Investment Highlights

• We maintain HOLD recommendation on Infomina with the same fair value of RM1.82/ share, pegged to 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 made no changes to FY24F-25F earnings as Infomina’s FY23 results were largely in line with our expectation. We introduce FY26F net profit with a conservative earnings growth assumption of 3% despite a strong revenue growth of 18% driven by lower margin turnkey projects.

• The group’s FY23 core net profit of RM41mil (+2.4x YoY) came in 2% above our FY23F core earnings but 61% above consensus estimate.

• YoY, the group’s FY23 revenue grew 25% to RM251mil, mainly attributable to renewal segment which contribute up to 74% of group revenue.

• The renewal segment’s revenue grew 87% YoY, driven by an increase in provision of core banking applications for financial services institutions in key markets like Thailand and Philippines.

• In tandem with the higher contribution from the relatively higher margin renewal segment, Infomina’s gross margin improved by 8%-point YoY to 29%.

• On a QoQ basis, 4QFY23 revenue slipped 48% to RM58mil, primarily as a result of reduced overage fee charges invoiced by the group.

• As at end-May 2023, Infomina’s substantive order book of RM445mil translate to a comfortable 1.3x FY24F revenue, underpinned by a healthy tenderbook of RM500mil. We expect the order book replenishment rate to remain healthy as the company continues to receive inquiries from existing and potential customers from various regions for both turnkey and renewal segments.

• Going forward, Infomina aims to continue expanding its footprint into North Asia, especially China, Hong Kong, Taiwan and Japan which are part of the CA partner regions that the company currently does not have a strong presence.

• However, we view that the positive developments have been priced in with the stock currently trading at a premium FY24F PE of 24x, compared to Bursa Technology Index’s 5- year forward average of 23x.

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

Source: AmInvest Research - 1 Aug 2023