Company profile
C-Link SQ is an outsourced document management service provider and developer of related software applications and enterprise software solutions headquartered in Malaysia. In 2005, the company began developing proprietary software applications focusing on the digital transformation of documents and data, and provided outsourced services such as electronic documents, printed document delivery, and document management and hosting services for companies in the Malaysian banking, insurance and retail industries. Outsourced document management services include (1) electronic document delivery; (2) document printing and mail delivery; (3) MICR cheque printing and mail delivery; (4) medical ID card printing and mail delivery; and (5) document imaging and scanning services. According to the Insight Consulting Report, the company ranked second in Malaysia in 2019 in terms of revenue obtained from providing document management services.
Sino-Thai views
The future growth of the Malaysian document management market is impressive: According to the Insight Consulting Report, the market size of Malaysian document management services is expected to expand from RM380 million in 2019 to RM520 million in 2024, with a compound annual growth rate of 6.7% from 2019 to 2024. As technology continues to advance in software development, the total cost of enterprise application software is expected to grow from RM2.4 billion in 2019 to RM3.8 billion in 2024. Considering the future trend of more widespread adoption of document digitization and paperless office within enterprises, the size of the software market is expected to expand from RM190 million in 2019 to RM330 million in 2024, with a compound annual growth rate of 11.1% from 2019 to 2024.
In terms of operating performance: In the 2016-2018 fiscal year and ending September 30, 2019, the company's operating revenue was RM68.2 million, RM71.04 million, RM67.1 million and RM54.27 million respectively. Among them, revenue contributions from the five major customers accounted for 57.9%, 57.9%, 51.8% and 45.6% of total revenue for the same period, respectively. The largest customers during the same period accounted for about 28.5%, 23.9%, 18.5% and 16.2% of total revenue respectively; gross margins were 25.1%, 29.2%, 39.8% and 40.9% respectively. Starting in 2018, gross margin increased due to the increase in revenue generated by high-margin services provided by customers, such as the increase in the proportion of programming costs, development costs, and user acceptance and testing costs, while the revenue generated by lower margin services, such as a decrease in postage and supply material starvation, was about 900,000 RM900,000, RM1.2 million, and RM1.2 million respectively; employee costs related to developing software were about RM900,000, RM900,000, RM1.2 million, respectively RM1 million accounted for approximately 1.8%, 1.7%, 3.0% and 3.1% of sales costs, respectively; net interest rates were 13.5%, 15.7%, 17.6% and 17.2%, respectively.
In terms of valuation: Based on the 800 million share capital after the global public sale, the company's market value is HK$5-580 million, which is lower than the Hong Kong stock market average. The price-earnings ratio of the company in 2018 was about 22.6-26.2 times, higher than the industry average; the net price-earnings ratio was about 2.99-3.15 times, higher than the industry average. In terms of profitability, ROE and ROA in 2018 were 33.7% and 19.6% respectively, which is higher than the industry average. The sponsor's historical track record is only 1 project. Although it was not broken on the first day, it is less indicative. Most Malaysian companies listed in Hong Kong were companies with small market capitalization. There were large fluctuations on the first day. We counted a total of 7 Malaysian companies in recent years, with 4 rising and 3 falling. Also, considering that although the company is in the software service industry, its actual business is only digitally converting original paper documents and mailing them to customers, which is far different from the software service or online office concept with the same valuation level on the market, so we gave it 54 points, and the rating was “no subscription”.
Risk warning: (1) market competition risk, (2) data center security risk, (3) customer concentration reliance on large banking and insurance customers
