We came away from Cloudpoint Technology meeting last week with management guiding an exciting outlook as it aims to maintain the strong growth momentum this year, driven by i) a strong orderbook (RM133.6m), ii) diversification of customer base through ServiceNow software, and iii) the availability of more data centre jobs. Meanwhile, 4QFY24 results are expected to be released on 26th Feb 2024 and we expect a strong finish, given that majority of the contracts were successfully delivered according to the timeline before the year-end. We believe that the recent retracement, caused by weak sentiment, offers investors a favourable opportunity as the risk-reward ratio becomes more appealing. Maintain Outperform and TP of RM1.17 based on 26x FY25 EPS.

• Cementing footprint in data centre. Riding on the Johor's data centre boom, the group has managed to bag contracts ranging from RM4m-10m from hyperscalers for various job scopes such as power installation, liquid cooling, cabling and containers. We understand that the group is currently in talks with 2 new data centre operators on the uninterrupted power supply and Generative AI Assist platform solutions. It has also received an invitation from an automotive player to participate in a data centre project. Meanwhile, the results of the first Elmina data centre cabling tender will be known by the end of 1Q 2025 as it is required to be completed by Sept 2026. We believe the group stands a good chance as it has received positive feedback with regards to its technical submission, and there are only 3 shortlisted participants in this cabling project. Based on our estimates, this RM100m contract could potentially contribute additional 20%-25% to our FY25F-26F earnings forecasts.
• Rosy outlook for digital application and cloud. Following a contract win from a local bank last month, the group has now become the largest System Integrator in Malaysia for ServiceNow software, which is a specialist in internal workload automation. Currently, there are three banks adopting the ServiceNow software, and it plans to promote the AI agent ServiceNow platform to other industries, namely, oil and gas, telco and utilities sectors.
• Penetrating into Customer Relationship Management (CRM). The group is currently in the early stage of discussion to acquire a company that provides interactive customer call centre services. The CRM business will leverage on i) AI applications, ii) AI Chat box, and iii) Enterprise AI.
• Immune from trade sanctions and foreign exchange volatility. It is worth noting that the group has limited exposure to the various global trade sanctions and almost all of its sales and costs are denominated in local currency.
• Re-rating catalysts. i) winning more data centre projects under Unique Central, ii) penetration into more non-FSI (Financial Services Industry) sectors under the partnership with ServiceNow and iii) M&A opportunities within customer relationship space.

Source: PublicInvest Research - 16 Jan 2025