IFCA should see strong earnings growth over the next two years as it is one of the main beneficiaries of the upcoming GST implementation in Apr 2015. What could also positively surprise is its China division. Sales are growing fast and could surpass Malaysia's in 2 years' time. Assuming IFCA's 2015 net profit is around RM13m (2.2 sen EPS fully diluted) and if we peg the stock at 21x 2015 P/E (in line with peers MyEG and Cuscapi), the stock could be worth RM0.46. Potential re-rating catalysts for the stock include higher GST-driven and China sales and potential dividends or bonus issues.Assuming IFCA's 2015 net profit is around RM15m (2.5 sen EPS fully diluted) and if we peg the stock at 21x 2015 P/E (in line with peers MyEG and Cuscapi), the stock could be worth RM0.53. Potential re-rating catalysts for the stock include higher GST-driven and China sales and potential dividends or bonus issues.
Software specifically for property developers
IFCA MSC (IFCA) is the country's dominant software solutions provider for the property sector, with more than 70% market share. Its software is for property development, property management, clubs and hotels. IFCA currently has more than 1,000 customers (and has distributed more than 50,000 software licences).
GST and China play
The next two years will be bumper years for the company as domestic property developers upgrade their GST software in Malaysia ahead of the 1 Apr GST implementation. At end-Jun, IFCA's Malaysia YTD sales contract was already RM42.1m compared to 2013's RM38.9m. As at end-Jun this year, we understand that only 10% of its customers have upgraded their software, an indication of the immense amount of business in the pipeline for the company over the next few quarters. IFCA is also a big player in China. One of its largest customers, the Wanda Group, is China's largest commercial property company. 1H14 China sales were already RM21m, surpassing 2013's RM16m revenue. In 2-3 years' time, IFCA's sales in China could surpass that in Malaysia. There are more than 40,000 property companies in China compared to 1,000 in Malaysia.
Strong earnings recovery
IFCA earnings are already showing signs of a turnaround. 2Q14 net profit was RM3m, surpassing 2013's RM1.7m net profit. We believe IFCA should be able to record RM8m-9m net profit in 2014. Momentum should continue into 2015, with net profit likely to be RM15m. If the company can deliver the numbers, IFCA could move to the Main Board in 2016. Its balance sheet is also strong, with RM30m net cash or 6.7 sen net cash per share as at end-Jun.
Source: CIMB Daybreak - 28 August 2014
