KUALA LUMPUR: IFCA MSC Bhd, whose share price has gained 1,310.53% in the past year as one of the major beneficiaries of the goods and services tax (GST), expects to sustain its strong growth momentum in 2015, driven by the launch of new cloud-based solutions for small and medium enterprises (SMEs), and high growth from the China market.
“There is still a huge potential for us to grow our recurring income as we launch our software as a service (SaaS) in June, which is designed specifically for the SMEs,” IFCA chief executive officer Ken Yong Keang Cheun told The Edge Financial Daily in an interview.
SaaS allows smaller property companies to rent IFCA’s (fundamental: 3; valuation: 1.1) software.
“SMEs can subscribe to our software services by paying a monthly subscription fee of RM4,000 to RM5,000 instead of forking out hundreds of thousands of ringgit upfront,” said Yong.
The business software solutions provider, which is seeking to transfer its listing from the ACE Market of Bursa Malaysia to the Main Market by year end, posted a 1,119.7% surge in net profit to RM21.07 million for the financial year ended Dec 31, 2014 (FY14), from RM1.73 million in FY13, mainly due to the scalable nature of the software business.
Revenue for FY14 rose 71.59% to RM89.24 million from RM52 million.
IFCA is the country’s largest maker of cloud-based software for property companies, with around 80% market share of the domestic property sector. It serves major property developers including S P Setia Bhd (fundamental: 1.4; valuation: 1.4), Mah Sing Group Bhd (fundamental: 2; valuation: 2.4) and Eco World Development Group Bhd (fundamental: 0.5; valuation: 0.3).
With the implementation of the GST on April 1, which forces smaller companies to computerise and upgrade their software, Yong believed it’s a “very good time” for IFCA to launch SaaS.
The group will launch four SaaS products this year, covering business accounting solutions for contracting business, standard operating procedures, marketing and contract management.
Yong said IFCA will not restrict itself to the property industry but will expand its services in the information technology, construction and engineering sectors.
This year, IFCA is also banking on growth from its China market. “It is business as usual in China. Our existing business is growing there and we plan to open eight to 10 offices in China this year,” he said.
Yong expects the China market to grow significantly this year, leveraging on its reputation and proven products. It accounted for 30% of the group’s revenue in FY14.
“It’s very competitive in China, but if you can provide the best product, people will buy from you,” he said.
IFCA’s clients in China include big names like the Wanda and R&F groups, and Country Garden Holdings Co Ltd. Other regional clients include Japan’s Mitsui Fudosan Co Ltd and Singapore’s CapitaLand Ltd.
Some may think IFCA’s recent share price rally and stellar financial performance ride mainly on the GST theme, but Yong said the good results it recorded in FY14 were not solely from GST software upgrade jobs, which only contributed 20% to its revenue in FY14.
“Our new software and cloud-based products targeted at bigger property players like S P Setia, Eco World and Sunway Bhd (fundamental: 1.5; valuation: 1.8) had helped boost our profitability,” he said.
Yong conceded, however, that IFCA, together with other software and technology companies, have benefited from the GST imposition.
“The implementation of the GST actually triggered the trend of computerisation. It makes computerisation a must for all companies as they have to prepare reports to the customs now,” he said.
The group, with a market capitalisation of RM759.38 million, has caught the attention of institutional investors, which currently hold a combined 20% stake.
Yong said he will be participating in roadshows to further promote IFCA to fund managers in Hong Kong and Singapore.
As at Jan 23, Yong has a direct interest of 0.51% and an indirect interest of 42.48% in IFCA, according to Bursa Malaysia.
Some believe the GST theme would end two quarters later when companies finish their upgrades, and that the current share price of the GST-related stocks is not sustainable, but CIMB Research senior analyst Nigel Foo said IFCA may be the exception.
“IFCA has its contribution from China and it will still benefit from the migration from the Windows platform to a mobile-based platform. SaaS and its plan to transfer to the Main Market are the potential catalysts,” he added.
The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.
This article first appeared in The Edge Financial Daily, on April 15, 2015.