N2N - Fundamental Analysis LTA Style

Simply due to N2N highly potential to become next JFTECH, which can Meletup from RM 0.80 all the way to RM 2.29 within just a few month time, therefore we further share our LTA views in this company.

It's so less chance to find a great profitability stock that can easily estimate and with very strong business background, therefore I have to write one more post to share my views and hope it can be same like JFTECH again!

You can find out why I like N2N on previous post at link below:

http://bursalogicanalysis.blogspot.com/2017/08/n2n-market-know-how.html

This post we will only discuss about N2N fundamentals like balance sheet, quarterly result, business details and futures prospect.

Let us study the latest quarter result first.

Looking at the latest quarterly result balance sheet,

Total cash = Deposit with Licensed Bank RM 94 million + Cash at Bank RM 38 millions
                 = RM 132 millions !

Total loan = Long term loan RM 74 millions + short term loan RM 2 million
                 = RM 76 millions

Total cash - Total loan = RM 132 million - RM 76 million = RM 56 millions

Total share issued 477 millions / RM 56 million = RM 0.117 nett cash per share. 

As long as the company is nett cash, usually it deserve higher valuation !

How about cash flow is it positive?

Very positive !! 

Again we read this quarterly result and to see how much potential it should be for the next few coming quarter:

We can see the obvious jump in Revenue and net profit, you should already know it's due to newly acquired company name AFE Solution Ltd which have most business in Hong Kong. To know whether how much it contributes, we can check from latest report as well:

We can see May result still not yet include new acquired company's contribution.

We can see obviously compare with May's quarterly result which not yet show any contribution from Hong Kong, Macau and Vietnam but in latest August quarterly result, it show the contribution from this 3 country increase extra 240 % revenue, which DOUBLE UP the revenue and also it's profit !

Let's also compare N2N direct competitor EFORCE which also provided trading solution in Malaysia.

I don't dare to compare at all !

If compare N2N price should limit up at least 3 time !! ? 

EPS 4.02 x PE 75 (EFORCE current's PE) = RM 3.015 !! 

N2N EPS is 2.6x times higher compare to EFORCE and yet to calculate if N2N continue to post better result then EPS might be even higher !

If look at N2N PE which is almost 3.4x times lower to EFORCE !!

NTA of N2N also almost 4 time higher compare to EFORCE !!

And yet EFORCE stock price at RM 1.10+ and N2N only RM 0.80+ ??

Since we know that the contribution from newly acquired company contribute a lot, we can roughly estimate upcoming quarterly result revenue and profit as below to project how much N2N should worth:

First quarter net profit     : RM 3.624 millions = 0.77 EPS
Second quarter net profit : RM 9.944 millions = 2.12 EPS

From here, we have to estimate the future already !

We use very low profit of RM 5.00 million will do. If doing better, it's going to greatly impact the PE and stock price.

Third quarter net profit estimate : RM 5.00 mil = EPS 1.04
Fourth quarter net profit estimate : RM 5.00 mil = EPS 1.04

Total EPS = 0.77+2.12+1.04+1.04 = EPS 4.97 in RM its RM 0.0497 per share.

RM 0.0497 it's about PE 21 if based on RM 1.05.

 However if coming two quarter able to deliver better than just RM 5.00 million net profit (should be can since last quarter already RM 9 million), it's expect to much lower down the PE value !

(for example if Q3, Q4 post RM 7.5 mil, total EPS = RM 0.0157. Price RM 1.05/EPS 0.0603=PE 17 only.)

If earning maintain around RM 9.0 mil, then the price definitely SUPER Big Meletup Up !! 

I can tell you why it worth more than just PE 20 as this is a very strong growth stock with nett cash position and strong market leader position which ensure their business and profitability and capabilities !

In Malaysia we should know that only one Competitor which is EFORCE. N2N have a long list of client too, and most importantly all these client very unlikely going to switch to other trading solution as it going to spend a lot of cost therefore N2N business is very solid and steady:

 -------EXCHANGES business------- 

1)Bursa Malaysia Securities 
2)Singapore Exchange Securities 
3)Saudi Stock Exchange (Tadawul) 
4)Jakarta Stock Exchange (JSX) 
5)The Stock Trading Center of Vietnam (STC) 
6)Philippine Stock Exchange (PSE) 

-------MALAYSIA'S e-Broking business------- 

1)Aseambankers 
2)CIMB Bank 
3)Citibank 
4)Maybank 
5)AmFraser 
6)AmSecurities 
7)Apex Securities 
8)CIMB Securities 
9)HWANGDBS 
10)Kenanga Investment Bank Berhad 
11)PM Securities 
12)SJ Securities 
13)Macquarie 
14)AffinTrade 
15)TA Securities

Look very familiar right ! You might be one of their client too ! The more people trade then N2N will be benefited !When you place your order for buy stock, you may already supported N2N and help their revenues !

Now some more added Hong Kong, Vietnam, Macau, client based huge and many are from Banks which definitely value added to N2N ! 

As a conclusion, 

I raised my own personal "hope" for short term price to reach RM 1.10, mid term hope RM 1.50, long term hope RM 2.50.

Above are purely sharing information that might have errors cause by human mistake, miscalculation, and for education and personal reference only. 

N2N Connect Bhd - The Market Know How

N2N (0108) have come into LTA radar finally because it's time for this ACE stock Gem unlock their potential fully. Why I said so? Because this company again fulfilled all my criteria to be a Meletup Stock !

At first let us understand what exactly this company doing. You can view their website
http://www.ngnconnection.com/ , http://www.n2nconnect.com/.

