Investment Highlights

• We maintain our HOLD recommendation on Infomina with a higher fair value of RM1.82/ share from RM1.51/share previously. This is based on a raised FY24F EPS and an unchanged FY24F PE of 25x, in line with its closest industry peers' average forward. The FV also reflects an unchanged neutral ESG rating of 3 stars.

• We revise upwards our FY23F/FY24F earnings by 27.6%/21.1% after Infomina’ 3QFY23 results came in above expectations.

• Infomina reported a robust 3QFY22 core net profit of RM22.7 mil (+4.5x QoQ), bringing 9MFY23 core net profit to RM32.5mil which made up 104% of our FY23F earnings and 137% of consensus.

• Notably, 9MFY23 core net profit has already exceeded the record-high net profit in FY22 by 90%. The positive deviation was due to upward contact rate revisions to existing customers and additional recognition of overage fee due to higher-than-expected usage and consumption by customers in 3QFY23.

• The higher 3QFY23 earnings was supported by higher revenue of RM109.7mil (+2.6x YoY), mainly driven by the renewal segment which contribute up to 80% of group revenue.

• In tandem with the higher contribution from the relatively higher margin renewal segment, Infomina’s gross margin improved by 5.8%-point QoQ to 32%.

• Infomina’s 3QFY23 revenue surge QoQ mainly stems from a RM61mil increase in provision of core banking applications for financial services institutions in the Philippines and Thailand under the renewal segment.

• Recently, Infomina has been appointed by the Companies Commission of Malaysia (CCM) as the service provider for an online platform. We view this contract as kick starting the third pillar of the main business segment.

• However, we view that these positive developments have been priced in with the stock currently trading at a FY24F PE of 22.1x, compared to Bursa Technology Index’s 5-year forward average of 26.8x.

• Key risks to our call and earnings forecasts are termination of contracts from major customers and a sharp dip in orderbook value.

Source: AmInvest Research - 14 Apr 2023