CEO's Statement

Dear Shareholders,

The Group went through a challenging, and yet exciting period as we saw the completion of our business re-alignment programme in 2007. Our core businesses can now be separated into two major groupings of Digital Media and Infrastructure Enabling. The Digital Media group comprises Digital Media Solution, Multi-Media Software and New Media Content, while the Infrastructure Enabling division consists of Infrastructure Solution and Managed Services. With this new business focus in place, I will now share with you in greater details our operational performance for FY2007.

Overview

The Group's total revenue for FY2007 rose to US$161.6 million from US$160.7 million in the previous year while gross profits declined by US$3.4 million to US$39.4 million. Despite intense market competition, gross margins for the year remained healthy at 24.4%. Achieving such results on the back of a comprehensive business organisation re-alignment and difficult market conditions in our traditional business bolstered our confidence and we look forward to greater successes in the upcoming year.

Although we experienced decline in revenue from our traditional infrastructure business in China, it was compensated by good growth from the digital media business; resulting in China remaining the largest contributor of the Group's total revenue at 72.5% or contributing a total of US$117.1 million. On the other hand, we saw revenue outside China increasing 9.3% to US$44.5 million in FY07. Lower revenue from Korea was offset by increased revenue from Indonesia and Malaysia; as these countries continue to secure infrastructure business with telecom operators. Such results reflect our strong relationships with established customers and our success in gaining new customers.

Administration expenses increased to US$11.6 million in FY07 from US$8.1 million in the previous year. This was attributed to increments in engineering and services headcount for our Digital Media business. Even as the Group re-aligned our infrastructure business, the Group took a necessary strategic decision to continue our expansion in the growing digital media market.

Digital Media

The Group has been positioning itself for explosive growth in digital media and especially in the cable industry in China. The migration from analog to digital Cable TV (CATV) subscribers grew at over 80% from 2006 to 2007. The CAGR of this migration is forecast to be 35% from 2007 till 2010; with China switching to full digital TV broadcast by 2015. Our foresight has been rewarded, as reflected by the good performance from our Digital Media group in FY07. Revenue surged to US$35.7 million, up 37.3% from US$26.0 million in the previous year. The Digital Media Solution segment exhibited strong growth, with revenue totalling US$28.3 million in FY07, an increase of 22.7% from US$23.1 million in FY06. The remarkable growth came from the Multi-Media Software segment, where revenue escalated 150.6% to US$7.4 million for the year. The Group is starting to see the returns on the software development investments that we have previously made. Equipped with our professional skills in implementing large-scale digital media solution for operators, and developing world-class proprietary multi-media video software based on international standards, we made various inroads into the CATV and IPTV sectors. Besides having secured the first optical backbone network contract for the digiti sation of the CATV industry in Central China, we also made inroads into Beijing Gehua, other city cable operators and more recently, into Inner Mongolia in China. Outside of China, we also secured a number of IPTV trials for operators in a number of countries. The successes that we have achieved with our software and solution put us in a good position to play an important role in the digital media market.

Besides digital TV and IPTV, mobile TV will likely become an important trend as consumption of video content on the move continues to increase. As such, the Group formed a New Media Content segment in October 2007 and invested in Beijing CNTI Media Holding Co. Ltd (CNTI), a company that holds a long-term technical service contract with China Teleformation Culture Media Co. Ltd (CTCM). CTCM is one of only six TV operators in China with a license to deliver mobile TV services on any mobile network.

In addition to tapping on the benefits of a highly exclusive mobile TV platform of CNTI in the longer term, this partnership provides an avenue for the Group to develop products and services in areas including mobile content and advertising.

Infrastructure Enabling

FY2007 was a challenging year for our traditional Infrastructure Enabling group. After years of rapid growth in IT infrastructure market, we witnessed a slowing of growth; as this market enters maturity especially in developed countries. As a result, revenue for our Infrastructure Enabling group declined by 6.6% to US$125.8 million for FY07. The Infrastructure Solution segment recorded a drop in revenue to US$120.6 million, down by 6.4% from US$128.8 million in FY2006. We also saw a reduction of US$0.7 million in revenue to US$5.2 million for our Managed Services segment.

However, the Group believes that with rising global need for network security and related services due to increasing awareness of security threat to networks and more stringent corporate governance from Internet proliferation, there is opportunity for specialised security solution for our Infrastructure Solution segment. The IT security solutions market in Asia Pacific is forecasted to grow by approximately 15% per annum till 2011, reaching over US$5.8 billion in the process. China, on the other hand, is expected to grow faster than other countries in this market. The Group has developed an end to end security solution; including skilled security professionals, to target the information security needs of both telecom operators and enterprises.

Complimenting our end to end security solution, our newly set up Managed Services segment, under the brand name, Vantage, will be able to capitalise on the growth potential of managed security services or MSS. The MSS market in Asia-Pacific, excluding Japan, is expected to grow at about 20%; exceeding US$604 million in 2008.

Riding the Next Wave of Growth in Digital Media Industry

The Group has identified the cable industry as the next, near term growing market. During the last few years, the Group has spent considerable effort and resources in designing a unique, cost-effective, total solution for cable operators. In particular, we have developed a multi-media software with the aim of transforming these cable operators into world-class operators offering advance interactive TV services. The inroads that we have made with a large provincial operator in Central China, Beijing Gehua, Inner Mongolia and others, where there are in total more than 9 million cable subscribers confirm acceptance of our software and solution. With these large reference customers, we work towards replicating our successes further in the market; as operators strive to meet the timeframe to convert to digital TV broadcasting and providing advanced interactive TV services by 2015.

Going Forward

The Group has transformed, streamlined our operations and made strategic investments and alliances to address challenging market demands. In our re-alignment of business segment, we have already identified niche area of focus where we see growing market opportunities. As the Group moves more towards security, software and services in both infrastructure and digital media market, we are changing our business model from project-based to recurring-based. This change puts us in a stronger position for the future.

We are excited with the outlook ahead; in spite of current economic uncertainties. We will continue to deliver excellent services to our valued customers and hope to achieve greater success in 2008.

Jismyl Teo
Chief Executive Officer