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Tuesday, December 06, 2016

N2N: Riding The Fintech Train

Background

N2N is in the provision of trading and analytics solutions mainly to local stock broking firms and banks. It is the provider of the TCPro brand of trading terminals used by 70% of the investment banks and stockbroking firms in Malaysia. It's currently operating in 3 other ASEAN countries, such as Singapore, Indonesia and the Philippines. It plans to expand into Hong Kong, Australia and Japan in the next 3 years.  

Last month, it announced plan to acquire AFE Solutions Ltd from its 2 shareholders, Reuters International Holdings S.A.R.L. and Systex Capital Group Inc for USD20.6 million. The acquisition of AFE would enable N2N to have a strong presence in the provision of financial data & trading solution in Hong Kong, Macau & Vietnam. For more, go here.



Historical Financial Performance

N2N's financial performance has been on a steady rise after the Global Financial Crisis.


Graph 1: N2N's last 10 years' P&L

Recent Financial Result

For QE30/9/2016, N2N's net profit rose 18% q-o-q or 71% y-o-y to RM3.4 million while its revenue was mixed - down 1.5% q-o-q but up 5.7% y-o-y - to RM10.5 million. The improved bottom-line was mainly due to the fair value changes on the financial assets at fair value through profit or loss.


Table: N2N's last 8 quarters' P&L


Graph 2: N2N's last 12 quarters' P&L

Latest Financial Position

N2N's financial position is very strong. As at 30/9/2016, it has net cash, FDs & financial assets totaling RM101 million (or, 21 sen per share). This gave the group a current ratio of 18x and a gearing ratio of less than 0.1x.

Valuation

N2N (closed at RM0.78 yesterday) is now trading at a PER of 33x (based on last 4 quarters' EPS of 2.4 sen). If the net cash is deducted from the share price, its PER would be reduced to 24x. Based on earning CAGR of 28% over the past 3 years, its PEG ratio is 0.86x. This means its valuation is acceptable.

Technical Outlook

N2N is resting on its "arching" uptrend line support of RM0.75.


Chart: N2N's monthly chart as at Dec 5, 2016 (Source: ShareInvestor)

Conclusion

Based on good financial performance, strong financial position, fairly attractive valuation & still positive technical outlook, N2N could be a good stock for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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