N2N: A Potential Fintech Play

Result Update

In QE31/12/2018, N2N's net profit rose 27% q-o-q but dropped 47% y-o-y to RM2.8 million while its revenue rose 10% q-o-q or 0.5% y-o-y to RM27.8 million. N2N's net profit y-o-y dropped mainly due to lower unrealised forex gain in the current quarter. However, the core profit of the Group increased by 46.6% from RM1.99 million to RM2.91 million mainly due to the combination of lower operating cost and improved margins.

N2N's profit after tax rose q-o-q but the core profit of the Group declined 4.8% from RM2.91 million to RM3.06 million mainly due to provisions for trade receivables. The q-o-q increase in profits was mainly attributed to the higher revenue and better margins for the current quarter in comparison to the preceding quarter. Revenue increased by 10.2% from RM25.24 million in the preceding quarter to RM27.80 million in the current quarter. [Note: The result for QE31/12/2018 was announced on 25 February.]


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


Graph: N2N's last 49 quarters' P&L

Latest Financial Position

As at 31/12/2018, N2N's financial position is satisfactory, with current ratio of 5.2x and gearing ratio of 0.23x.

Corporate Development

In December last year, Japanese online broker SBI Japannext Co Ltd has acquired a strategic investment stake in N2N from its founder and managing director Andrew Tiang Boon Hwa in a deal worth RM91.4 million. SBI Japannext Co. Ltd purchased 65.276 million N2N shares at RM1.40 each from N2N's MD. This strategic investment is expected to lead to collaboration between Japannext and N2N, which will open up new opportunities for both entities through the promotion of more trading activities in the region, while encouraging greater uptake of cross border trading. For more, go here.

Valuation

N2N (closed at RM0.815 last Friday) is now trading at a PER of 32x (based on last 4 quarterly EPS of 2.53 sen). At this PER, N2N is deemed fully valued.

Technical Outlook

N2N is in a long-term uptrend line (SS) with support of RM0.80.


Chart: N2N's weekly chart as at Apr 5, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory, albeit weaker, financial performance, healthy financial position and positive technical outlook, N2N could be a good stock for long-term investment. It may benefit from a pick-up in equities trading in the region this year.

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.