N2N Connect expanding into P2P lending

N2N Connect Bhd
(April 13, 93 sen)
Maintain outperform with an unchanged target price (TP) of RM1.53: 
N2N announced plans to acquire a 28% interest in Australian-based OurMoneyMarket Holdings Pty Ltd (OMM) through a subscription of new shares for a cash consideration of A$2.8 million (RM8.43 million).

While the company has made earnings-accretive acquisitions to the benefit of all shareholders in the past, the most recent being Hong Kong-based AFE Solutions Ltd which was synergistic; we reserve judgement on this particular one pending further clarity from management.

We continue to view N2N’s prospects favourably nonetheless, and retain our “outperform” call on the stock. Our target price is unchanged at RM1.53, tagged to a 25 times price earnings (PE) multiple to financial year 2018 (FY18) earnings per share (EPS), the higher multiple is justifiable as we see the group continuing to make inroads into its ongoing and/or planned initiatives.

OMM is Australia’s first hybrid marketplace lender utilising the latest peer-to-peer (P2P) lending technology in combination with traditional structured finance methods to fund high-yielding unsecured loans. In essence, it is a platform to either invest or borrow money, with borrowers getting lower rates and investors more competitive returns by dealing directly with each other.

OMM prides itself as an innovative financial technology company that has big plans to make significant improvements to financial services. The investor platform is open to both retail and institutional investors, who can now access an alternative asset class to traditional equities and bonds for as little as A$50 (RM151).

Direct financial benefits may not immediately accrue to N2N with this platform only being at its infancy stages, we gather. P2P lending has also only had limited successes to date. That said, the group has proven itself in value creation, and we remain optimistic that this is no different. — PublicInvest Research, April 13

Source: The Edge (16th April 2018)

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