Investment Highlights

• We maintain HOLD recommendation on Infomina with an unchanged fair value of RM1.60/share, pegging the stock to FY25F PE of 20x, in line with its closest industry peers' average. Our FV also reflects an unchanged neutral ESG rating of 3 stars.

• We made no changes to FY25F-27F earnings as Infomina’s FY24 results were generally in line with our expectation. Although the group’s FY24 core net profit of RM33mil came in 6% below our FY24F core earnings and 12% below consensus estimate, we expect higher contribution from the Japan market to the group’s revenue in the upcoming financial year.

• YoY, the group’s FY24 revenue dropped 10.4% to RM225mil, mainly attributable to the one-off overage fee charged to a customer for higher-than-expected utilisation in the corresponding year. In tandem with the lower revenue, Infomina’s gross margin decreased by 0.4%-point YoY to 28.6%.

• On a QoQ basis, 4QFY24 revenue grew 15.3% to RM58.5mil, primarily because of higher revenue recognised for both renewal (+22.6%) and turnkey (+3.0%) segments. However, 4QFY24 core net profit declined slightly by 8.4% QoQ due to the deterioration of EBITDA margin by 3.7%- point to 17.8%, impacted by higher operating costs as well as a 3%-point increase in effective tax charge.

• Going forward, Infomina aims to continue its strategic expansion both locally and regionally to further enhance its orderbook. We anticipate the company securing a higher volume of contracts in the near term.

• Additionally, the group recently secured a renewal segment contract valued at RM53.6mil with a Thailand bank. This contract is expected to bring positive cash flow and stable revenue in the coming years.

• The stock currently trades at a fair FY25F PE of 18x, in line with the Bursa Technology Index’s 5-year forward average PE.

Source: AmInvest Research - 26 Jul 2024