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AeM seeks northern exposure with Singaporean joint venture

IT consulting group AeM expects to increase staff numbers by up to one-third in the next year, having formed a joint venture with two Asian companies to explore business prospects in the greater Asian market.

The West Perth company will take a 40 per cent stake in Enigma Solutions, a Singapore-based company that also comprises Singapore’s NMG Financial Services Consulting and a smaller Singaporean IT services provider, e-contech.

AeM director Ray Bayliss said the joint venture company would follow NMG’s lead and target financial services companies throughout Asia, particularly in the region’s south-east areas.

He said the deal was an excellent opportunity for an Australian company to move into a lucrative market.

“Perth companies have traditionally tended to look eastwards for deals,” Mr Bayliss said.

“If they look northwards, the mistake a lot of firms make is to try to set up an office in Kuala Lumpur or Singapore and burn a lot of money in the process.

“By joint venturing with existing companies, it’s a golden opportunity to ride on their experience and lower the risk.”

Nonetheless, Mr Bayliss said Enigma would follow accepted wisdom and focus on the markets in Singapore, Hong Kong and Kuala Lumpur, which, he said, were home to businesses that were used to international dealings and, conveniently, were quite accessible from Perth.

“It’s easier to get to Singapore than Sydney most days,” Mr Bayliss said.

The agreement between the companies eventuated after HBF, a 10 per cent shareholder in AeM, introduced AeM to NMG in October 2001.

A ‘heads of agreement’ was signed in May this year, and the companies are anticipating formal shareholder approval for the arrangement by the end of this month. Already, however, the joint venture company has been operating with, according to Mr Bayliss, a huge amount of goodwill and trust between the participants.

Mr Bayliss said that, while NMG was not an IT consultancy firm, its clients were particularly keen for it to offer IT services. On that basis, it was quite interested in AeM’s experience in that field.

AeM and NMG had already worked together on a number of small projects before the more substantial arrangement was proposed.

Mr Bayliss said Enigma was already pursuing at least six different opportunities for consultancy work, having already completed one small contract for a client in Tokyo.

If the joint venture proves successful in the next two years, Engima will consider whether to expand its operations into the South American market.

That continent is home to a market that needs the services Engima offers, Mr Bayliss said.

By this time next year AeM expects to have added 15-20 people – if not more – to its existing staff of 60 to fulfil Enigma’s requirements.

But while AeM said it expected the deal to be “fairly significant” in financial terms, the company was reluctant to offer specific revenue projections.

Mr Bayliss said the company was being conservative in its estimates and it would carefully manage its growth in Asia.

“I think we’ve got into this market with two fantastic partners, and that lowers our risk and theirs,” he said.

“It’s not an easy market to break into and succeed in but our view is that, with our partners’ expertise in that region, it will be a success.”

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