F-1 1 d676326df1.htm FORM F-1 Form F-1
Table of Contents

As filed with the Securities and Exchange Commission on July 14, 2014

Registration No. 333-            

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

MOL Global, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

 

 

Cayman Islands   7389   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

Lots 07-03 & 08-03, Levels 7 & 8

Berjaya Times Square, No. 1, Jalan Imbi

55100 Kuala Lumpur, Malaysia

+603 2082-1251

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Law Debenture Corporate Services Inc.

400 Madison Avenue, 4th Floor

New York, New York 10017

+1 (212) 750-6474

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Jonathan B. Stone, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

c/o 42/F, Edinburgh Tower, The Landmark

15 Queen’s Road Central

Hong Kong

+852 3740-4700

 

Rajeev P. Duggal, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

c/o 6 Battery Road

Suite 23-02

Singapore 049909

+65 6434-2900

 

James C. Lin, Esq.

Davis Polk & Wardwell LLP

c/o 18/F, The Hong Kong Club Building

3A Chater Road

Hong Kong

+852 2533-3300

 

 

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Proposed maximum aggregate

offering price(2)(3)

 

Amount of

registration fee

Ordinary Shares, par value $1.00 per share(1)

  $300,000,000   $38,640

 

 

(1) American depositary shares issuable upon deposit of ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333-             ). Each American depositary share represents              ordinary shares.

 

(2) Includes ordinary shares that are issuable upon the exercise of the underwriters’ over-allotment option. Also includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These ordinary shares are not being registered for the purpose of sales outside the United States.

 

(3) Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus Dated             , 2014

                 American Depositary Shares

 

LOGO

MOL Global, Inc.

Representing             Ordinary Shares

 

 

This is an initial public offering of American depositary shares, or ADSs, representing ordinary shares of MOL Global, Inc., or the Issuer.

We are offering             ADSs. The selling shareholders identified in this prospectus are offering an additional             ADSs. Each ADS represents             of our ordinary shares, par value $1.00 per share. We will not receive any proceeds from the ADSs sold by the selling shareholders.

Prior to this offering, there has been no public market for the ADSs or the ordinary shares. It is currently estimated that the initial public offering price per ADS will be between $            and $            . We intend to apply to list the ADSs on the NASDAQ Global Market under the symbol “            .”

We are an “emerging growth company” under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.

Investing in the ADS involves risks. See “Risk Factors ” beginning on page 15 for factors you should consider before buying the ADSs.

 

 

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

     Per ADS      Total  

Initial public offering price

   $                   $               

Underwriting discount and commissions(1)

   $                    $                

Proceeds, before expenses, to the Issuer

   $                    $                

Proceeds, before expenses, to the selling shareholders

   $                   $               

 

(1) We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting.”

To the extent the underwriters sell more than             ADSs, the underwriters have an option to purchase up to an additional             ADSs from us and up to an additional             ADSs from the selling shareholders at the initial public offering price less the underwriting discount and commissions.

 

 

The underwriters expect to deliver the ADSs against payment in U.S. dollars in New York, New York on             , 2014.

 

Citigroup    Credit Suisse    Deutsche Bank Securities    UBS Investment Bank
(In alphabetical order)

 

 

Prospectus dated             , 2014


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TABLE OF CONTENTS

 

     Page  

Business

     122   

Regulation

     148   

Management

     164   

Principal and Selling Shareholders

     170   

Related Party Transactions

     172   

Description of Share Capital

     176   

Description of American Depositary Shares

     186   

Shares Eligible for Future Sale

     193   

Taxation

     195   

Underwriting

     200   

Expenses Related to this Offering

     206   

Legal Matters

     207   

Experts

     208   

Where You Can Find Additional Information

     209   

Index to the Consolidated Financial Statements

     F-1   
 

 

 

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ADSs offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus or any filed free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus or any filed free writing prospectus outside of the United States.

This prospectus contains information from an industry report commissioned by us, for which we paid a more than nominal fee, and prepared by Frost & Sullivan (S) Pte Ltd, or Frost & Sullivan, a third-party research firm, to provide information regarding the information and communication technologies, or ICT, industry in Southeast Asia, Turkey and Brazil. We refer to this report as the Frost & Sullivan report.

We present our consolidated financial statements in Malaysian Ringgit. Solely for convenience and unless otherwise indicated, certain Malaysian Ringgit amounts have been translated into U.S. dollars at a rate of MYR3.2630 to U.S.$1.00, the noon buying rate in The City of New York for cable transfers of MYR as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2014. Such U.S. dollar amounts are not necessarily indicative of the amount of U.S. dollars that could actually have been purchased upon exchange of Malaysian Ringgit at the dates indicated and have been provided solely for the convenience of the reader.

 

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under “Risk Factors,” before deciding whether to buy the ADSs.

Our Business

We are the largest e-payment enabler for online goods and services in Southeast Asia by payment volume, according to the Frost & Sullivan report. We operate a payments platform that facilitates online and mobile commerce for consumers in emerging and other markets by providing a vast network of payment channels that accept payment using cash and online methods. Our physical distribution network comprises more than 920,000 physical locations in 13 countries across four continents where we maintain a local presence as of March 31, 2014 and physical locations in other countries where we have relationships with aggregators that distribute our products through channels with which they have relationships. We also have mobile and electronic distribution channels that accept major credit cards and online banking from 94 banks globally as of March 31, 2014. Our primary product is MOLPoints micropayment system, which sells payment credits that can be used by consumers to purchase online game credits and other digital content, including Facebook Game Cards. We also operate MOLReloads, a distribution network that distributes prepaid mobile airtime and digital content; MOLPay, a payments solution for online merchants; and MMOG.asia, an online games portal. We plan to launch MOLWallet, an online and mobile payment processing and money transfer system in Malaysia in 2014. Our products provide various opportunities to acquire and retain customers and their payment credentials, which present cross-selling opportunities for our existing and future solutions. Our user base consists of both registered and unregistered users.

MOLPoints can be used to purchase credits that can be used in thousands of online games and other digital content, from over 450 content providers as of March 31, 2014. We operate in markets that are largely cash-based and offer consumers the opportunity to purchase MOLPoints in cash through our physical distribution network, which comprises chain operators such as 7-Eleven, individual retailers such as cybercafés, and aggregators such as e-pay. Our physical distribution network for MOLPoints includes our MOLReloads distribution network in Malaysia, the Philippines and Thailand. In addition, MOLPoints are available for purchase using credit cards, through online banking and at electronic kiosks in retail locations. We currently operate local websites for MOLPoints, or equivalent products for local markets, in 13 countries, namely Malaysia, Thailand, Turkey, the Philippines, Singapore, Indonesia, India, the United States, Australia, Brazil, Taiwan, Vietnam and New Zealand.

MOLReloads distributes electronic vouchers, or e-vouchers, for pre-paid mobile airtime and digital content including MOLPoints. Consumers can purchase prepaid mobile airtime for most major mobile service providers in Malaysia, the Philippines and Thailand through our MOLReloads distribution network, which comprises chain operators, including more than 1,500 7-Eleven convenience stores as of March 31, 2014, cybercafés and bookstores, and in the Philippines, individual distributors who distribute e-vouchers through mobile phones and personal computers in cybercafés. In January 2014, we entered into an agreement with InComm, a provider of pre-paid products, services and transaction technologies, pursuant to which we plan to distribute point-of-sale activated, or POS-activated, pre-paid gift cards through our MOLReloads distribution network.

MOLPay is an integrated payments solution for online merchants, which offers cash, online banking and credit card payment processing options for their consumers. MOLPay is currently offered in Malaysia and Vietnam, and we expect to launch MOLPay in Indonesia in 2014. MOLPay has an agreement with MyClear to serve as a third party (non-bank) acquirer for MyClear’s Financial Process Exchange, or FPX, and direct debit services. In addition to online banking and credit card payment, MOLPay has agreements with various distribution partners for collecting payments at more than 22,000 additional physical cash payment points in

 

 

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Malaysia, Singapore and Indonesia, including at 7-Eleven and other convenience stores, cybercafés and petrol stations, which are in the process of being rolled out in 2014. We own 51% of MOLPay Sdn. Bhd., which operates MOLPay. As of March 31, 2014, consumers could use MOLPay to make purchases from 3,455 online merchants.

MOLWallet is our planned account-based online and mobile payment processing and money transfer system that is designed to effectively replace a physical wallet using a mobile phone. Account holders will be able to pay for digital and physical retail goods and services, pay third party bills, reload pre-paid accounts for mobile airtime and other mobile applications as well as perform peer-to-peer money transfers through a convenient, secure and intuitive online or mobile interface with multiple payment methods. MOLWallet uses technology that was developed by Nganluong Joint Stock Company, or NganLuong, an online payments solutions provider based in Vietnam that we acquired in 2013. We plan to launch MOLWallet in Malaysia in 2014. Our revenue from mobile commerce has historically not been material.

MMOG.asia is an online games portal that operates licensed games in Southeast Asia, including through localized portals operated in local languages for Malaysia, Thailand and Indonesia. MMOG.asia accepts MOLPoints to purchase game credits for games that it operates. We acquired MyCNX, which operates MMOG.asia, in November 2012.

In recent years, we have evolved our product offering in response to consumers’ increasing use of mobile devices for online activities. In each country where we operate a local website for MOLPoints, we also operate a local mobile website, which facilitates access to our website for consumers using mobile devices. We have increasingly partnered with content providers to collect payments for mobile content through MOLPoints. We have mobile carrier billing partnerships with 23 telecommunications service providers operators in eight countries, which offer further exposure to mobile consumers who can pay for MOLPoints through the deduction of prepaid mobile airtime or, with respect to post-paid users, on their monthly statement. For MOLPay, we have a mobile enabled application program interface, or API, which facilitates payment for m-commerce transactions. Furthermore, MOLWallet, which we plan to launch in Malaysia in 2014, is our first product that is targeted primarily to mobile consumers, and MMOG.asia plans to launch ten mobile games in 2014 including mobile games for the Malaysia, Thailand and Indonesia markets. Our revenue from mobile games has historically not been material.

We have experienced substantial growth in recent years. In the years ended December 31, 2011, 2012 and 2013 and three months ended March 31, 2014, respectively, consumers conducted 6,198,339, 10,905,409, 20,843,529 and 4,983,149 transactions on our MOLPoints platform, involving an aggregate value of MYR175.3 million, MYR371.8 million, MYR589.3 million and MYR165.4 million. For the years ended December 31, 2011, 2012 and 2013 and three months ended March 31, 2014 our revenue was MYR63.2 million, MYR95.6 million, MYR171.5 million and MYR48.6 million, respectively.

Competitive Strengths

Our key competitive strengths include the following:

 

   

Extensive distribution network;

 

   

Broad content offering;

 

   

Active user community that trusts our brand;

 

   

Powerful network effects;

 

   

Scalable financial model;

 

   

Flexible technology platform; and

 

   

Proven execution.

 

 

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Our Strategies

Our vision is to be the dominant e-payment platform for digital services across emerging markets. To this end, our business strategy includes the following:

 

   

Expand to new markets;

 

   

Execute our mobile strategy;

 

   

Expand our online merchant network;

 

   

Broaden our product penetration across our markets; and

 

   

Accelerate “real world” payments.

Our Challenges

Our ability to achieve our goal and execute our strategies is subject to risks and uncertainties. The following is a summary of some of the principal risks we face:

 

   

We face significant competition in the markets in which we operate, and we may fail to successfully compete against current or future competitors;

 

   

We depend on certain of our distribution partners;

 

   

We are dependent on global and regional digital content providers and telecommunications service providers;

 

   

We receive certain support from our major shareholder and companies controlled by our major shareholder, which may not continue following the offering;

 

   

Material breaches in security of our information technology systems may subject us to liability;

 

   

We may experience breakdowns in our information technology systems or software defects, computer viruses and development delays that could damage customer relations and expose us to liability;

 

   

The growth of our business is largely dependent on our distribution network;

 

   

Our growth prospects will suffer if we are unable to continue to grow our business for mobile platforms;

 

   

If customer confidence in our businesses or our brands deteriorates, our business, financial condition and results of operations could be adversely affected;

 

   

An increase in the use of credit cards, debit cards or bank transfers and a decline in the use of cash as a means of payment in the markets in which we operate, may result in lower growth or a decline in the use of our services;

 

   

Our payment system might be used for fraudulent, illegal or improper purposes such as money laundering, which could expose us to additional liability and harm our business; and

 

   

We are subject to extensive government regulation, including regulations with respect to electronic payment services and data privacy.

Please see “Risk Factors” and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face.

Recent Developments

In April 2014, we agreed to purchase Easy2Pay, a mobile payment platform for merchants that facilitates payment by mobile phone subscribers through various gateways, including short message service (SMS) and

 

 

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multimedia message service (MMS), among others. In 2013, more than 480,000 users used Easy2Pay for in-game purchases. We intend to integrate digital content that is currently offered by MOLPoints into Easy2Pay’s platform. We believe Easy2Pay will complement our operations in markets where we do not have mobile carrier billing arrangements. In order to purchase Easy2Pay, we entered into a share purchase agreement with Magical Venture Corp. and Mr. Pongsak Thamprapasasadon pursuant to which we agreed to acquire 100% of the outstanding shares of three companies, namely, 3Sept Corporations Co. Ltd., a Thai company, e-Innovations Systems & Networks Thai Co. Ltd., a Thai company, and Sept 3 Technology Sdn. Bhd., a Malaysian company. We acquired 60% of the outstanding shares of each of these companies in May 2014 for aggregate consideration of THB61.1 million (MYR6.1 million). Pursuant to the agreement, which is subject to customary closing conditions, we have agreed to purchase a further 20% in November 2015 and the remaining 20% in May 2017. The purchase price for each remaining tranche is based on the financial performance of the companies during a specified period prior to the relevant closing.

In July 2014 our board of directors approved our acquisition of a mobile carrier billing platform that currently operates in Turkey and the Middle East. The target has an experienced management team and strong technology base, which we believe will promote our strategy of growing our mobile payments business in Turkey and expanding into the Middle East. We expect to enter into a share purchase agreement that provides for our acquisition of an initial 51% equity interest in the target prior to completion of this offering. The share purchase agreement is also expected to provide for our acquisition of an additional 24.5% equity interest 24 months following the initial acquisition and the final 24.5% equity interest 36 months following the initial acquisition. The purchase price for each tranche is based on the financial performance of the target during a specified period prior to the relevant closing. The purchase price for the initial 51% equity interest is expected to be approximately MYR27.9 million.

Corporate History and Structure

MOL Global, Inc. was incorporated on February 20, 2014 by our shareholder, MOL Ventures Pte. Ltd. (previously known as MOL Global Pte. Ltd.), or MOL Ventures, a company incorporated under the laws of Singapore, which is controlled by our major shareholder, Tan Sri Dato’ Seri Vincent Tan, who will remain our major shareholder following this offering. All of our operations are conducted through MOL AccessPortal Sdn. Bhd., or MOL AccessPortal, a company incorporated under the laws of Malaysia.

 

 

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Corporate Structure

The following diagram illustrates our corporate structure, including our beneficial interests in our principal operating subsidiaries and our shareholders’ beneficial interests in our company, as of the date of this prospectus:(1)

LOGO

 

(1) The shareholding of MOL Global, Inc. is presented as if the transactions described under “—Corporate Restructuring and Other Transactions”, which are currently in progress, had been completed.

 

(2) Our major shareholder, Tan Sri Dato’ Seri Vincent Tan, together with his entities and affiliates, beneficially owns a 69.3% interest in the Issuer through his direct ownership of 110,764 of our ordinary shares; a 89.9% effective equity interest in MOL.com Sdn. Bhd., which owns 14,618,356 of our ordinary shares; a 60.0% equity interest, and an additional 40.0% equity interest held by his son, Robin Tan Yeong Ching, in Hotel Resort Enterprise Sdn. Bhd., which owns 13,706,739 of our ordinary shares; a 75.5% effective equity interest, and an additional 10.0% equity interest held by his son, Rayvin Tan Yeong Sheik, in MOL Ventures, which owns 7,563,837 of our ordinary shares; a 100% equity interest in MOL Investments Pte. Ltd., which owns 3,057,669 of our ordinary shares; and 5,089,176 of our ordinary shares held directly by Rayvin Tan Yeong Sheik.

 

(3) Ganesh Kumar Bangah’s equity interest in the Issuer is held through his direct ownership of 5,916,182 our ordinary shares and his beneficial ownership of an 11.6% interest in MOL Ventures, which directly owns 7,563,837 of our ordinary shares.

 

 

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(4) For each of our subsidiaries incorporated in Thailand, our beneficial ownership does not represent our direct voting interest, as our beneficial ownership in such subsidiaries is held in part through our holdings in other entities that hold direct and indirect interests in such subsidiaries. See “Risk Factors—Our subsidiaries in Thailand are subject to restrictions on foreign ownership of their shares under Thai law.”

The following diagram illustrates our corporate structure, including our beneficial interests in our principal operating subsidiaries, upon completion of this offering assuming no exercise of the over-allotment option:

LOGO

 

 

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(1) For each of our subsidiaries incorporated in Thailand, our beneficial ownership exceeds our direct voting interest, as our beneficial ownership in such subsidiaries is held in part through our holdings in other entities that hold direct and indirect interests in such subsidiaries. See “Risk Factors—Our subsidiaries in Thailand are subject to restrictions on foreign ownership of their shares under Thai law.”

Corporate Information

Our principal executive offices are located at Lots 07-03 & 08-03, Levels 7 & 8, Berjaya Times Square, No. 1, Jalan Imbi, 55100 Kuala Lumpur, Malaysia. Our telephone number at this address is +(603) 2082-1251. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. In addition, we have local offices in Thailand, Northern Cyprus, Turkey, the Philippines, Singapore, Vietnam, Indonesia, the United States, Australia, Taiwan and Brazil.

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.molglobal.net. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc.

Conventions that Apply to this Prospectus

Unless otherwise indicated or the context otherwise requires, references in this prospectus to:

 

   

“7-Eleven Malaysia” are to 7-Eleven Malaysia Sdn. Bhd., which owns and operates or franchises to other operators all 7-Eleven convenience stores in Malaysia, a wholly-owned subsidiary of 7-Eleven Malaysia Holdings Berhad;

 

   

“ADSs” are to American depositary shares, each of which represents              ordinary shares;

 

   

“BNM” are to Bank Negara Malaysia, the central bank of Malaysia;

 

   

“Game Sultan” are to our wholly-owned subsidiary, Sihirli Kule Bilgi Sistemleri Ltd., which operates the micropayment system Game Sultan, a product that is substantially similar to MOLPoints and is included in references to “MOLPoints” throughout this prospectus;

 

   

“MDV” are to Malaysia Debt Ventures Berhad;

 

   

“MMOG.asia” are to our online games portal, which is operated by MyCNX;

 

   

“MOL,” “we,” “us,” “our company” and “our” are to MOL Global, Inc. and its subsidiaries;

 

   

“MOL Ventures” are to MOL Ventures Pte. Ltd. (previously known as MOL Global Pte. Ltd.);

 

   

“MOLPay” are to our payments solution for online merchants, which is operated by our 51%-owned subsidiary, MOLPay Sdn. Bhd., and our NganLuong payments solution for online merchants in Vietnam;

 

   

“MOLPoints” are to our MOLPoints micropayments system, our Game Sultan micropayments system for the Turkish market and our EasyTOPUP micropayments system for the Thai market, and the payments credits issued through each of our micropayment systems;

 

   

“MOLReloads” are to our distribution network for pre-paid mobile airtime and digital content, including our LoadCentral distribution network in the Philippines, and the vouchers distributed through each such distribution network;

 

   

“MyCNX” are to our subsidiary, MyCNX Holdings (M) Sdn. Bhd., which is wholly-owned by us and operates MMOG.asia;

 

 

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“MYR,” “RM” and “Malaysian Ringgit” are to the legal currency of Malaysia; “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States; “IDR” and “Rp.” are to the legal currency of Indonesia; and “THB” and “Baht” are to the legal currency of Thailand; and “S$” are to the legal currency of Singapore;

 

   

“MyClear” are to Malaysian Electronic Clearing Corporation Sdn. Bhd.;

 

   

“Northern Cyprus” are to the Turkish Republic of Northern Cyprus, a self-declared state that comprises the northeastern portion of the island of Cyprus;

 

   

“ordinary shares” prior to the completion of this offering are to our ordinary shares, par value $1.00 per share;

 

   

“our major shareholder” are to Tan Sri Dato’ Seri Vincent Tan;

 

   

“PaytoGo” are to our wholly-owned subsidiary, MOL Turkey Bilgi Sistemleri Yayincilik Gida ve Tekstil Sanayi Ticaret Anonim Sirketi, which operates the payment service provider PaytoGo;

 

   

“SEC” are to the United States Securities and Exchange Commission; and

 

   

“the Frost & Sullivan report” are to the “Independent Market Report on the ICT Industry in Southeast Asia, Turkey & Brazil” dated May 2014, which was commissioned by us and prepared by Frost & Sullivan.

Certain of our subsidiaries are referred to in this prospectus using the conventions set forth in the table under “Corporate History and Structure—Corporate Structure.”

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

 

 

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The Offering

 

Offering price

We currently estimate that the initial public offering price will be between $             and $             per ADS.

 

ADSs offered by us

             ADSs (or              ADSs if the underwriters exercise their over-allotment option in full).

 

ADSs offered by the selling shareholders

                 ADSs (or              ADSs if the underwriters exercise their over-allotment option in full).

 

ADSs outstanding immediately after this offering

             ADSs (or              ADSs if the underwriters exercise their over-allotment option in full).

 

Ordinary shares outstanding immediately after this offering

             ordinary shares (or              ordinary shares if the underwriters exercise their over-allotment option in full).

 

The ADSs

Each ADS represents              ordinary shares, par value $1.00 per share.

 

  The depositary will hold ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement.

 

  We do not expect to pay dividends in the foreseeable future. If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.

 

  You may turn in your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees for any exchange.

 

  We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement as amended.

 

  To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

 

Over-allotment option

We and the selling shareholders have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of              additional ADSs.

 

Use of proceeds

We expect that we will receive net proceeds of approximately $             million from this offering, assuming an initial public offering price of $             per ADS, which is the mid-point of the estimated initial public offering price range set forth on the front cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

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  We intend to use the net proceeds from this offering to repay indebtedness, including advances from MOL Ventures, to increase our beneficial ownership in our subsidiaries and for general corporate purposes. See “Use of Proceeds” for more information.

 

  We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.

 

Lock-up

We, our directors, executive officers and all of our existing shareholders have agreed with the underwriters not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 180 days after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting.”

 

Reserved ADSs

At our request, the underwriters have reserved for sale, at the initial public offering price, up to an aggregate of              ADSs offered in this offering to some of our directors, officers, employees, business associates and related persons through a directed share program.

 

Listing

We intend to apply to have the ADSs listed on the NASDAQ Global Market under the symbol “            .” The ADSs and our shares will not be listed on any other stock exchange or traded on any automated quotation system.

 

Payment and settlement

The underwriters expect to deliver the ADSs against payment therefor through the facilities of The Depository Trust Company on             , 2014.

