N2N Connect Berhad (KLSE:N2N) - Share price, News & Analysis

Q: What is the Fair Price of N2N when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

N2N (MYR0.46) is trading above our estimate of [[fair value]] (MYR0.29)

N2N fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	2/6
Past Performance	2/6
Financial Health	6/6
Dividends	3/6

N2N Stock Overview

N2N Connect Berhad, an investment holding company, engages in the research and development of software packages in Malaysia, Hong Kong, and internationally.

Rewards

Price-To-Earnings ratio (14.1x) is below the Software industry average (14.9x)

Earnings are forecast to grow 12.72% per year

Risk Analysis

Unstable dividend track record

Profit margins (16.2%) are lower than last year (26.7%)

Does not have a meaningful market cap (MYR260M)

N2N Connect Berhad Competitors

Excel Force MSC Berhad

KLSE:EFORCE

RM240.5m

IFCA MSC Berhad

KLSE:IFCAMSC

RM178.9m

Censof Holdings Berhad

KLSE:CENSOF

RM165.7m

Microlink Solutions Berhad

KLSE:MICROLN

RM619.6m

Price History & Performance

Summary of all time highs, changes and price drops for N2N Connect Berhad
Historical stock prices
Current Share Price	RM0.46
52 Week High	RM0.82
52 Week Low	RM0.46
Beta	0.81
1 Month Change	-14.82%
3 Month Change	-15.60%
1 Year Change	-42.14%
3 Year Change	-42.14%
5 Year Change	-37.84%
Change since IPO	119.05%

Shareholder Returns

	N2N	MY Software	MY Market
7D	-1.1%	0.3%	0.5%
1Y	-42.1%	-37.3%	-7.1%

Return vs Industry: N2N underperformed the MY Software industry which returned -34.3% over the past year.

Return vs Market: N2N underperformed the MY Market which returned -7.1% over the past year.

Price Volatility

Is N2N's price volatile compared to industry and market?
N2N volatility
N2N Average Weekly Movement	3.7%
Software Industry Average Movement	7.1%
Market Average Movement	5.5%
10% most volatile stocks in MY Market	11.2%
10% least volatile stocks in MY Market	2.8%

Stable Share Price: N2N is less volatile than 75% of MY stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: N2N's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
2000	200	Andrew Tiang	https://www.n2nconnect.com

N2N Connect Berhad, an investment holding company, engages in the research and development of software packages in Malaysia, Hong Kong, and internationally. The company provides design, programming, consultancy, sales, marketing, and related services. It offers infrastructure for hosting, data processing, and related services; professional training for remisiers and related fields; hosting and managed network services; webpage and server design services; information technology systems and solutions; and wealth and asset management solutions, as well as manages investment properties.

N2N Connect Berhad Fundamentals Summary

How do N2N Connect Berhad's earnings and revenue compare to its market cap?
N2N fundamental statistics
Market Cap	RM259.56m
Earnings (TTM)	RM18.16m
Revenue (TTM)	RM112.08m

14.1x

P/E Ratio

2.3x

P/S Ratio

Is N2N overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
N2N income statement (TTM)
Revenue	RM112.08m
Cost of Revenue	RM45.67m
Gross Profit	RM66.40m
Other Expenses	RM48.24m
Earnings	RM18.16m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	0.033
Gross Margin	59.25%
Net Profit Margin	16.20%
Debt/Equity Ratio	0%

How did N2N perform over the long term?

See historical performance and comparison

Dividends

4.3%

Current Dividend Yield

61%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is N2N undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for N2N?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for N2N. This is calculated by dividing N2N's market cap by their current preferred multiple.
What is N2N's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	RM259.56m

N2N key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.1x
Enterprise Value/EBITDA	5x
PEG Ratio	1.1x

Price to Earnings Ratio vs Peers

How does N2N's PE Ratio compare to its peers?

N2N PE Ratio vs Peers

The above table shows the PE ratio for N2N vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	19.6x
EFORCE Excel Force MSC Berhad	22x	n/a	RM240.5m
IFCAMSC IFCA MSC Berhad	24x	n/a	RM178.9m
CENSOF Censof Holdings Berhad	9x	n/a	RM165.7m
MICROLN Microlink Solutions Berhad	23.6x	n/a	RM619.6m
N2N N2N Connect Berhad	14.1x	12.7%	RM259.6m

Forward PE

Price-To-Earnings vs Peers: N2N is good value based on its Price-To-Earnings Ratio (14.1x) compared to the peer average (19.6x).

