Due to the efforts of OpenSys, the number of CRMs increased dramatically from a small installed base of 200-300 units in 2014 to more than 4,000 units at end 2018. Since then, the CRM installed base continues to grow at the expense of ATMs and CDMs. If the banks in Malaysia keep up the momentum of replacing their older ATMs and CDMs with CRMs, OpenSys is in a prime position to profit from it. Considering that we have an excellent track record in providing the best customer experience, we are optimistic that we will continue to win more market share than our competitors moving forward.

Wow!! Imagine the recurring income growing every year!!

Very conservative valuation!!

Why?
1. CRM sales are material starting only in 2014 and peaking in 2015 until 2018 (see table ESM revenue >RM50m)!!
2. Opensys provides 3 year free maintenance period. It means maintenance profit started only in 2017!! (see table SSS margin)
3. Maintenance profit margin is north of 80%!! Just ask any software maintenance guys. There is almost zero cost. Majority fixed labor cost.
4. PE ratio should >15x because earnings growth potential >30% for next 3 years and recurring income is >80% of profit!!
5. Free cash flow > net profit. Very little capex for a software business. Some value in property bought few years back!!

Opensys is easily worth >RM300m market cap (<RM100m today)!! When profit double in 2 years, it will start to attract attention!! People are fixated on e-wallet today because of free cashback!! Cash is king!!

As expected, Q1 is a slow quarter.

But dividend is a surprise!! Last 12 months dividend is 1.5 sen!!

Very strong cash inflow!! More dividends coming!!

Good buying opportunity!!

OPINION VS FACT

2015: we are going cashless (OPINION)
2015: 200-300 CRMs

2016: we are going cashless
2016: 1000+ CRMs

2017: we are going cashless
2017: 2000+ CRMs

2018: we are going cashless
2018: 4,000+ CRMs (FACT)

Everyone can have their opinions. But facts are what really matters. Period.

Yes , cashless payment is here. How often do you use ewallet? Can I stop using cash? No. I still need cash everyday. Give me a call after you don't use cash anymore.

This is a great catalyst!! Game changer!!

I suggest we open up our mind.

imagine the exponential growth of CRM machine!! Now another new product!!

Target Price of 80 sen? RM1.20? RM1.50?

I don't know but I am very optimistic!!

P/BV is 1.76 times. ROE is 18%!!

P/BV is not relevant for tech companies because their ROEs are high.

Most tech companies P/BV is 5-6 times!!

Vitrox is 8 times!!

Opensys 1.76 times is low!!

For tech companies, the key ratios are like ROE, PEG, PER.

Yes lah!

KCChong is back!

Post more articles!

Yes lah!


The biggest catalyst?

my shareinvest BNM had on 24/3/17, announced new policy/ measures to enhance the security of ATMs & other related cash service machines against robbery attempts.

Among the few measures is imposition of ink-staining technology at ATMs, Cash Deposit Machine (CDM) & Cash Recycler Machine (CRM) which will cause the banknotes stored within to be stained in the event the ATMs are attacked, thus rendering any ink-stained banknote unfit for use.

The policy will come into effect on 1 April 2017 & must be implemented within following timeline:

• By 31/12/17 – 5% of total ATMs
• By 31/12/18 – 15% of total ATMs
• By 31/12/19 – 25% of total ATMs

As of 2016, estimated about 16K ATMs available all across Malaysia.

Opensystem Bhd (0040) being the market leader in providing ATM, CDM & CRM solutions & services is set to be the key beneficiaries.

Worth relooking at this.

P/BV 1.76 times only? So low?

Most tech companies P/BV is 5-6 times!

Vitrox is 8 times.

P/BV is not relevant for tech companies because their ROEs are high.

You should focus on key ratios like ROE, PEG, PER.

Yes lah!

Open up your mind!

ROE 18%?? FCF yield 15%?? But P/FCF 7 times?? Sure or not?? This is tech company. Should worth at least 20 times!

--
I don’t mind buying a company with high ROE of 18% and FCF yield of 15%, even if it is an “average” company, by your definition.

Better still, I’m paying less than 7x free cash flow for THE market leader with blue chip clients, with net cash position, with 3.79% dividend yield, with undemanding valuations, and exciting growth prospects.

Why exciting growth prospects? In the last five years, the total number of CRMs in the market has grown exponentially with a Compound Annual Growth Rate of close to 40 percent. Is this expected to continue? Yes. Because banks will continue to cut costs. Banks are benefitting from the cost- effectiveness of CRMs in areas of cost of ownership, lower cash holding and reduction in cash handling cost. These significant savings have been a major driving factor for banks to undertake major fleet replacement and consolidation, resulting in the exponential growth of CRMs.

What is the total market size? The total number of ATMs and CDMs in Malaysia is 17500 units with annual growth of about 5%. Opensys’ installed base of CRM (only) is 2600 units with close to 80% market share. Therefore, total CRMs in Malaysia is 3250 as compared to 17500 ATMs and CDMs to be replaced sooner or later.

Assume only 60% machines are CRMs in the future, the growth potential is more than 3 times (10500 units as compared to 3250 today).

The biggest catalyst?

my shareinvest BNM had on 24/3/17, announced new policy/ measures to enhance the security of ATMs & other related cash service machines against robbery attempts.

Among the few measures is imposition of ink-staining technology at ATMs, Cash Deposit Machine (CDM) & Cash Recycler Machine (CRM) which will cause the banknotes stored within to be stained in the event the ATMs are attacked, thus rendering any ink-stained banknote unfit for use.

The policy will come into effect on 1 April 2017 & must be implemented within following timeline:

• By 31/12/17 – 5% of total ATMs
• By 31/12/18 – 15% of total ATMs
• By 31/12/19 – 25% of total ATMs

As of 2016, estimated about 16K ATMs available all across Malaysia.

Opensystem Bhd (0040) being the market leader in providing ATM, CDM & CRM solutions & services is set to be the key beneficiaries.

Worth relooking at this.
29/03/2017 10:54 AM

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”