 

Depositary

The Bank of New York Mellon

 

 

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Summary Consolidated Financial and Operating Data

The following summary consolidated financial information has been derived from our consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statements of profit or loss data for the years ended December 31, 2011, 2012, and 2013, summary statements of financial position data as of December 31, 2011, 2012, and 2013 and summary consolidated statements of cash flows data for the years ended December 31, 2011, 2012, and 2013 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our summary consolidated statements of profit or loss data for the three months ended March 31, 2013 and 2014, summary statements of financial position data as of March 31, 2014 and summary consolidated statements of cash flows data for the three months ended March 31, 2013 and 2014 have been derived from our unaudited condensed interim consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We have prepared the unaudited condensed interim consolidated financial statements on the same basis as our audited consolidated financial statements. Our unaudited condensed interim consolidated financial statements include all adjustments, consisting only of normal and recurring adjustments that we consider necessary for a fair presentation of our financial position and results of operations for these periods. Our summary consolidated financial data also includes adjusted EBITDA, which is a non-IFRS measure that is not required by, or presented in accordance with, IFRS, but is included because we believe it is indicative of our operating performance and used by investors and analysts to evaluate companies in our industry. Our historical results are not necessarily indicative of results expected for future periods. You should read this Summary Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

    For the year ended
December 31,
    For the three
months ended
March 31,
 
    2011     2012     2013     2013     2014  
    (MYR in millions, except per share data)  

Summary Consolidated Statements of Profit or Loss

         

Revenue

    63.2        95.6        171.5        36.8        48.6   

Direct cost and other ancillary expenses

    (32.0     (48.2     (70.0     (14.5     (22.4

Employee expenses

    (10.2     (16.5     (31.0     (6.9     (7.8

Depreciation and amortization expenses

    (3.6     (6.9     (20.6     (4.5     (5.6

Marketing, advertising and promotion expenses

    (1.2     (1.8     (8.3     (1.9     (1.0

Communication and travelling expenses

    (2.4     (3.0     (5.7     (1.3     (1.5

Office related expenses

    (1.9     (2.4     (3.9     (0.9     (1.0

Other operating expenses

    (2.8     (3.8     (6.7     (0.5     (1.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from operations

    9.1        12.9        25.4        6.5        7.3   

Other income

    3.0        0.9        2.5        1.4        4.1   

Non-operating expenses

           (1.6     (3.0              

Finance costs

    (2.7     (2.9     (5.1     (1.3     (1.3

Share of results of associates

    1.0        (0.0     (0.0     (0.0     (0.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before tax

    10.4        9.4        19.8        6.5        10.0   

Income tax expense

    (2.2     (3.4     (1.2     (0.3     (0.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the year

    8.2        6.0        18.7        6.3        9.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the year attributable to owners of the company:

    8.2        4.7        12.0        4.3        7.7   

(Loss)/Profit for the year attributable to non-controlling interests:

    (0.1     1.3        6.7        2.0        2.0   

Earnings per share

         

Basic (sen)(1)

    13.97        8.01        20.39        7.27        13.02   

Diluted (sen)(1)

    13.97        8.01        20.39        7.27        13.02   

 

 

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Note:

 

(1) Sen is a unit of Malaysian currency. One hundred sen equal one Malaysian Ringgit.

 

    As of December 31,     As of March 31,  
    2011     2012     2013     2014  
    (MYR in millions)  

Summary Consolidated Statements of Financial Position Data

       

Cash and cash equivalents

    5.4        32.1        49.7        61.4   

Total current assets

    60.3        97.4        127.0        138.1   

Intangible assets

    21.1        62.4        138.9        135.1   

Total assets

    92.1        174.3        282.9        292.8   

Total current liabilities

    70.8        124.5        204.7        206.3   

Total liabilities

    71.1        134.5        217.9        219.1   

 

    For the year ended
December 31,
    For the three
months ended
March 31,
 
    2011     2012     2013     2013     2014  
    (MYR in millions)  

Summary Consolidated Statements of Cash Flows Data

         

Net cash (used in)/from operating activities

    (3.3     23.9        54.0        9.3        22.2   

Net cash used in investing activities

    (12.5     (3.3     (60.6     (52.6     (3.2

Net cash from/(used in) financing activities

    18.0        6.3        27.3        69.6        (6.0

Net increase in cash and cash equivalents

    2.1        27.0        20.7        26.3        13.1   

Cash and cash equivalents at beginning of year/period

    3.2        5.4        32.1        32.1        49.7   

Effect on exchange rate changes

    0.1        (0.3     (3.0     (0.2     (1.4

Cash and cash equivalents at end of year/period

    5.4        32.1        49.7        58.2        61.4   

 

     As of and for the year ended December 31,      As of and for the three
months ended March 31,
 
     2011      2012      2013      2013     2014  

Summary Operating Data

             

Volume (MYR in millions)

             

MOLPoints(1)

     175.3         371.8         589.3         125.5        165.4   

MOLReloads(2)

     923.6         1,063.5         1,214.0         288.9        318.2   

MOLPay(3)

     18.0         68.1         144.3         21.7        53.1   

MMOG.asia(4)(5)

     29.1         27.4         32.2         27.6        31.9   

MOLPoints active registered paying users(6) (number)

     312,596         383,766         1,007,344         808,229        997,091   

MOLPoints transactions (number)

     6,198,339         10,095,409         20,843,529         4,689,925        4,983,149   

MOLReloads active retailers(7) (number)

     40,076         32,239         37,204         34,997        39,042   

MOLPay online merchants (number)

     916         1,205         3,455         3,221        3,674   

MMOG.asia active paying users(4)(8) (number)

     116,120         107,264         110,826         111,194        84,308   

MMOG.asia AVPPU(4)(9) (MYR)

     250.5         255.0         290.9         248.5        378.9   

 

Notes:

 

(1)

MOLPoints volume is the total retail value of content purchased through redemption of vouchers for games and other digital content provided by content providers using MOLPoints during the period. Volume comprises (i) volume from registered consumer members, which is the total volume of content purchased through redemptions of MOLPoints in registered MOLPoints accounts during a period; (ii) consumer direct purchase volume, which is the total volume of content purchased by end-users through redemptions of MOLPoints directly from content providers during a period without creating a registered MOLPoints account; and (iii) direct channel volume, which is the total volume of content purchased through redemptions of MOLPoints during a period by cybercafés and distributors that redeem

 

 

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  MOLPoints for digital content that the cybercafés and distributors sell to end-users. MOLPoints volume tends to be significantly greater than MOLPoints revenue, which excludes amounts that we pay to digital content providers pursuant to our revenue sharing arrangements.

 

(2) MOLReloads volume is the total retail value of pre-paid mobile airtime distributed by MOLReloads during a period. MOLReloads volume tends to be significantly greater than MOLReloads revenue, which excludes amounts that we pay to mobile airtime providers pursuant to our revenue sharing arrangements.

 

(3) MOLPay volume is the total value of payments processed by MOLPay during a period. MOLPay volume tends to be significantly greater than MOLPay revenue, which excludes amounts paid to financial institutions.

 

(4) We acquired approximately 80% equity interest in MyCNX, which operates MMOG.asia, in November 2012. The information presented for MMOG.asia as of and for the years ended December 31, 2011 and 2012 includes the period prior to the acquisition. The actual volume for MMOG.asia for the period after the acquisition in 2012 was MYR3.0 million.

 

(5) MMOG.asia volume is the total retail value of content sold by MMOG.asia during a period.

 

(6) MOLPoints active registered paying users is the number of unique MOLPoints accounts that have been used to purchase or redeem MOLPoints during the preceding twelve-month period.

 

(7) MOLReloads active retailers is the total of number of MOLReloads terminals in Malaysia and Thailand as of the end of the period, in each case which have sold at least one MOLReloads e-voucher during the preceding twelve months, and the number of individual distributors in the Philippines as of the end of the period, who have sold at least one MOLReloads e-voucher during the preceding month.

 

(8) MMOG.asia active paying users is the number of unique MMOG.asia accounts that have been used to purchase game points on MMOG.asia during the preceding twelve-month period.

 

(9) MMOG.asia average volume per paying user, or AVPPU, is equal to total volume for a preceding twelve month period divided by the number of active paying users as of the end of the period.

Adjusted EBITDA

We present adjusted EBITDA, which is a non-IFRS financial measure. You should not consider adjusted EBITDA as a substitute for or superior to net profit prepared in accordance with IFRS. Furthermore, because adjusted EBITDA is not determined in accordance with IFRS, it is susceptible to varying calculations and may not be comparable to other similarly titled measures presented by other companies. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

We present adjusted EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation and amortization expenses), changes in foreign exchange rates that impact financial assets and liabilities denominated in currencies other than our functional currency (affecting unrealized gain/(loss) on foreign exchange and realized gain/(loss) on foreign exchange), variations in capital structures (affecting interest income and interest expenses) provision for impairment loss on trade and other receivables, share of results of operation of associates, effect of remeasurement of equity interest in associates as a result of the consolidation of our Thailand business such that it is deemed a subsidiary instead of an associate, and tax positions (affecting income tax expenses) (such as the impact on periods or companies of changes in effective tax rates). In addition, adjusted EBITDA excludes inventory and intangible assets written off and the non-cash impact of changes in the fair value of derivative, that, in each case, we do not believe reflect the underlying performance of our business.

Some limitations of adjusted EBITDA are that:

 

   

adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;

 

   

adjusted EBITDA does not include other income, other expense and foreign exchange gains and losses; and

 

   

adjusted EBITDA excludes depreciation and amortization and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.

 

 

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The following table reconciles adjusted EBITDA to profit for the year/period.

 

     For the year ended
December 31,
    For the three
months ended
March 31,
 
     2011     2012     2013     2013     2014  
     (MYR in millions)  

Profit for the year/period

     8.2        6.0        18.7        6.3        9.6   

Plus:

          

Total depreciation and amortization

     3.6        6.9        20.6        4.5        5.6   

Impairment loss on trade and other receivables

     0.2               0.5                 

Share of results of associates

     (1.0     0.0        0.0        0.0        0.1   

Inventory written off

                   0.7                 

Intangible assets written off

                   0.1        0.0          

Unrealized (gain)/loss on foreign exchange

                   (0.4     0.0        0.1   

Realized (gain)/loss on foreign exchange

     (0.8     (0.7     0.2        (0.2     0.0   

Effect of remeasurement of equity interest in associates

            1.6                        

Derivative fair value adjustment

                   3.0        (0.8     (3.7

Interest income

     (0.0     (0.4     (0.8     (0.1     (0.3

Interest expense

     2.7        2.9        5.1        1.3        1.3   

Income tax expense

     2.2        3.4        1.2        0.3        0.4   

Adjusted EBITDA

     15.1        19.7        48.9        11.3        13.1   

 

 

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RISK FACTORS

An investment in the ADSs involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in the ADSs. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of the ADSs could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We face significant competition in the markets in which we operate, and we may fail to successfully compete against current or future competitors.

We face competition from other payments system operators as well as banks, telecommunications operators and other companies in each of our product lines and in each of the countries in which we operate. MOLPoints competes primarily with game operators, online retailers of digital content, global micropayment providers and aggregators, and local micropayment providers on the basis of its ability to attract and retain online game players and other consumers, which in turn depends on MOLPoints’ ability to attract content providers and distribution channels. MOLReloads competes primarily with online and offline sellers of mobile airtime and operators of payment terminal networks on the basis of transaction processing speed, convenience, coverage, network size, accessibility, availability, reliability, price and after-sales service. MOLPay competes primarily with retail banks, non-traditional payment services providers (such as retailers), electronic payment system operators as well as other companies that provide various forms of payment services, primarily on the basis of transaction processing speed, convenience, network size, accessibility, reliability and price. MOLWallet is expected to compete with online and mobile payment service providers and other e-wallet providers, primarily on the basis of transaction processing speed, convenience, network size, accessibility, reliability and price. Certain of the financial institutions we use for clearing and settlement services are also our competitors and provide payment processing services to online merchants. In addition, in recent years, many of our competitors have substantially expanded their online payment services capabilities.

MMOG.asia, our online games portal, competes with game operators and other providers of leisure activities, primarily on the basis of the quality and features of its online games, its operational infrastructure and expertise, the strength of its product management approach, and the services offered to enhance game players’ experience.

There are limited barriers to entry for new companies wishing to enter our industries. In addition, many of our competitors are larger than us and may have greater financial, management or operating resources than us, or have more experience in the geographic markets in which we compete with them. If we are unable to compete effectively in each of our product and geographic markets, our business, financial condition and results of operations will be adversely affected.

We depend on certain of our distribution partners.

We depend on our relationships with certain physical distribution partners, each of which has distributed our products that accounted for a substantial proportion of our revenues in recent years. For the years ended December 31, 2011, 2012 and 2013 and the three months ended March 31, 2014, we derived 55.8%, 37.5%, 23.8% and 25.2%, respectively, of our revenue from the distribution of products at 7-Eleven Malaysia’s convenience stores, which represented 75.0%, 63.6%, 51.4% and 51.5%, respectively, of our revenue for Malaysia. For the years ended December 31, 2012 and 2013 and the three months ended March 31, 2014, we derived 81.1% and 78.3% and 78.3%, respectively, of our revenue in Thailand from sales through Advance Mpay Co. Ltd., or Advance MPay.

We have a long term contract with 7-Eleven Malaysia for the placement of MOLReloads terminals, which expires in 2024. Pursuant to this contract, we are 7-Eleven Malaysia’s exclusive provider of mobile airtime and online game credits. We and 7-Eleven Malaysia are currently ultimately controlled by our major shareholder. We also have a payment service agreement with Advance MPay, pursuant to which Advance MPay distributes

 

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MOLPoints and MOLReloads in Thailand in exchange for a volume-based service fee. The agreement expires in December 2014, subject to an automatic one-year extension if not earlier terminated. Either party may terminate the agreement at any time upon 30 days’ written notice.

There can be no assurance that our relationship with 7-Eleven Malaysia would not be adversely affected if our major shareholder was to cease to control us or 7-Eleven Malaysia or if our major shareholder was to cause us not to pursue our full rights under our agreement with 7-Eleven Malaysia. In addition, to the extent the customer base of 7-Eleven Malaysia or Advance MPay and its distribution channels decreases, or if the number of distribution channels in desirable locations in Malaysia or Thailand is reduced, or if the business strategy of 7-Eleven Malaysia or Advance MPay is otherwise modified, customer traffic could be adversely affected, and our sales volume could suffer.

While we believe that we have generally enjoyed good commercial relations with 7-Eleven Malaysia, Advance MPay and other important distribution partners, there can be no assurance that such companies will continue to observe the terms of existing agreements, or enter into or renew their contracts with us on terms as favorable as current terms. If we are unable to maintain our relationships with any of our key distribution partners, including 7-Eleven Malaysia and Advance MPay, or if any of the respective businesses of our distribution partners changes or suffers, our business, financial condition and results of operations may be materially and adversely affected.

We are dependent on global and regional digital content providers and telecommunications service providers.

As of March 31, 2014, MOLPoints can be used to purchase game credits and other digital content, including thousands of online games, provided by more than 450 content providers. We have relationships with global game operators such as Wargaming, global games platforms such as Facebook, regional platform operators such as Garena in Southeast Asia and Taiwan, and regional content providers such as Asiasoft, and we continually seek to enter into new relationships to broaden our content offering. We are dependent on the adoption of MOLPoints by new content providers, in particular major social media and gaming platforms, in order to grow our business and attract new customers. If we are unable to continue to add popular content providers to our platform, or if our existing relationships with content providers deteriorate, the attractiveness of MOLPoints to consumers may suffer. In addition to third party content, games operated by MMOG.asia, our games portal, also accept MOLPoints. For the years ended December 31, 2011, 2012 and 2013 and the three months ended March 31, 2014, we derived 7.6%, 5.0%, 2.8% and 2.1%, respectively, of our revenue from Boomz (DDT), a game that is operated by MMOG.asia, and there can be no assurance that the success of Boomz (DDT) will continue, or that our other games will be commercially successful. Any of the foregoing could have an adverse effect on our business, financial condition and results of operations.

In addition, we are dependent on, and our results of operations may be significantly affected by, our relationships with digital content providers with respect to our MOLPoints business and telecommunications service providers with respect to our MOLReloads business. For example, MOLReloads’ segment revenue decreased from 2011 to 2012, notwithstanding increased volume, primarily due to unfavorable changes to our revenue sharing arrangements with telecommunications service providers in Malaysia, which imposed reduced commissions for fulfillment agreements on our MOLReloads business in Malaysia. Furthermore, we enter into purchase or fulfillment arrangements based on the preferences or requirements of our counterparties, which affects our margins, capital outlay and inventory risk. If the telecommunications service providers or digital content providers with which we do business change the terms of their arrangements with us in a manner adverse to us, our business, financial condition and results of operations could be adversely effected.

You should not consider or rely on statements made by our major shareholder that appeared in a news report in June 2014.

In an article in The Business Times, a Singapore-based newspaper, dated June 23, 2014, information regarding us and this offering was published. This article quoted statements that were made by our major

 

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shareholder, Tan Sri Dato’ Seri Vincent Tan, to a reporter, during an interview relating to matters unrelated to us or this offering, and were published without his consent. These statements were also not made with the knowledge or consent of us or our directors, officers or employees. The article referred to statements by our major shareholder regarding the expected timing of our initial public offering and our projected market capitalization and value of our company. Portions of the article were republished by other news agencies.

These statements regarding market capitalization and value by our major shareholder were not based on any methodology, calculations or analysis undertaken by us or, we understand, our major shareholder. We understand these were informal, speculative statements made by our major shareholder that were not expected by him to become public. These statements should not be relied upon for any purpose whatsoever. We are unable to accurately project our market capitalization or the value of our Company because these will be based on many factors beyond our control. You should carefully evaluate all the information in this prospectus, including the risks described in this section and throughout the prospectus. You should only rely on the information contained in this prospectus in making your investment decision.

Neither we nor any of the underwriters in this offering, nor any of our or their respective affiliates, have confirmed, endorsed or adopted any of the information reported in the news articles referred to above, and all such information is disclaimed by us and the underwriters and our and their respective affiliates. Accordingly, prospective investors should not rely on any such statements or information in such news reports.

We receive certain support from our major shareholder and companies controlled by our major shareholder, which may not continue following the offering, and our major shareholder and our Chief Executive Officer have investments in businesses that may compete with our operations or otherwise result in conflicts of interest.

We have received in the past and expect to continue to receive support from our major shareholder and companies controlled by our major shareholder, which may not continue following the offering. For example, our major shareholder has granted advances to us on an interest-free basis, in connection with certain of our acquisitions. These amounts are repayable on demand. Our major shareholder and related parties have also provided guarantees for certain bank loans and other arrangements that we have entered into. Furthermore, an entity controlled by our major shareholder provides corporate secretarial services to us free of charge. Our principal executive offices in Kuala Lumpur are rented at prevailing market rates from an entity controlled by our major shareholder. See “Related Party Transactions” for descriptions of certain of these arrangements. The loss of support from our major shareholder or the companies controlled by our major shareholder could have an adverse impact on our business. For example, going forward, as a publicly listed company, our major shareholder and related parties may no longer provide us with interest free loans or guarantees for financing, which could increase our costs and make it more difficult for us to obtain financing in the future. We may also need to replace such financing and guarantees provided by our major shareholder and related parties, which may not be available or may be on less favorable terms. Our major shareholder, Tan Sri Dato’Seri Vincent Tan, and entities owned by our major shareholder, and our Chief Executive Officer, Ganesh Kumar Bangah, have investments in businesses that operate in a wide variety of industries, some of which may compete with our operations or otherwise result in conflicts of interest. For example, Cyberventures Sdn. Bhd., or Cyberventures, which is owned 80% by our major shareholder and 20% by our Chief Executive Officer, owns 51% of Sea Gamer Mall Sdn. Bhd., or Sea Gamer. Sea Gamer sells online game credits and secondary market items for online games, and we have a reseller arrangement with, and provide collection services for, Sea Gamer. See “Related Party Transactions”. In addition, MOL Ventures, in which our controlling shareholder has a 75.5% effective equity interest, with an additional 10.0% equity interest held by his son, Rayvin Tan Yeong Sheik, and an 11.6% equity interest held by our Chief Executive Officer, owns less than 4% of GHL, which is a listed company that owns 100% of e-Pay Malaysia, which has an electronic distribution infrastructure similar to MOL Reloads and that distributes MOL Points. There can be no assurance that our major shareholder, and entities owned by him and our Chief Executive Officer, will not act, or cause us or other entities controlled by him to take action, in a manner that adversely impacts your interests as a holder of ADSs. The foregoing could have an adverse effect on our business, financial condition and results of operations.

 

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Material breaches in security of our information technology systems may subject us to liability.

The uninterrupted and secure operation of our information technology systems, the safekeeping of confidential customer and consumer information that is stored on such systems and the secure handling of consumer information that is processed on such systems are critical to the successful operations of our business. We collect and maintain databases of sensitive information about online merchants and consumers, including names, email addresses, credit card numbers and bank account numbers. We have observed a global increase in information technology security threats and more sophisticated and targeted computer crime, which pose a risk to the security of systems and networks and the confidentiality, availability and integrity of our data. Our visibility in the online payments industry may attract hackers to carry out attacks on our systems that could compromise the security of our data. The encryption software and the other technologies we use to provide security for storage, processing and transmission of confidential customer and other information may not be effective to protect against data security breaches by third parties. As of the date of this prospectus, we have not experienced any material information technology security breaches. An information breach in our systems and loss of confidential information such as credit card numbers stored on third-party servers with respect to MOLPay or other information could have a longer and more significant impact on our business operations than a hardware failure. The loss of confidential information could result in our online merchants and their customers or our users losing confidence in us and thus the loss of their business. The loss of confidential information could also subject us to liability as well as the imposition of fines and damages by credit card merchant acquirers or government bodies or, in cases of material breach, the prohibition from provision of processing transactions for card networks. In addition, any data security breach of our or our content providers’ or third-party processors’ systems could lead to fraudulent activity involving our products and services, reputational damage, private claims or regulatory actions against us and increased compliance costs. Any of the above events could have an adverse impact on our business, financial condition, results of operations and growth prospects.

We may experience breakdowns in our information technology systems or software defects, computer viruses and development delays that could damage customer relations and expose us to liability.

We depend heavily on the stable operation of our information technology systems including software, processing systems, data centers and telecommunications networks, as well as systems provided by third parties. In addition, our business depends on the performance and reliability of our servers and MOLReloads terminals. A system outage or data loss could have a material adverse effect on our business, financial condition and results of operations. Not only would we suffer damage to our reputation and potential loss of business in the event of a system outage or data loss, but we may also be liable to third parties. Defects in our software systems and errors or delays in our processing of electronic transactions could result in one or more of the following:

 

   

additional development costs;

 

   

diversion of technical and other resources from our other development efforts;

 

   

loss of credibility with current or potential customers;

 

   

harm to our reputation and brands;

 

   

exposure to liability claims; and

 

   

regulatory action or investigation.

In addition, we rely on technologies supplied to us by third parties that may also contain undetected errors, viruses or defects. To successfully operate our business, we must be able to protect our systems and software from disruption, including from events that may be beyond our control. Events that could cause disruptions include, but are not limited to, upgrading of our information technology systems, installation difficulties or delays, fire, natural disaster, unauthorized entry, power loss, telecommunications failure, software defects, computer viruses, terrorist acts and war. We perform the vast majority of disaster recovery operations ourselves, though we utilize select third parties for some aspects of recovery, particularly internationally. To the extent we outsource our disaster recovery, we are at risk of the relevant service provider’s unresponsiveness or failure to respond appropriately in the event of breakdowns in our systems. Furthermore, we may not have insurance policies, or our insurance policies may not be adequate, to compensate us for all losses or failures that may occur.

 

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The growth of our business is largely dependent on our distribution network.

Our ability to successfully grow our business internationally will depend to a significant extent on us successfully developing and maintaining relationships with local distribution partners in the countries in which we operate. Our ability to enter into relationships with global game operators such as Wargaming, and global games platforms such as Facebook, is largely dependent on our ability to provide a distribution network in markets where such content providers have a more limited presence. At the same time, our ability to enter into relationships with regional platform operators, such as Garena, and regional content providers, such as Asiasoft, is largely dependent on the regional and local penetration of our distribution network. If we are unable to maintain and increase the penetration of our distribution network in existing markets, and develop distribution networks in new markets, our products and services may become less attractive to consumers and in turn, to both global and local content providers. We have in the past expanded our distribution network partly through acquisitions and partnerships in new markets. There can be no assurance that we will succeed in expanding our distribution network to new markets, nor that our earnings in such markets will offset the cost of acquisition. In cases where our strategy involves organically growing into a new market by establishing a presence in the market and signing up distribution partners directly, there can be no assurance that we will succeed in expanding our distribution network rapidly or at all. Any of the foregoing could adversely impact our business, financial condition and results of operations.

