• 9M14 net profit exceeded full-year expectations by 34-36%.

• Our new FV is MYR1.00 (on 19.2x CY15 PER).

• Main Market transfer , M&As are further re-rating catalysts.     

What’s New

IFCA’s  3Q14  net  profit  of  MYR8.5m  (+445%  YoY,  +184%  QoQ)  took 9M14  earnings  to  MYR12m  (+631%  YoY).  The underlying  strength  in 9M14  earnings  came  from  net  margin  expansion  (+16ppt  YoY)  as revenue  growth  (+53%  YoY)  on  better  pricing  power  and  higher number  of  new  customers  surpassed  cost  expansion  (+12%). Revenue  growth  in  turn  came  mainly  from  the  overseas  markets (+63.6% YoY ; mainly from China) vs. Malaysia (+49% YoY).

As  at  Sep  2014,  IFCA  has  secured  MYR84m  in  sales  contracts, meeting 84% of its FY14 sales target of MYR100m. Its balance sheet remains clean with a net cash of MYR34.7m or 8sen/sh.

What’s Our View

We now expect higher FY14/15 earnings by +125%/+132% compared to  our  earlier  projections  in our  note  on  25  Aug  2014.  This  factors in:  1) a stronger-than-expected net margin of 25% (previously  13%) and  2)  a  higher  sales  contract target  of  MYR110m  for  2014  (+10%), but 3) a lower 2015 sales target of MYR130m (-13%). IFCA is now  in its  growth  phase  and  is  reaping  the  fruits  from  its  aggressive expansion in China over the past ten years.

Pegging  IFCA  to  19.2x  CY15  PER  (on  an  unchanged  10%  discount  to sector  average),  our  new  fully  diluted  fair  value  for  IFCA  is MYR1.00  (+58sen).  We  were  the  first  to  discover  this  underresearched  gem.  Since  our  report  dated  25  Aug  2014,  share  price has performed strongly +162.3%. Even so, there is still +42% upside based on our new FV .

Source: Maybank Research - 6 Nov 2014