Infomina Berhad (Infomina) registered a core PATAMI of RM7.4mn in 1QFY24 (-11% QoQ, +43.3% YoY). The result came in below in house and market expectations, making up only 13.1% and 14.2% of full year forecast. We have a positive outlook on the group's strategic initiative to enhance its footprint in North Asia, concurrently fortifying its position in regional countries such as Thailand and the Philippines. Leveraging Infomina's R&D and technological expertise, we are optimistic with its ability to secure both turnkey and renewal projects effectively. Maintain a BUY call on Infomina, with a lower TP of RM1.90.

• Below expectations. 1QFY24 core PATAMI of RM7.4mn was below ours and market expectations, making up only 13.1% and 14.2% respectively of full year forecast. The lower-than-expected result was stemmed from lesser earnings in the Turnkey segment.

• QoQ. Revenue and operating profit (OP) declined by 2.3% QoQ and 12.5% QoQ, respectively, due to a substantial decline in the Renewal segment, where revenue and OP marginally decreased by 7% QoQ and 1.9% QoQ. The revenue in the Turnkey segment improved by 10.4% QoQ however, the OP tumbled by 86.8% QoQ. On top of that, no overage fee was charge to their customer during this period.

• YoY. On yearly comparison, revenue and OP surged by 34% YoY and 43.5% YoY, respectively. This was aided by new and renewed contracts from the Philippines and Thailand, as well as higher revenue recognized from the Turnkey segment, particularly customers in Malaysia. Turnkey segment revenue increased by 36.6% YoY, despite a subdued operating profit (OP) declining by 70% YoY. Nonetheless, this was offset by improved revenue and OP from the Renewal segment, which soared by 32.9% YoY and 42.6% YoY respectively. This was largely contributed by contracts from Philippines and Thailand.

• Outlook. The group is confident in its substantial investment plans for research, development, and expanding technology. The company aims to explore new markets, foster business growth, and strengthen brand presence. Notably, the group has successfully entered into Japanese market whereby it is optimistic on recruiting local talent for a new entity to streamline operations and engage with customers, supplier, and its principal partner in the mainframe business, Broadcom.

• Forecast. In view of lower-than-expected earnings forecast, we cut our FY24F-FY25F earnings by 14.0-14.9% to RM48.1-54.4mn respectively to account for lower revenue from both segments.

• Our call. Maintain a BUY call with lower TP of RM1.90 (RM1.96 previously) pegged at 22x PER (15% discount to 5-year sector average of 25.9x) and CY24F EPS of 8.6sen (8.9sen previously). The discount applied is taking into consideration the potential downside risks associated with the recent US banking crisis, particularly considering the group's significant exposure in the financial industry.

Source: BIMB Securities Research - 18 Oct 2023