Our growth prospects will suffer if we are unable to continue to grow our business for mobile platforms.

Increased adoption of MOLPoints by mobile content providers, including mobile game operators, is an important component of our strategy as a result of the increasing use of smartphones. We cannot guarantee that we will be able to establish successful relationships with mobile content providers or that MOLPoints will appeal to mobile users. The uncertainties we face include but are not limited to:

 

   

we have relatively limited experience working with certain mobile game operators and other mobile content providers whose cooperation we may need in order to be successful;

 

   

mobile games operators may not succeed in introducing chargeable features that are sufficiently attractive to players to use MOLPoints to pay for such features; and

 

   

competition for use of payment methods on mobile platforms is intense and we may not be able to compete effectively.

If we are unable to successfully grow the use of MOLPoints in connection with mobile content, our growth prospects will be materially and adversely affected.

If customer confidence in our businesses or our brands deteriorates, our business, financial condition and results of operations could be adversely affected.

Our customers include our user community, in addition to content providers with respect to MOLPoints, telecommunications service providers with respect to MOLReloads and online merchants with respect to MOLPay. Our business is built on customers’ confidence in our business or brands, as well as our ability to provide fast, reliable payment services. The strength of our brands and reputation are of paramount importance to our business. A number of factors could adversely affect customer confidence in our brands, many of which are beyond our control, and could have an adverse impact on us. These factors include but are not limited to:

 

   

any significant interruption to our systems and operations;

 

   

any regulatory action or investigation against us;

 

   

measures taken to combat risks of fraud and breaches of privacy and security, such as freezing consumer funds;

 

   

customer complaints about our customer service and our ability to handle customer complaints effectively;

 

   

our ability to manage and train our customer service representatives properly;

 

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any breach of our security system or any compromises of consumer data; and

 

   

any regulatory action or investigation against us.

Furthermore, negative publicity surrounding any assertion that we or any associated merchants are implicated in fraudulent transactions, irrespective of the accuracy of such publicity or its connection with our current operations or business, could harm our reputation. Any event that damages our brands and reputation among consumers as a reliable payment services provider could have a material adverse effect on our business, financial condition and results of operations.

An increase in the use of credit cards, debit cards or bank transfers and a decline in the use of cash, or an increase in the use of digital currencies, as a means of payment in the markets in which we operate, may result in lower growth or a decline in the use of our services.

MOLPoints, MOLReloads, and MOLPay connect our user community with content providers, telecommunications service providers and online merchants, respectively, primarily in emerging markets. Many of our users do not readily have access to credit card, debit card or bank transfer services, or may be unwilling to use credit cards for electronic transactions over the internet, and require alternative methods for payment for online products and services. For example, the credit card penetration rate in 2013 was 16.7% in Malaysia, 7.8% in Thailand, 16.9% in Turkey, 5.0% in the Philippines, 1.5% in Vietnam and 2.6% in Indonesia, according to the Frost & Sullivan report. Our physical distribution network, which includes convenience stores, cybercafés, bookstores and other retail stores, provide access to e-commerce for such users by facilitating cash payments. In the year ended December 31, 2013 and the three months ended March 31, 2014, cash payments accounted for 55.3% and 58.0%, respectively, of transactions conducted by our user community on our platform. While we currently accept credit cards and online banking as a means of payment by consumers, we do not accept, and we do not presently have plans to accept, any unregulated digital currency as a means of payment. At this time when digital currencies remain unregulated and at an early stage of adoption, we consider digital currencies to be neither a form of competition nor an area for operational growth or diversity. If digital currencies were to become more widely adopted and regulated we may experience competition from platforms and business that conduct business using such currencies. Further to this, we may consider entering into arrangements with a digital currency operator if the digital currency was regulated, in which case it is possible that we could enter into arrangements for MOLPoints to be used as a funding mechanism for a regulated digital currency, or to accept a regulated digital currency as a means of payment for MOLPoints. While such arrangements could potentially make our broad content offering and extensive distribution network available to a regulated digital currency, we would consider such arrangements only if the currency was regulated and only after evaluating the associated risks, such as the risk of abuse of MOLPoints and any reputational concerns. A significant increase in the availability, acceptance and use of credit card, debit card, bank transfer services or digital currencies for online payments by consumers in the markets in which we operate could adversely affect the growth of our business, our financial condition and results of operations.

Material weaknesses and significant deficiencies in our internal control over financial reporting have been identified, and we have not yet assessed the effectiveness of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002.

Our internal controls relating to financial reporting have not kept pace with the expansion of our business. Our financial reporting function and system of internal controls are less developed in certain respects than those of similar companies that operate in fewer or more developed markets and may not provide our management with as much or as accurate or timely information. The Public Company Accounting Oversight Board, or PCAOB, has defined a material weakness as “a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim statements will not be prevented or detected on a timely basis.” A significant deficiency is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

 

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In connection with the audit of our consolidated financial statements for the year ended December 31, 2011, 2012 and 2013, we and our independent registered public accounting firm identified two material weaknesses in internal controls. These material weaknesses related primarily to the lack of segregation of duties among information technology personnel and lack of access control and audit trails over the e-pins inventory database at our Turkish micropayment system operator, Game Sultan, and payment service provider, PaytoGo, which we acquired in 2013.

Significant deficiencies were also identified in the internal controls relating to various group companies, relating among other things, to the lack of an internal control department as well as documentation and IT system matters. As our business has grown rapidly in scope and complexity, our internal controls relating to these matters have not kept pace with the growth in our business.

We are not required to, nor was our independent registered public accounting firm engaged to, perform, an audit of our internal control over financial reporting. The audits of our independent registered public accounting firm included consideration of internal control over financial reporting, and the identified material weaknesses and significant deficiencies, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of our internal control over financial reporting. The report of our independent registered public accounting firm on our annual consolidated financial statements included herein is unqualified.

We can give no assurance that our planned remediation will be properly implemented or will be sufficient to eliminate such material weaknesses and significant deficiencies or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of the ADSs.

Our independent registered public accounting firm did not undertake an audit of the effectiveness of our internal controls over financial reporting, whether of the type set forth in Section 404 of the Sarbanes-Oxley Act of 2002 or otherwise. Our independent registered public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 until our annual report on Form 20-F following the date on which we cease to qualify as an “emerging growth company,” which may be up to five full fiscal years following the date of this offering. We have not yet commenced the process of assessing the effectiveness of our internal control over financial reporting. This process will require the investment of substantial time and resources, including by members of our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions in order to implement effective control over financial reporting. If in subsequent years we are unable to assert that our internal control over financial reporting is effective, or if our auditors express an opinion that our internal control over financial reporting is ineffective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on the price of our common stock.

There is no assurance that we will be able to maintain the pace of recent growth in our business and develop, or sustain, profitable operations in new markets.

A significant proportion of our recent growth has been derived from our expansion to new markets, especially through acquisitions, as a critical element of our business strategy depends on our ability to profitably develop and grow our operations in several countries outside Malaysia, including Thailand, Turkey, the Philippines, Singapore, Indonesia, India, the United States, Australia, Brazil, Taiwan, Vietnam and New Zealand.

Our successive acquisitions and rapid expansion make comparisons with historical data difficult, as these acquisitions have contributed significantly to our revenue growth and expansion of our operations. For example, we acquired 70% of each of Game Sultan and PaytoGo in Turkey in 2013 and our revenue from Turkey was

 

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MYR23.2 million, or 13.5% of our total revenue in 2013. We acquired the remaining 30% equity interest in each of Game Sultan and PaytoGo in 2014. If we reduce the pace of our acquisitions, our future revenue growth and expansion may be affected.

Our growth strategy entails, among others, developing platform interfaces in local languages adapted for local practices and tastes, recruiting and retaining local management personnel, introducing product offerings that are localized and customized for users in those markets, complying with new and changing regulatory environments, developing and maintaining a substantial network of physical payment locations and contracting local merchants to offer our services to their customers. We have a limited operating history in most countries outside Malaysia where we operate and, in certain of these countries, we are not yet profitable. Furthermore, as we enter new markets in the future, we generally expect to operate at a loss for a period while we seek to develop our brands and relationships in that market. There is no assurance that we will be able to develop profitable operations in all the countries in which we are currently operating or which we may enter in the future. Our inability to develop profitable operations in such markets would have an adverse effect on our business, financial condition and results of operations.

If we fail to effectively manage our growth, our business and results of operations could be materially and adversely affected.

We have experienced rapid growth in recent years in the scope of our operations, which will continue to place significant demands on our management and our operational, financial and technological infrastructure. As we continue to grow, we must expend significant resources to identify, hire, integrate, develop and motivate a large number of qualified employees. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our growth prospects could be adversely affected.

To effectively manage the growth of our business and operations, we will need to continue spending significant resources to improve our technology infrastructure, our operational, financial and management controls, and our reporting systems and procedures by, among other things:

 

   

setting up a network operations center to monitor and update our technology infrastructure to maintain high performance, enhance system availability and minimize down time;

 

   

implementing third party solutions to enhance information and communication systems with a view to ensuring that our employees and offices around the world are well-coordinated and can effectively communicate with each other;

 

   

enhancing our internal controls to ensure timely and accurate reporting of all of our operations by implementing the SAP Business One accounting system regionally;

 

   

documenting our information technology systems and our business processes, for example by adopting a product requirements definition, functional requirements definition, technical design definition, merchant integration guide and payment integration guide, among other policy documents;

 

   

implementing a business continuity plan and a disaster recovery plan for our servers outside Malaysia similar to that which we implemented for our main servers in Kuala Lumpur in 2013; and

 

   

expanding our information technology infrastructure into a third party cloud platform.

These enhancements and improvements will require significant capital expenditures and allocation of valuable management and employee resources. If we fail to implement these enhancements and improvements effectively, our ability to manage our expected growth and comply with the rules and regulations that are applicable to public reporting companies will be impaired. In addition, if our operating costs are higher than we expect or if we do not maintain adequate control of our costs and expenses, results of operations will be materially and adversely affected.

 

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Our payment system might be used for fraudulent, illegal or improper purposes such as money laundering, which could expose us to additional liability and harm our business.

Despite measures we have taken and continue to take, our payment system remains susceptible to potentially illegal or improper uses. These may include the use of our payment services in connection with fraudulent sales of goods or services, software and other intellectual property piracy, money laundering, bank fraud and prohibited sales of restricted products. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase in the future. We could be subject to fraud claims if confidential information obtained from customers is used for unauthorized purchases with misappropriated bank card information or impersonation. In addition, we are subject to the risk of claims related to counterfeit MOLPoints or fraud committed by merchants where customers use MOLPoints, either of which could cause consumers and merchants to lose confidence in our products, damage our reputation and subject us to liability claims. We are also subject to the risk that users could use our system to engage in illegal or improper activities, which could damage our reputation.

Our risk management policies and procedures may not be fully effective to identify, monitor and manage these risks. We are not able to monitor in each case the sources for our counterparties’ funds or the ways in which they use them. Increases in chargebacks or other liability could have a material adverse effect on our business, financial condition and results of operations. Furthermore, an increase in fraudulent transactions or publicity regarding chargeback disputes could harm our reputation and reduce consumer confidence in our services.

As we expand our business internationally, we will face additional business, political, regulatory, operational, financial and economic risks, any of which could increase our costs and hinder such growth.

We expect to continue to devote significant resources to international expansion through acquisitions and organic growth, including the establishment of additional offices. Expanding our business internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems and commercial infrastructures. For example, we may become subject to risks that we have not faced before or increase the risks that we currently face, including risks associated with:

 

   

recruiting and retaining talented and capable management and employees in various countries;

 

   

challenges caused by distance, language and cultural differences;

 

   

contracting with content providers for games and other digital content that appeal to the tastes and preferences of users in international markets;

 

   

competition from local competitors with significant market share in those markets and with a better understanding of consumer preferences;

 

   

protecting and enforcing our intellectual property rights;

 

   

negotiating agreements that are sufficiently economically beneficial to us and protective of our rights;

 

   

the inability to extend proprietary rights in our brand, content or technology into new jurisdictions;

 

   

implementing our payment methods for virtual and other goods in a manner that complies with local laws and practices and protects us from fraud;

 

   

complying with applicable foreign laws and regulations, including privacy laws, consumer protection laws, anti-money laundering laws, and laws and regulations relating to content, currencies and payment systems;

 

   

currency exchange rate fluctuations;

 

   

protectionist laws and business practices that favor local businesses in some countries;

 

   

foreign tax consequences;

 

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foreign exchange controls or tax restrictions that might restrict or prevent us from repatriating income earned in foreign countries;

 

   

political, economic and social instability; and

 

   

higher costs associated with doing business internationally.

Entering new international markets or expanding our operations in existing international markets will involve substantial cost and our ability to successfully gain market acceptance in any particular market is uncertain. There can be no assurance that we will be able to successfully grow our business internationally.

Our expansion into new jurisdictions could involve challenges for us associated with the social, regulatory, political or economic environments in those jurisdictions, particularly where those jurisdictions have economies that are generally considered to be developing. For example, we plan to expand into a number of countries that are widely considered to have developing economies, such as countries in the Middle East, North Africa, Eastern Europe and in Latin America and will face additional risks associated with our expansion into these regions. In recent years there has been substantial political instability in a number of countries in the Middle East and North Africa. Such political instability could potentially negatively affect market sentiment towards other countries in the region, including the countries in which we plan to expand our operations, or potentially disrupt our operations if the countries to which we plan to expand our operations were to become unstable. In Eastern Europe, we expect to expand our operations into Poland, which has undergone significant political and economic change since 1989. Future political, economic, social and other developments could adversely affect our planned business there. In Latin America, we expect to expand into Mexico, which has experienced periods of political uncertainty and recent legislative gridlock. Mexico’s proposed economic reforms may not be implemented due to legislative gridlock or any other reason, in which case Mexico’s economic outlook, and the prospects of our proposed business there, may be adversely impacted. Any of the foregoing could have an adverse effect on our business, financial condition and results of operations.

Our subsidiaries in Thailand are subject to restrictions on foreign ownership of their shares under Thai law.

Pursuant to the Thai Foreign Business Act B.E. 2542 (1999), or FBA, a “foreign entity” (as defined in the FBA) cannot conduct business in certain sectors in Thailand, including the industry that our subsidiaries in Thailand operate in, unless an appropriate license is obtained. As our subsidiaries in Thailand do not hold such license, they are subject to restrictions on foreign ownership of their shares in order to ensure that none of them are “foreign entities” under the FBA.

Under the FBA, it is also unlawful for a Thai national or entity to hold shares in a Thai company as a nominee for or on behalf of a foreigner in order to circumvent the foreign ownership restrictions. While there are no clear official guidelines or criteria stipulated under the FBA or by the Ministry of Commerce of Thailand in determining whether a Thai national or entity is holding shares in a Thai company as a nominee for or on behalf of a foreigner, certain factors are generally considered, including: (i) the intention of the parties, (ii) the source of funds used for the investment by the Thai shareholder, (iii) the direct voting rights of the Thai and foreign shareholders in the Thai company and (iv) the distribution of dividends by the Thai company to the Thai and foreign shareholders.

Our Thai counsel, Baker & McKenzie Ltd. (Thailand), has opined that the ownership structure of our Thai subsidiaries is and will be in compliance with applicable Thai law based on, among others, the fact that a majority of the share capital of our Thai subsidiaries is held by Thai nationals or entities for their own benefit. We therefore, believe that our subsidiaries in Thailand are not “foreign entities” under the FBA, and that the share ownership structure of our subsidiaries in Thailand do not violate the legal prohibitions against nominee arrangements. Their opinion is filed as an exhibit to the registration statement of which this prospectus forms a part. However, there is a risk that the Ministry of Commerce of Thailand may reach a different conclusion, which could lead to an action being brought in the Thai court. If the court determines that a nominee arrangement exists with respect to any of our subsidiaries in Thailand, the court may order sanctions, which may include criminal

 

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sanctions, against us and the Thai shareholders of such subsidiary in Thailand, and such subsidiary may be ordered to cease operations in Thailand, which would have a material adverse effect on our business, financial condition and results of operations.

We may encounter problems relating to the businesses that we operate with minority shareholders.

We operate a number of our businesses through subsidiaries that are not wholly owned by us. Among others, we own, directly or indirectly, 86.73% of MOL Thailand; 50% of NganLuong, which conducts our operations in Vietnam; 54.2% of Rixty, which conducts our operations in the United States and Brazil; 65% of MOL Australia, which conducts our operations in Australia; 75% of MOL Taiwan, which conducts our operations in Taiwan and 51% of MOLPay Sdn. Bhd., which operates our e-commerce payments service, MOLPay. We also plan to acquire an initial 51% equity interest in a mobile carrier billing platform that currently operates in Turkey and the Middle East prior to completion of this offering. Following this initial acquisition, we plan to operate this business with minority shareholders until our acquisition of the remaining equity interest in two tranches, the last of which is planned to close in 2017. There can be no assurance that the initial and subsequent acquisitions will be completed within the expected timeframes or at all. To the extent there are disagreements between us and the other holders of equity interests in our subsidiaries regarding the business and operations of these companies, we cannot assure you that we will be able to resolve them in a manner that will be in our best interests. In addition, our partners in our subsidiaries may be unable or unwilling to fulfill their obligations, whether of a financial nature or otherwise; have economic or business interests or goals that are inconsistent with ours; take actions contrary to our instructions or requests, or contrary to our policies and objectives; take actions that are not acceptable to regulatory authorities; or experience financial difficulties. Any of the foregoing could have a material adverse effect on our business, prospects, financial condition and results of operations.

We may be subject to additional tax liabilities, which could materially and adversely affect our business, financial condition and results of operations.

The application, interpretation and enforcement of sales and use tax, value-added tax (VAT), goods and services tax (GST), business tax, gross receipt tax, and other taxes and related regulations applicable to e-commerce businesses and consumers are complex and evolving. Primarily because many of the laws and regulations relating to taxation were established prior to the widespread adoption of the internet and e-commerce, it is not always clear how these laws apply to businesses such as ours. In addition, as governments seek to increase tax revenue, certain jurisdictions in which we operate have considered tax reform, including proposals to increase taxes on e-commerce businesses and consumers. Furthermore, companies in the payment processing industry, including us, may become subject to taxation in various tax jurisdictions, some of which may not have adopted uniform positions on this topic. Any change to tax regulations relating to our business or our customers, and any change to the application, interpretation or enforcement of such regulations, could adversely impact our revenues or the cost of our products to our customers. Our competitive position may be adversely impacted if our business or customers are taxed differently from our competitors, whether due to the jurisdictions in which we or our competitors are organized, located or operating, or for any other reason. It is also possible that we could be found liable to pay taxes with respect to previous tax periods during which we are found to have been liable to collect and pay taxes and failed to do so. Furthermore, any requirement for us to calculate, collect or pay taxes that are levied on our business or our customers, and any resulting communication, review, audit or inspection, could consume financial resources and divert management attention from our core operations. In addition, certain policies that we develop and apply to our operations, including but not limited to transfer pricing policies, can impact our tax position and there can be no assurance that such policies and our application of such policies will not be challenged by the regulators. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.

We benefit from certain tax exemptions that will expire.

Several of our Malaysian subsidiaries have been granted Multimedia Super Corridor Malaysia, or MSC Malaysia, status by the Minister of Finance of Malaysia and the Minister of International Trade and Industry of

 

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Malaysia, and enjoy certain incentives, including “pioneer status,” which entitles a company to a five-year exemption from Malaysian income tax on income derived from MSC Malaysia-related activities, which is renewable for a second five-year term provided certain conditions are met. There can be no assurance that we will continue to benefit from these incentives or that these incentives will not be revoked or modified in any way in the future. While several of our Malaysian subsidiaries have only recently been granted or are in the process of applying for this exemption, MyCNX’s second five-year exemption will expire in 2017, and MyCNX will thereafter be subject to Malaysian income tax. MOLPay received approval for this status in 2014 and intends to make the required submission to activate such status.

Failure to continue to develop and expand our product and service offerings and their features, and to develop or incorporate the technologies that support them, could jeopardize our competitive position.

We participate in an industry characterized by rapidly changing technology and new products and services. For example, in recent years there has been an increasing emphasis on the delivery of games, music and other content on mobile devices, in addition to e-wallets and similar mobile electronic payment products and services. To remain competitive, we must continue to develop and expand our product and service offerings. We must also continue to enhance and improve the user interface, functionality and features of our websites. These efforts may require us to develop internally, or to license, increasingly complex technologies. In addition, our competitors may introduce new internet-related products, services and technologies, which will require us to update or modify our own technology to keep pace. Purchasing preferences for mobile airtime may change, which could reduce the demand for the airtime sold through our MOLReloads distribution network. In addition, a shift to post-paid mobile services in our key markets may negatively impact our MOLReloads business. Developing and integrating new products, services and technologies into our existing businesses could be expensive and time-consuming. Furthermore, we may not be able to license technology we require on commercially acceptable terms or at all. We may not succeed in incorporating new internet or mobile technologies, or, in order to do so, we may incur substantial expenses. If we fail to develop and introduce or acquire new content, features, services or technologies effectively and on a timely basis, we may cease to attract new consumers and merchants and may be unable to retain our existing consumers and merchants, any of which could adversely affect our business, financial condition and results of operations.

In addition, MMOG.asia expects to launch eight new online games in 2014, including its first game launch for the Indonesian market. MMOG.asia also plans to expand its mobile games offering with ten mobile games expected to be launched in 2014. If these new games or our entrance into new markets fail to gain market acceptance, our growth prospects could be materially and adversely affected.

We are subject to extensive government regulation, including regulations with respect to electronic payment services and data privacy.

Our business is impacted by laws and regulations that affect our industry, and their scope have increased significantly in recent years. We are subject to a variety of regulations aimed at preventing money laundering and financing criminal activity and terrorism, financial services regulations, electronic payment services regulations, consumer protection laws, currency control regulations, and privacy and data protection laws. Money laundering and the financing of terrorism are prohibited in Malaysia, which also has regulations requiring certain entities to report certain activities to BNM. MOL AccessPortal (as an issuer of e-money) and MOLPay Sdn. Bhd. (as a payment systems operator) are considered “reporting institutions” and are under an obligation to monitor and report suspicious transactions to BNM. They are also required to implement various measures such as know your customer procedures and ongoing customer due diligence to facilitate the prevention of money laundering and terrorism financing offences. In Malaysia, we are also subject to consumer protection laws which imply certain statutory guarantees as to the quality of services provided and prohibit misleading and deceptive trade practices and the imposition of unfair contract terms.

Furthermore, these laws and regulations vary significantly from country to country and are often evolving, unclear or inconsistent with other applicable laws. For example, in Malaysia we are subject to the Malaysian Financial Services Act of 2013 as a non-bank e-money issuer and provider of merchant acquiring services, which

 

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in turn makes us subject to a number of other regulations. In particular, MOL AccessPortal’s business as an e-money issuer is dependent on it maintaining its approval from BNM (which BNM has the right to reassess at any time). In Turkey, PaytoGo’s operations will subject us to the Payment Services and Electronic Money Institutions Law enacted on June 27, 2013 which remains subject to pending secondary legislation. As a result, PaytoGo will be required to obtain clearances from the Turkish Central Bank and Banking Regulations Supervisory Agency.

MOL AccessPortal distributes MOLPoints in several markets outside of Malaysia. We obtain licenses in jurisdictions where we believe they are required based on the nature of our business activity and the legal and regulatory requirements in such jurisdictions. It is possible, however, that the authorities in certain jurisdictions may take the position that we are required to obtain licenses or otherwise comply with laws and regulations which we believe are not required or applicable. As a result, we may be required to change the manner or business activity that we conduct in such markets, obtain licenses or otherwise comply with regulations. We may also be subject to penalties and sanctions for previously operating without a license. See “Regulation.”

