The TP represents a potential return of 84.8% over the initial public offering (IPO) price of 33 sen for the financial management software company, which is due to be listed on Bursa Malaysia’s ACE Market on May 9.
It said the TP of 61 sen was based on FY2023F earnings per share (EPS) of 2.8 sen and a price-to-earnings ratio (PE) of 22x, which is a 10% discount to the technology sector’s FY2023F PE.
In a note, Mercury said Autocount is well-positioned to leverage on the growth of the financial management software industry in Malaysia.
“The company offers three types of financial management software consisting of the accounting, point of sales, and payroll software which can be utilised by businesses and companies on a standalone basis,” it said.
Autocount has so far sold about 70,000 software licences for use by about 210,000 businesses and companies in Malaysia and Singapore to support its finance and accounting functions, it added.
The company is managed by chairman Choo Chin Peng, who has more than 27 years of experience in the financial management software industry. It noted the company was able to achieve a three-year revenue compound annual growth rate of 27% from FY2019 to FY2022.
Mercury said Malaysia and Singapore contributed about 80.65% and 18.72% of the company’s revenue in FY2022.
“The company intends to leverage on the success of its business growth in Singapore by diversifying its revenue stream and expanding its business across various countries such as Thailand, Vietnam, Indonesia, and the Philippines with the primary focus of selling cloud-native software.” said Mercury.
IPO proceeds to expand R&D
Autocount plans to facilitate this expansion along with other research and development (R&D) efforts to enhance existing software and develop new software using proceeds from the IPO.
The company, which launched its prospectus on April 14, will have an enlarged share capital of 550.5 million shares upon listing, and expects to raise RM30.88 million from the IPO.
The offering comprises a public issuance of 93.59 million new shares or 17% of its enlarged share base, and an offer for sale of 44.04 million shares.
Malacca Securities Sdn Bhd has been appointed principal adviser, sponsor, underwriter and placement agent for the listing exercise.
Autocount expects to have a market capitalisation of RM181.67 million at the IPO price of 33 sen.
Its FY2022 profit after tax was RM13.8 million compared to RM10 million a year earlier, while revenue in FY2022 stood at RM38.7 million from RM29.5 million the previous year.
Choo said the offering of new product services and the older software’s end of life on March 31 this year contributed to FY2022’s rise in net profit.
“Only 21% of our customers have upgraded to the newer version, we still have 79% of customers yet to upgrade,” he said at the IPO prospectus launch.
Mercury has forecasted Autocount’s earnings to rise by 12.3% to RM15.5 million in FY2023.
On potential risk factors, it listed skilled labour shortages, and foreign exchange transaction risk arising from its revenue exposure to the Singapore dollar which constituted approximately 18.72% of total revenue in FY2022.