Dear Shareholders,

On behalf of the Board of Directors (the “Board”) of mDR Limited (the “Company”, and together with its subsidiaries, the “Group”), I am pleased to present to you our annual report for the financial year ended 31 December 2019.

Global economic growth remained weak in 2019 and recorded its slowest pace since the 2008 financial crisis because of trade and geopolitical tensions. Singapore’s economy grew by a modest 0.7% in 2019 (2018: 3.2%). The Group however successfully navigated through the economic uncertainties and recorded $1.0m in profits for FY2019. If non-cash impairments are excluded, profits after tax for FY2019 would have been $6.26m.

We continued with the Group’s evolutionary and transformative journey. In April 2019, shareholders approved the capital reduction by the cancellation of share capital of the Company to write off losses that were incurred and accumulated between FY2004 and FY2009. The capital reduction exercise was completed in June 2019. The Company successfully raised $28.41m from the exercise of Tranche 2 Warrants, of which my contribution (together with my spouse) was $17.50m (i.e. almost 61% of the Tranche 2 Warrants proceeds raised). Despite the economic uncertainties, 52% of the Tranche 2 Warrants were exercised by the warrantholders. Several Directors (including myself, Zhang Yanmin, Mark Leong and Ian Oei) subscribed for the entitlement of their Tranche 2 Warrants in full. Directors and Group employees, in aggregate, have invested $17.80m for the exercise of Tranche 2 Warrants. To recap, mDR has raised approximately $95m to-date from its Rights cum Warrants issue (Rights, Tranche 1 and Tranche 2 Warrants), of which my contribution (together with my spouse) was $43.51m, our CEO Frankie Ong’s contribution was $6.60m and cumulatively that of all Directors and staff was $51.02m. I believe the investments by our Directors and staff is tangible evidence that we have confidence in our business and more importantly this increases alignment of interest with all shareholders.

In January 2019, the Group entered into a subscription agreement with Mainboard listed USP Limited for the proposed subscription of 15,000,000 new ordinary shares of USP. However, after mutual discussions with USP, the Company decided not to proceed with the proposed subscription. We conducted the relevant legal and financial due diligence in-house and the Company did not incur any third-party fees in this aborted transaction.


A summary of the Group’s financial performance in FY2019 is set out below.

Group’s year-on-year ("YoY") revenue increased by $20.82m to $285.69m (FY2018: $264.87m). The Group achieved operating profit after tax (before impairments) of $6.26m (FY2018: $2.49m). YoY the Group improved its operating profit by 151%. However, Group’s net profits were lower due to certain non-cash accounting adjustments, these being, goodwill impairment, loss allowance of financial assets in relation to a debt security, and impairment for right of use assets (lease of an outlet).

YoY revenue from After Market Solutions (“AMS”) division decreased by 18% from $24.24m to $19.86m, primarily due to lower repair volumes.

Revenue contribution from Distribution Management Solutions (“DMS”) division increased by $20.20m to $253.05m (FY2018: $232.85m). DMS achieved higher revenue mainly due to higher sales volume generated from its retail operations.

Revenue for the Group’s Digital Inkjet Printing for Out-Of-Home Advertising Solutions (“DPAS”) division was $5.79m, 6% lower than the 2018 revenue of $6.15m.

Investment division’s revenue increased by 329% to $6.99m (FY2018: $1.63m), primarily due to higher dividend income of $4.33m from investment in equities (FY2018: $1.31m) and coupon interest income of $2.32m from investment in debt securities. Group’s gross profit margin from investment income is 100%. mDR currently has a portfolio of approximately $142.29m of equities and debt securities (before loss allowance on investment in debt securities) assets as at 31 December 2019, generating dividend and coupon payments. Our equity investment portfolio in 2019 registered a total return of 1.44%. During the same period, the STI and FTSE ST Catalist's return inclusive of dividends was a gain of 9.40% and a loss of 9.67%. Maintaining a balanced equity-bond allocation, our investment portfolio return lagged the STI, yet outperformed the FTSE ST Catalist. We adopt a long term, absolute-return approach to investing and are less distracted or constrained by index benchmarks or year to year mark-to-market volatility.

The Group’s financial position has strengthened with total net tangible assets of $152.34m as at 31 December 2019 (31 December 2018: $127.50m).


Singapore Operations

The Group is one of the largest distributor, retailer and aftermarket service provider of mobile phones. The Company is Samsung’s authorised aftermarket service provider for mobile phones and other consumer electronic goods. The AMS division manages and operates Samsung’s 4 service centres at Plaza Singapura, VivoCity, Westgate and Causeway Point. Group’s DMS division currently operates and manages an island-wide network of retail outlets in Singapore comprising 9 Singtel stores (including 2 franchised stores), 8 M1 stores and 3 Samsung concept stores at Plaza Singapura, VivoCity and Westgate.

