IFCA gears up for Beijing Olympics
The Star, StarBiz, 29 Mar 2004, By C.S. Tan

SOFTWARE developer IFCA MSC Bhd has positioned itself to pursue sales in China where numerous hotels are being built ahead of the Beijing Olympic Games in 2008. The company is targeting to sell its hotel management software to the booming market there.

IFCA has specialised software products for two sectors, namely clubs and hotels, and construction. Besides the hotel sector, IFCA has specialised software for the construction companies that are building the hotels.

These will be very active sectors. There will be 300 new hotels, ranging from budget to five-star properties, which will be completed before the Games start.

China is a promising new market for IFCA, which is entering an exciting year, analysts said. The group posted a 62% increase in net profit to RM5.1mil for the year ended Dec 31, 2003.

The net profit could almost double to about RM10mil this year, an analyst said.

Ken Yong

The basis for this target was that the RM5mil earned last year could be maintained, with cost savings of RM3mil in its Shanghai office, RM1mil of guaranteed profit from China's Sys-Win group and incremental earnings, he added. The cost savings will come from IFCA's closure of its Shanghai office, and the use of Sys-Win's resources in that city. IFCA formed a joint venture (JV) with the Sys-Win group last month at a cost of RM6 million cash that IFCA will inject into the JV. Sys-Win is also a software house, and it has four of its own offices, with business partners in 46 cities in China.

The smart money seems to have discerned IFCA's prospects. TA Asset Management is understood to have built up a 4% stake in the company.

IFCA's share price of 43 sen, which works out to a price-earnings multiple of 18 times, may not appear to be cheap. “But if the profit doubles next year, the PE will come down to nine or 10 times this year, and it may be even cheaper next year,” the analyst said.

IFCA chief executive officer Ken Yong, who has just returned from a business trip to Beijing, explained the China strategy. “We were in Shanghai on our own for one year. It was not easy. We have now adopted a JV model. You need local partners,” he told StarBiz. Hence, that JV with Sys-Win.

The partners in Sys-Win will help, for instance, in providing the contacts and local flavour as IFCA bids to sell its systems to the hotels coming up in Beijing.

IFCA is distinctive for its determination to sell its products overseas. While most Mesdaq companies have exposure to just two or three countries, IFCA's distribution network covers 14 countries.

Managing director Jack Yong said analysts tend to ask why was it that IFCA's profit margin was so low for a software company. Its margin was 16% last year. He explained this is due to the costs of setting up the regional distribution network.

Now, the network is in place, and it will be spending less on such costs. Hence, IFCA's profit margins will increasingly widen. One example of these overseas jobs is a RM24mil six-year contract with an agency in South Africa, that builds public housing throughout that country. IFCA is in its fourth year of this contract.

When sales are made by the business partners, 50% of the revenue goes to IFCA. Most of that was profit for IFCA as the costs were largely borne by the dealers, Jack Yong said.

While IFCA continues to have its niche in Malaysia, revenue from overseas will increasingly feature in the group's results.

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