In certain jurisdictions, governments have not yet issued relevant regulations or implementation guidelines to relevant regulations, but are expected to issue new regulations or implementation guidelines in the near future. The implementation of new regulations or guidelines could require us to change the way we conduct our business, incur new expenses or retain legal counsel or additional staff to ensure compliance with such regulations. Any of the foregoing could have a material and adverse effect on our results of operations and growth prospects. As we further expand internationally, the geographical scope and complexity of the regulation frameworks to which we are subject will increase.

In addition, we receive, store and process personal information and other data. The regulatory framework for privacy issues worldwide is currently in a state of flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the internet and mobile platforms have recently come under increased public scrutiny. Various government and consumer agencies have called for new regulation and changes in industry practices. It is possible that obligations imposed under applicable laws may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to our users or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of information or other data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause our users to lose trust in us, which could have an adverse effect on our business. Furthermore, if third parties with whom we work, such as individual users, distribution partners, content providers and online merchants, violate applicable laws or our policies, such violations may put information at risk and could have an adverse effect on our reputation and business.

We will need to obtain government approvals to implement our growth strategy.

Implementing our growth strategy may require approvals from governmental entities in Malaysia and other jurisdictions where we have operations. For example, as a result of regulatory restrictions in Malaysia and other countries relating to online payments, we are required to limit the balance of MOLPoints in a registered account. The applicable regulatory limit for accounts based in Malaysia, which is the lowest regulatory limit among countries where we operate, is MYR500. We apply this limit to accounts based in Malaysia and an equivalent limit to all other accounts. For accounts based in a country where we maintain a local presence other than Malaysia, the balance is not permitted to exceed the local currency equivalent of MYR500. For accounts based in countries where we do not maintain a local presence, transactions are denominated in U.S. dollars and the balance is not permitted to exceed the U.S. dollar equivalent of MYR500. For accounts based outside Malaysia, we adjust the balance limit whenever the exchange rate between the applicable currency and Malaysian Ringgit fluctuates by at least 5% since the most recent adjustment. In addition, as we launch our MOLWallet business, we will need to obtain approval from the relevant central banking authority in each country in which we intend to operate our MOLWallet business.

 

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Failure to attract and retain qualified personnel could jeopardize our competitive position.

Our business functions at the intersection of rapidly changing technological, social, economic and regulatory developments that require a wide ranging set of expertise and intellectual capital. In order for us to compete and grow successfully, we must attract, recruit, retain and develop the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. This is particularly true with respect to qualified and experienced software engineers and IT staff, who are highly sought after and are not in sufficient supply in Malaysia and in most other markets in which we operate. The market for such personnel is highly competitive, and we may not succeed in recruiting additional personnel or may fail to replace current personnel who depart with qualified or effective successors. It may also be difficult for us to obtain necessary qualified personnel with local experience to support our international growth, which may jeopardize our ongoing and planned expansion. For this reason, we are reliant on certain managers who have joined us through our acquisitions, including but not limited to certain managers of MOL Thailand and MyCNX. Our efforts to retain and develop personnel may result in significant additional expenses, which could adversely affect our profitability. Failure to retain or attract key personnel could have a material adverse effect on our business, financial condition and results of operations.

In addition, we place substantial reliance on the industry experience and knowledge of our senior management team as well as the senior management teams at our subsidiaries in our key operating countries and their relationships with other industry participants. Finding suitable replacements for our current senior management could be difficult as competition for such talent is intense. For example, Mr. Ganesh Kumar Bangah, our co-founder and Chief Executive Officer, is particularly important to our future success. In addition, historically, once we acquire a new subsidiary, we tend to retain the key personnel at such subsidiary, including, in a number of cases, the founder, and these personnel are especially important for our businesses in the relevant countries. We do not carry key person insurance on any member of our senior management team. The loss of one or more members of our senior management team could hinder our ability to effectively manage our business, adversely affect our international operations and harm our ability to implement our growth strategies.

Potential acquisitions may disrupt our ability to manage our business effectively, including our ability to successfully integrate acquired businesses into our existing operations.

We have in the past and expect to continue to engage in acquisitions and other inorganic growth opportunities, especially as we expand into new markets. Acquisitions and the subsequent integration of new companies or businesses require significant attention from our management, in particular to ensure that the acquisition does not disrupt any existing collaborations, or affect our users’, distribution channels’ and merchants’ opinions and perceptions of our services and customer support. As part of our strategy of expansion, we have in the past, and may, from time to time, acquire businesses or interests in businesses, including non-controlling interests, form joint ventures or create strategic alliances. For example, in 2013 we acquired 70% of each of Game Sultan, which operates a micropayment system for the Turkish market, and PaytoGo, which operates a payment service provider for the Turkish market, and AyoPay, an Indonesian payment service provider that specializes in online distribution of game credits. We acquired the remaining 30% equity interest in each of Game Sultan and PaytoGo in 2014. We also acquired 50% of NganLuong, which now serves as our primary distribution network in Vietnam. We expect to continue to evaluate potential strategic acquisitions of businesses or products with the intention to expand our user and revenue base, widen our geographic coverage and increase our product range. Whether we realize the anticipated benefits from these transactions depends, to a significant extent, on the integration of the target businesses into our group, the performance and development of the underlying services or technologies, our correct assessment of assumed liabilities and the management of the relevant operations. We may not be able to successfully integrate any newly acquired businesses or products and the integration may divert our management’s focus from our core business and result in disruption to our normal business operations. We may spend time and resources on such acquisitions that do not ultimately increase our profitability or that cause loss of, or harm to, relationships with employees, customers and users as a result of the integration of new businesses. The diversion of our management’s attention and any difficulties encountered in integration could have a material adverse effect on our ability to manage our business.

 

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We may require additional capital to meet our financial obligations and support business growth, including through acquisitions, and this capital might not be available on acceptable terms or at all.

We intend to continue to make significant investments, including potential acquisitions, to support our business growth and may require additional funds to respond to business challenges, including the need to develop new products or services, improve our operating infrastructure or acquire complementary businesses, personnel and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or securities convertible into, or exchangeable for, equity securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital (including by restricting the ability of our company, or our subsidiaries, to distribute dividends to our shareholders and our company, respectively) and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be materially and adversely affected.

We had negative working capital positions in the past and may be unable to generate sufficient revenue from operations to pay our operating expenses or execute our business plans.

We had a negative working capital position as at each of December 31, 2011, 2012 and 2013 and March 31, 2014. Working capital is defined as current assets minus current liabilities. Our working capital ratio, which is defined as current assets divided by current liabilities, as at December 31, 2011, 2012 and 2013 and March 31, 2014 was 85.2%, 78.2%, 62.0% and 67.0%, respectively. Borrowings under our credit facility from MDV are required by applicable accounting guidance to be classified as current liabilities because the facility is a revolving facility. Amounts due to other related parties are classified as current liabilities as of the relevant balance sheet dates because there are no stated repayment terms. We plan to repay a portion of the outstanding amount under our credit facility with MDV and our amounts due to our shareholder, MOL Ventures, using a portion of the proceeds of this offering. See “Use of Proceeds.”

We believe that we have adequate working capital for our present requirements and that our net cash generated from operating activities, together with cash and cash equivalents and funds from financing sources, will provide sufficient funds to satisfy our working capital requirements for the next 12 months. However, if our future cash from operating activities is lower than expected or we fail to obtain additional financing in the future, this would impede our ability to make continued investments, which could adversely affect our results of operations and financial condition.

Our business depends on the volume of MOLPoints used to purchase digital content, primarily game credits, which in turn is dependent on the popularity of the underlying games.

MOLPoints can be used to purchase digital content, including game credits for online games such as those licensed and operated by our games portal, MMOG.asia. For a game to remain popular, game operators must constantly enhance, expand or upgrade the games with new features that players find attractive. Game operators, including MMOG.asia, may not be able to successfully enhance, expand or upgrade current games. Any decrease in the popularity of MMOG.asia’s licensed games and any other games that accept MOLPoints, any breach of game-related security or prolonged server interruption, or any other adverse developments relating to such games, could materially and adversely affect our sales volume and results of operations. In addition, paying players purchase virtual goods in games because of the perceived value of these goods, which is dependent on the relative ease of securing equivalent goods via non-paid means within the game. The perceived value of these virtual goods can be impacted by an increase in the availability of free or discounted game credits or by various actions that content providers take in the games including offering discounts for virtual goods, giving away virtual goods in promotions or providing easier non-paid means to secure these goods. Our content providers’

 

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management or mismanagement of virtual economies could affect players’ interest in virtual goods and demand for MOLPoints. Any of the foregoing could adversely affect our business, financial condition and results of operations.

As a result of our rapid growth, we need to implement enhanced compliance processes, procedures and controls with respect to the rules and regulations that apply to our business.

Our business has grown rapidly in recent years and we need to realign our compliance function with the size of our business. In light of the fact that we are a regulated business that processes large volumes of payments and information, we need to implement enhanced processes, procedures and controls in order to provide reasonable assurance that we are operating in compliance with applicable regulatory requirements. In particular, applicable anti-money laundering laws and laws and regulations aimed at preventing terrorist financing contain numerous requirements with respect to the identification of clients, and documentation and reporting of transactions subject to mandatory control and other suspicious transactions to the relevant authorities.

While our administrative systems have developed rapidly, during our earlier history, our practices relating to intellectual property, data privacy and security, and legal compliance may not have been as robust as they are now, and there may be unasserted claims arising from this period that we are not able to anticipate. In addition, our business, including our ability to operate and expand internationally, could be adversely affected if laws or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices, the design of our websites, features or our privacy policy. In particular, the success of our business has been, and we expect will continue to be, driven by our ability to responsibly use the data that our users share with us. Therefore, our business could be harmed by any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of data our users choose to share with us, or regarding the manner in which the express or implied consent of users for such use and disclosure is obtained. Such changes may require us to modify our services and features, possibly in a material manner, which could have an adverse effect on our business and results of operations. In the area of information security and data protection, many jurisdictions have passed laws requiring notification to players when there is a security breach for personal data, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. The costs of compliance with these laws may increase in the future as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.

Following the offering, we will be subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment, and other laws concerning our international operations. Similar legislation in other jurisdictions contains similar prohibitions, although varying in both scope and jurisdiction. We do not have a fully developed FCPA compliance program and will need to implement such a program, including measures that require our merchants to comply with the FCPA.

We have neither an established operating history nor proven management experience in establishing and maintaining, over the long term, the required compliance processes, procedures and controls. Our business involves handling large and growing payment volumes and consumer funds, and our success is dependent on public confidence in our ability to do so as well as our compliance with applicable regulatory requirements. Any failure to manage consumer funds or to comply with applicable regulatory requirements could result in the imposition of fines, harm our reputation and significantly diminish use of our products.

Our business is exposed to counterparty and credit risks.

Under the terms of our service contracts with merchants, we are deemed to have received funds for the purposes of triggering our contractual obligation to transfer funds to a merchant at the time a consumer pays for its purchase using MOLPoints. Where a consumer has paid for the transaction using MOLPoints, even if we have not received any funds from the relevant sale of MOLPoints from the relevant distribution channel, we will be under a contractual obligation to transfer money to the merchant. Furthermore, when an online merchant uses

 

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MOLPay to process payment, MOLPay Sdn. Bhd. is technically the “acquirer” for regulatory purposes, which may subject us to liability.

In addition, we are subject to the credit risk of merchants being unable to satisfy obligations for which we also may be liable. For example, we may be liable for transactions that are disputed by customers and charged back to the merchant. If we have already paid the merchant but are unable to collect this charged back amount from the merchant, due to the merchant’s insolvency, bankruptcy or other reasons, we may bear the loss for the amount of the refund paid to the consumer. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Our agreements with third parties may be legally unenforceable if they are found to infringe applicable competition laws.

Our agreements with third parties, or certain provisions of such agreements, may be found to be unenforceable if they are found to infringe the competition laws of jurisdictions in which we operate. For example, we have entered into agreements in Malaysia and Turkey with third parties, including distribution partners, content providers and telecommunications service providers, that, among other things, include or may in the future include provisions that grant exclusivity privileges to, impose territorial restrictions on, and/or involve resale price maintenance by, one or more parties.

Under the Malaysian Competition Act of 2010, or the MCA, such provisions may be considered to be anti-competitive if they are found to significantly prevent, restrict or distort competition in any market for goods or services. For purposes of the MCA, an anti-competitive agreement will not be deemed significant if (i) the parties to the agreement are competitors and their combined market share is less than 20% of the relevant market; or (ii) the parties to the agreement are not competitors and their individual market share in any relevant market is not more than 25%. The MCA also prohibits enterprises from engaging in any conduct which amounts to an abuse of a dominant position in any market for goods or services. Generally, for purposes of the MCA, market share above 60% would be indicative (but not conclusive evidence) that an enterprise is dominant. If we are seen to be in a dominant position in the market, the provisions on exclusivity, territorial restrictions and/or resale price maintenance could potentially be seen to be an abuse of such dominant position. Some of our businesses may be regulated by the Malaysian Communications and Multimedia Act of 1998, or the CMA, in which case the competition-related provisions under the CMA (instead of the MCA) will apply to such businesses. The CMA prohibits a licensee from engaging in any conduct which has the purpose of substantially lessening competition in a communications market, or entering into any understanding, agreement or arrangement which provides for (i) rate fixing; (ii) market sharing (iii) boycotting of a supplier of apparatus; or (iv) boycotting of another competitor. Under Turkish competition rules, where there is an agreement involving an exclusive supply obligation, if the market shares of the parties to the agreement are below 40% in their own market of activity, then a safe harbour, or block exemption, is available, but otherwise a facts and circumstances analysis must be undertaken in order to determine whether an exemption must be sought from the Turkish Competition Board, or TCB. The TCB is the only decision making authority that can grant such exemptions. Similar rules apply for agreements involving territorial restrictions and non-compete obligations. Violation of such Turkish competition rules can result in fines of up to 10% of annual gross revenues.

However, because limited guidance, decisions and guidelines are available with respect to determination of the relevant market or the market shares for the industries in which we operate, it is unclear whether our agreements with third parties will be found to infringe applicable competition laws. If any such agreement is found to infringe such laws, the authorities may (i) require that the infringement be ceased immediately; (ii) specify steps which are required to be taken by the infringing enterprise(s) to bring the infringement to an end; (iii) impose financial penalties which could, for example, be 10% of the worldwide turnover of the relevant enterprise over the period during which an infringement occurred; or (iv) take any number of other actions, including imposing sanctions and penalties, as they deem appropriate.

There can be no assurance that our agreements will not be found to be unenforceable or to infringe relevant laws and regulations. Any such finding may have a material adverse effect on our business, prospects, financial condition and results of operations.

 

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Our business is highly dependent on relationships with mobile carriers and banks and we derive a portion of our revenue from aggregators and intermediaries.

Our top five mobile carriers account for nearly all of MOLReloads’ revenue. If our relationship with any of these mobile carriers was impaired, or if our revenue sharing arrangements were to become less favorable to us, our business would be adversely impacted. For example, in response to increased volume in 2012, telecommunications service providers in Malaysia imposed reduced discounts and commissions on our MOLReloads business. There can be no assurance that our revenue sharing arrangements will not be revised in manner that is unfavorable to us in Malaysia or any other market where we operate. In addition, in Malaysia, Alliance Bank Malaysia Berhad, or Alliance Bank, processes nearly all credit card payments that are made through MOLPay. If our relationship with Alliance Bank was impaired, or if our fee arrangements with Alliance Bank were to become less favorable to us, our business would be adversely impacted. Furthermore, we work with aggregators and intermediaries to enter into mobile carrier billing arrangements and online banking relationships, and to acquire mobile airtime for distribution through MOLReloads. In such cases, we do not have a direct relationship with the mobile carrier or the bank. If any of these aggregators or intermediaries was to choose not to work with us, or if our revenue sharing arrangements with them were to become less favorable to us, our business would be adversely impacted. Any of the foregoing would have an adverse effect on our financial condition and results of operations.

We may use open-source software in a manner that could be harmful to our business.

We use open-source software in connection with our technology and services. The original developers of the open-source code provide no warranties on such code. Moreover, some open-source software licenses require users like us who distribute open-source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open-source code on terms unfavorable to us or at no cost. The use of such open-source code may ultimately require us to replace certain code used in our products, pay a royalty to use some open-source code or discontinue certain products. Any of the above requirements could be harmful to our business, financial condition and results of operations.

We may not be able to successfully protect our intellectual property and may be subject to infringement claims.

We rely on a combination of contractual rights, copyright, trademark and trade secret laws to establish and protect our proprietary technology. We also maintain patents for certain of our technologies. We customarily require our employees and independent contractors to execute confidentiality agreements or otherwise to agree to keep our proprietary information confidential when their relationship with us begins. Typically, our employment contracts also include clauses requiring our employees to assign to us all of the inventions and intellectual property rights they develop in the course of their employment and to agree not to disclose our confidential information. Nevertheless, others, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property. Furthermore, contractual arrangements may not prevent unauthorized disclosure of our confidential information or ensure an adequate remedy in the event of any unauthorized disclosure of our confidential information. Because of the limited protection and enforcement of intellectual property rights in certain jurisdictions in which we operate, as well as in certain jurisdictions in which we have started expanding our operations, our intellectual property rights may not be as protected as they may be in more developed markets such as the United States. We may have to litigate to enforce or determine the scope or enforceability of our intellectual property rights (including trade secrets and know-how), which could be expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection could harm our business and ability to compete and could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm.

We may also be subject to costly litigation in the event our services or technology are claimed to infringe, misappropriate or otherwise violate a third party’s intellectual property or proprietary rights. Such claims could include patent infringement, copyright infringement, trademark infringement, trade secret misappropriation or breach of licenses. In addition, while we seek to obtain copyright registration certificates for the critical software

 

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we develop, our rights to software obtained as works for hire might be potentially challenged by the employees and former employees or developers of such software. We may not be able to successfully defend against such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and also might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our services. In such circumstances, if we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, in recent years, non-practicing entities have been acquiring patents, making claims of patent infringement and attempting to extract settlements from companies in our industry. Even if we believe that such claims are without merit and successfully defend these claims, defending against such claims is time-consuming and expensive and could result in the diversion of the time and attention of our management and employees.

We do not have, and may be unable to obtain, sufficient insurance to insure against certain business risks.

The insurance industry in certain jurisdictions where we operate is not yet fully developed, and many forms of insurance protection common in more developed countries are not yet fully available or are not available on comparable or commercially acceptable terms. We do not currently maintain insurance coverage for business interruption or loss of key management personnel as we have been unable to obtain these on commercially acceptable terms. We do not hold insurance policies to cover for any losses resulting from counterparty and credit risks and fraudulent transactions, nor for losses from cyber-attacks, software failures and data loss. Other than user funds which are required under law to be held in a separate trust account, we also do not generally maintain separate funds or otherwise set aside reserves for most types of business-related risks. Accordingly, our lack of insurance coverage or reserves with respect to business-related risks may expose us to substantial losses, which could materially adversely affect our business, financial condition and results of operations.

The successful operation of our business depends upon the performance and reliability of the internet infrastructure and telecommunications networks in the countries where we operate.

Our business depends on the performance and reliability of the internet infrastructure in the countries where we operate. We may not have access to alternative networks in the event of disruptions or failures of, or other problems with, the relevant internet infrastructure. In addition, the internet infrastructure, especially in the emerging markets where we operate, may not support the demands associated with continued growth in internet usage.

We also rely on major telecommunication operators in the countries where we operate to provide us with data communications capacity primarily through local telecommunications lines and internet data centers to host our servers. We may not have access to alternative services in the event of disruptions or failures of, or other problems with, the fixed telecommunications networks of these telecommunications operators, or if such operators otherwise fail to provide such services. Any unscheduled service interruption could disrupt our operations, damage our reputation and result in a decrease in our revenues. For example, in Vietnam in December 2013, piping used by our internet service provider experienced an outage and as a result our business in Vietnam was adversely affected for a two-week period. Furthermore, we have no control over the costs of the services provided by the telecommunications operators we use. If the prices that we pay for telecommunications and internet services rise significantly, our gross margins could be significantly reduced. In addition, if internet access fees or other charges to internet users increase, our user traffic may decrease, which in turn may cause our revenues to decline.

Fluctuations in foreign currency exchange rates will affect our financial results, which we report in Malaysian Ringgit.

As we have continued to expand our international operations, we have become more exposed to the effects of fluctuations in currency exchange rates. In addition to our operations in Malaysia from which we earn revenue denominated in Malaysian Ringgit, we also earn revenue denominated in Baht, Turkish Lira, Philippine Pesos and U.S. dollars, among other currencies. In 2013, 53.7% of our revenue was earned in currencies other than

 

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Malaysian Ringgit. We incur expenses for employee compensation and other operating expenses in the local currencies in the jurisdictions in which we operate. Fluctuations in the exchange rates between the Malaysian Ringgit and those other currencies could result in the Malaysian Ringgit equivalent of such expenses being higher and/or the Malaysian Ringgit equivalent of such foreign currency-denominated revenue being lower than would be the case if exchange rates were stable. There can be no assurance that movements in foreign currency exchange rates will not have a material adverse effect on our results of operations in future periods. We do not generally enter into hedging contracts to limit our exposure to fluctuations in the value of the Malaysian Ringgit, or any other currency. Furthermore, the substantial majority of our revenue is denominated in emerging markets currencies, including Malaysian Ringgit. In recent months, foreign currency exchange rates for emerging markets currencies have experienced substantial volatility. For example, in 2013 the exchange rate of U.S. dollars and Malaysian Ringgit varied from a high of 3.3330 to a low of 2.9620. Because fluctuations in the value of Malaysian Ringgit and other emerging markets currencies are not necessarily correlated, there can be no assurance that our results of operations will not be adversely affected by such volatility.

Our major shareholder will have the ability to significantly influence the outcome of shareholder actions in our company.

Upon completion of this offering, assuming the underwriters do not exercise their over-allotment option, our major shareholder and his family members will directly and indirectly hold         % of our ordinary shares and voting power. Our major shareholder has advised us that he does not anticipate further disposing of his voting control in us in the near future. Our major shareholder’s voting power gives him the ability to significantly influence actions that require shareholder approval under Cayman Islands law, our memorandum and articles of association and NASDAQ requirements, including the election and removal of a majority of our board of directors, significant mergers and acquisitions and other business combinations, changes to our memorandum and articles of association, the number of shares available for issuance under share incentive plans, and the issuance of significant amounts of our ordinary shares in private placements.

Our major shareholder’s voting control may cause transactions to occur that might not be beneficial to you as a holder of ADSs, and may prevent transactions that would be beneficial to you. For example, our major shareholder’s voting control may prevent a transaction involving a change of control of us, including transactions in which you as a holder of the ADSs might otherwise receive a premium for your securities over the then-current market price. In addition, our major shareholder is not prohibited from selling a controlling interest in us to a third party and may do so without your approval and without providing for a purchase of your ADSs.

We are subject to economic risk and business cycles of our merchants and the overall level of consumer spending.

Our business depends heavily on the overall level of consumer spending, particularly in our primary markets in Southeast Asia and other emerging markets. We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income or changes in consumer purchasing habits. A reduction in the amount of consumer spending could result in a decrease in our revenue and profits. If our merchants make fewer sales of their products and services using our services or consumers spend less money per transaction, we will have fewer transactions to process at lower amounts, resulting in lower revenue. A weakening in the economies in which we operate could have a negative impact on our merchants, as well as consumers who purchase products and services using our payment processing systems, which could, in turn, negatively impact our business, financial condition and results of operations. In addition, a weakening in such economies could force some of our merchants to close or go bankrupt or insolvent, or could cause our merchants to reduce the number of their locations or hours of operation, resulting in future transaction declines. We also have a certain amount of fixed costs, including salaries and rent, which could limit our ability to adjust costs and respond quickly to changes in our business and the economies in which we operate. Changes in economic conditions could adversely impact our future revenues and profits and cause a material adverse effect on our business, financial condition and results of operations.

