If executed well, Orion is expected to turnaround in FY6/19 following the synergistic acquisition of ASAP for RM73m in Oct 2017 to become the largest computerised maintenance management systems provider in Malaysia, as well as diversifying into fintech solution targetting non-bank financial institutions (NBFIs) for the promising end-to-end microloan applications. In Oct 2018, it had made a major breakthrough with ANGKASA to provide a fintech end-to-end loan application and approval platform called MyAzZahra for its credit co-operatives to offer microloans to government staff. We also see exciting prospects in the long term after signing MOUs with Malaysia SME Bank and Indonesia’s PT Kirana Investima Nusantara in April 2019 to develop platform for microloans applications. Currently, ORION trades at 17.2x FY6/19E P/E and 1.1x P/B, which are 20% and 68% lower against its peers. Technically, its uptrend remains intact to retest RM0.195-0.21 after building base above the channel support trendline.

Positive transformation from CMMS to fintech solutions. From loss-making in the past few years, Orion has transformed itself from the largest computerized maintenance management systems provider in Malaysia (after acquiring ASAP for RM73m in Oct 2017) to one of the early birds in the fintech space, having developed an end-to-end loan application and approval platform for microloans in the country. The platform uses big data analysis (BDA), artificial intelligence (AI) and blockchain technology solutions.

Major breakthrough with ANGKASA. In Oct 2018, Orion’s fintech division secured first major success via its 20%-owned associate company Sukaniaga (wholly-owned subsidiary Ganda Integrasi Sdn Bhd) entered into a service level agreement with MyAngkasa Holdings, a wholly-owned subsidiary of the Malaysian National Cooperative Movement (ANGKASA) for the development of a fintech end-to-end loan application and approval platform called ‘MyAngkasa Az-Zahara’ (MyAzZahra). ANGKASA is the largest organisation for the co-op movement in Malaysia, with 14,000 co-ops and 6.5m members in end-2017. Credit risk for the co-op loans are low as loan instalments is being deducted from government employees’ monthly salaries.

Orion gets a fee of 1.275% on loans approved via MyAzZahra . Under the 15-year service level agreement, GISB will provide the MyAzZahra system (went live in Jan 2019) to Sukaniaga. For every loan approved via MyAzZahra, Sukaniaga is entitled to 1.5% of total loan amount approved, while Sukaniaga will allocate 85% of its billings (or 1.275% of total loan amount) to GISB. If executed well, Orion expected to record a robust 41% net profit CAGR for FY19-21.

Benefits of using MyAzZahra include (i) loan applications processing take a shorter time of 2-3 weeks vs. the average of 2-3 months under the manual system, (ii) fewer online forms to fill up compared to the manual system, (iii) greater transparency as borrowers are able to search for the co-op with the lowest interest rate charges etc.

Promising long-term growth prospects given the bright propects of the microloan industry in Malaysia. According to statistics from the Co-operative Societies Commission of Malaysia (CSCM), co-ops in the country disbursed loans amounting to RM25.6bn in 2017 (vs RM20.3bn in 2015). Capitalising Orion’s first-mover advantage to target non-bank financial institutions (NBFIs) that are keen to offer microloans to consumers, Orion had signed an MOU with SME Bank to automate the latter’s traditional banking business and develop an alternative credit-scoring engine platform for microloans to SMEs. In order to penetrate overseas NBFIs about its fintech solutions, Orion had also signed an MOU (in April 2019) with Indonesia’s PT Kirana Investima Nusantara to develop a platform for microloans mainly focused for the SME in the provinces/villages.

1st tranche of the proposed 108.2m private placement shares was fixed at RM0.165. In Jan 2019, the company announced that it plans to place out in stages 30% of its new shares (i.e 179.7m) to raise funds for the Sukaniaga Acquisition and development of the MyAzZahra system. So far, 108.2m shares or 60% of the proposed 179.7m placment shares (issud at RM0.165) were listed on 30 Apr.

Pending a downtrend line breakout to retest RM0.195-0.21 levels. Despite facing near term sideways consolidation as Orion’s share prices continue to trade below key SMAs, the uptrend from Sep 2018 remains intact with prices continue to hover above the support trend line and the 100D SMA near RM0.16. Once this pattern ends, we expect Orion to rebound towards RM0.185 (daily mid Bollinger band). A decisive breakout above RM0.185 will lift prices higher towards RM0.195 (30D SMA and downtrend line). Formidable resistance is situated near our LT objective at RM0.21 (daily upper Bollinger band) in wake of the stock overhang from the 108.2m new placement shares. Key supports are RM0.165 (the placement price) and RM0.16 (hourly neckline support). Cut loss at RM0.15.

Source: Hong Leong Investment Bank Research - 7 May 2019