Cloud strategy transformation on track
? AwanTec’s 9MFY66 results were broadly in line with our expectations.
? We project softer sales and net profit delivery in 4QFY6/22F given that the
bulk of its Pernec contract award had been recognised in 1HFY6/22.
? Reiterate Hold with a lower RM0.50 TP, based on a lower 2.0x CY23F P/BV.
Sequentially lower sales and core net profit in 3QFY6/22
Awanbiru Technology’s (AwanTec) revenue in 3QFY6/22 slid 75% qoq to RM13.3m mainly
due to lower contributions from the software & service (S&S) segment, which fell by 80%
qoq. The group attributed the weaker qoq sales to lower backlog orders given that the bulk
of the Pernec contract had been recognised in 2QFY6/22. Stripping out exceptional items,
such as gain on disposal of its subsidiary for RM153km and a RM486k impairment loss on
trade and other receivables, AwanTec posted a significantly lower core net profit of
RM594k in 3QFY22 (vs. RM8.5m core net profit in 2QFY22).
Back in the black in 9MFY6/22
Revenue fell 23% yoy in 9MFY22 to RM78.3m, mainly due to lower revenue contributions
from its S&S segment due to the dual effects of the expiry of Master Licensing Agreement
with the Malaysian government, and the discontinuation of its membership in the Microsoft
Partner Network on 31 Jan 2021. Despite the lower revenue, AwanTec managed to return
to profitability in 9MFY22, mainly due to stronger contributions from cloud infrastructure
services in 2QFY22, compared to a RM17.5m core net loss in 9MFY21.
Cloud transformation strategy gaining good traction
AwanTec recently signed a Cloud Framework Agreement (CFA) with the Malaysian
Administrative Modernisation and Management Planning Unit (MAMPU) and Google to
establish the scope and basic terms of the government’s purchase of cloud services. This
will provide the opportunity for AwanTec to offer government agencies with Google Cloud
Platform Products, such as AI & Machine Learning, Compute, Storage and Workspace,
and services like data analytics, cloud migration and cloud-based system integration. Apart
from that, AwanTec has also been appointed a Google Authorised Training Partner (ATP)
starting from Jun 22. As an ATP, AwanTec would be able deliver certified curriculum
courses on Google Cloud, enabling the group to be a one-stop training centre for users
from both the public and private sectors. Overall, we see this is as a good prospect for
AwanTec to broaden its product and services offerings and expand its customer base.
Reiterate Hold with a lower RM0.50 TP
We retain our Hold rating on the stock with a lower RM0.50 TP, based on a reduced CY23F
P/BV of 2.0x (vs. 2.8x P/BV, in line with historical mean previously). We now peg our
valuation to -0.5 s.d. from its 5-year historical mean in view of weaker sentiment in the
technology sector amid the rising interest rate environment and a prolonged RussiaUkraine war