 

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Our results of operations may fluctuate or otherwise be materially and adversely affected due to seasonal variations.

Our sales have historically been higher during festive periods, as our business tends to benefit from consumers’ increased leisure time. Such periods include Chinese New Year, which generally occurs in January or February, Ramadan, which occurred in the third quarter in each of 2011, 2012 and 2013, and the December holiday season. Our sales tend to be highest during the first and fourth quarters, while our sales for the second half of the year tend to exceed our sales for the first half of the year.

We rely on various financial institutions to provide clearing and settlement services in connection with our online payment services.

We rely on various financial institutions to provide clearing and settlement services in connection with our online payment services. If such financial institutions stop providing clearing and settlement services or start imposing excessive processing fees, we would need to find other financial institutions to provide these services. In addition, some of these financial institutions have divisions that provide payment options to consumers that could compete with our services. If we are unable to find a replacement financial institution to provide clearing and settlement services on commercially reasonable terms or at all, we may no longer be able to provide our online payment services to certain customers, which could negatively impact our business, financial condition and results of operations. For example, in Malaysia, Alliance Bank processes nearly all credit card payments that are made through MOLPay. If our relationship with Alliance Bank was impaired, or if our fee arrangements with Alliance Bank were to become less favorable to us, our business would be adversely impacted.

From time to time, credit card merchant acquirers and banks increase the organization and processing fees (known as interchange fees or debit network fees) that they charge. We may not be able to pass on all of the increases in interchange fees or debit network fees along to our online merchants, if at all. It is possible that competitive pressures may result in our absorbing a portion of such increases in the future, which would increase our operating costs and reduce our profit margin. Furthermore, we rely on Visa and MasterCard to process most of our credit card transactions and we may be subject to penalties if we do not comply with their rules and procedures, or applicable laws and regulations. Any of the foregoing could adversely affect our reputation, business, financial condition and results of operations.

If we cannot pass increases from payment networks including interchange, assessment, transaction and other fees, and distribution costs, along to online merchants, our operating margins will be reduced.

We pay interchange and other fees set by payment networks to card-issuing financial institutions and payment networks for each transaction we process. From time to time, payment networks increase such fees. At their sole discretion, our financial institution sponsors have the right to pass any increases in interchange and other fees on to us and they have consistently done so in the past. We are generally permitted under the contracts into which we enter, and in the past we have been able to, pass these fee increases along to our online merchants through corresponding increases in our processing fees. However, if we are unable to pass on these and other fees, and distribution costs, in the future, it could have a material adverse effect on our business, financial condition and results of operations.

The unaudited pro forma condensed consolidated financial information included in this prospectus may not be representative of our past or future results.

The unaudited pro forma condensed consolidated financial information as of and for the year ended December 31, 2013 and as of and for the three months ended March 31, 2014 included in this prospectus are derived from the historical financial statements of the Issuer, MOL Thailand and MyCNX. This unaudited pro forma condensed consolidated financial information has been prepared to illustrate the effects of our acquisition of the remaining approximately 20% interest in MyCNX on May 30, 2014, which was prior thereto approximately 80% owned by us and is now wholly owned by us, and the acquisition of an indirect additional 37.73% interest in MOL Thailand, which was 49% owned by us prior to such acquisition, each as if they had

 

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been consummated on January 1, 2013. These transactions are further described under “Corporate History and Structure—Corporate Restructuring and Other Transactions.”

Neither the underlying pro forma adjustments nor the resulting pro forma financial information has been audited in compliance with AICPA’s guidelines as set forth in the Statement on Standards for Attestation Engagements; Reporting on Pro Forma Financial Information (as adopted by the PCAOB pursuant to Rule 3300T as Interim Attestation Standards). While the historical consolidated financial statements of the Issuer as of and for the year ended December 31, 2013 is derived from audited consolidated financial statements of the Company included elsewhere in the prospectus, the historical financial information of MOL Thailand and MyCNX as of and for the year ended December 31, 2013 from which the unaudited pro forma condensed consolidated financial information is derived are not audited. The historical condensed consolidated financial statements of the Issuer, MOL Thailand and MyCNX as of and for the period ended March 31, 2014 from which the unaudited pro forma condensed consolidated financial information as of and for the period ended March 31, 2014 is derived are not audited.

The unaudited pro forma condensed consolidated financial information is based in part on certain assumptions. Accordingly, the unaudited pro forma condensed consolidated financial information included in this prospectus is not necessarily indicative of the results or financial position that we would have achieved had we actually completed these transactions on January 1, 2013 and should not be relied upon to project the results of operations or financial position for any future date or period.

Any natural or other disasters, including outbreaks of health epidemics, and other extraordinary events could severely disrupt our business operations.

Our operations are vulnerable to interruption and damage from natural and other types of disasters, including earthquakes, fire, floods, environmental accidents, power loss, communication failures and similar events. If any natural disaster or other extraordinary events were to occur in the area where we operate, our ability to operate our business could be seriously impaired. Our business could be materially and adversely affected by any outbreak of H7N9 bird flu, H1N1 swine influenza, avian influenza, severe acute respiratory syndrome, or SARS, or another epidemic. Any prolonged occurrence of swine influenza, avian influenza, SARS or other adverse public health developments in Southeast Asia could severely disrupt our business operations and adversely affect our results of operations.

Risks Related to Doing Business in Malaysia and Other Countries Where We Operate

Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.

Our business, prospects, financial condition and results of operations may be adversely affected by social, political, regulatory and economic developments in Malaysia. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods of taxation.

Negative developments in Malaysia’s socio-political environment may adversely affect our business, financial condition, results of operations and prospects. The Malaysian economy registered growth of 4.7% in 2013, according to the Department of Statistics Malaysia. Although the overall Malaysian economic environment (in which we predominantly operate) appears to be positive, there can be no assurance that this will continue to prevail in the future.

Economic, market and political developments in the countries where we operate could have a material and adverse effect on our business.

The economic, market and political conditions in other countries, particularly emerging market conditions in Southeast Asia, Turkey and Brazil, could have an influence on our business. Any widespread global financial instability or a significant loss of investor confidence in emerging market economies may materially and adversely affect our business, financial condition, results of operations, prospects or reputation.

 

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Examples of such external factors or conditions that are outside our control include, but are not limited to the following:

 

   

general economic, political and social conditions in Southeast Asian countries and other key foreign markets;

 

   

consumer spending patterns in our key markets;

 

   

currency and interest rate fluctuations;

 

   

international events and circumstances such as wars, terrorist attacks, natural disasters and political instability; and

 

   

changes in legal regimes and governmental regulations, such as licensing and approvals, taxation, duties and tariffs, in key markets and abroad.

The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and the global economy has continued to face new challenges. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States. For example, in 2013, the Federal Reserve Bank in the United States announced the tapering of its bond-buying program which led to a high degree of volatility in equity markets and substantial devaluations in the currencies of many emerging economies, including markets where we operate. There have also been concerns over unrest in the Middle East and Africa and over the possibility of international hostilities over Ukraine, which have resulted in volatility in oil prices and other markets. Recently there have been concerns over instability in Thailand due to significant anti-government protests which have been ongoing since 2013 and have resulted in the imposition of martial law and a change in government. There have also been a number of major anti-government protests in Turkey in late 2013 and early 2014. Economic conditions in the countries where we operate are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in emerging markets.

The Malaysian Ringgit is subject to exchange rate fluctuations.

BNM has, in the past, intervened in the foreign exchange market to stabilize the Malaysian Ringgit, and instituted a fixed exchange rate of MYR3.80 to $1.00 on September 2, 1998. Subsequently, on July 21, 2005, BNM adopted a managed float system which benchmarked the Malaysian Ringgit to a currency basket to ensure that the Malaysian Ringgit remains close to its fair value. As of March 31, 2014, the closing exchange rate was MYR3.2630 to $1.00. However, there can be no assurance that BNM will, or would be able to, intervene in the foreign exchange market in the future or that any such intervention or fixed exchange rate would be effective in achieving BNM’s objectives. Fluctuations in the Malaysian Ringgit’s value against other currencies will create foreign currency translation gains or losses and may have an adverse effect on our business, financial condition and results of operations.

We are subject to communication and multimedia regulations.

Our business depends on the performance and availability of our online platforms and services which are governed in Malaysia by various multimedia and communication regulations, guidelines, ministerial directions and other standards arising from the CMA, and the Malaysian Communications and Multimedia Commission. MOL AccessPortal has registered for, and obtained, an applications service provider, or ASP, class license to provide messaging services. The ASP class license requires annual renewal and the application is currently an administrative one but there can be no assurance that this will remain the case. We cannot guarantee that other services provided by MOL AccessPortal, or our other Malaysian companies, that are currently exempt from licensing requirements or which do not currently require licensing may require licensing in the future. The implementation of new regulations or guidelines could require us to change the way we conduct our online business or the licenses that we require, incur new expenses or retain legal counsel or additional staff to ensure

 

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compliance with such regulations. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We are subject to foreign exchange control policies in Malaysia and other countries where we operate.

The ability of our subsidiaries to pay dividends or make other payments to us may be restricted by the foreign exchange control policies in the countries where we operate.

For example, there are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered by the Foreign Exchange Administration, an arm of BNM. The foreign exchange policies monitor and regulate both residents and non-residents. Under the current Foreign Exchange Administration rules issued by BNM, non-residents are free to repatriate any amount of funds from Malaysia in foreign currency other than the currency of Israel at any time (subject to limited exceptions), including capital, divestment proceeds, profits, dividends, rental, fees and interest arising from investment in Malaysia, subject to any withholding tax. In the event BNM or any other country where we operate introduces any restrictions in the future, we may be affected in our ability to repatriate dividends or other payments from our subsidiaries in Malaysia or in such other countries. Since we are a holding company and rely principally on dividends and other payments from our subsidiaries for our cash requirements, any restrictions on such dividends or other payments could materially and adversely affect our liquidity, financial condition and results of operations.

The exchange control law in Thailand provides that the outward remittance from Thailand of dividends or the proceeds of sale (including capital gain) from the transfer of shares after payment of the applicable Thai taxes, if any, may be made without the requirement to file a specified form to the relevant financial institution if the amount is less than $50,000 or the equivalent amount in relevant currency per remittance, provided that required documents and evidence of the particular transaction have been duly submitted to the relevant financial institution. Because the Bank of Thailand has a policy to not allow any person to bring Baht out of Thailand, with certain exemptions, dividends paid to a non-resident must be converted into foreign currency prior to the outward remittance from Thailand. If the amount is at least $50,000 or its equivalent in the relevant currency, a specified form must be submitted to the relevant financial institution together with required documents or evidence of the particular transaction.

Turkey does not have foreign exchange control restrictions. Pursuant to Decree N.32 on Protection of Turkish Currency, importation of foreign currency to Turkey is free and residents in Turkey are allowed to accept payment in foreign currency from non-residents for the transactions that they conduct in Turkey in favor of such non-residents. Residents in Turkey and non-residents may freely transfer foreign currency abroad provided that they use banks as intermediaries and relevant reporting requirements are complied with. The Turkish Ministry of Finance is authorized to determine other establishments that are allowed to transfer foreign currency abroad. Our presence in Northern Cyprus, which is not an internationally recognized state, may place us at a disadvantage in transferring funds out of the country and where Turkey is used as intermediary, additional taxes may be levied.

Furthermore, dividends from certain subsidiaries, including our subsidiaries in Thailand, Turkey and the Philippines, may be subject to local withholding tax.

Risks Related to this Offering and the ADSs

An active trading market for our shares or the ADSs may not develop and the trading price for the ADSs may fluctuate significantly.

We have applied to list the ADSs on the NASDAQ. Prior to the completion of this offering, there has been no public market for the ADSs or our ordinary shares underlying the ADSs, and we cannot assure you that a liquid public market for the ADSs will develop. If an active public market for the ADSs does not develop following the completion of this offering, the market price and liquidity of the ADSs may be materially and adversely affected. Even if an active public market for our ordinary shares or the ADSs develops, we cannot assure you that it will continue. The initial public offering price for the ADSs will be determined by negotiation between us and the underwriters based upon several factors, and we can provide no assurance that the trading

 

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price of the ADSs after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs.

The trading prices of the ADSs are likely to be volatile, which could result in substantial losses to investors.

The trading prices of the ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other similarly situated companies that have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of these companies’ securities after their offerings, including companies in the internet, online payment and online and mobile gaming industries, may affect the attitudes of investors toward such companies listed in the United States, which consequently may impact the trading performance of the ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting or other practices at other Malaysian or Southeast Asian companies may also negatively affect the attitudes of investors towards Malaysian or Southeast Asian companies in general, including us, regardless of whether we have engaged in such practices. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as the large decline in share prices in the United States and other jurisdictions in late 2008, early 2009, the third quarter of 2011 and the second quarter of 2012, which may have a material adverse effect on the market price of the ADSs.

In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following:

 

   

variations in our revenue, earnings and cash flow;

 

   

announcements of new investments, acquisitions, strategic partnerships, or joint ventures;

 

   

announcements of new services and expansions by us or our competitors;

 

   

changes in financial estimates by securities analysts;

 

   

changes in the number of our users;

 

   

fluctuations in our operating metrics;

 

   

failure on our part to realize monetization opportunities as expected;

 

   

additions or departures of key personnel;

 

   

release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

 

   

detrimental negative publicity about us, our competitors or our industry;

 

   

regulatory developments affecting us or our industry; and

 

   

potential litigation or regulatory investigations.

Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

 

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We intend to grant employee share options and other share-based awards in the future. We will recognize any share-based compensation expenses in our consolidated statements of profit or loss and other comprehensive income in accordance with IFRS. Any additional grant of employee share options and other share-based awards in the future may have a material adverse effect on our results of operation.

We intend to adopt an employee stock option plan in 2014, or the 2014 plan, for the purpose of granting share-based compensation awards, in an aggregate amount of up to 10% of our issued and outstanding ordinary shares following this offering, to our employees, directors and consultants to incentivize their performance and align their interests with ours. Under the 2014 plan, we expect to be permitted to issue options to purchase up to ordinary shares. As of the date of this prospectus, options to purchase              ordinary shares are issued and outstanding, options to purchase              ordinary shares have been exercised for which we will issue              ordinary shares to the option holders after the expiration of the 180-day lock-up period, and              ordinary shares have been issued upon exercised vested options under the 2014 plan. As a result of these grants and potential future grants, we expect to continue to incur significant share-based compensation expenses in the future. The amount of these expenses is based on the fair value of the share-based awards. We account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statements of profit or loss and other comprehensive income in accordance with IFRS. The expenses associated with share-based compensation will decrease our profitability, perhaps materially, and the additional securities issued under share-based compensation plans will dilute the ownership interests of our shareholders, including holders of the ADSs. However, if we limit the scope of our share-based compensation plan, we may not be able to attract or retain key personnel who expect to be compensated by options.

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company. We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

 

   

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

 

   

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

 

   

the selective disclosure rules by issuers of material non-public information under Regulation FD.

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NASDAQ. Press releases relating to financial results and material events will also be

 

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furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely as compared to that required to be filed with the SEC by United States domestic issuers.

As a Cayman Islands company listed on the NASDAQ, we are subject to the NASDAQ corporate governance listing standards. However, NASDAQ rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NASDAQ corporate governance listing standards. Under the NASDAQ corporate governance listing standards, listed companies are generally required to have a majority of independent directors, in addition to a nominating/corporate governance committee and a compensation committee, each of which is composed entirely of independent directors. However, corporate governance requirements in the Cayman Islands do not require us to have a majority of independent directors, a nominating/corporate governance committee nor a compensation committee. Immediately following the offering we will not have a majority of independent directors and our nominating/corporate governance committee and our compensation committee will include a majority of independent directors but will not be entirely independent. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a United States domestic issuer.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline.

The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.

The sale or availability for sale, or perceived sale or availability for sale, of substantial amounts of the ADSs could adversely affect their market price.

Sales of substantial amounts of the ADSs in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. There will be             ADSs (equivalent to ordinary shares) outstanding immediately after this offering, or             ADSs (equivalent to             ordinary shares) if the underwriters exercise their options to purchase additional ADSs in full. The ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. In connection with this offering, we and our officers, directors and the selling shareholders have agreed not to sell any shares or ADSs for 180 days after the date of this prospectus without the prior written consent of the underwriters. However, the underwriters may release the securities subject to lock-up agreements from the lock-up restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. In addition, ordinary shares subject to our outstanding options as of the closing of this offering will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. We may also issue additional options in the future which may be exercised for additional ordinary shares. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

 

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Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

If you invest in the ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. After giving effect to (i) the issuance of 543,267 ordinary shares to entities controlled by certain beneficial owners of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions” and (ii) the issuance and sale of              ADSs in this offering at an assumed initial public offering price of $             per ADS, being the midpoint of the estimated public offering price range set forth on the cover of this prospectus, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised), new investors in ADSs in this offering would be diluted by $            , or        %. This number is determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds we will receive from this offering, from the assumed initial public offering price of $             per ordinary share, which is the mid-point of the price range set forth on the cover page of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. See “Dilution” for a more complete description of how the value of your investment in the ADSs will be diluted upon the completion of this offering.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are registered under Cayman Islands law.

We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law (2013 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our existing articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Certain corporate governance practices in the Cayman Islands differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. Currently, we do not plan to rely on home country practice with respect to any corporate governance matter. However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or major shareholders than they

 

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would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Law of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital—Differences in Corporate Law.”

Judgments obtained against us by our shareholders may not be enforceable in our home jurisdiction.

We are a Cayman Islands company and a substantial majority of our assets are located outside of the United States. A significant percentage of our current operations are conducted in Malaysia and other Southeast Asian countries. In addition, a significant majority of our current directors and officers are nationals and residents of countries other than the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, Malaysia and other jurisdictions where we operate may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

There are uncertainties as to whether Cayman Islands courts would:

 

   

recognize or enforce against us, judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and

 

   

impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. For more information regarding the relevant laws of the Cayman Islands and Malaysia, see “Enforceability of Civil Liabilities.”

We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree and such use may not produce income or increase the ADS price.

We have not determined a specific use for a portion of the net proceeds of this offering, and our management will have considerable discretion in deciding how to apply these proceeds. You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you that the net proceeds will be used in a manner that would improve our results of operations or increase the ADS price, or that these net proceeds will be placed only in investments that generate income or appreciate in value.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your ordinary shares.

As a holder of ADSs, you will only be able to exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will endeavor to vote the underlying ordinary shares in accordance with these instructions. You will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. Under our amended and restated memorandum and articles of association which is currently in effect, the minimum notice period required for convening a general meeting is 7 days. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and

 

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its merchants are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.

The depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not give voting instructions, except in limited circumstances, which could adversely affect your interests.

Under the deposit agreement for the ADSs, if we timely ask for voting instructions but the depositary does not receive your instructions by the date it sets, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders’ meetings unless:

 

   

we have failed to timely provide the depositary with notice of meeting and related voting materials;

 

   

we have instructed the depositary that we do not wish a discretionary proxy to be given;

 

   

we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or

 

   

a matter to be voted on at the meeting would have a material adverse impact on shareholders.

The effect of this discretionary proxy is that if you do not give voting instructions, you cannot prevent our ordinary shares underlying your ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of the ADSs for return on your investment.

We do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income.

Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.

You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

To the extent that we decide to pay a dividend or make other distributions in the future, the depositary has agreed to pay to you such cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary

 

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shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.

You may not be able to participate in rights offerings and may experience dilution of your holdings.

We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays in the United States. The depositary may refuse to deliver, transfer or register the transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary think that it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement. As a result, you may be unable to transfer your ADSs when you wish to.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an emerging growth company.

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, and NASDAQ, impose various requirements on the corporate governance practices of public companies. As a company with less than $1.0 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

 

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We may be a passive foreign investment company for United States federal income tax purposes, which could result in adverse United States federal income tax consequences to United States investors in the ADSs or ordinary shares.

Our status as a passive foreign investment company, or PFIC, for any taxable year will depend on the composition of our income and assets and upon the value of our assets, which may be determined based, in part, on the market value of the ADSs and the nature of our assets and income over time. Based on our current and expected income and asset composition and projections as to the value of our assets, which are based on the expected price of the ADSs pursuant to this offering, we do not expect to be a PFIC for the current taxable year or in the foreseeable future. While we do not anticipate becoming a PFIC, fluctuations in the market price of the ADSs (which may be volatile) may cause us to become a PFIC for the current or subsequent taxable years. Because of the uncertainties in the application of the relevant rules and because PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our income and the value of our active versus passive assets for that year, there can be no assurance that we will not be a PFIC for the current or any future taxable year. The overall level of our passive assets will be affected by how, and how quickly, we spend our liquid assets and the cash raised in this offering. Under circumstances where gross income from activities that produce passive income significantly increase relative to our gross income from activities that produce non-passive income or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase.

If we were to be or become a PFIC, a U.S. Holder (as defined in “Taxation—United States Federal Income Tax Considerations—General”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules. Further, if we are a PFIC for any year during which a U.S. Holder holds the ADSs or ordinary shares, we generally will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding years during which such U.S. Holder holds the ADSs or our ordinary shares. You are urged to consult your tax advisor concerning the United States federal income tax consequences of acquiring, holding, and disposing of ADSs or ordinary shares if we are or become a PFIC. For more information see “Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations” and “—Passive Foreign Investment Company Rules.”

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

In some cases, you can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

 

   

our anticipated growth strategies;

 

   

our future business development, results of operations and financial conditions;

 

   

expected changes in our revenues and certain cost or expense items;

 

   

our ability to attract customers and further enhance our brand recognition; and

 

   

trends and competition in the industries in which we operate; and general economic and business conditions in the regions where we provide our solutions and services.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Prospectus Summary—Our Challenges,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulation” and other sections in this prospectus. You should thoroughly read this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. Our industries may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of the ADSs. In addition, the rapidly changing nature of the industries in which we operate results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $            , or approximately $            if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of $            per ADS, the midpoint of the price range shown on the front cover page of this prospectus. A $1.00 increase (or decrease) in the assumed initial public offering price of $            per ADS would increase (or decrease) the net proceeds to us from this offering by $            , assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders, retain talented employees by providing them with equity incentives, and obtain additional capital. We plan to use the net proceeds of this offering as follows:

 

   

approximately $30 million to repay (i) an aggregate of approximately MYR29.3 million of interest-free advances from MOL Ventures, which were advanced in connection with our acquisitions of Game Sultan, PaytoGo, NganLuong, Rixty, Uniwiz and Zest; and (ii) approximately MYR             million of the MYR68 million outstanding as of March 31, 2014 under our revolving credit facility from MDV, which was incurred in connection with the expansion of our business in Malaysia, incurs interest at the rate of 7.25% per annum and is due in December 2015;

 

   

approximately $25 million to increase our beneficial ownership in our subsidiaries, MOL Thailand, Game Sultan, PaytoGo and MyCNX, as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions;” and

 

   

the balance for general corporate purposes, including funding potential acquisitions of complementary businesses and funding our ongoing working capital requirements.

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See “Risk Factors—Risks Related to this Offering and the ADSs.” You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase the ADS price.

Pending any use described above, we plan to invest the net proceeds in short-term, interest-bearing, debt instruments or demand deposits.

We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.

 

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DIVIDEND POLICY

Our board of directors has complete discretion on whether to distribute dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future after this offering.

We are an exempted company incorporated in the Cayman Islands with limited liability. We are a holding company and all of our operations are conducted through MOL AccessPortal, a company incorporated under the laws of Malaysia. We rely principally on dividends from our subsidiaries in Malaysia and other countries for our cash requirements, including any payment of dividends to our shareholders. Local regulations and contractual restrictions may restrict the ability of our subsidiaries to pay dividends to us.

