NET One Systems (TYO:7518) - Fundamental Investment Case

1H earnings strength featured frontloaded orders in the Public division alongside evidence of productivity & profitability improvements.

Whilst 1H orders were flat YoY, the figure included a high YoY hurdle due to Y12bn in large government orders in the 1H 3/19. In reality the 1H 3/20 order total was over Y9bn above plan.

The Public division was a particular area of strength as continued regional municipality demand combined with above plan orders in the new hospital & educational facility customer sectors. Delayed customer investment in the Enterprise division also began to show a recovery.

We have revised up our FY 3/20 OP estimate from Y15.5bn to Y18bn +38.3%YoY to reflect greater than expected productivity & profitability. Similarly we have raised our FY 3/21 OP estimate from Y18.1bn to Y21bn +16.7%YoY.

On 17x 3/21 earnings we conclude the stock remains undervalued versus its long term growth prospects & reiterate our Positive rating.