Software company Cape Range (ASX: CAG) is set to expand its product suite and expand its logistics market footprint in Asia after acquiring Malaysian company Xtreme Software for 900,000 Malaysian ringgit (A$315,000).
Earlier today, Cape Range announced that it subsidiary, Biztrak Business Solutions had executed a sale and purchase of software agreement for the acquisition of Xtreme’s windows-based logistics-warehouse management software.
The acquisition means Biztrak will obtain Xtreme’s proprietary software which it then plans to upgrade and integrate with its own windows-based accounting package. Once complete, the final software solution will enable Biztrak to market and sell a fully integrated logistics and warehouse management software package into the growing logistics market.
Moreover, the deal effectively propels Biztrak into a new niche.
Currently, Biztrak provides accounting and business intelligence software solutions that comply with both GST and value-added tax regulations and the International Financial Reporting Standards (IFRS).
The company claims that its software is being used by over 37,000 users working within 18,000 small businesses across Asia with the majority of clientele located in Malaysia, Brunei and Singapore.
Cape Range acquired Biztrak in June 2017 as a means of spring boarding into the Malaysian market and diversifying its Australian operations.
Biztrak’s most compelling value proposition is its software architecture, which facilitates real-time integration with other products and merging information from different systems, companies and countries – all with a view of allowing businesses to conduct better decision making.
By acquiring Xtreme, Biztrak hopes to expand its overarching accounting software market coverage into the logistics, warehouse and inventory control markets.
Furthermore, Cape Range said that syncing Xtreme’s software with its own will provide it with an additional and growing revenue stream by tapping into Malaysia’s rapidly expanding supply chain software solutions market.
Hong Kong market connection
In addition to the acquisition of Xtreme’s warehouse management software, Cape Range said it has been engaged by Hong Kong-based company GM Limited to develop a cloud-based warehouse management software application for a fee of A$670,000.
Cape Range said it had already received A$140,000 of the total sum with the remainder to be paid in instalments prior to final completion in December 2019.
The two announcements are operationally related given that a significant portion of the technology acquired from Xtreme will be incorporated into the cloud-based solution to be developed for GM.
From a strategic perspective, the rationale behind today’s deal is directly related to the growing preference of using cloud-based solutions within all areas of the sprawling logistics sector that spans across multiple industries and operations.
“The development of cloud-based logistics-warehouse management software coincides with increasing demand for software that provides real-time access to view and manage inventory data online via a website,” Cape Range said in a statement.
Further down the track, Cape Range then intends to form a joint venture with GM.
The software company declared that subject to the development of an integrated software package, Biztrak and GM have “essentially agreed terms” to form a joint venture whereby a newly formed Malaysian company will be established to acquire the newly-developed software from Biztrak in exchange for a 51% equity interest in the joint venture company.
As part of the deal the company will then acquire the corresponding 49% equity interest in exchange for the cloud-based logistics-warehouse management system.
Once established, the parties intend to jointly market, promote, distribute and sell the logistics-warehouse software to the rapidly expanding supply chain software solutions market.
Biztrak stands to further benefit from the establishment of the joint venture due to ongoing services it will provide in the form of ongoing technical support. All services rendered are expected to generate recurring licence fee revenues as well as customer consulting fees generated from the sale and distribution of the integrated Biztrak accounting software solutions.
In early morning trade, Cape Range’s shares were steady at $0.90.