IFCA MSC Bhd
(May 27, RM1.43)
Maintain add with unchanged target price of RM2.04: We organised a teleconference with IFCA chief executive officer Ken Yong with former chief financial officer Philip Voo and UHY audit head Michelle Lim also taking part.

There were two positives from the conference call: (i) Voo stated that he had resigned to pursue another career and clarified that there was no disagreement with management on IFCA’s financials and financial results; and (ii) Lim cleared IFCA’s audited 2014 financial results, saying they are clean and there are no accounting irregularity issues with the company.

In our view, Voo and Lim’s clarifications should allay concerns about any financial problems at the company.

It also helped that Yong provided details on the shareholders of DP Capital Ltd and how they ended up as major shareholders of PT IFCA Consulting Indonesia (PICI).

We think that IFCA buying PICI at eight times financial year 2014 price-earnings ratio (PER) is attractive, given the potential of the Indonesian market.

The two reasons that we are bullish on Indonesia are that all of its customers are still on a Windows-based platform and there is strong revenue upside from IFCA’s major customers moving to a mobile-based platform.

For the smaller customers in Indonesia, service as a software (SaaS) is ideal as the culture of renting is common in the country. As such, we believe that SaaS could take off at a faster rate in Indonesia than in Malaysia.

Investors should take this opportunity to accumulate on recent share price weakness. Over the next few months, investors should focus on SaaS take-up rates in Malaysia and IFCA’s development in Indonesia. — CIMB Research, May 27

This article first appeared in The Edge Financial Daily, on May 28, 2015.