Quick read through on $OPENSYS / 0040 (OPENSYS (M) BERHAD) Annual Report FY2023:
- Revenue has increased 7.4% y-o-y at RM88.39 mil.
- Main revenue contribution which takes up ~50% comes from Maintenance & Software Solutions Services increased 12.7% y-o-y. It is also the key recurring income segment. With the increasing number of CRMs entering maintenance mode after the expiry of warranty period, the demand for maintenance services is steady. More than 400 units of CRMs entered the maintenance mode in FY2023. The Group is currently providing maintenance services for nearly 7,650 devices including CRMs, cheque deposit machines and desktop cheque scanners.
- Second largest revenue contribution which takes up ~23% is the Hardware Segment, increasing 8.4% y-o-y to RM20.60 million, driven by strong sales performance of cheque deposit sidecar modules of CRM to the banking customers.
- Third largest revenue contribution which takes up ~21% is the BPO Segment. The Group’s BPO in Bill Payment Kiosk Outsourcing and CPO revenue decreased by 5.4% y-o-y to RM18.96 million in FY2023. The decline was attributed to reduced rental income from bill payment kiosks and a lower volume of cheques processed. 2024 onwards, the newly awarded “Outsourcing of Outward Cheque Clearing” services project from a major local bank is expected to contribute significant revenue to this segment.
- There’s 3.3% increase in gross profit, rising from RM31.40 million in FY2022 to RM32.43 million in FY2023, with slight decline in its overall gross profit margin, dropping from 38.2% in FY2022 to 36.7% in FY2023 due to depreciation of MYR against the USD, leading to higher costs for goods and spare parts. Additionally, elevated staff costs further contributed to this marginal gross profit decline.
- PBT and PAT continues slight upward trajectory at RM16.5mil and RM12.4mil respectively in FY2023.


BUSINESS SEGMENTS TO KEEP AN EYE ON
1. Cash Recycling Machine - the Group has been supplying the CRMs to banks for the last 10 years with a commanding market share of 80%. The Group’s CRM installation continued its steady growth in FY2023 as banks normalized CRM procurements after the recovery from the pandemic. The total number of installed units increased from 4,523 units in FY2022 to 4,758 units in FY2023, which presents a sizeable opportunity to introduce other value-added functions such as cheque deposit and card dispensing by using the Group’s own-designed sidecar modules. In 2023, 100 units of such sidecars with cheque deposit functions had been deployed. The typical life span of self-service cash machines is around 7 years. Besides wear and tear, the CRMs need be replaced because of technology obsolescence. The number of CRMs supplied by the Group that are due for replacement is estimated at 3,000 units in the next 3 years.
2. In the CPO (Cheque Process Outsourcing) sub-segment, the Group has secured a 7-year contract worth RM105 million from a major local bank in the last quarter of 2023. CPO services will bring about additional revenue stream to the Group’s Services Segment starting from FY2024 through to FY2030.
3. Mass adoption of BOTF solutions by banks in the next 2 years. Currently, the Group is in the process of implementing SmartTCR solutions for four (4) banks. Further POCs are slated for implementation in FY2024. The Group is confident that SmartTCR will emulate the successful trajectory of CRM in the foreseeable future. The market potential for SmartTCR is estimated to span between 4,000 to 6,000 units, catering to over 2,000 bank branches in Malaysia.


Market Outlook indication: TLDR continuous healthy co-existence of cash usage and e-payments will prevail in the foreseeable future.
• In 2023, Automated Teller Machine (“ATM”)s/CRMs remained an important distribution channel for cash due to continuous wide circulation and usage by the public.
• Based on the payment statistics from Bank Negara Malaysia (“BNM”), ATM/CRM usage remained robust.
• According to BNM’s 2023 Annual Report, Cash In Circulation remained high at RM161.8 billion in 2023, a minor decline of 0.2% from RM162.1 billion in 2022.
• The value of ATM/CRM transactions only declined marginally by less than 2% to RM396.42 billion while transaction volume remained intact at about 798 million transactions compared to the previous year.
• When comparing transaction values of other payment instruments, ATM/CRM cash withdrawal transaction value was the second highest after cheque transaction value.
• For non-cash transactions which comprise e-Wallets, debit and credit cards and bank transfers, e-Wallets usage is only 25% of total non-cash transactions.
• The usage of non-cash payments dipped by 4% to 51% as people re-balanced their payment behaviour after the pandemic.


Other trivia:
- Consistent track record of distributing dividends to shareholders for 13 consecutive years since July 2010.
- In 2023 the Group’s staff turnover rate is 11.5%, last year (2022) was 14%.
- Looking at their top 30 shareholders in 2023 AR, most of them are individuals. Interestingly, Oppstar Technology Sdn. Bhd. is one of the top 30 shareholders, but only 0.24%.


Tagging people that may be interested in them:
@rhresearch @terence775 @mshumts @kimkuan