IFCAMSC (0023) : IFCA MSC - Best quarter ever
Target RM1.05 (Stock Rating: ADD)
3Q14 net profit was a record high for IFCA. At 178% annualized 9M14 net profit, IFCA’s 3Q results was above our (no consensus) expectations due to higher-than-expected top-line growth. We raise our FY14-16 EPS by 36%-100% to reflect stronger top-line growth and target price also rises based on unchanged 21x 2016 P/E(in line with domestic peers). The stock remains an Add with potential catalysts such as record 3Q14 net profit and move to Main Board in 2015.
9M14 net profit up close to 700% yoy
9M14 revenue was up 53% yoy but net profit was up close to 700%. No interim dividend was declared, in line with our expectations. Higher-than-expected 3Q14 profit was mainly due to its strong top line growth, coming from domestic and the China business. YTD, only RM8.4m GST jobs were completed while we are targeting 80%-90% revenue growth from the China market this year. The company only has 100 customers in China and we understand there are 40,000 property companies in that country.
High operating leverage business
IFCA’s software business has a high operating leverage. Most of its operating costs is fixed (labour is 65% of its operating costs) and its top line has reached the sweet spot this year. Revenue is now more than sufficient to cover its operating costs and as such, most of the revenue incremental growth should follow directly to the bottom line. This is shown by 3Q14’s EBITDA margin which was at 37.4% compared to 18.0% in 2Q14. 3Q revenue was up 40% qoq at RM25.7m.
Cash rich balance sheet
IFCA is a net cash company, RM34.9m or 7.7sen net cash/share as at end-Sep. With limited capex spending and R&D at only RM4-6m annually, the company’s cash pile will continue to grow in time. In addition, by next year, we more of the warrants would be converted (143.3m outstanding warrants, exercise price RM0.10 and expires in Feb-2016) and this could raise additional RM14.3m for the company. We were looking for the company to move to the Main Board in 2016 but based on the expected strong 2014 net profit, IFCA could be looking to move to the Main Board next year instead of 2016. The company will hold its results briefing tomorrow afternoon.
Source: CIMB Daybreak - 06 November 2014
Target RM1.05 (Stock Rating: ADD)
3Q14 net profit was a record high for IFCA. At 178% annualized 9M14 net profit, IFCA’s 3Q results was above our (no consensus) expectations due to higher-than-expected top-line growth. We raise our FY14-16 EPS by 36%-100% to reflect stronger top-line growth and target price also rises based on unchanged 21x 2016 P/E(in line with domestic peers). The stock remains an Add with potential catalysts such as record 3Q14 net profit and move to Main Board in 2015.
9M14 net profit up close to 700% yoy
9M14 revenue was up 53% yoy but net profit was up close to 700%. No interim dividend was declared, in line with our expectations. Higher-than-expected 3Q14 profit was mainly due to its strong top line growth, coming from domestic and the China business. YTD, only RM8.4m GST jobs were completed while we are targeting 80%-90% revenue growth from the China market this year. The company only has 100 customers in China and we understand there are 40,000 property companies in that country.
High operating leverage business
IFCA’s software business has a high operating leverage. Most of its operating costs is fixed (labour is 65% of its operating costs) and its top line has reached the sweet spot this year. Revenue is now more than sufficient to cover its operating costs and as such, most of the revenue incremental growth should follow directly to the bottom line. This is shown by 3Q14’s EBITDA margin which was at 37.4% compared to 18.0% in 2Q14. 3Q revenue was up 40% qoq at RM25.7m.
Cash rich balance sheet
IFCA is a net cash company, RM34.9m or 7.7sen net cash/share as at end-Sep. With limited capex spending and R&D at only RM4-6m annually, the company’s cash pile will continue to grow in time. In addition, by next year, we more of the warrants would be converted (143.3m outstanding warrants, exercise price RM0.10 and expires in Feb-2016) and this could raise additional RM14.3m for the company. We were looking for the company to move to the Main Board in 2016 but based on the expected strong 2014 net profit, IFCA could be looking to move to the Main Board next year instead of 2016. The company will hold its results briefing tomorrow afternoon.
Source: CIMB Daybreak - 06 November 2014
