Taking A Look At OpenSys

Taking a quick look at this ACE-listed IT company. It is currently listed at an approximate market cap of $280m.

OpenSys M Bhd is a public-listed company on Bursa Malaysia. It offers solutions to the financial services, telecommunication, and utility industries that heighten productivity, efficiency, and effectiveness. The business activity of the firm is functioned through Efficient Service Machine (ESM) and Software Solution and Services (SSS) segments. The Efficient Service Machine segment involves in the purchasing, manufacturing, and distributing of ESM machines. The Software Solution and Services segment includes the sale of licensing software and rental of ESM machines. All the activities are predominantly carried out through the region of Malaysia.

Directional Assumption

Long OpenSys

The Narrative

I love its financial margins. ROE > 10% and growing profitability margins.

It has growing free cashflow:

Decent gearing and liquidity ratios

Latest developments: OpenSys (M) Bhd’s net profit increased 41.2 per cent to RM3.07 million in the third quarter (Q3) ended September 30, 2020 from RM2.17 million recorded in the same quarter last year. In a statement today, the solutions provider for the financial services, telecommunications and utilities industries said this was due to the continued hardware and software solutions’ delivery mainly to its banking customers. Its revenue in the Q3 increased 11.6 per cent to RM23.89 million from RM21.41 million. OpeSys chief executive officer Eric Lim Swee Keah said charting all-round financial outperformance despite the challenging economic landscape spoke volumes of the sustainability of the company’s business model. “This is largely hinged on our strong recurring income stream from the solutions and services segment, as well as our support for essential services of financial institutions, telecommunications and utilities players.” Lim said the company had not witnessed any significant disruptions to its operations from the implementation of conditional Movement Control Order (MCO) since mid-October. “Barring unforeseen circumstances, we hope to register satisfactory performance in the financial year ending December 31, 2020,” he said.….

Source: https://www.nst.com.my/business/2020/11/643683/opensys-q3-net-profit-rises-41pct-revenue-rm24mil

Trading Strategy

I would like to look at this Company as a potential short term trading opportunity. One possible trading strategy is to consider current entry price at around $0.625 with possible target price ($0.72 / $0.77 / $.088 which are expected to be key resistance levels) and possible cut loss ($0.565 / $0.525).

OpenSys appears to be on an uptrend

Possible Downside Risks

Major contribution comes from providing services to the financial services sector. However, there may be certain headwinds in the financial services sector. Would the banks cut their future spending / capex expenditure and hence, indirectly impacting on financial IT solution providers such as OpenSys?

Disclaimer: This post is not an investment / trading advice. Please refer to the general disclaimer of this blog.

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