We have a SUBSCRIBE recommendation on Autocount Dotcom Berhad with a target price of RM0.56 based on FY23F EPS of 2.8 sen and a PE of 22x which is a 10% discount to the technology sector’s FY23F PE.
We like the stock for its attractive geographical expansion plans and strong technical capabilities, well-positioned to leverage on the growth of the financial management software industry in Malaysia where the sales value of accounting, POS, and payroll software licences is estimated by Smith Zander to grow by 13.27%, 9.08%, and 12.67%. The Group has a 13.79%, 4.68%, and 2.21% market share in accounting, POS, and payroll software in Malaysia. The target price represents a potential return of 84.8% over the IPO price.
Product widely adopted. The company offers 3 types of financial management software comprising of the accounting, POS, and payroll software which can be utilized by businesses and companies on a standalone basis. This ensures seamless connectivity and streamlines the flow of data and information which simplify financial and sales reporting process for better and timely decision making. Up to LPD, the company sold approximately 70,000 AutoCount software licences for use by about 210,000 businesses and companies in Malaysia and Singapore to support its finance and accounting functions.
Geographical expansion. As at LPD, Malaysia and Singapore contribute approximately 80.65% and 18.72% of the company’s revenue in FY22. The company intends to leverage on the success of its business growth in Singapore by diversifying its revenue stream and expand its business across various countries such as Thailand, Vietnam, Indonesia, and the Philippines with the primary focus of selling cloud-native software. The company plans to facilitate this regional expansion plan via the establishment of offices, hiring of personnel for each country, undertake sales and marketing activities, and localisation of software which will be satisfied with proceeds from the IPO.
Strengthening R&D efforts. The company intends to enhance existing software and develop new software to maintain its competitiveness and relevance in the industry.
Experienced management team. The company is managed by Chairman Choo Chin Peng who has more than 27 years of experience in the financial management software industry. The company was able to achieve a 3-year revenue CAGR of 27.0% from FY19 to FY22.
Risk factors. (1) Skilled labour shortages. (2) Foreign exchange transaction risk arising from its revenue exposure to SGD which constituted approximately 18.72% of the total revenue in FY22.
Source: Mercury Securities Research - 20 Apr 2023
Created by kltrader | Jan 24, 2024