Securemetric is a value buy here and it could be the next multi-bagger. Here are my reasons:
1. Low valuation. Market cap of 60mil with 34mil in cash & equivalent is a no-brainer. At this price, the market is not pricing in any growth prospect, which I think many of us here is fed up with the management's execution for the revenue has been declining since IPO in 2018. But, having said that, I think investors should also give them credit for the revenue did not drop further during MCO but in fact, the expenses and losses reduced. Quarter on quarter still showing slight revenue growth with majority of the revenue growth comes from Vietnam and Indonesia. A good thing that company is not dead as they expanded out of Malaysia given that local market got so much of political uncertainties over the past few years.
2. Low entry level. At 11c is one of the lowest level. Cash yield alone is 5.5c. How much can it drop? Limited downside to me as company's balance sheet is healthy, no debt and no cashflow problem. They do not need any fund raising. So, rights issue of another of private placement could be out of the topic.
3. Cornering. Edward and other directors have been reducing stakes since IPO. Not a bad sign as probably they could have cashed out from the warrants, which means they could have gotten more cash to accumulate more at the low now.
4. Management team. Tech / cybersecurity experts are running the show. As long as the market demand is there, they will succeed at the right time. Have faith in them although I'm not familiar with the technical part, but eventually corporates/companies need to digitise their businesses, which is already a global trend now. Cybersecurity and cloud is pretty much in huge demand but whether the technology is competent enough is another question.
5. Government's digitsation blueprint. Since the government has taken initiative to digitise businesses and infrastructures, time will come whereby this company will benefits. One of the directors Datuk Ng seems to have a very diverse profile and she seems to be well connected in the tech space. The company just need a big contract before it can fly.
6. Recovering market sentiment. There are a lot of investors holding cash by the sidelines and bearish on the market. In my opinion, the worst has been priced in and the war does not impact us directly other than leading to higher commodity prices and inflation. Therefore, the market should have found a bottom here as many of the companies are overly undervalued. Although foreign funds are increasingly coming into our country over the past few months, selling forces are there as fund houses are cashing out and EPF is not aggressive in buying. But economic data is still promising and market not due for crash yet. To time a short term crash versus buy and hold, I prefer the later on.
Based on the above justifications, I think securemetric is a buy here and it could be multiple x if the penny fad is back again like what happened after the MCO.
What if I'm wrong? I guess it won't go to 0. So, just hold till it comes as the company just need ONE booster / a killer contract to fly!
Looking at the share price movement, potentially it has bottom out at 0.09. Looks like insiders are collecting and supporting. I bet Q1 results going to be good and potentially profitable as losses are reducing sequentially. No huge sell down. It's rip to fly soon within the next few months.
if only my justifications make sense, let's buy in! Big selling queue at 0.13. Once cleared it should head right back to 0.15. But given the digital banking license pending to announce, worth a bet to speculate. Best outcome is Sunway Group get the license as they are one of Smetric's loyal customers!
This kind of stock should be valued at least 3x P/S. On average industry peers for cyber security is trading at 7x - 10x P/S. therefore, for 3x P/S in Smteric is extremely conservative. Moreover 3x P/S is equivalent to TP 0.18. Imagine if they were to get any new business related to digital banking, that would be at least 0.50 share price!!!
Smetric is worth rm1.2bil theoritical price using DCF valuation model 7% discount rate with 15x EBITDA/EV!
Can the company really grow 30% CAGR for the next 5 years? Based on 2016-2019 performance, exclude mco, it looks possible with digitalisation trending now!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
tokhang21
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Posted by tokhang21 > 2022-01-07 15:21 | Report Abuse
dh jalan