to FY2023?
How has Azeus Products’ customer count, or the customer count for Convene specifically, changed over time?
How has the product-subscribed-per-customer ratio for Azeus Product changed over time?
What does a typical subscription for Azeus Products look like? Specifically, (a) what is the average contract size, (b) for how long does a typical subscription term last, and (c) is the software charged based on usage, or the number of seats, or a mixture of both?
What is the market opportunity for Convene and Convene Records?
The CERKS contract value can be split into HK$633.9 million in the 5-year deployment phase, and HK$381.4 million in the subsequent 10-year maintenance and support phase. Is Convene Records a subscription SaaS (software-as-a-service) product such as Convene, and ConveneAGM?
What kind of margins (operating and net) will the CERKS contract have?
Azeus does not have any significant concentration of credit risk through exposure to individual customers – but is there significant concentration of revenue risk through exposure to individual customers?
The growth of Azeus’s revenue in the United Kingdom has been very impressive, rising from HK$11.9 million in FY2017 to HK$42.0 million in FY2023. Has this been mostly the result of growth in usage of AzeusCare, or has Convene or other software products played important roles too?
For both FY2022 and FY2023, Azeus paid out all of its earnings as dividends. What are management’s thought processes when it comes to capital allocation?

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Company Notes Series (#6): Azeus Systems Holdings