Stocks With Momentum: IFCA may have dividend policy to reward shareholders

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KUALA LUMPUR: Technology solutions provider IFCA MSC Bhd is “exploring” the possibility of implementing a dividend policy to pay out 20% of its annual earnings from the fourth quarter of financial year 2014 (4QFY14) onwards to reward its shareholders.

“It is time to reward our shareholders. We want to be a company that can give dividends and provide high yield,” its group chief executive officer Ken Yong told The Edge Financial Daily after a media briefing on the group’s 3Q ended Sept 30 (3QFY14) financial performance yesterday.

IFCA’s dividend distribution history has been scanty. It declared an interim dividend of 8% in FY03, an interim dividend of 10% and a final dividend of 5% in FY04, and an interim dividend of 5% in FY05.

Yong also attributed this willingness to reward shareholders to IFCA’s strong cash position and the nature of its business, which he said is not capital intensive. As at Sept 30, 2014, IFCA’s net cash stands at RM34.67 million, after growing RM5 million in 3QFY14.

“We have reached a stage where our net profit margin is very high and we have become a very profitable business. If you look at our operating cash surplus, in one quarter alone we will have RM5 million extra. That is RM20 million extra a year in terms of cash growth,” he explained.

The dividend policy, however, is not a sign that the company is slowing down its expansion plans as Yong confirmed that IFCA’s overseas expansion of its software distribution business to Thailand, Japan and the Middle East is on track.

“We want to expand in countries with massive property development [activities]. Our growth strategy is to look for and collaborate with companies which do property development to distribute our software,” said Yong.

It also has plans to expand its business in 2015 through mergers and acquisitions. Yong said IFCA is eyeing an Indonesia-based software distributor as its first acquisition target.

“It has over 200 customers and has been distributing our software for the last 20 years. They are very established and very profitable … We will make the announcement when the time is right,” he continued.

ACE Market-listed IFCA has also set its sights on graduating to Bursa Malaysia’s Main Market by 2015 and has started work on putting the transfer application together.

“The transfer to the Main Market will be very strategic to us moving forward. Our shares will be more attractive to big fund managers, command a bigger premium, and IFCA will gain more investor confidence,” said Yong.

“Right now, we know a lot of fund managers are interested in investing in IFCA. They could be very interested but do not have the mandate to buy [ACE Market-listed counters],” he added.

IFCA’s share price has soared over nine-fold from 8 sen at the beginning of the year to close at a 52-week high yesterday at 75.5 sen. The counter was featured in the Stocks with Momentum by TheEdge Research on Oct 24.

 

This article first appeared in The Edge Financial Daily, on November 7, 2014.