$N2N / 0108 (N2N CONNECT BERHAD)

N2N summary (part 2)

(a) N2N Connect to buy 28% stake in Australian lender
https://cutt.ly/fwJ1QLZD

N2N has completed their investment in OurMoneyMarket Holdings Pty Ltd (OMM) at Q2FY2018 at the cost of AUD 2.8 million (RM8.33 million) for 28% stake.

OurMoneyMarket raising Series C on $117m valuation in FY2021.
https://cutt.ly/WwJ1QZjQ

N2N's investment value in OMM is est. worth ~RM 90mil (AUD 117m x 25.15% x exchange rate 3.1)
Assumptions:
* N2N's stake has diluted from 28% to 25.15% after the rounds of funding.
* As per OMM's Series C funding pre-money valuation guideline,

Reference: Series A, B, C, D, and E Funding: How It Works
https://cutt.ly/RwJ1QZXZ

OMM was founded in 2017, which is already 6 years old +. If OMM manages to get an IPO listing in the future and N2N decides to cash out, should it be able to generate at least RM 100mil in return?

FY2021, the share of results of associates from OMM is reported at -RM 5.92mil loss. In the past 2 quarters (Q2 & Q3 FY2023), it has finally started to make profits.

(b) N2N unlocks synergy with AFE
https://cutt.ly/jwJ1QXQ9

AFE hasn't brought meaningful growth projections to the company so far, but it has immediately levelled up the company's top-line and bottom-line after the acquisition. The acquisition borrowings have been settled by the end of FY2020, which only took 4 years.

(3) Dividend paid for the past 5 years = 14.5sen (~2.9sen per year)
FY2018 = 4.0sen
FY2019 = 2.0sen
FY2020 = 4.5sen
FY2021 = 2.0sen
FY2022 = 2.0sen

(4) Hundsun Holdings Ltd became a N2N major shareholder by acquiring a 23.657% stake at 75sen in Apr 2021.
https://cutt.ly/TwJ1QCqh

It is a 28% discount compared to the current N2N's share price of 54sen. Also, a new synergy of business expansion with Hundsun?

(5) Closet Peers' valuation and DY
N2N @ PE 14.92 | DY 5.56%
BURSA @ PE 24.4 | DY 3.63%
EFORCE @ PE35.6 | DY 2.30%
Hundsun Technologies Inc. @ PE 27.8 | DY 0.52%

N2N's Dividend Yield is pretty attractive, and its PE valuation is relatively low compared to its historical PE range as well as peers comparisons.

(6) Promising prospects highlighted in FY2023 AR
a) Releasing a brand-new suite of ultra-low latency trading systems and our 4th generation trading platform
b) Rolling out a series of new generation products and services that are seamlessly integrated, eliminating the lines that traditionally divide the front end and back end system by merging them into one singular service.
c) Diversifying into non-capital market businesses. These new developments are currently in their infancy stage, we believe they will make a significant contribution to our revenue over the coming years.

(7) A thematic play for the bull market. A bullish market in Malaysia & a recovery trend in HK stock market will help to push up the earning for the company.