Infomina Berhad (Infomina) registered a core PATAMI of RM8.3mn in 4QFY23 (-63.2% YoY), bringing 12MFY23 core PATAMI of RM40.9mn (+139 YoY). The result came in within our expectations, making up 94.2% of our full year forecast but largely ahead consensus estimates by 161.7%. We are optimistic about the group's strategic plan to expand into North Asia while strengthening its presence in regional countries like Thailand and the Philippines. With Infomina's R&D and technology capabilities, we believe they able to secure both turnkey and renewal projects successfully. Upgraded to BUY from HOLD on Infomina, with higher TP of RM1.96.

• Within expectations. FY23 core PATAMI of RM40.9mn was within our expectations, making up 94.2% of our full year forecast.

• QoQ. Revenue decline 47.6% QoQ amidst disappointing PBT margin which decline by 6.3 ppts QoQ. The less-than-inspiring performance was dented by lesser excess fee charges invoiced by the Group due to lower utilisation in the contracts. Besides, both turnkey and renewal revenue slid by 29.7% QoQ and 52% QoQ respectively. Renewal segment showed 63% QoQ decline in operating margin (OP), despite the turnkey OP margin showing an increase of 58.9% QoQ, and hence, boosted the group’s OP by 53.6% QoQ.

• YoY. There are no comparative figures for the corresponding year’s quarter.

• YTD. For FY23, Infomina revenue and PBT surged 25% YoY and 124.2% YoY respectively, thanks to better contribution from its renewal segment. It is worth mentioning that the renewal revenue contribution significantly improved to approximately 69% during FY23 compared to 42% in FY22, driven mainly by financial services institutions in the key markets of Thailand and the Philippines as well as another region.

• Outlook. Moving forward, the group is confident in its plans to invest in research and development whilst expand its technology offerings They aim to explore new markets to foster business growth and bolster their brand presence Notably, the group has successfully expanded into the Japanese market by establishing a new key operation there. They are optimistic on hiring local talent to establish a new entity, which will facilitate business operations in the region and enable active engagement with customers, suppliers, as well as their key partner, Broadcoam, for the mainframe business.

• Forecast. We tweak higher our FY24F-FY25F earnings by 17.7-22.7% to RM56.5-63.3mn respectively to account for higher revenue from both segments. We are optimistic on the group's strategic plan to expand into North Asia and enhance its presence in regional countries like Thailand and the Philippines. Given Infomina's impressive research and development as well as technology capabilities, we firmly believe they have the capacity to secure both turnkey and renewal projects successfully.

• Upgrade to BUY, TP: RM1.96. Upgrade to BUY from HOLD call with higher Target Price of RM1.96 (RM1.72 previously) pegged at 22x PER (15% discount to 5-year sector average of 25.9x) and CY24F EPS of 8.9sen (8.3sen previously). Discount applied is relative to Infomina's short-term outlook, taking into consideration the potential downside risks associated with the current US banking crisis, particularly in light of the group's significant exposure in the financial industry.

Source: BIMB Securities Research - 1 Aug 2023