IFCAMSC (0023) - IFCA - Beyond organic growth

IFCAMSC (0023) - IFCA - Beyond organic growth

I think most of my blog followers and forum members are very excited about IFCA recently. Yes, stock has gone up more than 10 fold, will this persist? Lets look at the results for Q4 2014.

(i) Financial results  

Initially, I thought the company’s decision to defer its sales to FY2015 was a mistake, but the management is smart. Investors are looking at forward earnings and historical earnings does not matter anymore in this case, thus, Q1 2015 would be an interesting figure to watch out for. Conservatively, it should beat RM9m easily as the company mentioned in their quarter report shown here.

Cash level grew to RM49m! That is about RM0.10 per share.

(ii) Valuation

Valuation is an art, IFCA’s super normal growth does show us that a P/E of 21x is very fair. The larger boys like Alibaba/ Facebook/ Silverlake are all trading at above 30x P/E.If we annualize Q4 results at RM9m, we would get a forecast of RM36m. But wait, this haven’t included (M&A/ Growth of 10 offices from China/ SAAS)

(i) M&A – IFCA has decided to pay out 1 cent dividend, that amounts to about RM5m. This would reduce its cash position to about RM45m. What will IFCA be doing with this war chest? Assuming an acquisition target at 8x P/E of earnings at RM10m, that would need approximately RM80m of cash to acquire the company. Thus, a mix acquisition via cash and issuance of shares might happen here.

IFCA’s post acquisition earnings would be RM46m, and yes, even with a dilution of 10%, extra 50million shares to fund the acquisition, at 21x, IFCA should be valued at RM1.48.

(ii) Growth of 10 offices in China – Assuming only 50% growth in China, IFCA would potentially increase RM12m of revenue, and with a PAT margin of 50%, that would amount to another RM6m worth of profits, increasing its earnings to RM52m, valuing IFCA at RM1.68

(III) SAAS – Assuming IFCA is able to grab those small clients that only launch 1 property per year on average, with RM10,000 per month (RM120,000 per year) and maybe, 500 clients that subscribe to this service, IFCA could potentially add another RM60m worth of revenue. At 50% margin, that would be additional RM30m of PAT to the group, increasing it to RM82m profits assuming all (i), (ii) and (iii) happens. At 21x P/E, IFCA should then be traded at RM2.65.

(iii) Technical analysis

S1: RM1.13, S2: RM1.01

R1: RM1.30, R2: RM1.42

Last quarter, the share price only started to rally after 2 hours of trading. I believe RM1.30 will be tested again soon after 2 hammers were formed last few days at RM1.13, coincides with 20MA too. Should IFCA breaks RM1.30, we would potentially see RM1.42-1.45 level before it consolidates again.

There are still lots of catalysts for IFCA at this moment. I see no hurry into taking profit yet if you are a long term investor. These 2 months has been busy for me. I shall do more postings and new stock calls soon. Cheers!

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