OpenSys provides IT solutions for financial services, telecommunications, and utility industries. Main business activities of the firm is functioned through Efficient Service Machine (ESM) and Software Solution and Services (SSS) segments. The ESM segment involves in the purchasing, manufacturing, and distributing of ESM machines. We expect OpenSys to register net earnings of RM12.3m and RM13.7m for FY22 and FY23 respectively driven by higher income from cash recycling machines, growing recurring income and new tech platform-based businesses. BUY with a target price of RM0.46 based on 15x (3 years average) PER over FY23 EPS.

OpenSys has partnered with world leader and original inventor of the CRM, OKI Electric Japan to provide ATM Machines and Cheque Deposit Machines for banks and financial services in Malaysia namely AEON Credit, Affin, CIMB, Ambank, Maybank and many more. The company with over 80% market share has 4,300 units across 10 banks in Malaysia. The segment provides new and recurring income for OpenSys. The company has an orderbook of 230 units of cash recycling machines. Based on our estimates of around RM60k per machine, the orderbook is estimated at about RM13m-RM14m.

The Business Process Outsourcing which comprised of Bill Payment Kiosk Outsourcing and Cheque Process Outsourcing’s revenue fell slightly by 3.5% to RM21.1m. Leveraging on the 860,000 users visiting the Group’s 550 payment kiosks every month at more than 330 locations nationwide, we expect the segment to improve with the reopening of economy post Covid19.

Maintenance and Software Solutions Services has been consistently driving the Group’s top and bottom lines for the past couple of years. OpenSys is currently providing maintenance services for more than 7,000 devices including CRMs, cheque deposit machines and desktop cheque scanners. Management expects this business segment to continue this growth path as more CRM’s warranty are expiring, thus driving up demand.

OpenSys’ balance sheet is healthy with net cash of RM0.1m. Historically, the company pays dividend about 40%-50% from its net profit. We are forecasting dividends of 1.1sen and 1.2sen based on a 40% payout ratio for FY22 and FY23 respectively. This translates into yields of 3.2% and 3.6%.

Source: Rakuten Research - 4 Aug 2022