KUALA LUMPUR: AppAsia Bhd has been valued at 68 sen from its current share price of 47 sen by Japan's Rakuten Inc.
The world's third largest retail broker expects AppAsia to outperform the benchmark FBM Kuala Lumpur Composite Index by as much as 10 per cent over the next six months.
AppAsia - an information, communications and technology provider - has zero borrowing, while its net cash postion is around RM3.2 million.
Rakuten expects AppAsia's pre-tax profit to jump from RM2.7 million to RM11.2 million this year.
The firm recommended a "buy" on AppAsia, saying the 68 sen target price was premised on 25 times price-to-earnings ration for financial year 2021 as per Bursa's Technology Index.
The re-valuation of AppAsia has a lot to do directly with the company's recently-secured Malaysian Institute of Accountants (MIA) contract.
This has given the firm a monopoly as the sole service provider for electronic bank confirmation platform in collaboration with the MIA.
"This is set to be the game changer for them and we expect to see significant contributions from 2021 onwards when it becomes the new normal for audit confirmation," Rakuten said.
AppAsia recently launched its eConfirm.my APPASIA, which is the first and only industry-wide electronic bank confirmation platform providing electronic banking confirmation to all the auditors and banks operating in Malaysia.
The agreement with MIA will last for 12 years until 2030, with a pay-per-transaction revenue model.
The usage fee is RM15 per successful confirmation, thus generating income on a recurring basis.
The usage of the platform will provide mutual benefits to both the auditors and banks.
Compared with the traditional method, this platform enhances efficiency and security of the bank confirmation process.
AppAsia's clients are major banks such as Maybank, RHB Bank, OCBC Bank, Deutsche Bank and all the top audit firms in Malaysia such as Deloitte, Ernst & Young, KPMG and PwC.