• Market leader for accounting software in Malaysia that raked in approximately 70,000 AutoCount software licenses sales to approximately 210,000 businesses and companies, primarily in Malaysia and Singapore.

• Core earnings may register sequential improvement to RM17.8m in FY24f, on the Malaysia government led initiatives to boost the adoption of business digitalisation and replicate their success in Malaysia and Singapore to the ASEAN market.

• ADB is valued through pegging 16.5x P/E to FY24f EPS of 3.2 sen, leading to a FV of RM0.53 (potential upside of 60.6% from IPO price).

Company Background

• Autocount Dotcom Bhd’s (ADB) business started off since 1996 for the sale of computer hardware, development and sale of accounting software before officially launching their maiden accounting software; AutoCount Accounting in 1998.

• Over the years, ADB expanded their products offerings such as the launch of (i) onpremise payroll software, AutoCount Payroll in 2002, (ii) Pocket Autocount (a frontend software running on personal digital assistants) in 2003, (iii) Auto Count XP in 2003, (iv) AutoCount Retail POS in 2009, (v) AutoCount On-The-Go in 2017, (vi) AutoCount Payroll in 2019, (vii) AutoCount Cloud Accounting in 2021 and (viii) AutoCount OneSales in 2023.

• The announcement of the implementation of Goods and Services Tax (GST) was a major milestone breakthrough which boosted their sales of AutoCount Accounting with GST features in 2015. Since the revamp of the accounting software using Microsoft .Net Framework and Microsoft SQL Server in 2006 and up to the latest practicable date (LPD) of the prospectus, ADB have sold approximately 70,000 AutoCount software licenses to approximately 210,000 businesses and companies, primarily in Malaysia and Singapore.

• Key awards namely Sin Chew Business Excellence Awards – Digital and Technology Business Excellence Awards (2018), Ambank BizRace Programme – Top 30 Finalist (2019) and The Star Outstanding Business Awards – Certificate of Merit for the category of up to RM25.0m (2019) is a testament of ADB as one of the prominent development and distribution of financial management software providers.

Financials

• ADB’s core net profit demonstrated consistent improvement from RM4.2m recorded in FY19 to RM13.8m in FY22 (3-year CAGR of 49.0%). Likewise, revenue during the period was also stable, rising at 3-year CAGR of 27.0% to RM38.7m. Their core net margins range between 22.1-35.7% over the years, owing to the stronger revenue, roll-out of new products, being the proprietary owner of their software and better cost management. Elsewhere, we note that ADB has been operating in a positive net operating cash flow (OCF) over the past years.

• Moving forward, we are projecting their core net profit to see stable improvement, climbing 7.8% YoY to RM14.9m in FY23f, boosted by higher topline growth as a result of stronger local sales through several initiatives from Malaysia government such as (i) Malaysia Digital Economy Blueprint (MyDigital) to transform the country into a regional digital pulse by 2030, (ii) RM1.00bn allocation from Bank Negara Malaysia to assist SMEs to automate and digitalise operations and (iii) introduction of SME Digitalisation Scheme that provides up to RM100.0m (RM5,000 per company) for the adoption of business digitalisation. Already, 1QFY23 net profit at RM3.7m makes up to 24.6% of our forecast. Albeit that, we expect net margins to come mildly lower after accounting for the one-off listing expenses.

• Going into FY24f, we reckon that ADB’s top and bottom line may register further improvement at RM52.3m (+17.5% YoY) and RM17.8m (+19.3% YoY) respectively, supported by the efforts of regional expansion and addition of authorised dealers. Should earnings remain sustainable, ADB may also propose to transfer to the Main Market of Bursa Malaysia during the year.

Valuation

• At an indicative IPO offer price of RM0.33, ADB’s forward PE valuation for FY24f stands at 10.2x, based on our estimated FY24f EPS of 3.2 sen. We arrived our fair value of RM0.53 (potential 60.6% upside from its IPO price) by pegging 16.5x P/E to its FY24f EPS. The assigned P/E is based on approximately 20.0% discount to the technology sector forward P/E of 20.6x due to ADB’s smaller market capitalisation.

• We like ADB for its impressive historical financial track record, coupled with their market leader position in the financial management software in Malaysia. We foresee on-going efforts from businesses across various industries to digitalise their financial management and human resource system bodes well for ADB.

• We also favour ADB for its sturdy balance sheet (pro-forma net cash per share of 8.4 sen, representing 25.4% of IPO price) and net operating cash flow position over the years. Given that ADB does not adopt a formal dividend policy, we do not expect any dividend payments over the foreseeable future as the group places greater emphasis onto on-going efforts on development of and enhancement of existing software as well as geographical expansion into the ASEAN market.

Source: Mplus Research - 18 Apr 2023