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34,705 comment(s). Last comment by Mabel at Nov 11, 2019 4:05 PM
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andychay6124
98 posts

Posted by andychay6124 > Nov 8, 2019 11:13 AM | Report Abuse

Bullet in ready, waiting you to come down


itch
698 posts

Posted by itch > Nov 11, 2019 3:04 PM | Report Abuse

This Kenanga report dated 25th March 2019 seems a bit far fetch...

With its technical knowhow, we believe IRIS is a strong
contender for a possible IC contract tender. The group has
been divesting non-core assets to re-align its business focus
on Trusted ID. Based on Trusted ID’s earnings per se, the
stock is only trading at 7x FY19E PER, even before factoring
in any IC contract. The share overhang situation caused by a
GLC shareholder is likely to blow over soon. Trading Buy with
a FV of RM0.200.
Strong contender for upcoming government contracts. We believe
the tender for the supply of MyKads could possibly be opened up
soon, given that the existing RM260m contract (carried by a competitor
currently) is expiring end-2019. Although MyKads have not been fully
delivered under the existing contract, we understand that there are no
ramifications upon the expiry. We believe it is also in the Malaysian
government’s best interest to open up the tender to ensure fairer
competition and better pricing, and IRIS’ technical knowhow and
capabilities in digital ID render it a strong contender for the contract.
Based on our back-of-envelope calculation and assuming 15% lower
contract value, we estimate that the IC contract could generate
c.RM15m PAT (c.30% of FY20 CNP) annually from FY21 onwards.
Out with the old, in with the new. It is interesting to note that there
has been a change in substantial shareholders, which saw Dato'
Rozabil Abdul Rahman (executive director of IRIS) rapidly paring down
his stake in IRIS, from a peak of 320m shares (10.8%) on 21 Sep 2018
to 117m shares (3.9%) on 25 Jan 2019. Interestingly, Dato’ Sri Robin
Tan (eldest son of Tan Sri Vincent Tan) has emerged as a substantial
shareholder with 247m shares (8.3%) on 21 Sep 2018, and has
subsequently upped his stake to 271m shares (9.1%) at present.
Starting with a clean slate. The group has been divesting non-core
assets to realign its business focus on Trusted ID, which involved
kitchen-sinking impairments and write-offs of c.RM316m over FY17
and FY18. The exercise, which is almost concluded, has helped stem
the bleeding from the non-core assets and brought the group back into
profitability in the past three quarters. We believe the few remaining
non-core assets, which are still dragging earnings with aggregate
losses of >RM40m annually, could be disposed of this year. Based on
Trusted ID’s earnings per se, the stock is only trading at 7x FY19E
PER, even before factoring in the IC contract (refer overleaf for
details).
Overhang to be over soon. The continuous share disposals (likely
due to non-fundamental-related reasons) by a GLC shareholder have
probably been the impediment to IRIS’ share price improvements since
2018. Thankfully, the shareholder has ceased to be a major
shareholder on 21 Feb 2019 (from c.21.3% stake in early-2018).
Currently, we believe the shareholder has only 3-4% stake left in the
company, signifying that the share overhang will likely blow over soon.
Project FY19-20E CNPs at RM24.7-48.9m. The sturdy growth
expected in FY20 is largely fuelled by the discontinuation of non-core
businesses and 10% top-line growth in Trusted ID (vs.10-15% guided).
Trading Buy with a FV of RM0.200, based on FY20E PER of 12.0x, a
discount to its peers’ 18x given its ACE market status and smaller
earnings base. Although IRIS’ market capitalisation is c.40% smaller
than that of DSONIC’s, its superior earnings growth warrants a slightly
smaller discount rate of 30%. Post-disposals of non-core assets, IRIS’
earnings are expected to bounce back with a vengeance in FY20
(+98%). In addition, the stock only trades at FY20E PER of 8.5x, which
limits its share price downside, while providing investors with opportunities to buy into its potential to win the IC contract.

Continue...


itch
698 posts

Posted by itch > Nov 11, 2019 3:06 PM | Report Abuse

OTHER SALIENT POINTS
Commendable visibility. IRIS is touted as the pioneer of multi-application electronic national ID. It currently serves a
diversified customer base across 38 countries, with a total order-book of RM2b, offering commendable visibility in the
Trusted ID segment for the next 5 years.
Starting with a clean slate. Since Dato’ Paul Poh joined IRIS as the new management in 2017, the group has been
divesting non-core assets to re-align its business focus on Trusted ID. To this end, the group has conducted a major kitchen-
sinking exercise involving impairments and write-offs of c.RM316m over FY17 and FY18. This has helped to stem the
bleeding from the non-core assets and brought the group back into profitability in the past three quarters. The exercise is
almost concluded, with only a few more non-core assets remaining such as its Food and Agro (Rimbunan Kaseh) and
mining (Plaman Resources) businesses, which are still dragging its profitability. We believe that the Rimbunan Kaseh project
could be handed over back to state government by the end of 1HCY19, while the intended disposal of its mining business in
New Zealand could potentially be concluded this year as well, pending approval from local authority.
Under the Trusted ID segment, we understand that its contract to supply 2.5m units of 32-page Nigerian electronic passports
(contract value: c.RM170m) is expiring in August this year while the contract from the Senegalese government to supply
10m multi-application ID biometric cards (contract value: c.RM346m) is being fulfilled (>80%) well ahead of expiry in mid-
2021. Again, given IRIS’ technical knowhow and capabilities in the digital ID space, we believe the contracts could possibly
be renewed as soon as this year. Based on Trusted ID’s earnings per se, the stock is only trading at 7x FY19E PER, even
before factoring in the IC contract. Currently, the bulk of Trusted ID revenue comes from the African continent (70-80%),
while Malaysia contributes less than 10% of total revenue.
Risks include unexpected cancellation of contracts, failure to renew contracts before expiry and cost overruns.


itch
698 posts

Posted by itch > Nov 11, 2019 3:06 PM | Report Abuse

Still waiting for that 0.20c ...


Mabel
3354 posts

Posted by Mabel > Nov 11, 2019 4:05 PM | Report Abuse

@itch Still waiting for that 0.20c ...

Sound good to me itch!

Thanks for sharing the above reports.

Cheers!

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