THOSE with a keen eye would have noticed that N2N Connect Bhd recently witnessed a sharp rise in its share price. In a span of five trading days, the integrated e-commerce securities trading solutions provider’s stock gained 21% to reach 87 sen on April 27 from 72 sen on April 20.

The surge in share price came amid the emergence of China-based Hundsun Holdings Ltd and deemed interested company Hundsun Technologies Inc as new substantial shareholders after acquiring 132.05 million shares, equivalent to a 23.65% stake, from Japan’s SBI Holdings Inc and its subsidiary ­Japannext Co Ltd.

Interestingly, Hundsun Technologies is a Shanghai-listed financial software company whose largest shareholder is Hundsun Technologies Group, which holds a 20.7% stake and is in turn 100% owned by Chinese fintech giant Ant Group, according to a CGS-CIMB Research report on Hundsun Technologies in August 2020. Hundsun Technologies is a leading software and IT solutions provider for financial institutions, financial regulators and other industries in China.

At last Friday’s closing price of RMB91.89, Hundsun Technologies had a market value of RMB95 billion (RM60.1 billion). It is currently trading at a historical price-earnings ratio of 62 times.

What value will the new shareholders bring to N2N?

In its report last August, CGS-CIMB Research noted that Hundsun Technologies has gained a leading market position in the IT services it provides to sub-sectors in China such as investment and trading systems, comprehensive banking wealth management systems, transfer agency systems and asset management systems.

The company is also in the financial technology (fintech) industry, focusing on IT solutions for securities firms, futures companies, mutual funds, trust companies, asset management subsidiaries of insurance companies, banks, corporates, financial exchanges and emerging industries.

CGS-CIMB Research said Hundsun has the advantage of Ant Group as its shareholder, suggesting that there would be future cooperation between the two entities as well as Alibaba Cloud.

“With Ant Group’s competitive edge in financial data and Alibaba Cloud’s leading cloud infrastructure, we believe Hundsun will be the key gateway for Ant Group to export financial technology to financial institutions and other industries,” it said.

For the financial year ended Dec 31, 2020 (FY2020), Hundsun Technologies posted a net profit of RMB1.3 billion on revenue of RMB4.17 billion.

It is worth noting that N2N said in its 2020 Annual Report that it was not limited to fintech companies when exploring collaborative opportunities with synergistic companies. The company added that it was looking at other types of collaborations, partnerships with third-party vendors that will complement N2N’s suite of solutions and services.

Meanwhile, SBI and Japannext have since April 26 ceased to be shareholders of N2N after the sale of their shares to Hundsun.

SBI first emerged as a substantial shareholder of N2N, with a 9.09% stake in September 2018 via a private placement exercise and later upped its stake to 20.36%. A few months after that, it increased its stake in N2N by a further 11.65% through ­Japannext to replace N2N’s managing director Andrew Tiang Boon Hwa as the largest shareholder with a 32.01% stake.

The stake in N2N was to pave the way for strategic collaboration that would leverage the fintech and brokerage networks of both parties.

But since May last year, SBI has been steadily paring its stake in N2N on the open market. By end-2020, it was left with a 10% direct stake, equivalent to 56.35 million shares in N2N.

SBI established the world’s first internet-based financial ecosystem to undertake a broad range of financial services, while its subsidiary Japannext is the operator of a proprietary trading system that offers after-hours and daytime trading on the Japanese stock market.

With SBI ceasing to be a shareholder at N2N, the biggest shareholder is now Hundsun with its 23.65% stake, followed by a 22.77% stake held by Tiang.

In terms of financial performance, FY2020 was a good year for N2N. It reported a record net profit and revenue of RM27.09 million and RM112.38 million respectively, up 72.7% and 6.9% from FY2019. N2N is in a net cash position of RM64.06 million.

The company, which derived 44% of its revenue from Hong Kong and 43% from Malaysia in FY2020, attributed the increased revenue to higher trading momentum seen on Bursa Malaysia compared with the previous years. The higher transaction-based revenues seen in the Malaysian market helped to cushion the impact of the lower revenues from the Hong Kong market.

In a Dec 17, 2020 report, TA Securities Research said it is optimistic about N2N’s performance and expects its contributions from Malaysia to remain robust.

“Acknowledging that a repeat of the momentous trading activity seen in 3QFY2020 is unlikely following the expiry of the six-month loan repayment moratorium at end-September 2020 and the easing of the Movement Control Order, we expect it to remain higher versus pre-Covid-19 levels in the foreseeable term,” it said.

The research house opined that trading activity will remain strong on the back of sustained interest from the new wave of retail investors and the high liquidity, thanks to the low interest rate environment.

The research house has a “buy” call on the stock, with a target price of RM1.15.