Petaling Jaya : Business management solutions provider IFCA MSC Bhd posted a much stronger net profit of RM9.1mil for its fourth quarter ended Dec 31, 2014, up from RM92,000 a year earlier, representing a strong billing quarter for software implementation works.
It also recorded a 122% improvement in revenue to RM31.2mil from RM14mil a year ago and has proposed a final dividend of 1 sen per share under the single-tier system for financial year 2014.
On its business prospects, IFCA MSC said it had outstanding order contracts of RM33.3mil as at end December 2014 which would be carried over to 2015.
“We see continued growth for 2015. Other than the business-as-usual growth in maintenance contracts and software licences, the revenue drivers will be continued goods and services tax (GST) activities, China market growth and Software as a Services (SaaS),” it told Bursa Malaysia.
Based on its experience from equivalent GST or value-added tax implementations in other countries, IFCA MSC said GST activities were expected to go on after April 1, 2015 due to possible legislation changes and fine-tuning during the year, or customers asking for professional services.
Depending on the scope of works required, it said this could translate to another cycle of professional services and software upgrades for its customers.
IFCA MSC said its China operations continued to grow strongly, with sales contracts expanding at 82% or RM13.2mil year-to-date, and would continue to outpace Malaysia.
“There is an estimated 46,000 property developers in China compared with 2,600 property developers in Malaysia.
“As such, our China market represents significant opportunities and potential. Our satisfied customer successes will lead us to more opportunities and repeat business,” it said.
Kuala Lumpur: IFCA is an ACE listed business software solution company specialising in the property industry with a market share of 70% serving more than 1,500 customers in Malaysia and Asia. We like IFCA for its highly scalable business model and strong earnings growth in the next two years, underpinned not only by the GST software upgrade but also the sustainable web-based conversion
business as well as overseas expansion.
Although IFCA’s 2014/2015 earnings will benefit strongly from the GST software upgrade in Malaysia, the perception that the company is a one-off GST play is misplaced. Its webbased conversion and regional expansion, especially penetrating into the Chinese market with more than 40,000 property developers (versus Malaysia’s 2,300) will propel earnings to the next level far beyond the current base.
Moreover, management is hands-on and has a clear roadmap for the company going into the next three years, including potentially launching new business initiatives like ecommerce
and regional mergers and acquisitions. Other catalysts include IFCA’s first dividend payout this year, an indication of its strong cashflow and netcash balance sheet position, coupled with the likely
migration of the stock to the Main Market of Bursa Malaysia in 2015.
Valuation-wise, based on our in-house FY15 EPS estimates, IFCA is trading at a FY15 PE multiple of 12.5 times, against a two-year EPS compounded earnings growth of more than 300%. We see substantial value in IFCA at
Risks include a recession-like slowdown in economic conditions, which results in the closing down of the business of some property developers and an unexpected rise in competition, although we think the latter is less threatening, as IFCA is far more established than its next competitor. Moreover, customers tend to be sticky with little incentive to replace a software solution once implemented.
Kuala Lumpur : IFCA MSC Bhd shares and warrants rose 8% each to be among the most actively traded counters on Bursa Malaysia.
IT software entity IFCA’s shares and warrants rose after founder and CEO Yong Keang Cheun purchased more shares in the company.
At 2.51pm, IFCA rose 6.5 sen to 88.5 sen with 30.54 million shares done. It was the second most actively traded counter on the local bourse.
Meanwhile, its warrant IFCAMSC-WA were up 5.5 sen at 75 sen with 24.63 million shares done.
The warrant became the third most active counter.
In a filing with Bursa Malaysia last Friday, IFCA said Yong had purchased an additional 500,000 shares in the company.
Yong had purchased the shares on the open market last Thursday at 79.8 sen each.
Following the purchase, Yong holds a direct stake of 500,045 shares or 0.103% in IFCA.
His indirect stake comprises 209.6 million shares or 43.31% in the company.
IFCA has been in the limelight after analysts described the firm as one of the major beneficiaries of goods and services tax (GST)related implementation and consultation work.
CIMB Investment Bank had earlier described IFCA as the country’s dominant software solutions provider for the property sector with more than 70% market share.
IFCA’s software caters for property development and management besides club and hotel operations.
Kuala Lumpur : IFCA MSC Bhd expects China, Indonesia and the domestic market to help the enterprise software solutions provider deliver “remarkable” better earnings for the financial year ending Dec 31, 2015 (FY15), with sales contracts amounting to RM130 million from the three markets.
IFCA chief executive officer Ken Yong said the group sees business growth from China leading the way this year, as it plans to open 10 new sales offices there and double the market’s contribution to the group’s revenue in FY15 to RM60 million.
