Systech Bhd
On Friday, our proprietary algorithm picked Systech for the second time in three months. During the first time it was picked, the stock was trading at 31.5 sen. The company was also queried by Bursa Malaysia for unusual market activity, following a rise in its share price and trading volume.  

Since then, the stock dipped to a low of 16.5 sen until our algorithm picked it up again following a build-up in trading momentum. The stock rose 5.3% from 28 sen to 29.5 sen over the last two days, with over 41.7 million shares changing hands on Friday.

It is unclear what sparked the sudden interest although there has been a recent rally in IT software stocks on the back of GST-themed investing. The Edge Research gives Systech a Valuation score of 1.5 out of 3, and a Fundamental score of 1.65 out of 3.

Systech has two main subsidiaries. Syscatech Sdn Bhd develops, customizes and implements proprietary software solutions, while Mobsys Sdn Bhd does franchise software systems for retail and franchises’ operational and management needs.

Its 1H FY March 2015 results saw revenue increasing 66.3% to RM4.78 million while net profit more than doubled to RM1.84 million from RM667,000. In FY2014, the company posted revenue of RM6.77 million with net profit of RM1.8 million.

Systech has net cash position of RM2 million, which declined from RM 7 million in FY2012 due to expansion plans to provide cyber security solutions. The company has recently paid a dividend of 0.003 sen per share for FY2014, which translates to a 1.03% yield.

The stock’s valuations appear high, trading at 2.51 times book and a trailing 12-month P/E ratio of 31.13 times. The company has a market capitalisation of RM98 million for a company that earned revenue of just under RM7 million in FY2014.

This article first appeared in The Edge Financial Daily, on January 19, 2015.