CIMB Research initiates coverage of IFCA with Add call

Monday, 13 October 2014

 CIMB Research has initiated coverage on software solutions provider IFCA MSC Bhd with an Add call, setting the target price at 78 sen based on 21 times 2016 price-earnings ratio – in line with domestic peers MyEG and Cuscapi.

It said potential catalysts for the stock include stronger-than-expected GST jobs, potential dividends and a move to the Main Board in 2016.

According to the research house, investors with higher risk appetite should consider IFCA’s warrants (exercise price 10 sen a share, expires in Feb-2016).

IFCA is a software solutions provider focused particularly on property development, golf clubs, hotels and the construction sector, with around 70% market share of the property sector. Clients include Sime Darby, SP Setia, EcoWorld and Mah Sing.

CIMB Research said there were three key factors that would turn operations around for IFCA from this year onwards, namely 

1) software migration from Windows-based to web and mobile platforms for its domestic customers, 

2) China sales taking off in the past few years, and

 3) domestic GST software upgrades and training in 2014/2015.

“We estimate IFCA should be able to secure RM60mil-70mil in sales from GST software upgrades and training in 2014/2015. We project IFCA’s three-year net profit CAGR (compound annual growth rate) to be 228%,” it said.

CIMB Research added that profit margins should expand quickly as revenue growth from the domestic and China markets was expected to accelerate.

While Malaysia was its largest market, China could overtake in the next few years, the research house said.

“Its major customers in China include the Wanda and R&F groups. Wanda is China’s largest commercial property company and the world’s largest cinema chain operator,” it noted, adding that the company would be kept busy even after the GST jobs.

This would be due to software migration from Windows-based to web/mobile platforms in the local and China markets. 

Meanwhile IFCA is also looking to expand its regional reach, eyeing Japan, the Middle East and Thailand.