APEX Securites gave its fair value review of RM0.54 for ACE-market bound Kucingko Berhad which is an advance of 80% from the IPO price at RM0.30.
The house notes that Kucingko Group's initial public offering (IPO) shed light on its core business in 2D animation production services, which has garnered a robust track record over 22 years.
It said the group's strategic focus lies in providing 2D animation production services, catering predominantly to international markets such as North America, Asia Pacific, and Europe. Kucingko has maintained strong client relationships, with revenue from international markets contributing significantly, accounting for 99.8% (RM28.1 million) of total revenue in FY23 alone.
Kucingko's operational model centres around customer-provided pre-production packages, ensuring a seamless production process from digitally drawn 2D images to final animation delivery. The Group's expertise is evident in its comprehensive project management, including storyboard creation and character design, which are integral to meeting stringent visual and technical requirements.
The global demand for 2D animation content continues to grow, driven by expanding digital platforms like Netflix, Disney+, and YouTube. This trend presents substantial growth opportunities for Kucingko, as evidenced by the US video streaming market's projected six-year CAGR of 19.8% from 2024 to 2030.
Financially, Kucingko demonstrates a sound position with a strong double-digit return on equity (ROE) and robust balance sheet metrics. The Group's net profit has shown steady growth, reaching RM8.4m in FY23, reflecting a three-year CAGR of +31.5%.
Apex Securities Berhad has maintained a positive outlook for Kucingko Group, forecasting a gradual improvement in core net profit for FY24F, supported by a strong order book of RM23.3m from ongoing projects.