To make it simple and easy to understand, one of the core business is providing stock trading platform, solutions, services.

" N2N markets its core enterprise-wide integrated e-commerce securities trading solutions to local stock broking firms and banks. It also focuses on online transactions with emphasis in the capital market segments. N2N’s products and services range from online trading portals within the stock broking industry, hosting and managing network services, to wealth and risk management solutions."

This company have been started in year 2000 which almost 17 years, although their website din't show who their main customer in Malaysia, but roughly we know few bank like CIMB, AMBANK, AFFIN and some other are using their platform.

In Malaysia, we can say that only a two public listed company providing such service, N2N and EFORCE.

We don't have to say about EFORCE as we know that EFORCE valuation already quite rocket and last year has been a big bull goreng up. And even after bonus still doing quite well in term of stock price.That's why we see big Potential in N2N too.

Let us look at latest quarterly report, we found something that we always like :

Their business not just in Malaysia, but also Singapore, Indonesia, Phillipines, and lately newly added Hong Kong, Macau and Vietnam after acquired AFE Solution Ltd (we will go into more details about this company later) on 31 March 2017.

This is one of the main consent to see whether this company are sole depending on Malaysia only, or well expanded to other country. Since their business already grow well to other country, this remind us about MYEG, GHLSYS, REXIT which also expanded to other country and doing very well, because if only make business alone in Malaysia is not good enough for growth.

For Financial background, I can conclude it's a Nett Cash Company !!
For details can you go to this blogger to read HERE <--

Look at the latest quarterly result, revenue triple up ! Profit triple up ! Why is this growth so much !

Now just the beginning of what we want to share. It's all coming from this newly acquired company AFE Solution Ltd and how potential is this company?

http://www.theedgemarkets.com/article/n2n-connect-expand-asian-footprint 

From link above, we learn that :

"AFE is a financial data and trading solutions provider with regional presence in Hong Kong, Macau and Vietnam. "

“The financial market in Hong Kong is huge with over 500 brokerage firms. AFE is among the top three [trading solutions] providers there. We bought AFE for their market share. Through AFE, we will have a good presence in Hong Kong, Macau and Vietnam."

“AFE’s strong presence in Hong Kong will also serve as a springboard for our expansion into China, with the Shenzhen-Hong Kong stock-trading link kicking off soon,” said Tiang. According to news reports, the trading link, dubbed the Shenzhen-Hong Kong Stock Connect, is slated to open on Dec 5. (SHENZHEN-Hong Kong already kick off)"

We know that AFE is already a very strong trading Solution Company, do you curious on its client?

Wow such a long list, so much client and many are big Bank in CHINA and Hong Kong. By just looking at their client already know this company have a very strong background and high profitability in future !


How much AFE estimate each year can contribute to N2N ? From this link, we learned that AFE last year make great profit of HKD 14 million. Equal to RM 7.63 million a year. 

"Besides helping N2N Connect extend its regional presence, the acquisition of the 34-year old AFE, which registered HK$110 million in revenue with HK$14 million profits in 2016, combines core technologies from two leaders in the field of capital and financial markets with AFE owning a number of intellectual property in data streaming and back office systems."

https://www.digitalnewsasia.com/business/n2n-connect-takes-big-step-towards-goal-us115mil-hk-acquisition

What is the idea of RM 7.63 million a year for N2N ? 

Again we refer back to this quarterly result history.

We show you what is the impact of extra RM 7.63 million gain !

Approximately N2N each quarter only make roughly RM 2-3 mil Max a quarter.

Total earning last year was RM 11.37 million.

And now each year gain extra RM 7.63 million.

This equal to RM 7.63 / RM 11.37 = 67 % Extra ! 

What is the meaning 67 % extra ? Which mean the company every year earn estimate extra 67 % !

This mean stock price also should at least up 50 % ? What if AFE contribute more this year?

This year stock market definitely hot than last year. As specially Hong Kong market big bull now !


Let us look at some stock that recently also acquire new company : KRONO















KRONO after acquired QUANTUM Storage last year, then it goreng up so high 5 time up from RM 0.20.

Lets us look at N2N stock price :

We can see it has been strong sideways at range of RM 0.70 - RM 1.00. Since result has been strongly improved, I believe it can break the resistant of RM 1.00 very soon.

We check the latest quarterly result propects:

We notice N2N is still growing their service to other country and they actually also involved in Data Services similar like KRONO which people are crazily like it and goreng it.

We all know that Data Centre services is important now, therefore again we see this N2N have a lot potential in future.

Not only that they also providing those network securities, and many other IT solution. Can check it here: http://www.ngnconnection.com/

What's more?

MAINBOARD LISTING again !

N2N is the very few profit making and stable business and potential growth ACE MARKET stock that already hit requirement to move to mainboard.


Again I see a lot potential in this company and bright future, I hope you can see it too.


As a Conclusion:

1. N2N is doing International Business.
2. N2N business in Malaysia almost consider Monopoly business as very High Barrier.
3. N2N claimed themself as Asia’s largest one-stop service provider in the financial investment industry.
4. N2N is a nett cash company.
5. N2N stock price still din't really perform much over the years but profit improved.
6. N2N business fit with current market needs, online solution, data, IT.
7. N2N earning improved a lot after acquired AFE Solution LTD.
8. N2N still list at ACE market, which potential transfer to Mainboard in future.
9. N2N technically bullish with volume, sign of black horse awake.

My own personal "hope" for short term price to reach RM 1.05, mid term hope RM 1.30, long term hope RM 2.00.