• Maintain BUY (TP: RM1.63). Infomina’s 1QFY25 core PATAMI of RM8mn was below our in-house and consensus full year forecast, making up only 17.6% and 17.2% respectively. The lower-than-expected deviation was due to lower contract from Turnkey segment. 1QFY25 revenue and PBT declined by 21.1% QoQ and 10.6% QoQ respectively due to a lower contribution from the Turnkey segment (revenue: -68.1% QoQ) despite improvement in the Renewal segment (revenue: +2.4% QoQ). We are positive on the group's strategic efforts to expand its footprint in North Asia including Japan, while simultaneously reinforcing its presence in regional markets such as Thailand and Philippines. By leveraging Infomina's strengths in R&D and technology, we believe the group is wellpositioned to secure both Turnkey and Renewal projects. We cut our FY25-FY27F earnings by 3.7% to RM42-58mn. Maintain a BUY call on Infomina with lower TP of RM1.63 (from RM1.78) following our earnings downgrade. Our new valuation is based on 19.9x PER (20% discount to weightage sector average of 24.8x) and pegged to FY26F EPS of 8.2sen. The discount accounts for potential risks from contract drawdowns in Renewal customers and lower-than-expected Turnkey contracts.

• Key Highlight. The higher operating margin on YoY basis was driven by the recognition of higher-margin contracts during this period despite a decline in revenue (-17.8% YoY). Overall, the contribution from the Turnkey segment was lower during this period, making up 13.5% compared to 30.2% in 1QFY24.

• Forecast. We cut our FY25-FY27F earnings by 3.7% to RM42-58mn respectively, to account for lower revenue from both segments.

• Outlook. Infomina remains confident in its strategic investments in research, development, and technology. Prioritizing on innovation, the group seeks to attract new customers, drive business growth, and enhance its brand presence both locally and globally. Furthermore, the rapid adoption of Artificial Intelligence (AI) and the increasing use of Application Programming Interfaces (APIs) are expected to further strengthen Infomina’s position within the IT supply chain.

Source: BIMB Securities Research - 16 Oct 2024