1. Business - recession proof and during good times they make money too.
How their business works.
a) they are an online trading platform for capital markets. hongkong and Malaysia is the largest markets for n2n (70% and 40% respectively). The company make money when volume of trading increases. They earn a cut from the volume itself. In short, nowadays, regardless of placing an order through online or a broker, it will go through this platform. There are only two trading platform in Malaysia. One is eforce and another is n2n.
2) Business prospect.
- expansion in 2018. They acquire AFE solutions from Thomson Reuters. The strategy if acquiring this business is to expand their trading online platform in hongkong. Which they see it has successfully achieved 300% improvement in it's core profits.
- secondly, new investors invested in n2n. Which includes one of the most reputable and largest platform in Japan (sbi holdings). It bought n2n at 1.40 per share from the Andrew tiang (managing director).
3) What's next
- the company is stepping effort to complete it's Asia Trading Hub (ATB) to promote and enhance seamless cross border trading.
- in addition they want to tap on sbi ( new investors ) capability to venture in Blockchain technology. Take note they are not investing but more towards providing a platform and earning base on the transactions volume.
Now.. at minimum I guess we need to look at some simple financial instead of focusing on dcf, etc.
1) revenue - 2014 (34mil) and 2019 (105mil). There is not a single drop in revenue from 2014 to 2019. Growing revenue always signal a gorwing company
2) profit margin - approximately 10% average.
3) cash - Net cash position. Alot of investors use cash - borrowings to consider net cash. To me, I am Abit more conservative. I take cash minus all liabilities (I mean in the end liabilities are liabilities. You will still need to pay them of regardless of accounts payable,etc.) They have around 120 million cash (including liquid securities) and total liability of 47 million. Which give them 73 million net cash.
4) pe ratio - not that convincing for many investors. Even to me. But ultimately, peg is more important.. what's their forward pe. Giving most conservative of earning 50 earning per share for one year and a forward pe of 15 would give us 75 cents ( 36% margin of safety). But when economy recovers again, their earning and pe should be given a higher valuation. Look at Penta, eforce, even at this unprecedented scenario, they are trading at 20/30 times.
5) % of cash and securities over asset is around 40%. Believe it or not, it's the largest asset component by proportion. In bursa, it would be hard or even tough to find such company. They are basically asset light and cash rich asset model. Basically one of my main criteria in investing.
Besides, there are more trading volume the past month. As retail investor constantly gambling in the share market, they are responsible in helping N2N boosting their revenue. Refer to Bursa quarterly result.