Securemetric Bhd (“Securemertic”) is the only digital security solutions provider listed on Bursa Malaysia and has caught the attention of Feitian Technologies Co Ltd (“Feitian”) acquiring substantial stake to strengthen business collaboration with a view to increase their stake. Recommend BUY with a target price of RM0.68 based on 20x PER FY19 as per closest related peers.

Securemetric is a regional provider in the digital security solutions across South East Asia (“SEA”) markets namely Vietnam, Singapore, Indonesia and Philippines with in-house technical expertise in securing applications, digital IDs and transactions in the online space with their two-factor authentication (“2FA”), Public Key Infrastructure (“PKI”), centralised authentication management system (“CENTAGATE”).

The emergence of Feitian with an 8.2% stake in Securemetric bodes well for the company as it is also their supplier of key hardware components with a solid working relationship. Feitian is listed on the Shenzhen stock exchange with market capitalization of over RM3.8bn and trading at over 40x PER. The company is also the No.1 supplier of user authentication and transaction security for China online banking. This synergistic partnership would allow

Securemetric to tap into their vast market access and technologies as Feitian has over 800 patents. In addition, this will support Securemetric in tapping regional cybersecurity opportunities in SEA in line with the growing usage of mobile devices in banking transactions. Securemetric balance sheet remains sound and is in net cash position from the IPO proceeds. FY2018 has been a transition for Securemetric as it continues to invest for expansion while revenue and profit has seen a drop due to completion of major projects and listing expenses. FY2019 would see the revival of revenue and EPS surge due to low base and normalise double digit earnings growth FY2020.

Source: Rakuten Research - 22 Apr 2019