Cloudpoint Technology announced yesterday that it has been awarded a ServiceNow's Integrated Service Management solutions contract worth RM33.6m - the biggest ever contract for the group. With the contract, the group's order book increases from RM100m to a record level of RM133.6m. Based on an estimated gross margin of 15%-20%, this contract could potentially generate additional 9-10% to our FY25-26F earnings forecasts. Maintain Outperform with a higher TP of RM1.17 based on 26x FY25 EPS.

• Salient details of the contract. The RM33.6m contract for the ServiceNow's Integrated Service Management Automation solutions for a local bank, involves the implementation services, cloud subscription, subscription of software licenses and warranty support for a period of 1-3 years. We estimate that this contract could potentially fetch a gross margin of 15%-20%, contributing additional earnings of 20% to our FY25-26F earnings forecast. Cloudpoint is required to provide a security deposit of RM1.68m to participate in this project. It is worth noting the earnings recognition of this project is subject to the confirmation of contract commencement date.
• Order book at record level. Following the order book in the bag, this raises the group's order book from RM100m to RM133.6m, which will be recognised for the 2024-2026 period. It also pushes the Digital Application and Cloud Services order book by 10-fold RM36.6m - an impressive growth given that it only makes a debut in mid-2023.
• Setting its sights on data centre. Riding on the strength and expertise of the newly acquired Unique Central, the group has started bidding for data centre jobs. Given its one-stop solutions from designs, cabling to software and hardware, we believe it stands a good chance to secure some contracts in the near-term.
• Re-rating catalysts. i) winning more data centre projects under Unique Central, ii) penetration into more non-FSI (Financial Services Industry) sectors under the partnership with ServiceNow and iii) M&A opportunities within the digital application and AI space.

Source: PublicInvest Research - 4 Dec 2024