The principal legislation governing the distribution of dividends of a Malaysian company is the Malaysian Companies Act 1965, or the CA. Under the CA, a Malaysian company is only permitted to pay dividends out of:

 

   

profits, if any, determined in accordance with Malaysian accounting standards and regulations; or

 

   

the share premium account, if any, if such dividends are satisfied by the issue of shares to members of the company.

If we pay any dividends, ADS holders will receive payment to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

 

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CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2014:

 

   

on an actual basis;

 

   

on a pro-forma basis to reflect the issuance of 543,267 ordinary shares to entities controlled by certain beneficial owners of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners, as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions;” and

 

   

on a pro-forma as adjusted basis to reflect (i) the issuance of 543,267 ordinary shares to entities controlled by certain shareholders of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners, as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions;” (ii) the issuance and sale of              ADSs in this offering at an assumed initial public offering price of $             per ADS, being the midpoint of the estimated public offering price range set forth on the cover of this prospectus, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised); and (iii) the application of a portion of the net proceeds of the offering to be received by us, to repay an aggregate of MYR29.3 million of interest-free advances from MOL Ventures and MYR             million under our revolving credit facility from MDV, and the payment of approximately THB240 million (MYR24.2 million) to entities controlled by certain shareholders of MOL Thailand, approximately MYR10.0 million to the minority shareholder of MyCNX and $14.8 million (MYR48.3 million) to the minority shareholders of Game Sultan and PaytoGo.

You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

     As of March 31, 2014
     Actual      Pro forma    Pro forma as adjusted
     MYR
(in millions)
     $
(in millions)
     MYR
(in millions)
   $
(in millions)
   MYR
(in millions)
   $
(in millions)

Total borrowings, including current portion(1)(2)

     73.6         22.6               

Equity:

                 

Share capital, $1.00 par value: 1,000,000,000 ordinary shares authorized,              ordinary shares issued and outstanding, actual; shares authorized,             shares issued and outstanding, as adjusted

     9.8         3.0               

Non-distributable reserves

     0.0         0.0               

Retained earnings

     31.8         9.7               

Non-controlling interests

     32.2         9.9               
  

 

 

    

 

 

    

 

  

 

  

 

  

 

Total equity

     73.8         22.6               
  

 

 

    

 

 

    

 

  

 

  

 

  

 

Total capitalization(3)

     147.4         45.2               
  

 

 

    

 

 

    

 

  

 

  

 

  

 

 

(1) Total borrowings included term loans and finance lease payables.

 

(2) All of our borrowings as of March 31, 2014, were guaranteed by related parties and secured.

 

(3) Total capitalization included total borrowings and total equity.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents and short-term investments, additional paid-in capital, total

 

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equity and total capitalization by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of one million shares in the number of shares offered by us would increase (decrease) each of additional paid-in capital, total equity and total capitalization by approximately $            , assuming that the assumed initial offering price remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The adjusted information discussed above is illustrative only and will adjust based on the actual initial offering price and other terms of this offering determined at pricing.

The following table sets forth our pro forma earnings per share for the year ended December 31, 2013 and the three months ended March 31, 2014 after giving effect to (i) the issuance of              shares in this offering, (ii) the issuance of 543,267 ordinary shares to entities controlled by certain shareholders of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners, as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions;” (iii) the issuance and sale of ADSs in this offering at an assumed initial public offering price of $ per ADS, being the midpoint of the estimated public offering price range set forth on the cover of this prospectus, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised); and (iv) the application of a portion of the net proceeds of the offering to be received by us, to repay an aggregate of MYR29.3 million of interest-free advances from MOL Ventures and MYR million under our revolving credit facility from MDV, and the payment of approximately THB240 million (MYR24.2 million) to entities controlled by certain shareholders of MOL Thailand, approximately MYR10.0 million to the minority shareholder of MyCNX and $14.8 million (MYR48.3 million) to the minority shareholders of Game Sultan and PaytoGo.

 

Pro forma earnings per share

   For the year ended
December 31, 2013
   For the three
months ended
March 31,
2014

Basic (sen)(1)

     

Diluted (sen)(1)

     

 

Note:

 

(1) Sen is a unit of Malaysian currency. One hundred sen equal one Malaysian Ringgit.

 

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DILUTION

If you invest in the ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the net tangible book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

Our net tangible book value as of March 31, 2014 was approximately MYR             ($            ) or MYR             ($            ) per ordinary share as of that date. Net tangible book value as of a date represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities, divided by the total number of ordinary shares outstanding as of such date. Dilution is determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds we will receive from this offering, from the assumed initial public offering price of $             per ordinary share, which is the mid-point of the price range set forth on the cover page of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

After giving effect to the issuance of 543,267 ordinary shares to entities controlled by certain shareholders of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners, as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions,” our pro forma net tangible book value would have been MYR million ($            ), or MYR ($            ) per ordinary share and MYR ($            ) per ADS, in each case as of March 31, 2014.

After giving effect to (i) the issuance of 543,267 ordinary shares to entities controlled by certain shareholders of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners, as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions”, and (ii) the issuance and sale of ADSs in this offering at an assumed initial public offering price of $             per ADS, being the midpoint of the estimated public offering price range set forth on the cover of this prospectus, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised), our pro forma net tangible book value would have been MYR             million ($            ), or MYR             ($            ) per ordinary share and MYR             ($            ) per ADS, in each case as of March 31, 2014. This represents an immediate increase in pro forma net tangible book value of MYR             ($            ) per ordinary share to our existing investors and an immediate dilution in pro forma net tangible book value of MYR             ($            ) per ordinary share and MYR             ($            ) per ADS to new Investors. The following table illustrates this dilution.

 

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Dilution

 

     Per Ordinary Share      Per ADS  

Assumed initial public offering price

   US$                  MYR               US$                  MYR           

Net tangible book value as of March 31, 2014

   US$           MYR               US$           MYR           

Pro forma net tangible book value after giving effect to the issuance of 543,267 ordinary shares, to the minority shareholders of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions”

  

US$

 

  

  

 

MYR        

  

  

US$

 

  

  

 

MYR        

  

Pro forma as adjusted net tangible book value after giving effect to (i) the issuance of 543,267 ordinary shares, to the minority shareholders of MOL Thailand, 513,468 ordinary shares to the minority shareholder of MyCNX and 65,349 ordinary shares to Javelin Venture Partners as described under “Corporate History and Structure—Corporate Restructuring and Other Transactions” and (ii) the issuance and sale of ADSs in this offering at an assumed initial public offering price of $             per ADS, being the midpoint of the estimated public offering price range set forth on the cover of this prospectus, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the over-allotment option is not exercised)

   US$        

 

MYR        

  

  

US$

 

  

  

 

MYR        

  

Amount of dilution in net tangible book value to new investors in this offering.

   US$           MYR               US$           MYR           

A $1.00 change in the assumed public offering price of $             per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease our net tangible book value after giving effect to the offering by MYR             million ($             million), the net tangible book value per ordinary share and per ADS after giving effect to this offering by MYR             ($            ) per ordinary share and MYR             ($            ) per ADS and the dilution in net tangible book value per ordinary share and per ADS to new investors in this offering by MYR             ($            ) per ordinary share and MYR             ($            ) per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses and assuming no exercise of the over-allotment option.

If the underwriters were to fully exercise their option to purchase              additional ADSs, the percentage of our ordinary shares held by existing investors would be     %, and the percentage of our ordinary shares held by new investors would be     %. After giving effect to the transactions described above, but assuming the over-allotment option is exercised in full, our pro forma net tangible book value would have been MYR             million ($            ), or MYR             ($            ) per ordinary share and MYR             ($            ) per ADS, in each case as of March 31, 2014. This represents an immediate increase in pro forma net tangible book value of MYR             ($            ) per ordinary share to our existing investors and an immediate dilution in pro forma net tangible book value of MYR             ($            ) per ordinary share and MYR             ($            ) per ADS to new investors.

A $1.00 change in the assumed public offering price of $             per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease our net tangible book value after giving effect to the offering by MYR             million ($             million), the net tangible book value per ordinary share and per ADS after giving

effect to this offering by MYR             ($            ) per ordinary share and MYR             ($            ) per ADS and

 

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the dilution in net tangible book value per ordinary share and per ADS to new investors in this offering by MYR             ($            ) per ordinary share and MYR             ($            ) per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses and assuming the over-allotment option is exercised in full.

The table below summarizes as of March 31, 2014, after giving effect to the transactions described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by existing investors and (ii) to be paid by new investors purchasing the ADSs in this offering at an assumed initial public offering price of $             per share, being the midpoint of the price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

     Assuming No Exercise of the Over-allotment Option   Assuming Exercise of the Over-allotment Option in Full
     Shares
Purchased
    Total Consideration     Average
Price Per
Share
  Average
Price Per
ADS
  Shares
Purchased
    Total Consideration     Average
Price Per
Share
  Average
Price Per
ADS
     Number   Percent     Amount   Percent                     Number   Percent     Amount   Percent                  
              (in millions, except
per share data)
                              (in millions, except
per share data)
                 
              MYR    $         MYR   $   MYR   $             MYR    $         MYR   $   MYR   $

Existing investors

                                                                 
 

 

 

 

 

   

 

  

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

   

 

  

 

 

 

 

   

 

 

 

 

 

 

 

New investors

                                                                 
 

 

 

 

 

   

 

  

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

   

 

  

 

 

 

 

   

 

 

 

 

 

 

 

      100.0          100.0               100.0          100.0        
 

 

 

 

 

   

 

  

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

   

 

  

 

 

 

 

   

 

 

 

 

 

 

 

 

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EXCHANGE RATE INFORMATION

A substantial portion of our operations are conducted in Malaysia, a significant amount of our revenues are denominated in MYR and our consolidated financial statements are presented in MYR. This prospectus contains translations of MYR amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from MYR to U.S. dollars and from U.S. dollars to MYR in this prospectus were made at a rate of MYR3.2630 to $1.00, the noon buying rate in The City of New York for cable transfers of MYR as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2014. We make no representation that any MYR or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or MYR, as the case may be, at any particular rate, at the rates stated below, or at all. The Malaysian government imposes control over its foreign currency reserves in part through direct regulation of the conversion of MYR into foreign exchange and through restrictions on foreign trade. On July 3, 2014, the noon buying rate was MYR3.1930 to $1.00.

The following table sets forth, for the periods indicated, information concerning exchange rates between the Malaysian Ringgit and the U.S. dollar based on the noon buying rate in New York City as certified for customs purposes by the Federal Reserve Bank of New York. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.

 

     Noon Buying Rate  

Period

   Period End      Average(1)      Low      High  
     (MYR per U.S. Dollar)  

2008

     3.4500         3.3324         3.1345         3.6380   

2009

     3.4220         3.5196         3.3560         3.7260   

2010

     3.0820         3.2129         3.0820         3.4420   

2011

     3.1690         3.0558         2.9370         3.2090   

2012

     3.0570         3.0751         2.9940         3.1980   

2013

     3.2770         3.1686         2.9620         3.3330   

2014

           

January

     3.3450         3.3028         3.2600         3.3450   

February

     3.2760         3.3068         3.2680         3.3450   

March

     3.2630         3.2801         3.2565         3.3070   

April

     3.2610         3.2539         3.2220         3.2810   

May

     3.2150         3.2291         3.2095         3.2655   

June

     3.2095         3.2176         3.1965         3.2380   

July (through July 3)

     3.1930         3.2003         3.1930         3.2060   

 

Source: Federal Reserve Bank of New York

 

(1) Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated in the Cayman Islands in order to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

 

   

political and economic stability;

 

   

an effective judicial system;

 

   

a favorable tax system;

 

   

the absence of exchange control or currency restrictions; and

 

   

the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:

 

   

the Cayman Islands has a less developed body of securities laws as compared to the United States and provides significantly less protection to investors; and

 

   

Cayman Islands companies may not have standing to sue before the federal courts of the United States.

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

A majority of our operations are conducted in Malaysia, and a majority of our assets are located in Malaysia. A majority of our directors and executive officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

We have appointed                     , located at                      as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

We have been informed by our counsel as to the laws of the Cayman Islands, Maples and Calder, that the United States and the Cayman Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically enforceable in the Cayman Islands. We have also been advised by Maples and Calder that a final and conclusive judgment obtained in U.S. federal or state courts under which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced in the foreign judgment debt in the Grand Court of the Cayman Islands, provided that:

 

   

the court that gave the judgment was competent to hear the action in accordance with private international law principles as applied by the courts in the Cayman Islands; and

 

   

the judgment was not contrary to public policy in the Cayman Islands, was not obtained by fraud or in proceedings contrary to the natural justice of the Cayman Islands, and was not based on an error in Cayman Islands law.

A Cayman Islands court may impose civil liability on us or our directors or officers in a suit brought in the Grand Court of the Cayman Islands against us or these persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding any violation constitute or give rise to a cause of action under Cayman Islands law.

 

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Neither the United States nor the Cayman Islands have a treaty with Malaysia, Thailand, Turkey or Singapore providing for reciprocal recognition and enforcement of judgments of United States or Cayman Islands courts. As such, judgments obtained in the courts of the United States or Cayman Islands would not be automatically enforceable in these jurisdictions.

Therefore, a litigant who obtains a final and conclusive judgment in the United States or Cayman Islands for monetary compensation will generally be required to file a new action in the court and country in which the litigant seeks to enforce the judgment. In Malaysia and Singapore, a new action is required to enforce the foreign judgment as an action on a debt, provided that the foreign judgment is, among other requirements, final and conclusive. A United States judgment, or any final judgment of a foreign court, is likely to be deemed by the Malaysian and Singapore courts as conclusive of any matter adjudicated upon and cannot be impeached for any error of fact or law unless it is demonstrated that the foreign court had no jurisdiction to give that judgment, it was obtained by fraud or in proceedings contrary to natural justice or it is contrary to the public policy of Malaysia or Singapore, respectively, or on certain other limited grounds. As such, assuming that the foreign court had jurisdiction to hear and determine the original case and there are no grounds on which to impeach the judgment, this type of action may be successful without having to re-litigate the merits of the case.

In Turkey, while there is no treaty in place, enforcement of a foreign judgment is possible where there is de facto, or common practice, reciprocity between Turkey and the foreign country, and the filing of an action before the Turkish courts. Any enforcement of a foreign judgment in Turkey requires, among other requirements, that the subject matter of the foreign judgment does not fall within the exclusive jurisdiction of the Turkish court and it is not in contradiction to Turkish public policy.

In Thailand, the Thai courts do not recognize foreign judgments and require a new action to be filed. The foreign judgment will be rendered as evidence when conducting the litigation.

Under Malaysian law, MOL Global, Inc. will be considered as a separate entity from our Malaysian subsidiaries. As such, holders of ADSs and our ordinary shares do not have a sufficient legal nexus to bring a cause of action against our Malaysian subsidiaries and their directors.

An investor may or may not be able to commence an original action against us or our directors or officers, or any person, before the Malaysian court and/or Singapore court to enforce liabilities under U.S. federal securities laws, depending on the nature of the action. For example, if the action requires the court to decide on liabilities (in particular, criminal liabilities) under U.S. federal securities law, then both the Malaysian and/or Singapore courts may potentially decline jurisdiction to hear the same. If however the action is based on a dispute between private parties governed by U.S. federal securities laws, such as a contractual dispute, the Malaysian and/or Singapore courts may consider the position of U.S. federal securities laws through expert witnesses and determine the position vis-à-vis the parties as a question of fact, assuming that the Malaysian and/or Singapore courts exercise jurisdiction over the case.

Further, whether an action may be commenced in a Malaysian court, depends on whether the court has jurisdiction and whether it is the most convenient forum to try the matter. This includes determining where the cause of action arose, where the relevant facts occurred and where the defendant(s) resides or has his / her place of business. Whether an action may be commenced in a Singapore court, depends on whether the Singapore court has jurisdiction. The Singapore courts will consider, among other considerations, whether there is a jurisdiction clause or connecting factors (such as the proper law of the contract or the place in which the tort occurred) which point to Singapore being the most appropriate forum.

As such, there is uncertainty as to whether Malaysian and Singapore courts will entertain original actions predicated upon the securities laws of the United States or any state in the United States.

If an action is brought by our investors before Turkish courts against us, or any person residing in Turkey, the judge of the Turkish court will first see if the court has jurisdiction over the case and consider factors such as the parties to the dispute and grounds of the dispute. If the Turkish court determines that it has jurisdiction over the case, it will review the case in light of the Turkish International Private and Procedural Law, or the IPPL, and according to the applicable foreign law determined by the IPPL provisions. However the process would be a very

 

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lengthy one, which may last up to ten years or longer, whereby the court would be required to seek assistance from the Ministry of Justice of Turkey and the Ministry of Foreign Affairs who will make a referral to the Turkish embassy or consulate in the United States (such as the Turkish Embassy in Washington DC or the Turkish Consulate in New York City) to obtain the provisions of the applicable foreign laws. Further, it may be difficult to bring an action before Turkish courts against us or our directors or officers if there is a final judgment obtained in U.S. courts against them based on U.S. federal securities laws as the Turkish court may reject the case on the basis that the action has already been determined by another court of law.

With respect to filing an original action in Thailand, the general rule is that, if (i) the defendant has a domicile or conducts its business in Thailand or (ii) the ground of claim arose in Thailand, a plaintiff can file an original action with the Thai Court regardless of nationality or domicile of the litigant. However, if (i) a defendant does not have a domicile in Thailand and (ii) the ground of dispute did not arise in Thailand, then the litigant can still file the original action if the litigant has a domicile in Thailand or has Thai nationality.

Pursuant to Thai conflicts of laws principles, if the claim arises out of contract, it should be governed by the law agreed to by the parties to such contract. However, if the claim arises from a breach of U.S. federal securities law, it will be regarded as a tortious claim to which the law of the country where the tort was committed, namely the United States, would apply. However, the party who asserts the application of foreign law shall have a burden to prove the existence and application of such foreign law to the satisfaction of the Thai court. If such party fails to do so, the Thai court has the discretion to apply relevant Thai law to the dispute. If the party can successfully prove the existence and application of such foreign law to the satisfaction of the Thai court, the Thai court will apply such foreign law to the extent that it is not contrary to Thai good moral and public order.

In the event our shareholders initiate proceedings in the United States courts against our directors or officers based in Malaysia, in order for process to be served against such directors and officers, the shareholders would first need to comply with the requirements under United States laws for service of process. Once this has been complied with, the shareholders would then, among other requirements, need to appoint a Malaysian agent to serve the proceedings on each of the directors or officers in accordance with the Malaysian civil procedure rules.

In Singapore, service of foreign process may be effected by the foreign tribunal sending a letter of request for service of foreign process to Singapore’s Minister for law; provided that where there is no practice in the foreign country to issue letters of request, service of foreign process may be effected in the same manner as service of Singaporean court process if such method of service is acceptable to the foreign tribunal.

Turkey and United States are both parties to the Hague Convention dated 1965, such that persons requesting service of process of United States documents in Turkey should execute the relevant request form for service abroad of judicial or extrajudicial documents. Turkey has filed certain reservations to the Hague Convention and does not accept service via mail. Therefore, it may be difficult to effect such service of process in Turkey from the United States.

The Thai Court will assist the courts of other jurisdictions in processing their service of writs or pleadings through diplomatic channels, such as through the Thai Ministry of Foreign Affairs and Ministry of Justice.

 

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CORPORATE HISTORY AND STRUCTURE

MOL Global, Inc., or the Issuer, was incorporated on February 20, 2014 by our shareholder, MOL Ventures, which is controlled by our major shareholder, Tan Sri Dato’ Seri Vincent Tan, who will remain our major shareholder following this offering. All of our operations are conducted through MOL AccessPortal, a company incorporated under the laws of Malaysia.

Significant milestones in our development include the following:

2000

 

   

MOL AccessPortal was incorporated in Malaysia under the name of Superior World Sdn. Bhd.

 

   

Entities controlled by Tan Sri Dato’ Seri Vincent Tan invested in MOL AccessPortal acquiring a 60% interest.

2001

 

   

MOLPoints was launched in Malaysia.

2002

 

   

We obtained approval from BNM to operate our MOLPoints micropayments system.

 

   

MOL AccessPortal was converted into a public company, and adopted the name MOL AccessPortal Bhd.

2003

 

   

MOL AccessPortal was listed on the MESDAQ Market of the Malaysian Stock Exchange.

2008

 

   

MOL AccessPortal Bhd. was privatized and delisted from the MESDAQ Market of the Malaysian Stock Exchange.

 

   

We established MOL AccessPortal Pte. Ltd. and launched MOLPoints in Singapore.

 

   

We rolled out MOLReloads at 7-Eleven convenience stores in Malaysia.

2009

 

   

We established MOL AccessPortal Co., Ltd., or MOL Thailand, which acquired Funloader, an online gaming distribution platform in Thailand, in exchange for a 45.45% interest in MOL Thailand being issued to Pactolus Co. Ltd. and we launched MOLPoints in Thailand.

2010

 

   

We formed a partnership with Facebook, pursuant to which Facebook began to accept MOLPoints as payment for Facebook credits.

 

   

We launched MOLReloads in Thailand.

2011

 

   

We acquired 100% of Uniwiz Trade Sales, Inc., or Uniwiz, which operates LoadCentral, a pre paid payment platform in the Philippines, and launched MOLPoints in the Philippines.

 

   

We launched MOLPoints in Indonesia.

 

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We subscribed for additional shares of MOL Thailand to increase our equity interest to 49% and MOL Thailand applied the proceeds to acquire 100% of Zest Interactive Co. Ltd., or Zest, a distributor of online games and games accessories.

 

   

We established MOLPay Sdn. Bhd., which acquired NBePay, an e-commerce payment service, from Netbuilder (M) Sdn. Bhd. in exchange for a 49% interest in MOLPay Sdn. Bhd.

2012

 

   

Malaysian Electronic Clearing Corporation Sdn. Bhd., or MyClear appointed MOLPay Sdn. Bhd. as a third party (non-bank) acquirer for MyClear’s FPX and direct debit services.

 

   

We acquired 65% of Ocash Pty Ltd, a payment service provider specialized in online game credits in Australia and New Zealand, which we renamed MOL AccessPortal Pty Ltd. and launched MOLPoints in Australia and New Zealand.

 

   

We acquired 54.2% of Rixty, Inc., or Rixty, an online payment solution provider based in the United States that has a presence in Brazil, and launched MOLPoints in the United States and Brazil.

 

   

We acquired approximately 80% of MyCNX Holdings (M) Sdn. Bhd., which operates MMOG.asia, our online games portal which, at the time of the acquisition, operated localized games portals for Malaysia and Thailand.

2013

 

   

We acquired 70% of MOL Turkey Bilgi Sistemleri Yayincilik Gida ve Tekstil Sanayi Ticaret Anonim Sirketi, or PaytoGo, a mobile payment service provider, and 70% of Sihirli Kule Bilgi Sistemleri Ltd., or Game Sultan, a micropayment system, each of which serves the Turkish markets.

 

   

We acquired AyoPay, an Indonesian payment service provider that specializes in online distribution of game credits.

 

   

We acquired 50% of Nganluong Joint Stock Company, or NganLuong, which provides online payment services and launched MOLPoints in Vietnam.

 

   

We launched our localized portal for MMOG.asia in Indonesia.

2014

 

   

His Royal Highness Sultan Ibrahim of the State of Johor acquired a 15% interest in MOL AccessPortal from MOL Ventures for $120 million (MYR391.6 million).

 

   

We signed an agreement with InComm APAC Pte. Ltd., or InComm, to roll out point-of-sale-activated, or POS-activated, cards in Malaysia.