Groups’ subsidiary, VT Cosmetics has currently 1 retail outlet at Plaza Singapura. VT Cosmetics has not returned the results we expected and therefore we have scaled down VT’s retail operations.

Group’s investment business pertains to investments in equity and debt securities, and loans. Of the Company’s total investments of $101.88m (as at 17 March 2020), $73.6m is classified under non-current assets. These investments are held for the long term to generate investment returns/income (interest, dividends and capital gains).

Malaysia Operations

The DPAS operations under Pixio in Malaysia is profitable. Pixio has continued to capitalize on its established reputation as a reliable, cost-effective and quality service provider.


We believe that the Investment division will be the future growth engine of the Group. We have successfully deployed the proceeds of $79.43m raised from the Rights cum Warrants issue in marketable securities (as at 17 March 2020). We have also built a fixed income portfolio of short duration bonds with the goal of capital preservation, lower market volatility and a respectable yield. Our investment portfolio’s dividend yield for equity securities as at 31 December 2019 is 5.34% and yield to maturity for debt securities as at 31 December 2019 is 5.80%.

Company’s share price continues to be undervalued in our view. mDR successfully bought-back approximately 1.67 billion shares under its Buy-back mandate approved at the annual general meeting ("AGM") last year.

We have been early prophets of a doomsday financial cataclysm. Investors tracking our market outlook shared during Quarterly management conference calls and our AGMs will attest to our consistent pessimism and anticipation of a financial crisis for almost 2 years. The current financial meltdown and global recession that may follow, will likely present the opportunities that we are patiently waiting for.

Given that nothing is ever certain in the financial markets, since the inception of our Investment division, we have taken a conservative balanced approach with some exposure to equities and some exposure to short duration bonds. If global economic expansion continues, our equity exposure should perform well and if a global recession occurs, our short duration bond portfolio will allow us to take advantage of opportunities that such an economic recession would bring. We will then expect to shift to a more aggressive 100% equity portfolio with moderate leverage. In such a scenario, we may experience short term mark-to-market volatility, but in the mid-term, mDR should reap substantial gains.

Looking further into the future, mDR will embark on its next transformation phase post recovery in the next 2-3 years into physical real estate. We expect to add substantial prime real estate assets with strong sustainable rental cash flow.

The distribution and retail businesses under the DMS division are expected to be impacted by the competitive pressures from the challenging retail environment and the economic effects of the COVID-19 outbreak. With the political instability and impact from the COVID-19 outbreak, DPAS division’s performance is expected to be subdued as the division is dependent on the advertising expenditure of its clients which is usually guided by the state of the economy and consumer sentiments. DPAS division will continue to work on increasing its market share and gaining new customers through its pricing strategy. These divisions will stay nimble and look for opportunities and additional revenue streams for expansion and growth.

The impact of the COVID-19 outbreak and the uncertainties in the global economy may exert pressure on the Group’s profit targets for FY2020. mDR will celebrate its 20th anniversary this year. In all these years, the Group has gone through various phases of challenges, expansion and growth. The Group is on track in its transformation. We believe the Group is adapting well to the disruptive headwinds affecting its distribution and retail businesses and is geared towards a stronger, resilient and profitable company over the long term via its diversification and transformation initiatives. We will continue to work towards our efforts to accelerate growth, achieve better results and value creation for all shareholders.


We are pleased to share that we achieved our best rank to date i.e. in the Top-50 rankings (42nd out of 578 SGX listed companies, compared to achieving 67th rank in 2018 and 242nd rank in 2017) in the corporate governance ranking in the Singapore Governance and Transparency Index 2019, having exceeded even some of the STI constituents (Genting Singapore, Thai Beverage and Yangzijiang Shipbuilding).

Despite achieving after tax profits of $6.26m (excluding noncash impairments), an increase of 151% from FY2018 of $2.49m, cash flow performance targets and a substantial increase in our capital base, all Directors and Department Heads (including myself) have foregone performance bonuses for FY2019 as a goodwill gesture in light of the various non-cash impairments.


The Company declared an interim dividend of S$2m (approximate) in 1H-FY2019.

In view of the impairment losses mentioned earlier, the Company is unable to declare a final dividend for FY2019. However, we remain committed to achieving better performance and dividend payment for FY2020.


From its introduction in March 2019, we have been holding Quarterly management conference calls with shareholders/ analysts/media. These briefings have helped us to gather valuable feedback and maintain regular communication with our investors. We welcome all shareholders to join us in our Quarterly earnings calls and at the upcoming AGM to share their views and feedback.


I thank our shareholders, business associates and customers for their continued support and confidence in us. I also extend my appreciation to my fellow Directors, management and employees of the Company for their dedication, efforts and teamwork that has contributed to the Group’s continued success. We look forward to steering the Group to achieve better performance this year.

Edward Lee
Executive Chairman
31 March 2020