In a Bursa announcement, Infomina announced that it has secured a US$28.4 million (RM125.1m) contract from the Siam Commercial Bank Public Company Limited (SCB) to provide services under its renewal segment (provision of technology application and infrastructure operations) as well as solutions for the improvement and implementation of SCB’s Application Programming Interface (transformation solutions and support services to SCB’s core banking applications). CGS-CIMB research hence gathered that this is to support SCB’s goal to transform into a regional financial technology group beyond the fintech economy.
Contract win a positive surprise. The research house is positively surprised by this win as it will further expand Infomina’s orderbook by 32.2%, from RM401 million as at end-Nov 2022 to RM530 million (which should last till end-FY27F). This contract value will be recognised over a period of three years (1 Jan 2023 till 31 Dec 2025), CGS-CIMB assumes on a straight line basis. In addition, it views the profile of SCB as a leading bank in Thailand as well as in ASEAN as a testament to Infomina’s capabilities in the mainframe and IT transformation space.
Targets to finalise more contracts over next 3-6 months. The research house’s channel checks with Infomina reveal that it is targeting to finalise more contracts with local and foreign customers in the next 3-6 months – it estimates contracts totalling RM100 milion-150 million, contributing positively to both its renewal and turnkey segments.
CGS-CIMB estimates that Infomina’s tenderbook currently stands above RM380 million and it expects further expansion as it wins more contracts from new and existing customers in the IT transformation and mainframe space.
CGS-CIMB has reiterated Add rating on Infomina, with higher target price (TP) of RM1.70 (25.3x CY24F P/E). It also lifts its forecast for financial year 2023-25 (FY23-25F) EPS (earnings per share) to account for more contract wins. Thus, its TP is raised to RM1.70, now pegged to 25.3x CY24F P/E, a 20.5% premium to the weighted average CY23F P/E of its local peers in the IT space (21x) from 20x P/E previously.
The research house also stated that in its view, the premium is justified given Infomina’s unique exposure to rising demand in the mainframe and related-businesses; its regional position as sole appointed Value Added Distributor (VAD) in Asia Pacific for Broadcom’s mainframe software, and its robust earnings growth profile (3-year CY21-24F EPS CAGR of 41.6% vs. local peers’ weighted average of 13.6%).
Re-rating catalysts are robust EPS growth and further expansion via the winning of more contracts over the next 3-6 months.
Whilst downside risks identified include non-renewal of Tier 1 VAD status with Broadcom; sharp dip in orderbook value; and lower-than-expected margins.
