N2N: Earnings Boosted By Its New Subsidiary, AFE

Result Update

In QE30/6/2017, N2N's net profit rose 174% q-o-q or 247% y-o-y to RM9.9 million while its revenue rose 164% q-o-q or 182% y-o-y to RM30 million. Revenue rose y-o-y as a result of full consolidation of AFE Solutions Ltd's ("AFE") profit after its acquisition. In addition, the increase was also due to higher monthly variable matched trades.

Net profit rose y-o-y due to the full consolidation of AFE's results, the unrealised foreign exchange gain on USD loan of approximately RM3.85 million and fair value change on financial assets at fair value through profit or loss of RM0.79 million. Excluding the last 2 items, N2N's net profit would have been RM5.3 million for QE30/6/2017 - a 85%-increase from same quarter last year.


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


Graph: N2N's last 15 quarters' P&L

Latest Financial Position

As at 30/6/2017, N2N's financial position is satisfactory, with current ratio of 8x and gearing ratio of 0.55x. In addition, it has net cash, FDs & financial assets totaling RM49 million (or, 10 sen per share).

Valuation

N2N (closed at RM0.73 last Friday) is now trading at a PER of 17x (based on annualized core EPS 4.4 sen). At this PER, N2N is deemed fairly attractive.

(Note: Annualized EPS is arrived at by dividing annualized net profit by number of shares outstanding of 477 million. Annualized net profit is computed by multiplying core net profit for QE30/6/2017 of RM5.30 million by 4.)

Technical Outlook

N2N is in a long-term uptrend line (SS) with support of RM0.70.


Chart 1: N2N's monthly chart as at Aug 25, 2017 (Source: ShareInvestor)


Chart 2: N2N's weekly chart as at Aug 25, 2017 (Source: ShareInvestor)

Conclusion

Based on good financial performance, healthy 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.