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Rockin' the KAZbah

Rockin' the KAZbah

Having proven itself instantly popular with investors, recently-listed Australian-owned IT services company, Kaz Computer Services (KCS) is laying foundations to become a fourth pillar in high-end outsourcing, according to managing director, Peter Kazacos.

Speaking to ARN following an announcement that Hong Kong telco, Hutchison Telecom - part of the giant Hong Kong-based Hutchison Whampoa Limited - has acquired a 20 per cent stake in the Vanda Technology Group, Kazacos said he wanted KCS to become "the biggest and best outsourcing company in Asia".

With KCS and Vanda - one of Asia's largest IT&T distributors - having entered a 50/50 joint venture last year to develop data centres across South-East Asia, the impact on KCS's ASX share price was immediate. Last Wednesday's trading saw a 10 per cent increase in the share price (up to $5.30) from its opening and closing prices. By Thursday's close, the price was up to $5.60.

"We are dovetailing on the back end of Vanda whose strength has grown as a result of this injection from Hutchison," Kazacos said of the deal. "Everybody wants to partner with Vanda as it is very strong in China. This investment from Hutchison confirms for us that we got involved with the best partner to help us with future growth in the region.

"Outsourcing in Asia is growing faster than it is in Australia as a result of the recent recession. They have a lot of catching up to do and there will be a lot of spending this year," he said.

While Kazacos said the announcement has no immediate impact on Australian operations other than putting smiles on the dials of shareholders, he did say it was all part of improving "longevity and viability" of the company.

In the public arena, the future looks rosy for KCS but there are many challenges ahead. Managing an aggressive growth strategy is top of the list, according to Kazacos.

"We are on the treadmill," he said. "We have to grow. Our goal is to be the biggest and best outsourcer in the Asia-Pacific and the challenge is to manage that appropriately.

"We can't do all that from organic growth. So along the way there will be some acquisitions that we will need to manage; making sure we manage that correctly is the biggest challenge we face."

Kazacos added that the timing of any acquisitions "depends on when they become available".

"They will be appropriate companies that give a level of synergy with what we are doing," Kazacos said.

As growth continues, KCS has well and truly set its sights on becoming a major player in the services game with ambitions to attain the same market- and mind-share as CSC, EDS and IBM Global Services.

"We already have five data centres," Kazacos said. "We are serious in that space and have them spread right across the [Asia-Pacific] region. We have been in this space for a long time. There is definitely room for us. We have already been winning contracts and I think that now we are public, we are worrying them even more," he added.

According to Kazacos, the whole public listing exercise has been a very positive one for KCS, which derives 80 per cent of its revenues from long-term fixed contracts.

He said most of the company's institutional customers took a piece of the IPO allocation, which offered the stock at $1 and was fully subscribed, which was "very pleasing because it showed they have confidence in us".

With that initial share price now increased in excess of five-fold, those customers are getting a good return on their investments. The share price rise has gone a long way (on paper anyway) towards paying for a lot of their servicing over the next couple of years.

"We thought that was very good," he said. "A lot of other institutions bought in as well, so now the challenge is to make them customers too. The share market confidence reinforces the point that we are a very good company to do business with as well as invest in."

Kazacos feels the share price rise has also markedly improved customer confidence and marketing impact.

"By being a public company we are getting into the larger deals," he said. "In the past we had to spend a lot more time on educating the customers about who we were and what we have achieved.

"Now it is a no-brainer and it is interesting to see we are being invited into more deals as a result of being public. Some of our existing customers are even now offering us more of their business."

While generally proving to be a positive experience, it hasn't been all beer and skittles for KCS. On the negative side of the business impact equation, Kazacos said he now has whole host of new masters to please. Any companies wanting to follow KCS to the ASX will have to be prepared for that, he warned.


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