Corporate Restructuring and Other Transactions

In anticipation of the offering, MOL Ventures incorporated the Issuer under the laws of the Cayman Islands on February 20, 2014 and was issued one ordinary share of the Issuer. In April 2014 MOL Ventures contributed 83,437,870 ordinary shares of MOL AccessPortal to the Issuer in exchange for 50,062,722 ordinary shares of the Issuer. The Issuer is a holding company with no operations. All of our operations are conducted through MOL AccessPortal, a company incorporated under the laws of Malaysia. We are undertaking a corporate restructuring and certain other transactions, prior to completion of the offering:

 

   

His Royal Highness Sultan Ibrahim of the State of Johor contributed 14,724,330 ordinary shares of MOL AccessPortal to the Issuer in exchange for 8,834,598 ordinary shares of the Issuer, representing a 14.7% interest in the Issuer on a post-restructuring basis.

 

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MOL Ventures distributed 42,498,886 ordinary shares of the Issuer, representing an approximate 70.8% interest in the Issuer on a post-restructuring basis, as a dividend in specie to its existing shareholders, namely MOL.com Sdn. Bhd., Hotel Resort Enterprise Sdn. Bhd., MOL Investments Pte. Ltd., Ganesh Kumar Bangah, Rayvin Tan Yeong Sheik and our major shareholder, Tan Sri Dato’ Seri Vincent Tan. Following this distribution, MOL Ventures holds 7,563,837 ordinary shares of the Issuer, representing a 12.6% interest in the Issuer on a post-restructuring basis.

 

   

MOL Investments Pte. Ltd. granted conditional call options over 1,766,920 ordinary shares of the Issuer, representing a 2.9% interest in the Issuer on a post-restructuring basis, to certain employees, officers and/or directors of our company, and certain employees, officers and/or directors of our shareholders, subsidiaries and/or affiliates, which entitle these individuals to purchase ordinary shares of the Issuer from MOL Investments Pte. Ltd. at a fixed price subject to vesting and certain conditions, following the completion of this offering. These options will vest between six and 36 months following completion of this offering.

 

   

We increased our 49% interest in MOL Thailand to an effective 86.73% interest by acquiring an indirect 37.73% interest in MOL Thailand from Sweet River International Limited and Cloverleaf Valley Investments Ltd., in exchange for 543,267 ordinary shares of the Issuer, representing a 0.9% interest in the Issuer on a post-restructuring basis, THB731 (MYR73.6), which we are required to pay within 14 days after the completion of the transaction, and approximately THB240 million (MYR24.2 million), which we are required to pay within 30 days after the completion of this offering. As a result of MOL Thailand’s 49% ownership interest in MOL Taiwan, this transaction increased our interest in MOL Taiwan to 94%. The unaudited pro forma condensed consolidated financial information included elsewhere in this prospectus provides information on the impact of our acquisition of the 37.73% interest in MOL Thailand as if it had been consummated on January 1, 2013.

 

   

We acquired the remaining equity interest of approximately 20% in MyCNX that we did not already own from (i) Pang Shiew Wai in exchange for 513,468 ordinary shares of the Issuer, representing an approximate 0.9% interest in the Issuer on a post-restructuring basis, and approximately MYR10.0 million, which we are required to pay within 30 days after the completion of this offering and (ii) Datuk Dr. Mohamed Arif Bin Nun in exchange for MYR8,302, which we paid upon completion of the transaction. The unaudited pro forma condensed consolidated financial information included elsewhere in this prospectus provides information on the impact of the acquisition of the approximately 20% interest in MyCNX on May 30, 2014 as if it had been consummated on January 1, 2013.

 

   

We issued 65,349 ordinary shares of the Issuer, representing an approximate 0.1% interest in the Issuer on a post-restructuring basis, to Javelin Venture Partners in consideration of the cancellation of a convertible promissory note jointly issued to Javelin by MOL Ventures and MOL AccessPortal in October 2012.

 

   

We acquired an additional 30% interest in each of Game Sultan and PaytoGo from Aykut Sanver and Kazim Akalin, in each case increasing our stake to 100%, in exchange for $14.8 million (MYR48.3 million), which we are required to pay on the later of the date that is three weeks after the date the ADSs are first listed on the NASDAQ Global Market and April 15, 2015.

 

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Corporate Structure

The following diagram illustrates our corporate structure, including our beneficial interests in our principal operating subsidiaries and our shareholders’ beneficial interests in our company, as of the date of this prospectus:(1)

 

LOGO

 

(1) The shareholding of MOL Global, Inc. is presented as if the transactions described under “—Corporate Restructuring and Other Transactions,” which are currently in progress, had been completed.

 

(2) Our major shareholder, Tan Sri Dato’ Seri Vincent Tan, together with his entities and affiliates, beneficially owns a 69.3% interest in the Issuer through his direct ownership of 110,764 of our ordinary shares; a 89.9% effective equity interest in MOL.com Sdn. Bhd., which owns 14,618,356 of our ordinary shares; a 60.0% equity interest, and an additional 40.0% equity interest held by his son, Robin Tan Yeong Ching, in Hotel Resort Enterprise Sdn. Bhd., which owns 13,706,739 of our ordinary shares; a 75.5% effective equity interest, and an additional 10.0% equity interest held by his son, Rayvin Tan Yeong Sheik, in MOL Ventures, which owns 7,563,837 of our ordinary shares; a 100% equity interest in MOL Investments Pte. Ltd., which owns 3,057,669 of our ordinary shares; and 5,089,176 of our ordinary shares held directly by Rayvin Tan Yeong Sheik.

 

(3) Ganesh Kumar Bangah’s equity interest in the Issuer is held through his direct ownership of 5,916,182 our ordinary shares and his beneficial ownership of an 11.6% interest in MOL Ventures, which directly owns 7,563,837 of our ordinary shares.

 

(4) For each of our subsidiaries incorporated in Thailand, our beneficial ownership exceeds our direct voting interest, as our beneficial ownership in such subsidiaries is held in part through our holdings in other entities that hold direct and indirect interests in such subsidiaries. See “Risk Factors—Our subsidiaries in Thailand are subject to restrictions on foreign ownership of their shares under Thai law.”

 

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The following diagram illustrates our corporate structure, including our beneficial interests in our principal operating subsidiaries, upon completion of this offering assuming no exercise of the over-allotment option:

LOGO

 

(1) For each of our subsidiaries incorporated in Thailand, our beneficial ownership exceeds our direct voting interest, as our beneficial ownership in such subsidiaries is held in part through our holdings in other entities that hold direct and indirect interests in such subsidiaries. See “Risk Factors—Our subsidiaries in Thailand are subject to restrictions on foreign ownership of their shares under Thai law.”

 

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following selected consolidated financial information has been derived from our consolidated financial statements included elsewhere in this prospectus. The following selected consolidated statements of profit or loss data for the years ended December 31, 2011, 2012, and 2013, selected consolidated statements of financial position data as of December 31, 2011, 2012, and 2013 and selected consolidated statements of cash flow data for the years ended December 31, 2011, 2012, and 2013 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our selected consolidated statements of profit or loss data for the three months ended March 31, 2013 and 2014, selected statements of financial position data as of March 31, 2014 and selected consolidated statements of cash flows data for the three months ended March 31, 2013 and 2014 have been derived from our unaudited condensed interim consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We have prepared the unaudited condensed interim consolidated financial statements on the same basis as our audited consolidated financial statements. Our unaudited condensed interim consolidated financial statements include all adjustments, consisting only of normal and recurring adjustments that we consider necessary for a fair presentation of our financial position and results of operations for these periods. Our selected consolidated financial data also includes adjusted EBITDA, which is a non-IFRS measure that is not required by, or presented in accordance with, IFRS, but is included because we believe it is indicative of our operating performance and used by investors and analysts to evaluate companies in our industry. Our historical results are not necessarily indicative of results expected for future periods. You should read this Selected Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

     For the year ended
December 31,
    For the three
months ended
March 31,
 
     2011     2012     2013     2013     2014  
     (MYR in millions, except per share data)  

Selected Consolidated Statements of Profit or Loss

          

Revenue

     63.2        95.6        171.5        36.8        48.6   

Direct cost and other ancillary expenses

     (32.0     (48.2     (70.0     (14.5     (22.4

Employee benefits expenses

     (10.2     (16.5     (31.0     (6.9     (7.8

Depreciation and amortization expenses

     (3.6     (6.9     (20.6     (4.5     (5.6

Marketing, advertising and promotion expenses

     (1.2     (1.8     (8.3     (1.9     (1.0

Communication and travelling expenses

     (2.4     (3.0     (5.7     (1.3     (1.5

Office related expenses

     (1.9     (2.4     (3.9     (0.9     (1.0

Other operating expenses

     (2.8     (3.8     (6.7     (0.5     (1.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit from operations

     9.1        12.9        25.4        6.5        7.3   

Other income

     3.0        0.9        2.5        1.4        4.1   

Non-operating expenses

            (1.6     (3.0              

Finance costs

     (2.7     (2.9     (5.1     (1.3     (1.3

Share of results of associates

     1.0        (0.0     (0.0     (0.0     (0.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before tax

     10.4        9.4        19.8        6.5        10.0   

Income tax expense

     (2.2     (3.4     (1.2     (0.3     (0.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the year

     8.2        6.0        18.7        6.3        9.6   

Profit for the year attributable to owners of the company:

     8.2        4.7        12.0        4.3        7.7   

(Loss)/Profit for the year attributable to non-controlling interests:

     (0.1     1.3        6.7        2.0        2.0   

Earnings per share

          

Basic (sen)(1)

     13.97        8.01        20.39        7.27        13.02   

Diluted (sen)(1)

     13.97        8.01        20.39        7.27        13.02   

 

Note:

 

(1) Sen is a unit of Malaysian currency. One hundred sen equal one Malaysian Ringgit.

 

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     As of December 31,     As of March 31,  
     2011      2012      2013     2014  
     (MYR in millions)  

Selected Consolidated Statements of Financial Position Data

          

Cash and cash equivalents

     5.4         32.1         49.7        61.4   

Total current assets

     60.3         97.4         127.0        138.1   

Intangible assets

     21.1         62.4         138.9        135.1   

Total assets

     92.1         174.3         282.9        292.8   

Total current liabilities

     70.8         124.5         204.7        206.3   

Total liabilities

     71.1         134.5         217.9        219.1   

 

     For the year ended
December 31,
    For the three
months ended
March 31,
 
     2011     2012     2013     2013     2014  
     (MYR in millions)  

Selected Consolidated Statements of Cash Flows Data

          

Net cash (used in)/from operating activities

     (3.3     23.9        54.0        9.3        22.2   

Net cash used in investing activities

     (12.5     (3.3     (60.6     (52.6     (3.2

Net cash from/(used in) financing activities

     18.0        6.3        27.3        69.6        (6.0

Net increase in cash and cash equivalents

     2.1        27.0        20.7        26.3        13.1   

Cash and cash equivalents at beginning of year/period

     3.2        5.4        32.1        32.1        49.7   

Effect on exchange rate changes

     0.1        (0.3     (3.0     (0.2     (1.4

Cash and cash equivalents at end of year/period

     5.4        32.1        49.7        58.2        61.4   

 

     As of and for the year ended December 31,      As of and for the three
months ended March 31,
 
     2011      2012      2013      2013      2014  

Selected Operating Data

              

Volume (MYR in millions)

              

MOLPoints(1)

     175.3         371.8         589.3         125.5         165.4   

MOLReloads(2)

     923.6         1,063.5         1,214.0         288.9         318.2   

MOLPay(3)

     18.0         68.1         144.3         21.7         53.1   

MMOG.asia(4)(5)

     29.1         27.4         32.2         27.6         31.9   

MOLPoints active registered paying users(6) (number)

     312,596         383,766         1,007,344         808,229         997,091   

MOLPoints transactions (number)

     6,198,339         10,095,409         20,843,529         4,689,925         4,983,149   

MOLReloads active retailers(7) (number)

     40,076         32,239         37,204         34,997         39,042   

MOLPay online merchants (number)

     916         1,205         3,455         3,221         3,674   

MMOG.asia active paying users(4)(8) (number)

     116,120         107,264         110,826         111,194         84,308   

MMOG.asia AVPPU(4)(9) (MYR)

     250.5         255.0         290.9         248.5         378.9   

 

Notes:

 

(1) MOL Points volume is the total retail value of content purchased through redemption of vouchers for games and other digital content provided by content providers using MOL Points during the period. Volume comprises (i) volume from registered consumer members, which is the total volume of content purchased through redemptions of MOLPoints in registered MOLPoints accounts during a period; (ii) consumer direct purchase volume, which is the total volume of content purchased by end-users through redemptions of MOLPoints directly from content providers during a period without creating a registered MOLPoints account; and (iii) direct channel volume, which is the total volume of content purchased through redemptions of MOLPoints during a period by cybercafés and distributors that redeem MOLPoints for digital content that the cybercafés and distributors sell to end-users. MOLPoints volume tends to be significantly greater than MOLPoints revenue, which excludes amounts that we pay to digital content providers pursuant to our revenue sharing arrangements.

 

(2) MOLReloads volume is the total retail value of pre-paid mobile airtime distributed by MOLReloads during a period. MOLReloads volume tends to be significantly greater than MOLReloads revenue, which excludes amounts that we pay to mobile airtime providers pursuant to our revenue sharing arrangements.

 

(3) MOLPay volume is the total value of payments processed by MOLPay during a period. MOLPay volume tends to be significantly greater than MOLPay revenue, which excludes amounts paid to financial institutions.

 

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(4) We acquired approximately 80% equity interest in MyCNX, which operates MMOG.asia, in November 2012. The information presented for MMOG.asia as of and for the year ended December 31, 2011 and 2012 includes the period prior to the acquisition. The actual volume for MMOG.asia for the period after the acquisition in 2012 was MYR3.0 million.

 

(5) MMOG.asia volume is the total retail value of content sold by MMOG.asia during a period.

 

(6) MOLPoints active registered paying users is the number of unique MOLPoints accounts that have been used to purchase or redeem MOLPoints during the preceding twelve month-period.

 

(7) MOLReloads active retailers is the total of number of MOLReloads terminals in Malaysia and Thailand as of the end of the period, in each case which have sold at least one MOLReloads e-voucher during the preceding twelve months, and the number of individual distributors in the Philippines as of the end of the period, who have sold at least one MOLReloads e-voucher during the preceding month.

 

(8) MMOG.asia active paying users is the number of unique MMOG.asia accounts that have been used to purchase game points on MMOG.asia during the preceding twelve-month period.

 

(9) MMOG.asia average volume per paying user, or AVPPU, is equal to total volume for a preceding twelve month period divided by the number of active paying users as of the end of the period.

Adjusted EBITDA

We present adjusted EBITDA, which is a non-IFRS financial measure. You should not consider adjusted EBITDA as a substitute for or superior to net profit prepared in accordance with IFRS. Furthermore, because adjusted EBITDA is not determined in accordance with IFRS, it is susceptible to varying calculations and may not be comparable to other similarly titled measures presented by other companies. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

We present adjusted EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation and amortization expenses), changes in foreign exchange rates that impact financial assets and liabilities denominated in currencies other than our functional currency (affecting unrealized gain (loss) on foreign exchange and realized gain/(loss) on foreign exchange), variations in capital structures (affecting interest income and interest expenses) provision for impairment loss on trade and other receivables, share of results of operation of associates, effect of remeasurement of equity interest in associates) as a result of the consolidation of our Thailand business such that it is deemed a subsidiary instead of an associate, and tax positions (affecting income tax expenses) (such as the impact on periods or companies of changes in effective tax rates). In addition, adjusted EBITDA excludes inventory and intangible assets written off and the non-cash impact of changes in the fair value of derivative, that, in each case, we do not believe reflect the underlying performance of our business.

Some limitations of adjusted EBITDA are:

 

   

adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;

 

   

adjusted EBITDA does not include other income, other expense and foreign exchange gains and losses; and

 

   

adjusted EBITDA excludes depreciation and amortization and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.

 

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The following table reconciles adjusted EBITDA to profit for the period.

 

     For the year ended
December 31,
    For the three
months ended
March 31,
 
     2011     2012     2013     2013     2014  
     (MYR in millions)              

Profit for the period

     8.2        6.0        18.7        6.3        9.6   

Plus:

          

Total depreciation and amortization

     3.6        6.9        20.6        4.5        5.6   

Impairment loss on trade and other receivables

     0.2               0.5                 

Share of results of associates

     (1.0     0.0        0.0        0.0        0.1   

Inventory written off

                   0.7                 

Intangible assets written off

                   0.1        0.0          

Unrealized gain on foreign exchange

                   (0.4     0.0        0.1   

Realized (gain)/loss on foreign exchange

     (0.8     (0.7     0.2        (0.2     0.0   

Effect of remeasurement of equity interest in associates

            1.6                        

Derivative fair value adjustment

                   3.0        (0.8     (3.7

Interest income

     (0.0     (0.4     (0.8     (0.1     (0.3

Interest expense

     2.7        2.9        5.1        1.3        1.3   

Income tax expense

     2.2        3.4        1.2        0.3        0.4   

Adjusted EBITDA

     15.1        19.7        48.9        11.3        13.1   

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

We are the largest e-payment enabler for online goods and services by payment volume in Southeast Asia, according to the Frost & Sullivan report. We operate a payments platform that facilitates online and mobile commerce for consumers in emerging and other markets by providing a vast network of payment channels that accept payment using cash and online methods. Our physical distribution network comprises more than 920,000 physical locations in 13 countries across four continents where we maintain a local presence as of March 31, 2014 and physical locations in other countries where we have relationships with aggregators that distribute our products through channels with which they have relationships. We also have mobile and electronic distribution channels that accept major credit cards and online banking from 94 banks globally as of March 31, 2014. Our primary product is MOLPoints micropayment system, which sells payment credits that can be used by consumers to purchase online game credits and other digital content, including Facebook Game Cards. We also operate MOLReloads, a distribution network that distributes prepaid mobile airtime and digital content; MOLPay, a payments solution for online merchants; and MMOG.asia, an online games portal. We plan to launch MOLWallet, an online and mobile payment processing and money transfer system in Malaysia in 2014. Our products provide various opportunities to acquire and retain customers and their payment credentials, which present cross-selling opportunities for our existing and future solutions. Our user base consists of both registered and unregistered users.

MOLPoints can be used to purchase credits that can be used in thousands of online games and other digital content, from over 450 content providers as of March 31, 2014. We operate in markets that are largely cash-based and offer consumers the opportunity to purchase MOLPoints in cash through our physical distribution network, which comprises chain operators such as 7-Eleven, individual retailers such as cybercafés, and aggregators such as e-pay. Our physical distribution network for MOLPoints includes our MOLReloads distribution network in Malaysia, the Philippines and Thailand. In addition, MOLPoints are available for purchase using credit cards, through online banking and at electronic kiosks in retail locations. We currently operate local websites for MOLPoints, or equivalent products for local markets, in 13 countries, namely Malaysia, Thailand, Turkey, the Philippines, Singapore, Indonesia, India, the United States, Australia, Brazil, Taiwan, Vietnam and New Zealand.

MOLReloads distributes electronic vouchers, or e-vouchers, for pre-paid mobile airtime and digital content including MOLPoints. Consumers can purchase prepaid mobile airtime for most major mobile service providers in Malaysia, the Philippines and Thailand through our MOLReloads distribution network, which comprises chain operators, including more than 1,500 7-Eleven convenience stores as of March 31, 2014, cybercafés and bookstores, and in the Philippines, individual distributors who distribute e-vouchers through mobile phones and personal computers in cybercafés. In January 2014, we entered into an agreement with InComm, a provider of pre-paid products, services and transaction technologies, pursuant to which we plan to distribute point-of-sale activated, or POS-activated, pre-paid gift cards through our MOLReloads distribution network.

MOLPay is an integrated payments solution for online merchants, which offers cash, online banking and credit card payment processing options for their consumers. MOLPay is currently offered in Malaysia and Vietnam, and we expect to launch MOLPay in Indonesia in 2014. MOLPay has an agreement with MyClear to serve as a third party (non-bank) acquirer for MyClear’s FPX and direct debit services. In addition to online banking and credit card payment, MOLPay has agreements with various distribution partners for collecting

 

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payments at more than 22,000 additional physical cash payment points in Malaysia, Singapore and Indonesia, including at 7-Eleven and other convenience stores, cybercafés and petrol stations, which are in the process of being rolled out in 2014. We own 51% of MOLPay Sdn. Bhd., which operates MOLPay. As of March 31, 2014, consumers could use MOLPay to make purchases from 3,455 online merchants.

MOLWallet is our planned account-based online and mobile payment processing and money transfer system that is designed to effectively replace a physical wallet using a mobile phone. Account holders will be able to pay for digital and physical retail goods and services, pay third party bills, reload pre-paid accounts for mobile airtime and other mobile applications as well as perform peer-to-peer money transfers through a convenient, secure and intuitive online or mobile interface with multiple payment methods. MOLWallet uses technology that was developed by NganLuong Joint Stock Company, or NganLuong, an online payments solutions provider based in Vietnam that we acquired in 2013. We plan to launch MOLWallet in Malaysia in 2014. Our revenue from mobile commerce has historically not been material.

MMOG.asia is an online games portal that operates licensed games in Southeast Asia, including through localized portals operated in local languages for Malaysia, Thailand and Indonesia. MMOG.asia accepts MOLPoints to purchase game credits for games that it operates. We acquired our equity interest of approximately 80% in MyCNX, which operates MMOG.asia, in November 2012.

Segments

For management purposes, our business is organized into five segments, as follows:

 

   

MOLPoints, which includes revenue derived from the sale of online MOLPoints vouchers;

 

   

MOLReloads, which includes revenue derived from the electronic distribution of pre-paid airtime and PINs through our MOLReloads distribution network;

 

   

MOLPay, which includes revenue derived from the provision of an online payment solution that online merchants use to collect payments from consumers;

 

   

MMOG.asia, which includes revenue derived from the sale of game pins or game points to consumers who play games on MMOG.asia; and

 

   

Others, which primarily includes income derived from the sale of internet media products, including promotional services that we provide to games publishers and the sale of electronic related services, including the provision of technology outsourcing services to BLoyalty Sdn. Bhd., a company that is indirectly controlled by our major shareholder, Tan Sri Dato’ Seri Vincent Tan.

 

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Key Measures of Operating Performance

Our management monitors the financial and operating performance of MOLPoints, MOLReloads, MOLPay and MMOG.asia on the basis of the measures described below.

MOLPoints

The following table sets forth our key operating measures for MOLPoints as of the specified dates and for the specified periods.

 

     As of and for the year ended December 31,      As of and for the three
months ended March 31,
 
     2011      2012      2013      2013      2014  

Registered Members (number)

              

Malaysia

     885,514         1,193,669         1,458,520         1,261,353         1,507,001   

Southeast Asia (other than Malaysia)(1)

     391,073         986,655         1,383,215         1,112,688         1,468,556   

Turkey

                     526,121         325,142         575,699   

Rest of the world

     199,325         611,450         1,076,030         772,907         1,389,377   

Total registered members

     1,475,912         2,791,774         4,443,886         3,472,090         4,940,633   

Active registered paying users (number)

     312,596         383,766         1,007,344         808,229         997,091   

Volume (MYR in millions)

              

Volume from registered consumer members

     129.1         175.8         262.8         54.2         70.0   

Consumer direct purchase volume

     8.3         88.8         154.0         32.1         57.8   

Direct channel volume

     37.8         107.2         172.5         39.2         37.6   

Total volume

     175.3         371.8         589.3         125.5         165.4   

Malaysia

     136.0         187.7         214.5         51.4         51.5   

Southeast Asia (other than Malaysia)(1)

     34.5         178.6         265.4         55.8         82.6   

Turkey

                     86.6         14.8         21.3   

Rest of the world

     4.8         5.5         22.8         3.4         10.0   

Total volume

     175.3         371.8         589.3         125.5         165.4   

Transactions (number)

              

Transactions by registered members

     4,677,633         5,156,711         11,061,262         2,629,252         1,783,831   

Transactions through direct purchase

     1,520,706         5,748,698         9,782,267         2,060,673         3,199,318   

Total transactions

     6,198,339         10,905,409         20,843,529         4,689,925         4,983,149   

 

Note:

 

(1) Includes Thailand, the Philippines, Singapore, Indonesia, and Vietnam.