IFCA currently has eight sales offices in China, which serve major companies like the Wanda and R&F groups, and contributed RM30 million in revenue for the nine-month period ended Sept 30, 2014 (9MFY14).
For 9MFY14, IFCA (fundamental: 3; valuation: 1.5) posted a net profit of RM11.95 million on revenue of RM58.05 million. Malaysia is currently its largest market, contributing 72% of its revenue for 9MFY14, while its overseas business accounted for the remaining 28% (RM16.4 million).
The group is due to release its financial results for the fourth quarter ended Dec 31, 2014, next month, and is expecting to post record earnings and revenue.
“Averaging RM4 million in sales per office in China, that number (RM60 million) is not unachievable or ambitious. To us, it is a conservative number and we are expecting very high growth from China,”
Yong told The Edge Financial Daily in an interview.
He said it is IFCA’s “dream” to open over 70 offices in China in five years, but this is subject to the speed of recruiting the necessary manpower for the expansion.
He added that the “highly scalable” nature and the low capital expenditure requirement for software companies like IFCA allow its rapid expansion in China.
Yong said IFCA is also eyeing a share of the Indonesian market in the near term through acquisition of a local firm.
He said IFCA is in talks with several Indonesian parties, but remained tight-lipped as to how advance
If the acquisition comes through, Indonesia will present IFCA with a new earnings growth catalyst.Most of the country’s property developers are using outdated versions of Windows-based software and a need for web-based solutions will bode well for IFCA.
In a report dated Oct 10, 2014, CIMB Research analyst Nigel Foo said IFCA’s balance sheet is cash rich, with RM29.7 million net cash or 6.5 sen net cash per share as at end-June 2014.
Foo noted that the group has 143 million outstanding warrants, which expire in 2016. If fully converted, this will raise an additional RM14.3 million cash or 7.5 sen net cash per share (fully-diluted basis) for IFCA.
Back home in Malaysia, much of IFCA’s success has also been attributed to the fact that it benefited from the goods and services tax (GST) software upgrades and training.
GST upgrades and projects accounted for 20% of the group’s revenue in 9MFY14.
“Moving beyond 2016, the GST element will probably not be there anymore, but we are not dependent on that,” said Yong, adding that the group is banking on its new suite of web/mobile-based solutions for property developers.
Till then, Yong said IFCA looks to secure around RM20 million in sales from GST software upgrades and training for FY15.
Meanwhile, IFCA’s strong earnings potential has not gone unnoticed by institutional investors, which represent some 10% of its shareholdings, said Yong.
“I looked at my shareholders list recently and was surprised to see JPMorgan Chase & Co and Merrill Lynch in it. I think we have about 20 institutional investors now. We are being recognised as a solid technology company with a clean balance sheet,” he added.
The stock has had the attention of the regulator too. Bursa Malaysia has reacted to IFCA’s growth by issuing two unusual market activity (UMA) queries — once in August 2014 and another in January 2015 after recent rises in price and volume of IFCA shares.
In reply, IFCA said it was unaware of any corporate development or report that could have account for the UMA.
IFCA’s share price has experienced a strong rally since January last year, growing more than nine-fold from eight sen on Jan 2, 2014 to end the year at 75 sen. It was one of the best performing stocks on Bursa Malaysia in 2014.
The stock rose to an intraday high of RM1.01 before easing to close down 4.52% at 95 sen last Friday, with 42.05 million shares traded, bringing a market capitalisation of RM460.5 million.
Yong also said the group is looking at establishing a dividend policy with payout ratio of 20% to 30% of its net profit this year to reward shareholders.
Kuala Lumpur: IFCA MSC BHD Maintain add with target price (TP) of RM1.48: We raise our financial year 2014 (FY14) to FY16 earnings per share by 16% and 46% to reflect stronger top-line growth.
The stock remains an “add” with potential catalysts such as strong earnings growth outlook,higher than expected China sales and move to the Main Market Board this year.
IFCA’s earnings growth outlook will be driven by three factors — goods and services tax (GST) software upgrade, China and migration to a mobile based platform. This year, IFCA should see a short-term boost from GST software upgrades.
The company estimates RM50 million to RM60 million in potential GST upgrades work. Some in RM15 million revenue was likely completed in 2014.
China has 46,000 property companies and IFCA has just slightly over 100 customers in this country. Unlike Malaysian developers who purchase whole software packages, China developers usually only buy one software module at a time.
So far, IFCA has only sold two to three modules out of the 13 offered, an indication of the potential of China’s market.
As for migration to mobile platform, IFCA currently has around 1,400 customers in Malaysia and we understand only around 50 companies have moved to its new mobile app-based platform. Management is studying the possibility of “renting” its software online (using cloud) and subscription could be based on a monthly or annual basis.— CIMB Research, Feb 4