KUALA LUMPUR (June 20): Mercury Securities Sdn Bhd has a “subcribe” recommendation on ACE Market-bound Information technology (IT) services firm Go Hub Capital Bhd at an initial public offer (IPO) price of 35 sen and fair value of 62 sen, indicating a potential upside of 77% to the IPO price.
In a note on Thursday, the research house said its target price-to-earnings ratio of 16x is at a 30% discount to comparable peers’ average valuation, given Go Hub’s smaller market capitalisation.
“We like the stock for its proven track record in implementing transportation IT solutions for KTMB, which makes it a frontrunner for several upcoming railway and bus transportation projects in Malaysia.
Proven track record
Mercury said Go Hub has achieved an impressive three-year revenue compounded annual growth rate of 32%, rising from RM19 million in FY2020 to RM44 million in FY2023.
It said this growth is attributable to the company's success in securing new transportation projects throughout the years, especially from KTMB.
“Banking on its expertise and proven track record with KTMB, management has guided that they are currently tendering for RM200m-300m worth of projects, which we believe could include 1) ECRL, 2) JB-Singapore RTS Link, 3) AFC upgrade (for LRT, MRT & Monorail lines), and 4) Cashless payment upgrade for Rapid KL buses,” it said.
Mercury said it was bullish about Go Hub’s chances of clinching sizeable transportation projects, leading it to assume strong order book replenishment of RM80 million in FY2024 and FY2025F, and RM100 million in FY2026F.
“As a result, we expect a substantial rise in its revenue to RM97 million/RM118 million, with earnings reaching new highs of RM15.5 million and RM18.2 million for FY25-26F.
“Go Hub’s recurring revenue base will also continue to grow, as completed projects often come with maintenance contracts (either fixed or on a revenue-sharing basis),” it said.