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.