N2n Connect Berhad

Company Face-Off: $BURSA / 1818 (BURSA MALAYSIA BERHAD) vs $N2N / 0108 (N2N CONNECT BERHAD) vs $EFORCE / 0065 (EXCEL FORCE MSC BERHAD)

Besides the data centre boom that has positively impacted Malaysia's stock market in the first half of 2024, the vibrant IPO scene has also drawn big interest from funds to come into Malaysia! Beyond the data centre-related and IPO stocks, the strong performance and high trading volume of Malaysia's stock market favor companies facilitating these trades in the market. Here’s a comparison of three prominent PLCs in this space: our very own bourse $BURSA / 1818 (BURSA MALAYSIA BERHAD) and two tech enablers for brokers providing the software and services for the trading platforms we use.

With the rising interest and volumes in Bursa Malaysia, could there be any opportunities here? Let us know in the comment section below!

Quarterly rpt on consolidated results for the financial period ended 31/03/2024

General Meetings: Outcome of Meeting

Annual Report & CG Report - 2023 (Amended Announcement)

Annual Report & CG Report - 2023

SHARE BUY-BACK STATEMENT IN RELATION TO THE PROPOSED RENEWAL OF THE AUTHORITY FOR THE COMPANY TO PURCHASE UP TO TEN PERCENT (10%) OF ITS TOTAL NUMBER OF ISSUED SHARES (PROPOSED SHARE BUY-BACK)

General Meetings: Notice of Meeting (Amended Announcement)

General Meetings: Notice of Meeting

OTHERSPROPOSED RENEWAL OF THE AUTHORITY FOR N2N TO PURCHASE UP TO TEN PERCENT (10%) OF ITS TOTAL NUMBER OF ISSUED SHARES

N2N - Notice of Book Closure

Second Interim Dividend

Quarterly rpt on consolidated results for the financial period ended 31/12/2023

I was looking at $N2N / 0108 (N2N CONNECT BERHAD) back in 2020 when they were potentially beneficiary of high volume trading, but these recent developments are quite interesting. Thanks for sharing!

$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.

$N2N / 0108 (N2N CONNECT BERHAD)

N2N summary (part 1)

Borrowings = 0

1. Marketable securities @ RM 60.866mil
2. Cash @ RM 92.370mil
Total = RM 153.236mil

Net cash per share = RM0.275

20th AGM Meeting Minutes:
https://cutt.ly/xwJKFqMq
*Company cash reserve practices range from 120-140mil. Balance for the dividend.

(a) The annual dividend base will be 2 sen per year.

(b) Potential for an extra dividend as of Q3 FY2023's cash level
= RM153 - 140 = RM 13mil
= 13 / (NOSH 558.204)
= 2.3sen

If the company management walks their talk, dividend is possible paying up to 4sen a year. If they are not paying more dividends, perhaps they are reserving huge amounts of cash for meaningful M&A going forward.

@portoftheyear

PORTFOLIO OF THE YEAR 2024

1. $KEINHIN / 7199 (KEIN HING INTERNATIONAL BERHAD) @ 50%
A low-profile, well-run company equipped with an already expanded production capacity in Vietnam. Malaysia automotive segment is growing strong. Deep undervalued valuation. The cash pile is growing fast.

2. $REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD) @ 10%
A strong fundamental company with proxy to new Agong, 5G infra, Starlinks, thematic play.

3. $N2N / 0108 (N2N CONNECT BERHAD) @ 10%
Huge cash pile of RM153mil, with DY range from 4-8%. Diversifying into non-capital market businesses. Holding 25.15% of OMM (Australian Fintech Company), which is valued at ~RM92 million and started to make profit in the past 2 quarters. A thematic play for the bull market as well.

4. $OPENSYS / 0040 (OPENSYS (M) BERHAD) @ 10%
Installed CRM aprox. 7k+ units (~RM80k/unit) in the market are building strong and growing recurring income. New growth engines going forward: (1) SmartTCR with a potential market size of ~5k units (~RM110k/unit). (2) SmartCIT potential market size is RM800mil. (3) Potential of more BPO business (recent awarded RM105mil contract from Maybank). Light asset business with DY ~5%.