Registered members.    MOLPoints registered members is the number of MOLPoints accounts that have been registered as of the end of a period.

Active registered paying users.    Active registered paying users is the number of unique MOLPoints accounts that have been used to purchase or redeem MOLPoints during the preceding twelve month period.

Volume.    MOLPoints volume is the total retail value of content purchased through redemption of vouchers for games and other digital content provided by content providers using MOLPoints during the period. Volume comprises (i) volume from registered consumer members, which is the total volume of content purchased by end-users through redemptions of MOLPoints in registered MOLPoints accounts during a period; and (ii) consumer direct purchase volume, which is the total volume of content purchased through redemptions of MOLPoints directly from content providers during a period without creating a registered MOLPoints account; and (iii) direct channel volume, which is the total volume of content purchased through redemptions of MOLPoints during a period by cybercafés and distributors that redeem MOLPoints for digital content that the cybercafés and distributors sell to end-users. MOLPoints volume tends to be significantly greater than MOLPoints revenue, which excludes amounts that we pay to digital content providers pursuant to our revenue sharing arrangements.

 

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Transactions.    Transactions is the number of unique purchases of MOLPoints, in any volume, during a period. Transactions through direct purchase includes all transactions that relate to either consumer direct purchase volume or direct channel volume.

MOLReloads

The following table sets forth our key operating measures for MOLReloads as of the specified dates and for the specified periods.

 

     As of and for the year ended December 31,      As of and for the three
months ended March 31,
 
     2011      2012      2013      2013      2014  

Active retailers (number)

              

Malaysia

     1,689         1,787         1,930         1,794         1,965   

Philippines

     38,387         30,452         35,151         33,094         36,943   

Thailand

                     123         109         134   

Total active retailers

     40,076         32,239         37,204         34,997         39,042   

Volume (MYR in millions)

              

Malaysia

     852.8         991.8         1,123.5         267.6         296.2   

Philippines

     70.7         71.8         88.3         20.9         21.5   

Thailand

                     2.2         0.4         0.5   

Total volume

     923.6         1,063.5         1,214.0         288.9         318.2   

Active retailers.    Active retailers is the total of the number of MOLReloads terminals in Malaysia and Thailand as of the end of the period, in each case which have sold at least one MOLReloads e-voucher during the preceding twelve months, and the number of individual distributors in the Philippines as of the end of the period, which have sold at least one MOLReloads e-voucher during the preceding month. MOLReloads’ active retailers in the Philippines decreased 20.7% to 30,452 as of December 31, 2012 from 38,387 as of December 31, 2011 primarily because a group of retailers left the MOLReloads distribution network in 2012 to launch a competing distribution network. Some of these retailers subsequently returned to our network in 2013.

Volume.    MOLReloads volume is the total retail value of pre-paid mobile airtime distributed by MOLReloads during a period. MOLReloads volume tends to be significantly greater than MOLReloads revenue, which excludes amounts that we pay to mobile airtime providers pursuant to our revenue sharing arrangements.

MOLPay

The following table sets forth our key operating measures for MOLPay as of the specified dates and for the specified periods.

 

     As of and for the year ended December 31,      As of and for the three
months ended March 31,
 
     2011      2012      2013      2013      2014  

Online merchants (number)

              

Malaysia

     916         1,205         1,109         1,214         1,162   

Vietnam

                     2,346         2,007         2,512   

Total online merchants

     916         1,205         3,455         3,221         3,674   

Volume (MYR in millions)

              

Malaysia

     18.0         68.1         65.0         15.8         20.5   

Vietnam

                     79.2         5.9         32.6   

Total volume

     18.0         68.1         144.3         21.7         53.1   

Online merchants.    Online merchants refers to the number of online merchants in Malaysia and Vietnam that accepted MOLPay as a payment option as of the end of the period.

 

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Volume.    MOLPay volume refers to the total payments processed by MOLPay during the year. MOLPay volume tends to be significantly greater than MOLPay revenue, which excludes amounts paid to financial institutions.

MMOG.asia

The following table sets forth our key operating measures for MMOG.asia as of the specified dates and for the specified periods.

 

     As of and for the year ended December 31,      As of and for the three
months ended March 31,
 
     2011(1)      2012(1)      2013      2013      2014  

Active paying users (number)

     116,120         107,264         110,826         111,194         84,308   

AVPPU (MYR)

     250.5         255.0         290.9         248.5         378.9   

Volume (MYR in millions)

     29.1         27.4         32.2         27.6         31.9   

 

Note:

 

(1) We acquired our equity interest of approximately 80% in MyCNX, which operates MMOG.asia, in November 2012. The information presented as of and for the year ended December 31, 2011 is based on MMOG.asia’s operations prior to the acquisition. The information presented for as of and for the year ended December 31, 2012 is based on a full year of MMOG.asia’s operations, including the period prior to the acquisition.

Active paying users.     MMOG.asia active paying users is the number of unique MMOG.asia accounts that have been used to purchase game points on MMOG.asia during the preceding twelve month period.

AVPPU.     Average volume per paying user, or AVPPU, is equal to total volume for a 12 month period divided by the number of active paying users as of the end of the period.

Volume.     MMOG.asia volume is the total retail value of content sold by MMOG.asia during a period.

Factors Affecting our Results of Operations

The significant factors that affect our results of operations include the following:

Developments within the online and mobile digital content industry

Our segment revenue from each of MOLPoints and MMOG.asia is affected by the overall demand for game credits in the markets in which we operate, which is in turn affected by developments within the online and mobile gaming industry. The following are certain key factors which affect the online and mobile gaming industry:

 

   

Launch of new games and release of enhancements.     As of March 31, 2014, MOLPoints can be used to purchase game credits and other digital content, including thousands of online games, provided by more than 450 content providers, and MMOG.asia operates 18 licensed online games. The volume of MOLPoints that we sell is significantly affected by the number of new games launched by content providers, the popularity of new and existing games and our ability to develop and maintain relationships with content providers. Similarly, MMOG.asia’s success is significantly affected by the number of games launched on MMOG.asia and their popularity.

 

   

Game monetization.     The vast majority of MOLPoints are redeemed by consumers to purchase virtual goods within online games, while MMOG.asia earns revenue from the sale of in-game items and virtual goods to game players. In addition, most of MMOG.asia’s games accept MOLPoints to purchase game credits. The extent to which players choose to pay for virtual goods in games is driven by the ability of our content provider partners, including MMOG.asia, to create content and virtual goods that enhance the game-play experience.

 

   

Marketing expenditure.     Although we acquire most of our users through unpaid channels and through our game merchants websites, we also utilize advertising and user acquisition and retention programs,

 

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such as promotions and gaming contests, to grow and retain our user base. The amount, cost and effectiveness of such activities are factors that affect our operating results.

 

   

The adoption of mobile games.     In recent years there has been an increasing shift to mobile gaming whereby users play online games using mobile devices. Our results of operations will be significantly affected by the extent to which mobile game players purchase online game credits and our ability to adapt to the mobile gaming environment. In particular, the relative success of mobile games launched by our content provider partners, including MMOG.asia, and our ability to monetize mobile games and their users, including through mobile carrier billing arrangements, will significantly affect our results of operations.

 

   

Global games and global games platforms.     In recent years, global games have accounted for an increasing share of the online games market, largely due to the availability of increased internet bandwidth and global games platforms. Relative to our MOLPoints business as a whole, our revenue sharing arrangements for global games (other than global games operated on global platforms) tend to be more favorable but our revenue sharing arrangements for games operated on global platforms tend to be less favorable. The increasing adoption of global games and global games platforms may significantly affect our results of operations.

 

   

New forms of digital content.     Digital content other than games is expected to account for an increasing share of the overall market for digital content. In particular, the rise of mobile chat applications has led to an increase in the use of emoticons. For example, LINE uses our payment services on a non-exclusive basis to monetize its chat services in Thailand. LINE is an application for instant messaging on smartphones and personal computers, which allows users to exchange text messages, graphics, video and audio media, make free VoIP calls and hold free audio and video conferences. The adoption of these and other similar forms of digital content, and the adoption of our payment services in connection with the marketing of such digital content may significantly affect our result of operations.

Developments in the payments industry

Our segment revenue from each of MOLPoints, MOLReloads and MOLPay is affected by developments in the payments industry. The factors below are certain key factors which affect the payments industry:

 

   

The relative use of cash and electronic payment systems in the markets in which we operate.     Changes in the number of transactions using cash as a means of payment is an important variable affecting our revenues. Many of our users do not readily have access to credit card, debit card or bank transfer services, and require alternative methods for payment for online products and services. For example, the credit card penetration rate in 2013 was 16.7% in Malaysia, 7.8% in Thailand, 16.9% in Turkey, 5.0% in the Philippines, 1.5% in Vietnam and 2.6% in Indonesia, according to the Frost & Sullivan report. Our physical distribution network, which includes convenience stores, cybercafés, bookstores and other retail stores, provide access to e-commerce for such users by facilitating cash payments. In the years ended December 31, 2011, 2012, 2013 and the three months ended March 31, 2014, cash payments accounted for 64.5%, 65.2%, 55.3% and 58.0%, respectively, of transactions conducted by our user community on our platform. If the use of cash as a means of payment declines in our key markets, we would be exposed to greater competition from competitors that primarily provide electronic payment solutions and our profit margin would be adversely affected by the fees we are required to pay to financial institutions in connection with electronic payments, each of which would adversely affect our results of operations.

 

   

Adoption of alternative payment structures.     The volume of online transactions has grown considerably and continues to grow, while limited credit card penetration in emerging markets has resulted in proliferation of alternative methods of payment. According to the Frost and Sullivan report, cash based payments (which includes cash, prepaid cards and manual bank transfers) account for a majority of payments for e-commerce transactions in a number of our markets. We believe that growth in online transactions and alternative payment methods will be an important driver to increase the number of potential content providers and merchants for which we can offer payment services and the potential

 

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number of users of MOLPoints, MOLPay and MOLWallet, the latter of which we plan to launch in Malaysia in 2014. We expect payment volumes from online transactions and alternative payment methods to increase significantly in the coming years.

 

   

The fees we pay to financial institutions in connection with our payment processing operations.     We rely on banks or other payment processors to process transactions, and we pay fees for this service. From time to time, payment card networks have increased, and may increase in the future, the interchange fees and assessments that they charge for each transaction using one of their cards. We may not be able to pass on all of the increases in interchange fees or debit network fees along to our online merchants, if at all. The extent to which we are able to pass any increases in fees on to customers could impact our profit margins.

Our distribution network and merchant network and arrangements with content providers and mobile airtime providers

Our results of operations are affected by our ability to continue to build out our distribution and merchant networks and our arrangements with digital content providers and telecommunications service providers. Our physical distribution network includes more than 920,000 physical locations in 13 countries where we maintain a local presence, and other locations in countries where we do not maintain a local presence but have indirect relationships with physical distribution locations. Currently, we provide payment services for customers of more than 450 content providers through MOLPoints, 23 telecommunications service providers through MOLReloads, and more than 3,400 online merchants through MOLPay. We are working aggressively to grow our merchant base in Malaysia while extending organically into Singapore and Indonesia. We have expanded into various other countries by acquiring an existing distribution network rather than developing one organically. Our distribution network is a key factor that affects our ability to reach consumers and attract content providers, telecommunications service providers and online merchants to our platform.

Our agreements with digital content providers and telecommunications service providers are either on a purchase basis, which means that we purchase digital content and mobile airtime at a discount for resale, or a fulfillment basis, which means that we sell digital content or mobile airtime on behalf of the digital content or telecommunications service provider in exchange for a commission or service fee based on the value of digital content or mobile airtime purchased by consumers using MOLPoints, among other factors. MOLPoints’ revenue sharing arrangements with content providers typically provide for MOLPoints’ share to be 20% of volume, but this share can vary depending on local market practice, the content provider, and the content. MOLReloads’ discounts and commissions from telecommunications service providers are typically between 5% and 11% of volume for purchase agreements and less than 1% of volume for fulfillment agreements. Our telecommunications service providers may from time to time change our revenue sharing arrangements for MOLReloads. In general, following periods of increased volume, telecommunications service providers have greater bargaining power in the contractual negotiations to reduce our share of the revenue sharing arrangement. For example, in 2012 certain telecommunications service providers in Malaysia reduced our revenue share following a period of increased volume, which had the effect of reducing our revenues even though volume had increased. Our distribution network and distribution costs are significant factors affecting our results of operations.

Expansion into new markets and ability to increase product penetration in existing markets

Since we commenced operations in Malaysia in 2000, we have successfully entered and grown in seven new countries through acquisitions. As part of our strategy of expansion, we have in the past, and may, from time to time, acquire businesses or interests in businesses, including non-controlling interests, form joint ventures or create strategic alliances. For example, since 2009 we have expanded into Thailand, Australia, New Zealand, the United States, Brazil, Turkey and Vietnam through acquisitions. We also launched MOLPay through an acquisition and we acquired MMOG.asia. We expect to continue to evaluate potential strategic acquisitions of businesses or products with the potential of expanding our user and revenue base, widening our geographic coverage and increasing our product range. We have grown organically in other markets by establishing a local subsidiary in such market to develop relationships with local distribution channels. In addition, our ability to leverage our existing distribution network to expand our product offering across our current markets and replicate our success in Malaysia across other countries where we

 

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operate will affect our growth and results of operations. We expect that our growth prospects will continue to be significantly affected by our ability to expand our business in new and existing markets.

Consumer spending patterns and seasonality

Our business depends heavily on the overall level of consumer spending, particularly in our primary markets in Southeast Asia and other emerging markets. We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income or changes in consumer purchasing habits. During periods of economic growth, overall consumer spending tends to increase along with rises in wealth, and during economic downturns, consumer spending tends to correspondingly decline. Furthermore, our sales have historically been higher during festive periods, as our business tends to benefit from consumers’ increased leisure time. Such periods include Chinese New Year, which generally occurs in January or February, Ramadan, which occurred in the third quarter in each of 2011, 2012 and 2013, and the December holiday season. Our sales tend to be highest during the first and fourth quarters, while our sales for the second half of the year tend to exceed our sales for the first half of the year.

Selected Statements of Operations Items

Revenue

We earn revenue from sales of goods in each of our segments. The following table sets forth our revenue derived from each segment for the specified periods.

 

     For the year ended
December 31,
     For the three
months ended
March 31,
 
     2011      2012      2013      2013      2014  
     (MYR in millions)  

Segment revenue

              

MOLPoints

     30.7         58.2         102.5         21.4         29.3   

MOLReloads

     31.4         30.9         34.5         8.3         8.7   

MOLPay

     0.6         2.3         9.4         1.3         4.0   

MMOG.asia(1)

             3.6         23.7         5.7         6.1   

Other

     0.5         0.5         1.3         0.2         0.5   

Total revenue

     63.2         95.6         171.5         36.8         48.6   

 

Note:

 

(1) We acquired our equity interest of approximately 80% in MyCNX, which operates MMOG.asia, in November 2012.

MOLPoints earns revenue from sales of MOLPoints vouchers, and vouchers provided by content providers, through our physical, electronic and mobile distribution channels. The amount that we recognize as revenue depends on our revenue sharing arrangements with digital content providers, which is typically 20% of volume but can vary depending on local market practice, the content provider and the content. For example, based on local market practice, we have relatively favorable revenue sharing arrangements in Turkey and relatively less favorable revenue sharing arrangements in the Philippines and Indonesia. Purchased MOLPoints can be deposited in a registered MOLPoints account or redeemed directly for digital content from a content provider. Vouchers provided by content providers can be redeemed directly for digital content from the relevant content provider. In each case, we recognize revenue from the sale of MOLPoints vouchers at the time the MOLPoints vouchers are redeemed for digital content. In cases where our customer is the end-user, which comprises all MOLPoints volume other than direct channel volume, there is typically a lag between the time the customer purchases MOLPoints and the time the MOLPoints are redeemed for content by the end-user, at which point revenue is recognized. However, in cases of direct channel volume, where our customer is a cybercafé or distributor that redeems MOLPoints for digital content that the cybercafé or distributor will sell to end-users, we recognize revenue immediately when the cybercafé redeems MOLPoints purchased from us. Revenue from MOLPoints vouchers that have been sold but not yet redeemed for digital content is deferred.

 

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MOLReloads earns revenue from sales of e-vouchers for pre-paid mobile airtime through our MOLReloads distribution network, which comprises retail store terminals in Malaysia and Thailand and individual distributors in the Philippines. Revenue from the sale of mobile airtime is recognized at the time of sale to the end-user. The amount that we recognize as revenue depends on our revenue sharing arrangements with mobile airtime providers, which are either on a purchase basis, which means that we purchase airtime upfront for resale, or a fulfillment basis, which means that we sell airtime on behalf of the telecommunications service provider. Under purchase agreements, we purchase mobile airtime at a discount to the price at which we distribute the airtime through our MOLReloads distribution network, which discount is typically between 5% and 11%. Under fulfillment agreements, we charge a commission, which is typically less than 1% of the value of airtime sold through our MOLReloads distribution network. In 2011, 2012, 2013 and the three months ended March 31, 2014, approximately 56.8%, 60.4%, 62.5% and 64.5%, respectively, of MOLReloads’ volume was distributed pursuant to fulfillment agreements, with the remainder on a purchase basis. We enter into purchase or fulfillment arrangements based on the preferences or requirements of our counterparties. In general, fulfillment arrangements have a lower margin but do not require a capital outlay or result in inventory risks to us.

MOLPay earns revenue from merchant fees, which are fees charged to online merchants upon their registration for MOLPay, and commissions for payments processed by MOLPay. Commissions are recognized at the time of sale. Merchant fees are recognized at the time we enter into agreements with merchants.

MMOG.asia earns revenue from sales of virtual goods to players on our online games portal and, commencing from the first quarter of 2014, the sale of advertising on our online games portal. Revenue from the sale of virtual goods is recognized when game PINs are used to purchase virtual goods within a game.

Other fees, which primarily include revenue derived from the sale of internet media products, including promotional services that we provide to games publishers mainly through MOL Singapore, and the sale of electronic related services, including the provision of technology outsourcing services to BLoyalty Sdn. Bhd., a company that is controlled by our major shareholder, are recognized on an accrual basis.

We currently own an 86.73% interest in MOL Thailand; 50% of NganLuong, 54.2% of Rixty, 65% of MOL Australia and 75% of MOL Taiwan and 51% of MOLPay Sdn. Bhd. and fully consolidate their financial statements with ours.

Direct Costs and Other Ancillary Expenses

Direct costs primarily comprise distribution costs that we pay to our distribution partners in connection with MOLPoints’ distribution of digital content and MOLReloads’ distribution of mobile airtime. For the years ended December 31, 2011, 2012 and 2013 and the three months ended March 31, 2013 and 2014, MOLPoints’ direct costs and other ancillary expenses, which primarily comprise fees paid to distribution partners, were equal to 8.5%, 7.4%, 7.9%, 6.9% and 8.5%, respectively, of MOLPoints volume, and MOLReloads’ direct costs and other ancillary expenses, which primarily comprise fees paid to distribution partners, were equal to 1.8%, 1.8%, 1.3%, 1.7% and 1.6%, respectively, of MOLReloads volume. Direct costs for MOLPay primarily include amounts paid to banks related to payment processing. Ancillary expenses primarily include information technology infrastructure and consulting costs relating to MMOG.asia.

 

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The following table sets forth our direct costs and other ancillary expenses for our MOLPoints, MOLReloads, MOLPay, MMOG.asia and Others segments for the specified periods.

 

     For the year ended
December 31,
     For the three
months ended
March 31,
 
     2011      2012      2013      2013      2014  
     (MYR in millions)  

Segment direct cost and other ancillary expenses

              

MOLPoints

     14.9         27.5         46.6         8.6         14.0   

MOLReloads

     16.7         18.8         16.3         4.8         5.1   

MOLPay

     0.3         1.5         5.7         0.6         3.0   

MMOG.asia(1)

             0.2         1.2         0.4         0.2   

Other

     0.0         0.2         0.2         0.0         0.1   

Total direct costs and other ancillary expenses

     32.0         48.2         70.0         14.4         22.4   

 

Note:

 

(1) We acquired our equity interest of approximately 80% in MyCNX, which operates MMOG.asia, in November 2012.

Segment gross profit

Segment gross profit represents segment revenue minus direct costs and other ancillary expenses. We monitor the operating results of our business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment gross profit is one of the key measures we use to assess the performance of our operating segments.

Employee expenses

Employee expenses primarily comprise wages, bonuses and salaries and other personnel-related expenses, which includes statutory retirement contribution schemes, social security payments, and staff welfare such as medical benefits among others, to the extent such costs are not capitalized as development expenditures.

The following table sets forth our employee expenses with respect to each segment for the specified periods.

 

     For the year ended
December 31,
     For the three
months ended
March 31,
 
     2011      2012      2013      2013      2014  
     (MYR in millions)  

Segment employee expenses

              

MOLPoints

     4.5         10.7         19.9         4.5         5.0   

MOLReloads

     4.7         3.3         4.5         1.1         1.1   

MOLPay

     0.3         1.1         2.3         0.5         0.7   

MMOG.asia(1)

             0.6         2.9         0.6         0.7   

Other

     0.0         0.0         0.3         0.0         0.1   

Unallocated

     0.6         0.6         1.0         0.2         0.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total employee expense

     10.2         16.5         31.0         6.9         7.8   

 

Note:

 

(1) We acquired our equity interest of approximately 80% in MyCNX, which operates MMOG.asia, in November 2012.

Depreciation and amortization

Property, plant and equipment are depreciated on a straight line basis at an annual rate between 5% and 33%, depending on the nature of the asset. Goodwill related to the domain name MOL.com and goodwill on consolidation of acquired subsidiaries are tested annually for impairment. Other intangible assets, including our software and copyrights, electronic payment system, exclusive license and distribution rights, other intellectual

 

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property and trademark, are amortized on a straight line basis at an annual rate between 20% and 33% depending on the nature of the asset. Development expenditure for web applications, software products and programs, which primarily comprises employee benefits expenses for information technology personnel and creative personnel, is amortized on a straight line basis over the shorter of five years and the period of the expected benefits.

The following table sets forth our depreciation and amortization expenses with respect to each segment for the specified periods.

 

     For the year ended
December 31,
     For the three
months ended
March 31,
 
     2011      2012      2013      2013      2014  
     (MYR in millions)  

Segment depreciation and amortization expenses

              

MOLPoints

     1.9         3.4         9.8         1.8         2.7   

MOLReloads

     1.7         1.7         1.1         0.5         0.3   

MOLPay

     0.0         0.6         0.7         0.2         0.2   

MMOG.asia(1)

             1.3         8.9         2.1         2.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation and amortization expenses

     3.6         6.9         20.6         4.5         5.6   

 

Note:

 

(1) We acquired our equity interest of approximately 80% in MyCNX, which operates MMOG.asia, in November 2012.

Marketing, advertising and promotion expenses

Marketing, advertising and promotion expenses primarily comprise expenses incurred to promote digital content that is available for purchase using MOLPoints and online games operated by MMOG.asia. Our MOLPoints operations in Turkey account for a substantial portion of our marketing, advertising and promotion expenses.

Communication and travelling expenses

Travel and communication expenses comprise expenses incurred by us in connection with corporate travel and communication.

Office related expenses

Office related expenses primarily comprise printing and stationery expenses, office rental expenses and utilities. Our office related expenses tend to be relatively higher in Turkey as compared with other countries where we have substantial operations due to higher office rental expenses in Turkey.

Other operating expenses

Other operating expenses primarily comprise contract and other professional costs, bank charges and other miscellaneous costs.

 

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Segment Operating Expenses

Segment operating expenses primarily comprise communication and travelling expenses, marketing, advertising and promotion expenses, office related expenses and other operating expenses. The following table sets forth our segment operating expenses with respect to each segment for the specified periods.

 

     For the year ended
December 31,