Securemetric Bhd, one of the regional leaders in digital security is making its debut on ACE market. BUY with a target price of RM0.49 based on 20x PER FY19 as per industry peers. We believe the 20x PER is justified as the recent tech IPOs are currently trading at the range between 27x-40x from their pre-listing PER range of 12x-13x. 

Founded in Malaysia, Securemetric is the only listed provider of digital security solutions, electronic identification products as well as other related services. Over the years, Securemetric has provided customised solutions across multiple industries, including government institutions, financial institutions, public certification authorities, software development companies and IT service providers. South East Asia being its key revenue contributor (-74%) is supported by solid clients such as VAXUCO (the procurement arm of Vietnam's Ministry of Defence) and Bank of the Philippine Islands. 

The group has developed numerous products comprising of software licencing protection dongles, 2 Factor Authentication, Public Key Infrastructure and CENTAGE®, an advanced authentication solution. CENTAGE® is the highest security standard achieved by the group so far and is one of the only four products awarded with MyCC EAL4+ certification by CyberSecurity Malaysia. In the pipeline, Securemetric has 4 new solutions targeted to be launched within 2Q 2019 and 1Q 2021. 

Of the total RM 17.0m IPO proceeds, 33.5% or RM5.7m is earmarked for development of new digital security solutions, reinforcing the company's priority in R&D. As for the rest, 30.4% is for working capital while 10% is allocated for business expansion, with the intention to strengthen its regional and local footprint, especially in the Philippines. 

Post listing, gearing ratio is expected to improve from 0.13x to near zero. Regional government initiatives to encourage the usage of digital security is set to benefit Securemetric. Hence, backed by outstanding orderbook of RM19.5m, the Group is expected to achieve a robust growth (+63%) in FY19 earnings. 

Source: Rakuten Research - 13 Nov 2018