Cuscapi - In the black this quarter

Date: 
2014-05-30
Firm: 
CIMB
Stock: 
CUSCAPI
Price Target: 
0.70
Price Call: 
BUY
Last Price: 
0.18
Upside/Downside: 
+0.52 (288.89%)
Target RM0.70 (Stock Rating: ADD)

Although annualised 1QFY14 net profit only met 16% of our full-year forecast, this was within our expectations as 1Q is seasonally the weakest quarter. The next few quarters should be much stronger but the REV tablet's progress is still slow. We maintain our EPS forecasts and target price, still based on 21x CY15 P/E, its 2-year average forward P/E. Stronger demand for the REV and M&As are potential catalysts for the stock. Cuscapi remains an Add.
     
1Q14 net profit in the black 
Although 1Q14 revenue rose 12.7% yoy, 1Q net profit contracted by 16.7% to RM0.5m. We are relieved that the company managed to record a small profit, after two quarters of disappointing losses. No interim DPS was declared, in line with our expectations. We believe that the company has recently secured some major contracts from two local F&B players and contribution to its bottomline should filter through from 2Q14 onwards. In the region, it has also secured a major job from one of the fast food giants in the Philippines. Negotiations are ongoing with a few major F&B players in China. 

M&A for growth? 
In addition, Cuscapi has indicated in the past that it is looking at an M&A exercise to expand its business in China later this year. This market is expected to be the company's largest revenue contributor from 2015 onwards. In 2014, China is expected to contribute 30% of Cuscapi's FY14 revenue and this percentage should rise post-M&A. Funding for M&As is not an issue as its balance sheet is strong, with RM17.2m net cash as at end-Mar. 

But REV's progress is slow... 
Progress for the REV, Cuscapi's interactive tablet, has been slow as the company has yet to secure any major customer in the region. After gathering feedback from its customers, Cuscapi might tweak its REV subscription-based business model to a hybrid subscription and straight purchase transaction. Negotiations are still ongoing with its customers. We have conservatively assumed that Cuscapi will secure 3,000 REV subscriptions this year. If it is able to secure REV subscriptions from one of its major China F&B customers, Cuscapi could still meet our REV target for FY14.

Discussions
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wintaxyong_59

a decline in cuscapi's share price,what happened?

2014-08-26 16:59

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