Kronologi is Asia’s leading authority in cutting-edge enterprise data management solutions, such as IT Infrastructure Optimization and Data Protection. With an extensive regional presence in countries like Malaysia, Singapore, Thailand, Philippines, Indonesia, India, Taiwan, Hong Kong and China, Kronologi is well-positioned to add value to enterprises in the Asia Pacific region.
Kronologi went IPO on Bursa (Malaysia Stock Exchange) in 2014.
Since then, Kronologi has worked with some of the biggest organisations in Asia, including Food Corporation, Toshiba, Ocean Park, NCS and many more.
http://www.kronologi.asia/case-study/
Kronologi’s success stems from helping enterprises unlock the power of relevant technologies for smart cities, data centers, geospatial, autonomous vehicle, backup, archive and cloud providers. As technological requirements differ according to specific business objectives, Kronologi provides innovative “as-a-Service” and customizable solutions – on-premise, cloud-based and hybrid. Through this unique and effective approach, partners are able to unlock the business value of their digital content, ensure data integrity, and keep their work processes safe and smart.
The Group specializes in data assurance and protection to ensure business continuity for clients. Krono's portfolio of products and services provide our clients with the ability to achieve data assurance and protection through the systematic backup, storage and recovery of enterprise data to ensure business continuity as follows:-
i) On-site data backup and storage;
ii) Off-site backup and storage for long term archival;
iii) Data recovery and restoration;
iv) Problem escalation and resolution in the event of issues or errors during the backup process;
v) 365 days, 24 hours a day, 7 days a week technical support; and
vi) Consultancy on process improvement for data assurance, data protection and disaster recovery.
The above-mentioned are delivered via the Group EDM Infrastructure Technology and EDM Managed Services division.
Krono's Corporate Structure
Group financial Status
Future prospects from FY2018 Annual Report
Although the EDM IT environment is expected to be challenging industry wide (e.g. mismatch of skilled human resources for data management at a time when enterprise data is growing exponentially), we are confident of continuing to provide better products and solutions to differentiate ourselves and provide innovative, value adding solutions to our customers.
The Group foresees that the EDM MS segment will remain highly competitive, but opportunities such as increased demand for hybrid cloud storage and other data management applications are well suited for its range of managed services solutions. To capture this growing market, the Group has already deployed its strategies into Hong Kong and plans to expand into other countries in the coming years.
The Group also expects the completion of its acquisition of Sandz Group in the financial year 2019 to contribute positively to our results. Synergies achieved from the enlarged Group will strengthen the offering of both EDM IT and EDM MS via the experience and network of Sandz Group in the Philippines.
The Group will continue to drive growth both organically through its existing footprint and inorganically via merger and acquisition opportunities, with the objective of expanding our suite of products and services to our existing customers base and in attracting new customers to the Group.
Coming back to the latest Q4 FY2019 Review.
The group's revenue for FY19 has recorded a 44% growth from RM 163 mil to RM 235.5 mil compared to the preceding year of corresponding period. Thanks to the contribution from the newly acquired Sandz Solutions (Singapore)Pte Ltd company.
From the beginning of year when Krono listed in Bursa until now, the CAGR over 6 years for revenue and net profit are 43.9% and 36.7% respectively, proving that data management and IT businesses are growing aggressively. This growth can further be sustained with the increase awareness of data analysis and network security in businesses. Based on this figure, it is a good sector that worth to invest for medium to long term.
If we look further into Krono business performance. Krono is mainly focusing on Asia countries.
The group continues to drive its growth can be seen from their recent activities that Krono acquired Quantum Storage (HK) Limited back in Dec 2017 which contributed to their sales from Hong Kong and Taiwan. The following years, Krono expanded its market share into more countries via acquisition of Sandz group on April 2019. Through Sandz group's network, Krono has ventured into Philippines and China market.
The breakdown of revenue by geographical area for each quarter from FY2018 to FY2019 can clearly see that Singapore market is Krono existing client base. However, sales from Singapore has slowed down. I anticipate that IT (Infrastructure Technology) businesses in Singapore has already saturated. In order to maintain their revenue, therefore, the managements try to grow their businesses inorganically via merger and acquisition opportunities. In FY2019, Krono has businesses in Philippines and China.
Hence, I can see that the management already have a good business strategies to drive their businesses. Although IT businesses will slowly get saturated in other countries, Krono has another business which is data management services for their new and existing customers as second income generation and also future plan. IT segment is still the main contribution to the group's revenue. One thing worth to take note is their data management services has improved the contribution compared to preceding period which it was only consisting of 6% in revenue for FY18 but 8% in FY19.
As mentioned earlier, contribution from China and Philippines market has increased the revenue starting from Q3 FY2019 mainly due to the sales revenue from Sandz group.
By looking at the gross margin trend, business expansion activities have caused higher operating cost which further reduces their gross and profit margin. Although Krono is still having double digit margin, the management have to optimize their costs to survive in this competitive market.
Comment:
Krono still have room to improve. With the recent Covid-19 pandemic outbreak, many countries are having movement restriction control. I believe it will stimulate more companies to invest in IT and data storage to bring their businesses into the internet.
However, the MCO will also affect Krono's operation in many countries. In latest quarter report (Q4 FY19) the group has highlighted that:
"The Company is cautiously optimistic for the outlook of the year ahead, which is clouded in the near-term by the on-going USChina trade war, political uncertainty in Hong Kong and the more recent global pandemic resulting from the Covid-19 virus. However, our evolving business strategy remains on track for achieving further business growth in the medium-to-long term."
Contributions from infrastructure technology segment might reduce due to their IT staffs are not able to carry out projects on site during MCO. Therefore, I reckon that the EPS for Q1 FY20 will reduce to 0.33 sen with a 50% reduction from preceding quarter. The reason I took Q4 FY19 EPS as a reference because after the newly acquisition, operating costs have increased which causes thinner margin compared to Q1 FY19.
By taking PE as 14, future EPS will be around 2.77sen to 4.56 sen, target price for Krono is around RM 0.40 - RM 0.56.
Technical Analysis:
Share price touches the resistance point at RM 0.57. Price closes above EMA50 trend on this Friday. It is a positive sign, where volume continues to improve to support the up trend, positive crossing between short term EMA 10 and 30 trends is about to happen. CCI continues to rise showing a strong buying signal on this counter. But the trend closed with a doji in the last trading day. Hence, next Monday, if the price stays above doji and EMA50, bullish trend remains.
