Financial Highlights

The following table sets out the financial highlights based on our combined statements of comprehensive income for FYE 2019 to 2022:

• The revenue increased from RM 66 mil (FYE2019) to RM 201 mil (FYE2022). This shows the company is aggressive in expanding their market share
• The gross profit margin decreased from 23.7% (FYE2019) to 20.8% (FYE2022) due increase in project-related hardware costs of RM49.2 million, largely for radiography machines and related expert services used for our contract with Customer K. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin decreased from 10.5% (FYE 2019) to 8.5% (FYE 2022).
• The gearing ratio is 0.1 (FYE 2022) which is under a healthy range. However, the company can increase the loan to keep the gearing ratio between 0.25 - 0.5 in order to maximize the use of funds (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The top 5 major customers for the Financial Year 2022 are as follows:

According to the details, the top 5 customers are around 75%. The top 3 companies contribute over 57% of revenue. This shows that the company is highly reliant on a few companies, especially the top 3 customers. This will cause the company to face high customer concentration risk, and it will cause a serious result when the customer swaps the service for another company.

Major Suppliers

The top 5 major suppliers for the Financial Year 2022 are as follows:

According to the details, the top 5 suppliers are around 90%. The company mentioned they generally do not enter into long-term agreements or arrangements with the major suppliers as this allows them to have the flexibility to source quality products and services at competitive prices, however, the company is still able to face unexpected costs when they decide to switch suppliers.

Industry Overview

According to the Providence Strategic Partners Report, the enterprise IT services industry in Malaysia specific to IT consulting and implementation services; and operations, maintenance and support services are characterized by enterprise spending on these IT services. The enterprise IT services industry in Malaysia grew from RM4.9 billion in 2019 to RM5.1 billion in 2021 at a compound annual growth rate (“CAGR”) of 2.0%.

Enterprise IT spending was initially affected in 2020 as a result of the COVID-19 pandemic as enterprises, particularly small and medium enterprises (“SMEs”), opted to defer or minimize selected expenses as they focused on sustaining their cash flows. However, the COVID-19 pandemic has created a case for the adoption of technology to address work-from-home policies, managing changes in demand and uncertain supply chains.

The COVID-19 pandemic has highlighted an aspect of technology that is not as distinctly apparent in more normal times – business continuity. While the ability of technology solutions to mitigate abrupt business changes has been noted in the past, the extensive reliance on technology solutions to maintain widespread and fundamental business continuity, as we are seeing today, has never been experienced on such a large scale. During the COVID-19 response, organizations relied on technology to sustain business operations through remote access, automated reporting, electronic data exchange, and real-time factory controls.

This led to a growth in enterprise IT spending in 2021 (year-on-year growth rate of 17.3%) amidst the global COVID-19 pandemic landscape. Industry growth in 2021 was also driven by increasing demand for IT system integration services given an increased penetration rate for IT systems used in enterprises and favorable government initiatives aimed at boosting the country’s digital economy; and increasing demand for IT consultancy services as well as system operations, maintenance and support services due to the rising number of end-users and growing complexity of enterprise IT systems.

With these factors expected to continue to have an influence in the years ahead, the enterprise IT services industry in Malaysia is expected to grow from RM5.1 billion in 2021 to RM6.5 billion in 2025 at a CAGR of 6.3%.

Source: IMR Report by PROVIDENCE

Business strategies and prospects for INFOMINA BERHAD

1. The company intends to strengthen its R&D and expand the technology application and infrastructure solutions in line with technological developments.
2. The company intends to continue expanding the business regionally to capture growth opportunities
3. The company intends to strengthen its branding, marketing and promotional activities to capture more growth opportunities

MQ Trader View

Opportunities

1. The company has a reputable customer base regionally consisting of government and nongovernment public bodies, local and MNCs who are major players in various industries ranging from the public sector, financial services institutions, automotive and telecommunications. These lend credence to its abilities and market reputation and allow them to market its technology application and infrastructure solutions to other customers. The company had a total of 14, 28, 35 and 43 customers in the FYE 2019, 2020, 2021 and 2022 respectively.
2. The company has established relationships with a total of 7 major international technology partners, being players in the industry whose software/hardware solutions are highly regarded and widely accepted by customers. The relationship with these partners gives them credibility when bidding for contracts with its customers. This has facilitated the capability to meet the ever-changing business requirements of its customers and assisted the Group in attracting and retaining customers

Risk

1. The company has the potential to face high customer concentration risk. The top 5 customers contributed 75% of the revenue to company. If one of the 5 customers no longer continues to cooperate with the company, the loss will be directly reflected in the revenue of the Financial Statement.
2. The company is dependent on CA Singapore as the major supplier. CA group contributed to 45.0% (FYE2022) of its purchase. The company mentioned if the business relationship with CA Singapore is terminated, its competitiveness will be affected as it will need time to familiarize itself with the hardware and software specifications as well as system processes of other product principals, including the implication of its integration in our technology solutions.

Click here to refer the IPO - Infomina Berhad (Part 1)

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