Potential jump in earnings for N2N from HK purchase

N2N is a one-stop stop application service provider for the financial industry.

KUALA LUMPUR: PublicInvest Research expects information technology services company N2N CONNECT BHD to record a potential 30% to 40% jump in earnings following its proposed acquisition of a Hong Kong firm.

N2N is buying financial data and trading solutions provider AFE Solutions Limited (AFE) for US$20.6mil (RM85.3mil) cash from Reuters International Holding S.A.R.L. and Systex Capital Group Inc. 

The research house said on Thursday this estimation was based on an average RM6.5mil consolidation of AFE’s numbers.

“We are positive on the acquisition, and see the transaction as a value accretive and synergistic one, enabling the group to fast track its regional expansion plans,” it said in a note. 

PublicInvest Research said it will not make any changes to its earnings estimates until the conditions precedent are met. The deal is expected to be completed in the first quarter of 2017.

It reaffirmed its Outperform call on the counter with a price-to-earnings derived target price of RM1.08.

Incorporated in Hong Kong, AFE has a presence in Hong Kong, Macau and Vietnam and its customers are stock brokerage firms, commercial banks, asset management companies and retail investors.

AFE offers a full suite of multimarket and multi-instrument platforms for information, stock trading and settlement services. 

Although the AFE Group had reported a RM714,000 loss for FY15, this  was as a result of equity-accounting a Thai associate’s RM7.47mil share of losses. The Thai associate will be sold after the deal is signed.

“With AFE, N2N is able to leverage on the former’s expertise in information solutions as well as its overseas customer base to complement its existing business and expand into new markets. 

“Add to that the partnership with its two significant shareholders, primed to bear fruit through the development and rolling out of QUICK PRO in Japan and across Asia, the company’s growth potential is exciting,” the research house added.

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