Considering the recently passed National Cybersecurity Bill, as one of the region’s leading cybersecurity firms LGMS stands to be the prime beneficiary. The company primarily involve in cybersecurity assessment, penetration testing, cyber risk management compliance and the provision of digital forensic and incident response services. 

Is it worth to keep LGMS mid to long term play?

The answer is a big YES. The recent quarter report recorded RM8.61 million revenue contribution from increase large contract value from the customers in cyber risk prevention segment. The revenue from cybersecurity industry is expected to show an annual growth rate of 12.80% for 2024 – 2028. The passing of Cybersecurity Bill 2024 amplifies significant milestone for the local industry. The Bill shows government strong focus towards ensuring the viability and efficiency in managing cybersecurity threats and incidents across key economic sectors.

Kenanga Investment Bank Berhad quoted LGMS has 35% potential upside tanking from cybersecurity awareness growth. The bank indicated and outperform call with the target of RM1.90. the target price is based on higher 30x FY25F PER, to reflect the uptrend among global peers such as Qualys, Fortinet and Akamai Technologies. 

Key factor for the earning drive

High prospect growth for its core cybersecurity business given under penetration of local and regional market. 

The deep moat around its business given high barrier to entry created by the tough qualification process as a vendor. 

New proprietary certification software which expected to be the next earning driver

The incoming E-Invoicing mandate that will begin in August carries significant risks if the system is vulnerable. LGMS is one of the beneficiaries for this move. This too will tank a better earning driver. The risks of e-invoice are:

- Data breaches

- Fraudulent activities

- Operation disruptions

- Regulatory penalties

 LGMS offers comprehensive services to ensure protection for the systems throughout the entire e- invoicing transition process. 

The advent of AI too significantly transformed the cyberthreat landscape. Criminal groups are beginning to weaponize AI to create advance and deceptive scams. To curb this, StarSentry cybersecurity solution, developed by LGMS subsidiary (Applied Security Intelligence Sdn Bhd) is the ideal solution to improve cybersecurity postures. 

StarSentry has been launched by Minister of Digital Dato Gobind Singh in June. It is a plug and play box designed to equip SMEs in defending against cyber threats. For this, LGMS has appointed VSTECS as the exclusive distributor. VSTECS group is a leading distributor for ICT hub. 

Given with all this information projections, LGMS positions to be one of growth company that should be in your portfolio. Please do expect a slow and steady growth. With the exuberance of economic transformation happening in our country now, traders should not miss LGMS. Once the Cybersecurity Bill is enforced (pending royal assent), LGMS will fly higher. 

Regards,

Lily of the Valley