Price to Earnings Ratio vs Industry

How does N2N's PE Ratio compare vs other companies in the Asian Software Industry?

Price-To-Earnings vs Industry: N2N is good value based on its Price-To-Earnings Ratio (14.1x) compared to the MY Software industry average (14.9x)

Price to Earnings Ratio vs Fair Ratio

What is N2N's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

N2N PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	14.1x
Fair PE Ratio	25.6x

Price-To-Earnings vs Fair Ratio: N2N is good value based on its Price-To-Earnings Ratio (14.1x) compared to the estimated Fair Price-To-Earnings Ratio (25.6x).

Share Price vs Fair Value

What is the Fair Price of N2N when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: N2N (MYR0.46) is trading above our estimate of fair value (MYR0.29)

Significantly Below Fair Value: N2N is trading above our estimate of fair value.

Price to Earnings Growth Ratio

PEG Ratio: N2N is poor value based on its PEG Ratio (1.1x)

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Future Growth

How is N2N Connect Berhad forecast to perform in the next 1 to 3 years based on estimates from 1 analyst?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

12.7%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: N2N's forecast earnings growth (12.7% per year) is above the savings rate (3.6%).

Earnings vs Market: N2N's earnings (12.7% per year) are forecast to grow faster than the MY market (10% per year).

High Growth Earnings: N2N's earnings are forecast to grow, but not significantly.

Revenue vs Market: N2N's revenue (1.5% per year) is forecast to grow slower than the MY market (5.2% per year).

High Growth Revenue: N2N's revenue (1.5% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: N2N's Return on Equity is forecast to be low in 3 years time (6.9%).

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Past Performance

How has N2N Connect Berhad performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

6.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: N2N has high quality earnings.

Growing Profit Margin: N2N's current net profit margins (16.2%) are lower than last year (26.7%).

Past Earnings Growth Analysis

Earnings Trend: N2N's earnings have grown by 6% per year over the past 5 years.

Accelerating Growth: N2N's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: N2N had negative earnings growth (-41.6%) over the past year, making it difficult to compare to the Software industry average (-16.3%).

Return on Equity

High ROE: N2N's Return on Equity (6.2%) is considered low.

Discover strong past performing companies

Financial Health

How is N2N Connect Berhad's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: N2N's short term assets (MYR167.2M) exceed its short term liabilities (MYR21.7M).

Long Term Liabilities: N2N's short term assets (MYR167.2M) exceed its long term liabilities (MYR3.5M).

Debt to Equity History and Analysis

Debt Level: N2N is debt free.

Reducing Debt: N2N has no debt compared to 5 years ago when its debt to equity ratio was 46%.

Debt Coverage: N2N has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: N2N has no debt, therefore coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is N2N Connect Berhad current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

4.35%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: N2N's dividend (4.35%) is higher than the bottom 25% of dividend payers in the MY market (2.08%).

High Dividend: N2N's dividend (4.35%) is low compared to the top 25% of dividend payers in the MY market (4.91%).

Stability and Growth of Payments

Stable Dividend: N2N has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: N2N has only been paying a dividend for 8 years, and since then payments have fallen.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (61.5%), N2N's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonably low cash payout ratio (45.3%), N2N's dividend payments are well covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

3.9yrs

Average management tenure

CEO

Andrew Tiang (59 yo)

no data

Tenure

RM343,397

Compensation

Mr. Boon Hwa Tiang, also known as Andrew, is the Founder of N2N Connect Berhad and serves as its Managing Director. Mr. Tiang's main responsibilities include management of N2N Connect Berhad’s overall busi...

CEO Compensation Analysis

Compensation vs Market: Andrew's total compensation ($USD77.94K) is below average for companies of similar size in the MY market ($USD112.74K).

Compensation vs Earnings: Andrew's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: N2N's management team is considered experienced (3.9 years average tenure).

Board Members

Experienced Board: N2N's board of directors are considered experienced (4.4 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/07/01 00:00
End of Day Share Price	2022/07/01 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31