LOW-PROFILE N2N Connect Bhd could be seeing some growth catalysts this year as it rolls out new trading products.

The Edge last week reported that the company will launch its Pair Trading algorithm and low-latency trading services this quarter, alongside QUICK — a trading terminal system comparable to Bloomberg and Reuters.

N2N’s (fundamental: 1.25; valuation: 0.7) core business is the provision of a trading platform for stockbroking houses, on which it earns fees. Its direct market access platform has cornered over 70% of the market.

N2N’s share price surged last year, more than doubling to RM1.07 in May last year. It has since drifted lower, closing at 85.5 sen last Wednesday.

Even then, it is trading at a hefty 53 times price-earnings (PE) premium.

That said, N2N believes that the PE is not a “fair reflection” of the company due to its heavy spending on research and development (R&D).

It invests about RM12 million in R&D each year and expects this investment to begin contributing to earnings by year-end.

The company’s only warrant, N2N-WA, has been mirroring the trajectory of its mother shares, declining from a high of 75 sen last May to 48.5 sen last Wednesday. This is a 5.85% discount to the mother share.

N2N-WA, with a strike price of 32 sen and expiring on Aug 4, 2018, has a one-to-one conversion ratio. It is an uncovered American call warrant, meaning that investors may exercise the warrant at any time up to maturity.

Another catalyst for the company is potential mergers and acquisitions (M&As), with several targets already identified.

Last year, N2N raised RM108.6 million in a share placement to Nikkei Inc and QUICK Corp. Of this amount, RM56 million has been set aside for M&As.

The company has also been showing strong earnings growth, turning around in the financial year ended Dec 31, 2012 (FY2012) to post a net profit of RM1.79 million. Revenue stood at RM23.6 million.

For its FY2014, net profit came in at RM6.93 million on the back of RM34.24 million in revenue.

Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in Capital, The Edge Malaysia Weekly, on April 27 - May 3, 2015.

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