Sedania Innovator Bhd
Not rated with a fair value of 39 sen: Sedania Innovator Bhd will issue 51.5 million new shares (26% of enlarged share capital) at an issue price of 38 sen. Seventeen per cent is allocated to the public, 2% for directors and selected employees, while the balance 81% is for private investors.

In a nutshell, Sedania is a platform and services enabler for mobile subscribers. The group’s main partners include Celcom (80% of revenue) and Robi Axiata. Sedania’s core product is airtime sharing solutions, which enable transfer of airtime credit from mobile users to prepaid subscribers.

Sedania is banking on its new product GreenBilling© to propel sales. This mobile application enables users to make payments simultaneously for multiple bills (for example, utilities, banks). The group also has a pipeline of product launches ( voice, data, network sharing platform for example) lined up for progressive launch in 2015 and 2016.

We believe the market for ancillary mobile services and content is highly competitive. Given the rapid evolution of technology trends, and low barriers of entry, aggregators and content developers face obsolescence unless innovation is rapid. Therefore, we are concerned about the company’s future growth prospects against this intensely competitive backdrop.

On the bright side, Sedania has a long-standing relationship with Axiata Group Bhd via Celcom, for more than 10 years. Having secured Robi Bangladesh as a client last year, there is a likelihood of Sedania signing up other subsidiaries within the Axiata Group. Axiata primarily operates in emerging markets Indonesia, India, Sri Lanka, Cambodia and so on), which are fast-growing prepaid markets.

We arrive at a fair value of 39 sen for Sedania based on 12 times financial year 2015 price-earnings ratio. This implies an 8% discount to IFCA MSC Bhd (13 times). We believe the discount is justified given IFCA’s larger market cap (excess of RM500 million), robust earnings growth, and more stable business model. — TA Securities, June 16

This article first appeared in The Edge Financial Daily, on June 17, 2015.