SMRT showing strength after restructuring, more uptrend expected

SMRT Holdings Bhd is seeing a quick recovery from its low of 96 sen on 7 Aug. The company reported a net profit of RM6.21 million for the fourth quarter ended June 30, 2024 (4QFY24), bringing its full-year net profit for FY2024 to RM26.68 million. As at June 30, 2024, it had net cash of RM15.69 million, with total cash of RM26.28 million, while total borrowings stood at RM10.58 million.

There is no comparison with the preceding year’s results as SMRT had in April last year changed its financial year end from Dec 31, 2022, to June 30, 2023. For its 18-month financial period (from Jan 1, 2022) ended June 30, 2023, SMRT posted a net loss of RM16.63 million.

SMRT’s turnaround in FY2024 was mainly driven by stronger-than-expected site deployments throughout the year. Moving forward, it is targeting double-digit growth as it focuses on delivering sustainable and stable performance. In terms of price/book value rating, the stock is presently trading at a multiple of 7x based on a book value per share of 17 sen as of end-Sep 2024.

The company became a pure-play enterprise Internet of Things (IoT) solutions provider after a series of corporate restructuring exercises completed in May 2023. This is via its main operating unit N’Osairis Technology Solutions Sdn Bhd, which is serving utility companies such as Tenaga Nasional Bhd and Pengurusan Air Selangor Sdn Bhd.

SMRT acquired a 64% stake in N’Osairis for just RM6 million in 2016. The group bought the remaining 36% last year for RM72 million, reflecting the significant growth and increased value of N’Osairis in recent years.

The Cyberjaya-based technology firm will focus on expanding its market share in the coming years, entering new regions and developing new products to serve more sectors. The company aims to establish itself as a digitisation player in the region, leveraging its experience in markets like Indonesia and the Philippines.

SMRT installs, monitors and maintains the necessary hardware including sensory devices, routers and SIM cards at its customers’ operational facilities to establish end-to-end wireless network connections that are customised to its customers’ needs. More than 50% of our revenue is recurring in nature from its maintenance services, providing the company with stable, predictable income

Investors should favour SMRT given the earnings potential arising from the utilities and financial services sectors and the growing recurring earnings base.