PETALING JAYA: N2N Connect Bhd
revenue profile seems to have stabilised to one with a stronger mix of recurring revenue of about 90% versus variable revenue of about 10%.
In the near-to-medium term, TA Research said the potential catalysts for N2N includes the launch of the Asia Trading Hub, which is expected to commence pilot phase in the first quarter of 2024 (1Q24), and a new trading platform, scheduled for launch in the second half of 2024 (2H24).
With the capital market trading frenzy observed during the pandemic having normalised, the research firm said N2N’s revenue profile has also stabilised.
Thus far, in 2023, said N2N has remained confronted with a challenging operating environment.
The company’s 1H23 revenue and core net profit declined 4.7% year-on-year (y-o-y) and 38.3% y-o-y to RM50.4mil and RM4mil, respectively.
Anchored by its predominantly recurring revenue profile, the research house anticipates N2N’s performance in 2H23 to mirror that of 1H23.
“Accordingly, we also maintain our forecast for FY23’s revenue and core net profit at RM99.1mil (minus 3.8% y-o-y) and RM8.2mil (minus 46.4% y-o-y),” TA Research said in its report following a recent meeting with N2N’s management.
By market, Malaysia and Hong Kong remain N2N’s key contributors as they each account for about 40% of the group’s revenue.
“Management shared that for Malaysia, drivers for the existing business include client requests for system upgrades.
As for Hong Kong, to cushion the impact of lower financial information terminal subscriptions, efforts are ongoing to transition clients to the managed services model, said TA Research.
It added that the Asia Trading Hub will leverage on N2N’s extensive network of brokers across Asia to facilitate cross-border trading across the related exchanges seamlessly and at a lower cost.
“We expect the channelling of such cross-border trades to offer upside and diversification to the group’s transaction-based revenue, which today is largely concentrated in Malaysia.”
As for the new trading platform, it is currently undergoing user acceptance testing and slated for launch in 2H24. It is designed to offer users a more intuitive user experience. This includes the ability for users to conduct ultra-low latency trading, a feature which is expected to appeal to traders seeking a competitive advantage.
