OpenSys
is a leading solutions provider for the financial services and banking
industry. OpenSys also provides end-to-end managed services outsourcing,
particularly for self-service terminals, bill payment kiosks and
back-office cheque processing services.
Its
customer base includes mainly blue-chip companies such as AEON Credit,
Alliance Bank, AmBank, Bank Islam, CIMB Bank, Hong Leong Bank, Maybank,
Public Bank, RHB Bank, Standard Chartered Bank, UOB, Celcom, Maxis, TNB,
TM, Sabah Electricity and Sarawak Energy.
Full background
Cheap valuation
Trailing 4Q earnings growth= 44.44%
Trailing 4Q earnings =RM9.68 million
Average equity =RM52.58 million
ROE = 18.4%
(Click to enlarge)
Despite
the high growth in earnings, shares of this low-profile company have
been range-bound, trading between 26 sen and 37.5 sen over the past
year. As a result, its trailing 12-month PE compressed from 19.7 times
in 2014 to 15.6 times in 2015 and 13.3 times in 2017 and further to 9.7
times.
Its
valuation appears comparatively cheap compared with its ACE
Market-listed peers, such as Rexit Bhd (14.7 times), Microlink Solutions
Bhd (N.A. lossmaking), Excel Force MSC Bhd (31.6 times) and GHL Systems
Bhd (54.5 times).
Currently, there is zero coverage on Opensys by any research house.
Fair Valuation?
Trailing 4Q EPS= 3.25 sen
Low end PE= 14.7 times x 3.25= RM0.48
High end PE= 54.4 times x 3.25= RM1.77
What is the fair value for Opensys? In
the latest announcement, Opensys mentioned “In the last five years, the
total number of CRMs in the market has grown exponentially with a
Compound Annual Growth Rate (CAGR) of close to 40 percent.” Its trailing
4Q earnings growth is 44.44%.
To be realistic, the 40% growth rate can’t go on forever. 25% is more realistic over the next few years. Based on PE ratio of 25 times, the fair value is RM0.82.
Future prospects
The
future looks exciting for Opensys. In 2017 annual report, Opensys
mentioned that it had installed over 2,500 CRMs in Malaysia since 2014
and became the industry leader with 80% market share.
Moving
forward, there is a huge patent demand for CRMs in Malaysia. Only 20%
of bank machines are CRMs today. Opensys is optimistic of winning more
market share considering its excellent track record.
Source
Disclaimer: The article above does not represent a recommendation to buy or sell.
https://klse.i3investor.com/blogs/Amazinggrowth/193718.jsp
https://klse.i3investor.com/blogs/Amazinggrowth/193718.jsp
