IFCAMSC (0023) - IFCA MSC - Just starting on its growth path
Target RM1.48 (Stock Rating: ADD)
We gather from our meeting with the fund managers and the company, outlook for IFCA this year remains bullish. To grow its recurring income, the company is studying software as a service (SaaS), targeting the smaller property developers. China offers huge growth potential for the company. We raise our FY14-16 EPS by 16-46% to reflect stronger top-line growth. Our higher target price is based on an unchanged 21x 2016 P/E (in line with domestic peers). The stock remains an Add with potential catalysts such as strong earnings growth outlook, higher-than-expected China sales and move to the Main Board in 2015.
We raise our FY14-16 EPS by 16-46% to reflect stronger top-line growth. Our higher target price is based on an unchanged 21x 2016 P/E (in line with domestic peers). The stock remains an Add with potential catalysts such as strong earnings growth outlook, higher-than-expected China sales and move to the Main Board in 2015.
GST boost in 2015
To better understand the company, we recently arranged a meeting between IFCA and a small group of fund managers. IFCA’s earnings growth outlook will be driven by three factors: i) GST software upgrade, ii) China, and iii) migration to mobile-based platform. In 2015, IFCA should see a short-term boost from GST software upgrades. The company estimates RM50m-60m potential GST upgrades work (RM15m revenue was likely completed in 2014).
China is huge
China has 46,000 property companies and IFCA has just slightly over 100 customers in this country. Unlike Malaysia developers who purchase the whole software packages, China developers usually only buy one software module at a time. So far, IFCA has only sold 2-3 modules out of the 13 modules offered by the company, an indication of the potential of China’s market.
Migration to mobile platform
IFCA currently has around 1,400 customers in Malaysia and we understand only around 50 companies have moved from the Windows platform to its new mobile app-based platform. Average software cost for the mobile-based platform is around RM1m. If history is any indication, it could take IFCA’s customers 5-7 years to completely move to the mobile-based platform.
Growing its recurring income?
IFCA is looking to grow its recurring income. One way is through software as a service (SaaS), targeting the smaller property companies. Management is studying the possibility of “renting” its software online (using cloud) and subscription could be based on a monthly or annual basis. We have not assumed any potential earnings from SaaS. IFCA’s 9MFY14 maintenance revenue was RM14.3m, 25% of the Group’s 9MFY14 RM58m revenue.
Source: CIMB Daybreak - 04 February 2015
Target RM1.48 (Stock Rating: ADD)
We gather from our meeting with the fund managers and the company, outlook for IFCA this year remains bullish. To grow its recurring income, the company is studying software as a service (SaaS), targeting the smaller property developers. China offers huge growth potential for the company. We raise our FY14-16 EPS by 16-46% to reflect stronger top-line growth. Our higher target price is based on an unchanged 21x 2016 P/E (in line with domestic peers). The stock remains an Add with potential catalysts such as strong earnings growth outlook, higher-than-expected China sales and move to the Main Board in 2015.
We raise our FY14-16 EPS by 16-46% to reflect stronger top-line growth. Our higher target price is based on an unchanged 21x 2016 P/E (in line with domestic peers). The stock remains an Add with potential catalysts such as strong earnings growth outlook, higher-than-expected China sales and move to the Main Board in 2015.
GST boost in 2015
To better understand the company, we recently arranged a meeting between IFCA and a small group of fund managers. IFCA’s earnings growth outlook will be driven by three factors: i) GST software upgrade, ii) China, and iii) migration to mobile-based platform. In 2015, IFCA should see a short-term boost from GST software upgrades. The company estimates RM50m-60m potential GST upgrades work (RM15m revenue was likely completed in 2014).
China is huge
China has 46,000 property companies and IFCA has just slightly over 100 customers in this country. Unlike Malaysia developers who purchase the whole software packages, China developers usually only buy one software module at a time. So far, IFCA has only sold 2-3 modules out of the 13 modules offered by the company, an indication of the potential of China’s market.
Migration to mobile platform
IFCA currently has around 1,400 customers in Malaysia and we understand only around 50 companies have moved from the Windows platform to its new mobile app-based platform. Average software cost for the mobile-based platform is around RM1m. If history is any indication, it could take IFCA’s customers 5-7 years to completely move to the mobile-based platform.
Growing its recurring income?
IFCA is looking to grow its recurring income. One way is through software as a service (SaaS), targeting the smaller property companies. Management is studying the possibility of “renting” its software online (using cloud) and subscription could be based on a monthly or annual basis. We have not assumed any potential earnings from SaaS. IFCA’s 9MFY14 maintenance revenue was RM14.3m, 25% of the Group’s 9MFY14 RM58m revenue.
Source: CIMB Daybreak - 04 February 2015
