Review

§  Excel Force MSC Berhad (EFORCE) is currently the market leader in Malaysia for the provision of financial services business solutions. With more than a decade of experience in offering information systems and services to the Banks and Stock-Broking Companies in Malaysia, EFORCE is the first IT Company in Malaysia to provide a total, comprehensive and market-proven business solution for the stock broking industry from Front Office to Back Office. Over the years, EFORCE have built up a considerable number of well-established Stock Broking customers as well as renowned Financial Institutions and have attained approximately 90% of stock broking Public Gallery Display System and 70% of Electronic Client Ordering System market share in Malaysia.

§  Eforce reported a full year FY14 Net Profit of RM8.6 million (-11.24% QOQ, +23.2% YOY). The decrease in net profit QOQ, mainly caused by the disposal of office amounting RM1.6 million (net expenses for bonus issue and warrants).

§  From previous year, Revenue rose to RM21.6 million (+5.8% YOY), mainly attributed by the increase in Application Service Provider (ASP) by RM1.61 million and Application Solution (AS) with a slight boost of RM424 K. On the other hand, Maintenance Segment revenue decreases by RM787 K.

§  Eforce revenue and profit have been growing steadily over the past 5 years in despite of the market volatility.

§  Eforce has been lying on a comfortable growth of average 10.33% CAGR over the past 5 years, and estimated to continue on a modest growth over the coming years.

§  With an improving operational efficiency over years, EFORCE registered a 39.4% profit margin and 19.86% ROE closing FY14 with a tremendous improvement.

§  With the Current Payout Ratio of 60%, and DPS of 2.5 cent for FY14 the estimated Dividend Yield (DY %), is 4.1% based on current price of (RM0.605).

(EFORCE Balance Sheet, figures extracted from Annual Report)

Outlook

§  Existing EFORCE customer (Alliance Investment, Bimb Securities, Hong Leong Investment, Jupiter Securities, Kenanga Investment, Maybank Investment, Malacca Securities, Public Investment, RHB Investment, UOB Kay Hian) already captured 70% market shares of the Electronic Client Ordering System in Malaysia.

§  After a successful penetration in Thailand and Vietnam, next EFORCE will be focusing on the penetration of other Asian region (Hong Kong, Taiwan, Indonesia & China)

§  A bright prospect, as company in focus on enhancement, development, and implementation of their product to existing and new clients.

§  Eforce is sitting on a comfortable economic moat, a sustainable competitive advantage against its competitor N2N Connect.

§  Defensive business model, as changes in economic settings will not have a significant impact on company earnings.

Valuation

§  Target Price based on Dividend Discount Model Valuation

Current Price: RM0.605

Target Price 1: RM0.69

Target Price 2: RM0.79

Target Price 3: RM0.92