IFCA MSC - Its SaaS time

Date: 
2015-04-17
Firm: 
CIMB
Stock: 
IFCAMSC
Price Target: 
1.92
Price Call: 
BUY
Last Price: 
0.63
Upside/Downside: 
+1.29 (204.76%)
Target RM1.92 (Stock Rating: ADD)

We recently took IFCA MSC's management on a roadshow in Singapore and Hong Kong. We met 21 fund managers from 18 institutions. Investor interest was strong for IFCA and some were surprised that it was successful in China. Management spoke about its plans to launch service as a software (SaaS) in the domestic market in mid-2015. We raise our FY15-17 EPS forecasts by 5%-28% to reflect potential earnings from SaaS, which lifts our target price, still based on 21x 2016 P/E (in line with domestic peers). The stock remains an Add. Potential catalysts include higher-than-expected take-up rates for SaaS and its transfer to the Main Board in 2H15.

What Happened 
We recently took IFCA MSC's CEO Ken Yong on a roadshow to meet institutional investors in Singapore and Hong Kong. We spent one day marketing in Singapore and another day in Hong Kong. In total, we met 21 fund managers from 18 institutions. There were a few positive surprises from the meetings: i) in mid-2015, the company is looking to launch three software modules through the service as a software (SaaS), which basically involves renting software, targeting the smaller property developers. This was a positive surprise as the company had earlier indicated plans to launch only one SaaS software module. ii) The company is looking to launch its e-commerce portal later this year, which is expected to add value to its current customers. We have not assumed any earnings from this business division. 

What We Think 
We believe the project cost management software will be the most popular among the three SaaS software modules. This software was popular in China as developers there focused on controlling cost due to the slowdown in the property market in the past few years. It could be the same for the Malaysia property market. In addition, our discussions with industry sources reveal that small construction players are not ready for GST. In current market conditions, there is a great need for small property and construction players to automate GST-related finances. Hence, SaaS is ideal for the small players. While SaaS is still new in Malaysia, it is very popular, particularly in USA. Companies need not be tied down by any software purchased and upfront cost is minimal. 

What You Should Do 
Remain invested in the stock. Over the next few months, news flow should be positive, with SaaS taking off. The beauty of SaaS is its scalability and we have not assumed any earnings from SaaS being launched in Indonesia.

Discussions
Be the first to like this. Showing 2 of 2 comments

Eric Liong

How the bank can proof the saas will be popular n success .. why changing ghe target price in so short term... is tis mean u ppl are not correct of ur last target ... i dun see any great progress of the company. Its still need facing steep competition from world competitor ... please proof by black n white data of their progress.. Thanks

2015-04-18 00:24

tan damien

Did not take a seat on this stock but notice CIMB promote it with TP RM1.92.

2015-06-12 22:12

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