KUALA LUMPUR: AmInvestment research has downgraded N2N CONNECT BHD to hold from buy with a reduced fair value of 70 sen a share from 73 sen previously, as it slashed FY19F-FY21F forecasts by 14-15%.
In a note, the research house said N2N's 1HFY19 core net profit of RM8.5mil was up 18.3% year-on-year due to a lower effective tax rate, but remained only 38% of its and market's full-year estimates.
N2N's revenue slid 2.9% y-o-y to RM53.4mil on the back of lower trading value in the equity market.
"Due to N2N’s emphasis on recurring income, it is highly susceptible to trading activities.
"Daily average trading value in Malaysia fell 25% YoY to RM2.04bil while daily average trading value in Hong Kong declined 23% YoY to HK$96.7bil," it said.
Moving forward, N2N continues to work with Japan's SBI Group to launch a new digital platform based on blockchain technololy.
The research house said it has not factored any earnings contribution from this new platform.
Near-term earnings will be driven by securing back-office systems contracts with brokers in the Philippines and locally this year, with total value estimated at RM12-36mil, said AmInvestment.