5. $ABLEGLOB / 7167 (ABLE GLOBAL BERHAD) @ 10%
One of the cheapest-valuation consumer companies in the market. Mexico JV Business is going to accelerate its business growth. DY ~4%.

6. $SHANG / 5517 (SHANGRI-LA HOTELS (MALAYSIA) BERHAD) @ 10%
Bottom-catching asset play.

NOTICE TO WARRANT HOLDERS IN RELATION TO THE EXPIRY AND LAST DATE FOR THE EXERCISE OF WARRANT 2019/2024

Change in Boardroom - MRS LIN, LIN

Change in Boardroom - MR JIANG, JIANFENG

Quarterly rpt on consolidated results for the financial period ended 30/09/2023

PETALING JAYA: N2N Connect Bhd revenue profile seems to have stabilised to one with a stronger mix of recurring revenue of about 90% versus variable revenue of about 10%.

$N2N / 0108 (N2N CONNECT BERHAD)
Research by TA Securities
Sell – Target Price RM0.35

“Expect 2HFY23 to Mirror 1HFY23”

Key takeaways from our recent meeting with N2N’s management: i) N2N’s revenue profile has stabilised to one with a stronger mix of recurring revenue (~90%) versus variable revenue (~10%), ii) in the near-to-medium term, potential catalysts for N2N include the launch of the Asia Trading Hub (to commence pilot phase in 1Q24), and a new trading platform (to launch in 2H24). In all, we maintain our Sell recommendation on N2N with an unchanged TP of RM0.35 based on a target PE of 17.0x against CY24F EPS. We take this opportunity to cease coverage on N2N due to the underwhelming traction in its growth plans.

Analyst:
Wilson Loo, CFA
wilsonloo@ta.com.my

N2N - Notice of Book Closure

$N2N / 0108 (N2N CONNECT BERHAD)
Research by TA
Sell - Target Price RM0.35

"Weighed by Weaker Revenue and Higher Opex"

Corresponding to our earnings downgrade, our TP for N2N is revised
lower to RM0.35 (previously RM0.37) based on a target PE of 17.0x against
CY24F EPS, which is >-2.0SD to the stock’s 3-year average PE of 27.1x.
Maintain Sell. The key rerating catalyst for the stock includes a pickup in
trading activity and traction with the group’s Asia Trading Hub.

Analyst:
Wilson Loo, CFA
wilsonloo@ta.com.my

First Interim Dividend

Quarterly rpt on consolidated results for the financial period ended 30/06/2023

Change in Principal Officer - MISS CHONG SHWU HUEY

Change in Principal Officer - MR YAW CHUN SOON

$N2N / 0108 (N2N CONNECT BERHAD)
Research by TA Securities
Sell - Target Price RM0.37

"Weighed by Softer Trading Momentum"

Corresponding to the earnings cut, our TP for N2N is lowered to RM0.37 (previously RM0.415) based on a target PE of 17.0x against CY24F EPS, which is -2.0SD to the stock’s 3-year average PE of 26.1x. Maintain Sell. Key rerating catalysts for the stock include a pickup in trading activity and traction with the group’s Asia Trading Hub.

Analyst:
Wilson Loo, CFA
wilsonloo@ta.com.my

$N2N / 0108 (N2N CONNECT BERHAD)
Research by Public Investment Bank
Ceasing Coverage

"Ceasing Coverage"

N2N reported a headline 1QFY23 net profit of RM2.9m (-26.4% YoY, -55.3% QoQ), the weaker numbers coming as a result of lower revenue recorded during the quarter. Lower one-time implementation revenue and transaction-based revenue in the current quarter was the primary cause. Amid an increasingly uncertain global economic environment, securities market transactions are anticipated to be subdued in the months ahead. We had temporarily suspended coverage since 2018 (last published report dated 7 June, 2018), and are now formalizing the cessation on a permanent basis as we also redeploy internal resources to broaden sector coverage. Our last call and target price are Outperform and RM1.65.

Analyst:
Ching Weng Jin
research@publicinvestbank.com.my