Malaysia: Would AppAsia Berhad Be Exciting To Trade?

Making A Play On The News

 

 

A recent report on 27 July 2020 by Rakuten Trade Research on AppAsia Bhd’s (“APPASIA”) says the research house is positive on the company’s foray into being the sole service provider for electronic bank confirmation platform in collaboration with Malaysian Institute of Accountants (“MIA”).

It believes that this is set to be game changer for them and expect to see significant contributions from FY21 onwards when it becomes the new normal for audit confirmation.

The report has a BUY recommendation on the stock with a target price of RM0.68 premised on 25x PER FY21 as per Bursa Technology Index.

According to the report, APPASIA has recently launched its eConfirm.my in May 2020, the first and only industry-wide electronic bank confirmation platform providing electronic bank confirmation to all the auditors and banks operating in Malaysia.

 

 

It adds that the company’s agreement with MIA will last for 12 years until 2030, with a pay-per-transaction revenue model. The usage fee is apparenty RM15 per successful confirmation, thus generating income on a recurring basis.

 

PEG Corporate Finance and Research view:

We believe that on the back of the research report, the new corporate development by the company appears to be positive for APPASIA.

Based on the report, APPASIA is said to be anticipating all auditors and banks operating in Malaysia to adopt this fintech e-confirmation platform developed in-house and targets to process annual bank audit confirmations for 1.3m companies that are registered with the Companies Commission of Malaysia.

This would be in line with the digitalization within the banking industry eg, BNM initiative such as DuitNow.

Based on the background of the company, APPASIA’s core strength appears to lie in their ICT security business under the brand name of “Extol”, which is one of the long-established players since 1984.

The company has another two divisions, digital content primarily in advanced digital publishing and e-commerce business in B2C and B2B via its e-Marketplace.

The group has also recently ventured into the lucrative money lending business supporting its online e-Marketplace customers.

If APPASIA has an exclusive right on the e-confirmation process with MIA, then obviously the company would see some sustained recurring income for many years to come. Rakuten Trade Research expects the company to see a jump in net profit to RM9.0m in FY2021 forecast compared to a forecast earnings of RM2.0m in 2020.

Some risks could nonetheless be the actual take-ups by the audit firms and whether the concession would continue to be exclusive to the company in the future.

In any case, the news and breakout in the stock’s trading price and volume could give trading opportunities to traders and investors.

Based on factors quantified by our algorithm, an entry into the stock was detected at the price level of 20 sen in May 2020 and up to now, there has been no sell action recommended as yet.

This means the stock price is continuing on its uptrend where it broke a key critical level (KCL) two days ago at 0.455 being its all-time recent high price for the stock.

Being a relative penny stock, its rise however is volatile as a recent push last month in June 2020 brought the stock to retest its all-time high then and it came back to major support at the KCLs of around 29 sen to 31 sen.

Even then, there was a second chance for elite traders to re-enter the stock then wth the algorithm recommending a re-entry then at around 33 sen.

On the back of its corporate news, the share price has started to rise again to break its all-time high of 45.5 sen.

A rise of 10%-20% after breaking this level is possible. However, elite traders now must be mindful of two KCL supports that should not be violated.

This is for elite traders who entered based on the recent breakout to keep their stop loss and managed their risk level.

Those who entered at 20 sen and 33 sen should hold until the trend is confirmed to have reversed based on the algorithm.

When should you hold and when should you exit the stock? Given several in-built proprietary mathematical calculations, the algorithm would easily tell you when this is happening.

Given the volatility in the stock, elite traders in the stock should know the KCLs in advance provided by the algorithm to be able to take action as quickly as possible.

Stay tuned as we watch the price action on the stock continuing to unfold.

 

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Certain information has been redacted and the full content is restricted to PEG Holdings clients, shareholders, fund management entities, and any affiliates or business partners approved by PEG Holdings only. You can register your interest and personal log-in here.

The content in the Research and Market section are only for general market information and should not be construed as an investment advice or constitute a recommendation to buy, hold or sell any instruments or markets. The information represents our personal view only and is for educational and general purposes only.

You should consult with your licensed investment adviser before attempting any real-life trading or investments in the marketplace. All information provided can change without notice and is not guaranteed for accuracy and completeness and is not for use by the general public. Please view the full disclaimer and terms and conditions notice here.

Please note that all algorithms calculated are dynamic and will change as prices, volume and other proprietary factors etc. move in real time.  All information pertaining to any technical or algorithm content are the proprietary assets of our affiliate partner, Bulls and Bears Research.

For more information on the algorithm, please contact our Corporate Finance and Research unit at:

Steven Liew
Head of Strategy
stevenliew@pegroupholding.com

Albert Ting
Head of Corporate Finance
albertting@pegroupholding.com

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