IFCA MSC Berhad
IFCA MSC Berhad is yet another integrated solutions provider that is riding high on the GST-theme.
Since the beginning of June, its share price has more than tripled to close at 50 sen last Friday on the back of rising volume. Current valuations look a tad high following this price surge — the stock is trading at 4.4 times price-to-book and trailing 12-month P/E ratio of 45.2 times. The company has not paid any dividend in recent years.
Having said that, valuations are likely to improve going forward. With the GST-implementation date drawing near, companies would need to upgrade or purchase GST-accredited software to adapt to the new regulation.
So far, only 10% of IFCA’s customers have upgraded their software. This bodes well for future demand. Indeed, net profit rose sharply in the latest 2Q2014 results and totalled RM3.4 million for 1H2014 – exceeding 2013’s full-year earnings.
IFCA’s client list includes top property developers like Country Garden Holdings from China, Capitaland from Singapore, and local developer Eco World. A significant 73.6% of sales are derived from the domestic market. Overseas sales have also improved and the company is set to expand its footprint in China.
The company’s underlying fundamentals appear solid. Edge Research (refer to www.theedgemarkets.com) rates IFCA with a fundamental score of 2.5 out of 3. It has a net cash of RM30 million at end-June 2014 or about 6 sen per share.
Revenue has been trending higher over the past few years, rising from RM37.4 million in 2010 to RM52 million in 2013. In line with the growing revenue, profitability also improved — the company returned to the black after posting losses in 2010-2011. IFCA reported net profit of RM1.7 million last year.
This article first appeared in The Edge Financial Daily, on October 27, 2014.