We remain positive on AppAsia Bhd’s (“APPASIA”) multi-year growth story on their recurring income stream from eConfirm.my platform and their recent collaboration with Telekom Malaysia to digitalise the iconic Yellow Pages. BUY with revised target price of RM1.18, based on discounted cash flow and sum of parts valuation which translates to FY21 PER @24x.

APPASIA is the digital platform developer of eConfirm.my, which is the first and only industry-wide electronic bank confirmation platform in Malaysia. To date, the digital platform has 13 major participating banks and over 400 audit firms in Malaysia covering approximately 80% of the market. This is similar to Confirmation, a digital confirmation services provider operating across 170 countries serving 16,000 audit firms, 4,000 banks and 5,000 law firms globally which was acquired by Thomson Reuters in 2019.

To recap, the platform is a collaboration agreement with Malaysian Institute of Accountants for 12 years until 2030, on a pay-per-transaction revenue model basis with RM15 per successful confirmation. Currently for bank balances, deposits and loan confirmation, management is working on potential add-ons to confirmation services for Hire-Purchase, Housing loan and legal confirmation. It is eyeing regional expansion to Thailand and Indonesia and is in talks with related parties to strengthen its regional footprints.

Their next catalyst for growth is their recent collaboration agreement with the subsidiary of Telekom Malaysia Berhad (“TM”) to transform the iconic Yellow Pages Business Directory into a Digital Business Community of e-marketplace. It has a revenue sharing model with TM which we believe is a strategic move that will provide the next growth impetus. Yellow Pages is the leading business directory in Malaysia with easily searchable online of 500,000 strong business entities.

Source: Rakuten Research - 18 Sept 2020