A GST play, to benefit from the property industry spanning upgrades for GST.

Massive jump in earnings expected; IFCA is ready to reward shareholders.

We value IFCA at MYR0.42, based on 14.5x FY15 PER. The stock is an under-researched gem.

What’s New

IFCA is a business software solution company specializing in the property industry. It has a monopoly-like business model with 70% market share in the Malaysian property software industry.

IFCA is the biggest beneficiary of GST implementation in the property sector. It has chalked up higher sales contracts in 1H14 of MYR42.1m at its Malaysia operation alone (2013: MYR38.9m) on upgrades in IT systems by the developers. As only 10% of its existing clients have upgraded/are upgrading their software for GST implementation, we see enormous potential for IFCA.

IFCA is also reaping the fruit from its aggressive expansion in China over the past ten years. Its China operation is expected to record strong double-digit growth in sales/earnings; it will likely overtake its Malaysian business as the key earnings driver by 2016-17. The company is ready to reward shareholders with dividends/free warrants. It also plans to transfer to the Main Market.

What’s Our View

Based on our back-of-the envelope calculation, we project a strong 406% growth in FY14 net profit to MYR8.8m, and a 50% growth in FY15 to MYR13.1m. These are premised on strong contract sales and improving net margins. As at June 2014, balance sheet was clean with a net cash of MYR30m or 6.7sen/sh.

Pegging it to 14.5x PER (10% discount to the average of peers of 16.1x), we derive a fair value of MYR0.42 for IFCA.

Source: Maybank Research - 25 Aug 2014