Results Update

Privasia Technology Bhd's 1Q2016 stood at RM0.7 mln vs. Rm1.3 mln in 1Q2015. The significant drop in earnings wad due to the weaker performances across all business segments, namely information technology, information and communications technolgy and satellite based network services. Revenue for the quarter, meanwhile, fell by 15.4% to RM18.0 mln from RM21.3 mln recorded in 1Q2015.

Future Plans

Will allocate RM0.8 mln to enhance its e-procurement platform for cost savings and eas access to its exiting clientele and this would enable the group to target overseas customers. The company has also fully commisiooned its new satellite hub in December 2015, which would result into lower cost structure and improved services variety. It will also continue to grow its offerings for both of its port solutions and outsourcing business - the latter business's orderbook stands at RM120.0 mln (which should provide the company with 4-5 years of earnings visibility)

Investment Highlights

Privaisa's unique proposition lies in the nature of its product and services offering, making it one-of-a-kind-technology stock that is listed on Bursa Malaysia with high recurring income component (with an average 2-3 years of contract period). The company is well underpinned by its proprietary products with a strong R&D team, sizeable pipeline of current and future projects to drive its revenue and earnings growth. It is also actively participating in tendering for government & private sector projects to boost its earnings visibility.

The company's current PER valuation of 26.7x, in our view, is overpriced vs. its average five-year PER of 9.4x as there is no comparable peers in the market segment that the company operates. Meanwhile, Privasia has consistenly distributed its annual dividend payment since listing in 2009, with an average five-year divident payout of 29.1% (from 2011-2015).

Source: M+ Online Research - 27 June 2016