CUSCAPI (0051) - Cuscapi - Bleeding continues
Target RM0.21 (Stock Rating: HOLD)
Excluding EI gains, at 103% of our full-year forecast, Cuscapi’s FY14 core net loss was in line with our expectations. 4Q14 remains in the red with no signs of any turnaround. We maintain our EPS forecasts and introduce our FY17 numbers. Until earnings turn positive, we will keep our target price – based on a conservative asset-based valuation, 1x CY15 P/BV. The stock remains a Hold. Switch to IFCA for exposure to small software solutions stocks.
FY14 disappoints with RM10.4m core net loss
Cuscapi’s FY14 revenue rose 7.4% yoy but operating cost increased by 17%. Thus, it is not surprising to see FY14 recording a net loss of RM7m. Excluding the RM3.4m gain after the sale of a subsidiary, FY14 core net loss stood at RM10.4m. The company’s problem started in 3Q13 when management increased its staff cost ahead of the REV interactive tablet's launch. Unfortunately, demand for the REV has been below expectations. No final DPS was declared, which is not a surprise in view of its losses during the year.
REV development costs are eating up cash
Cuscapi’s interactive tablet “REV” has so far been a disappointment. REV has not made any major breakthroughs in China’s F&B market and is reviewing its business model in that country. However, the company made some progress in Singapore. A F&B company is currently using around 500 REV tablets on a subscription basis, but this was lower than our earlier forecast of 3,000 REV subscriptions in 2014. We are targeting a conservative REV subscription of 2,000 in 2015.
Needs to raise funds soon?
Due to its operating loss and further development cost for the REV in the past year, Cuscapi’s net cash declined to only RM8m as at end-Dec (net cash was RM21m as at end-2013). Excluding the sale of its subsidiary Cuscapi Network Solutions S/B, net cash stood at only RM5m as at end-Dec. We believe that the company still needs funds for further development costs for the REV and as such, Cuscapi might need to raise more funds later this year, likely via a private placement or rights issue exercise. Management has indicated that it is also looking at some M&A opportunities in China, another factor which supports our view that the company will need more funds.
Source: CIMB Daybreak - 02 March 2015
Target RM0.21 (Stock Rating: HOLD)
Excluding EI gains, at 103% of our full-year forecast, Cuscapi’s FY14 core net loss was in line with our expectations. 4Q14 remains in the red with no signs of any turnaround. We maintain our EPS forecasts and introduce our FY17 numbers. Until earnings turn positive, we will keep our target price – based on a conservative asset-based valuation, 1x CY15 P/BV. The stock remains a Hold. Switch to IFCA for exposure to small software solutions stocks.
FY14 disappoints with RM10.4m core net loss
Cuscapi’s FY14 revenue rose 7.4% yoy but operating cost increased by 17%. Thus, it is not surprising to see FY14 recording a net loss of RM7m. Excluding the RM3.4m gain after the sale of a subsidiary, FY14 core net loss stood at RM10.4m. The company’s problem started in 3Q13 when management increased its staff cost ahead of the REV interactive tablet's launch. Unfortunately, demand for the REV has been below expectations. No final DPS was declared, which is not a surprise in view of its losses during the year.
REV development costs are eating up cash
Cuscapi’s interactive tablet “REV” has so far been a disappointment. REV has not made any major breakthroughs in China’s F&B market and is reviewing its business model in that country. However, the company made some progress in Singapore. A F&B company is currently using around 500 REV tablets on a subscription basis, but this was lower than our earlier forecast of 3,000 REV subscriptions in 2014. We are targeting a conservative REV subscription of 2,000 in 2015.
Needs to raise funds soon?
Due to its operating loss and further development cost for the REV in the past year, Cuscapi’s net cash declined to only RM8m as at end-Dec (net cash was RM21m as at end-2013). Excluding the sale of its subsidiary Cuscapi Network Solutions S/B, net cash stood at only RM5m as at end-Dec. We believe that the company still needs funds for further development costs for the REV and as such, Cuscapi might need to raise more funds later this year, likely via a private placement or rights issue exercise. Management has indicated that it is also looking at some M&A opportunities in China, another factor which supports our view that the company will need more funds.
Source: CIMB Daybreak - 02 March 2015
