Kucingko will become the only animation company in the Malaysian stock market with a maximum value of 54 cents

Kucingko is mainly engaged in 2D animation production, using digital drawing to create animated motion and visual content. The company focuses on mid-term production, producing visual content based on characters and scripts already set by the customer.

The company is listed on GEM to raise capital, and plans to set up a branch in East Malaysia, as well as a sales center in Los Angeles to establish stronger customer links.

Currently, the company is establishing partnerships with Sabah University, Sarawak University, and the Sabah Creative Economy and Innovation Center (SCENIC) to explore more talent collaborations, including providing internships, setting up mobile animation studios at universities, and sharing experiences.

Currently, the company's balance sheet is very healthy and has a large amount of cash. As of December 2023, it has net cash of RM14.4 million, or 2.9 cents per share, which is equivalent to 9.6% of the market value.

The company also plans to pay at least 40% of net profit as dividends. In the past, Kuchingko paid 47% to 164% of net profit as dividends in the fiscal year 2020 to 2023.

Currently, the company's unfinished orders have reached RM23.3 million. Tak Securities is optimistic about Kucongko, and based on a compound growth rate of 18% and a profit margin of nearly 30%, the net profit forecast for the current and next fiscal year is RM9.9 million, RM11.8 million, and RM14.1 million, respectively.

18.4 times the price-earnings ratio of the Japanese counterpart

Currently, there are no companies of the same type as Kucingko in Malaysian stocks, so it is impossible to compare them with peers. However, compared to Japanese listed companies of the same type, Dak Securities positions Kucingko's reasonable price at 43 cents based on an 18.4 times capital-to-profit ratio.

However, considering Kucingko's special interest in animation production, Dingfeng Securities received 28 times the capital-to-profit ratio after a 10% discount, and based on the net profit per share for fiscal year 2025, a target price of 54 cents was given.

Currently, Kucingko mainly serves customers in North America, Asia Pacific and Europe, with North American customers contributing the most. The company mainly animates for TV and streaming, reaching a global audience.

Da Securities believes that the company has a high-end customer base, including Warner Bros. and Titmouse Studios, which means that Kucingko's level is recognized by the industry.

In addition, Kucingko's customers include North America, Asia Pacific, and Europe, and revenue is scattered to avoid excessive dependence on a specific regional market.

Meanwhile, two management and executive directors, Shi Zhenyu and Huang Guofeng, have 22 years of rich experience in 2D animation production. Their industry insight and leadership have led the company's growth.

After learning about Kucingko's industry, Da Securities, Galaxy International Securities, and Dingfeng Securities all believed that relying on large customers can certainly improve the company's reputation level, but relying too much on North American customers is a major risk. At the same time, foreign customers will also face the impact of foreign exchange fluctuations.

According to Galaxy International Securities, the 2023 fiscal year revenue came from 3 major customers, and these 3 customers contributed 74% of the fiscal year 2023 revenue.

In addition, the securities bank also pointed out that competition is fierce in the video field, and the short video field is used to get more views. As a result, 2D animations are less popular in terms of viewership than short videos; at the same time, the animation threshold is higher than that of short videos, causing the industry to rely heavily on animation production specialists.

Dingfeng Securities and Heda Securities also pointed out that the company relies on customers to obtain major orders, so the continuity of orders cannot be guaranteed.