IFCA MSC Bhd
(Oct 13, RM0.485)
Initiating coverage with an “add” call and target price of 78 sen: IFCA is an enterprise software solutions provider focused particularly on property development, golf clubs, hotels and the construction sector. The company dominates in the domestic property sector, with around 70% market share. Most of the major domestic property developers, such as Sime Darby, S P Setia, EcoWorld and Mah Sing, are
IFCA’s customers.

Three key factors that will turn operations around for IFCA from this year onwards are: i) software migration from Windows-based to web and mobile platforms for its domestic customers; ii) China sales taking off in the past few years; and iii) domestic goods and services tax (GST) software upgrades and training in 2014/2015. We estimate IFCA should be able to secure RM60 million to RM70 million in sales from GST software upgrades and training in 2014/2015.

We project IFCA’s three-year net profit compound annual growth rate to be 228%. Profit margins should expand quickly as revenue growth from the domestic and China markets is expected to accelerate. Malaysia is its largest market but China could overtake in the next few years. Its major customers in China include the Wanda and R&F groups. Wanda is China’s largest commercial property company and the world’s largest cinema chain operator.

We are initiating coverage on IFCA with an “add” call. Our target price is set at RM0.78, based on 21 times 2016 price-earnings (which is in line with its domestic peers MyEG and Cuscapi). Investors with higher risk appetite can consider its warrants (exercise price 10 sen per share, expires in February 2016).

Potential catalysts for the stock include stronger-than-expected GST jobs, potential dividends and a move to the Main Board in 2016. — CIMB Research

This article first appeared in The Edge Financial Daily, on October 14, 2014.