Investment Highlights

• We maintain HOLD recommendation on Infomina with an unchanged fair value of RM1.60/share, pegging the stock to FY25F PE of 20x, in line with its closest industry peers' average. Our FV also reflects an unchanged neutral ESG rating of 3 stars.

• We maintain FY25F-FY27F earnings following an analyst briefing last week.

• Infomina’s outstanding order book as at end-May 2024 stands at RM434.4mil (1.28x FY25F revenue), in which 45% will be recognised in FY25F, 33% in FY26F and 22% in FY27F onwards. 85% of the order book is derived from technology infrastructural operations, maintenance and support services (renewal) segment with the balance 15% in turnkey solutions. This leads to a book-to-bill ratio of 1.34x vs. FY25F revenue for the renewal segment.

• 74% of the order book stems from overseas markets with the remaining 26% from local contracts. The renewal segment, involving contracts from 2020-2021, remains strong as the group is replenishing these contracts, which has an average of 3 years in duration. Key markets like Thailand and the Philippines continue to secure contract customers, ensuring consistent and growing recurring business.

• All the necessary investments have been fully integrated into Infomina Japan and already accounted for in 4QFY24 expenses. 4QFY24 gross profit declined due to employee bonuses and expenses invested into Infomina Japan. Without these non-recurring costs, Infomina would have delivered a stronger net profit instead of a decline of 8% QoQ. Initial renewal contracts involve mostly smaller upgrades, with more contracts expected in FY25F. The group anticipates breakeven within 1-2 years for the Japanese division after recouping a total investment of RM1.2mil spent in 4QFY24.

• Moving forward, the group will be launching new products in collaboration with its partners. These offerings will expand their technology offering locally and globally. The group is also changing its business model to ensure better payment methods and reduced foreign currency risk.

• Additionally, the group has incorporated a new subsidiary called Infomina AI to meet growing requirements from the financial industry, where most of its customers seek fintech solutions. With these strategic initiatives, the group is positioning to drive future growth.

• The stock currently trades at a fair FY25F PE of 18x, in line with the Bursa Technology Index’s 5-year forward average PE.

Source: AmInvest Research - 29 Jul 2024