Markets
Accsoft’s low gearing not appealing for warrants
Alan Voon 
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THE share price of information technology company Accsoft Technology Bhd has been declining since its share split in early March.

Accsoft undertook a share-split exercise which involved the subdivision of every 10 existing Accsoft shares into 25 split shares. This has increased the number of shares outstanding to 2.09 billion from 832.8 million.

After declining from 24 sen at the beginning of March to as low as 16 sen, Accsoft’s share closed at 17.5 sen on March 28 while its company warrant ACCSOFT-WA ended trading at 11 sen.

Formerly known as Oriented Media Group, Accsoft originally focused on the development of online games, educational web applications, mobile applications and digital media consulting services.

However, it is now focused on its indirect wholly-owned subsidiary, Fujian Accsoft Technology Development Co Ltd (FATD). Via FATD, Accsoft is expanding into the Internet-based e-commerce business through the design, development, management and operation of an online sportswear trading platform which specialises in China’s sportswear industry.

On March 28, Accsoft announced that it is proposing to change its name to Lambo Group Bhd.

Accsoft started its e-commerce business by focusing on the platform for sportswear in Fujian province, China due to the concentration of about 5,000 sportswear/footwear manufacturers in the province.

The group may expand its reach to other regions in China when it has established a well-known platform and reputation.

It has signed cooperation framework agreements with business partners in China to explore the country’s e-commerce market and increasing business competitiveness.

In the financial year ended Dec 31, Accsoft posted a revenue of RM84.73 mil which is a big jump from RM17.58 mil recorded in the 18-month financial period ended Dec 31, 2016.

Accsoft changed its financial year-end from June to December in 2016. With the substantial rise in revenue, Accsoft posted a net profit of RM19.19 mil which is the first time the company recorded a profit after many years in the red.

In the report accompanying its financial result, Accsoft attributed its revenue spike mainly to increased contribution from FATD in light of the commencement of the latter’s wholesale products.

Accsoft expects to continue deriving its income from trading activities and development of its Internet-based e-commerce platform.

Last September, the company entered into a memorandum of understanding with Malaysian Formula Bikes Sdn Bhd to jointly exploit market potentials in relation to last-mile delivery within the e-commerce industry in light of the newly-launched Malaysia’s Digital Free Trade Zone.

ACCSOFT-WA is now trading at a premium of 20%. With just under 300 days to go before the warrant expires, ACCSOFT-WA is considered expensive in terms of theoretical valuation as its implied volatility of 129% is much higher than the mother share’s short-term historical volatility of 77.5%.

The warrant does not have much leverage effect over the mother share with an effective gearing of only 1.38 times.

Investors who are bullish on the future prospects of Accsoft are better off buying directly into the mother share.

The writer is CEO of Warrants Capital Sdn Bhd



This article first appeared in Focus Malaysia Issue 278.