Infomina Expect A Strong 2H, Target Price RM1.70: CGC-CIMB

CGS-CIMB views Infomina 1HFY23 core net profit of RM11.2m is within expectations while 2QFY5/23 core net profit came in at RM6.4m, after adding back estimated one-off IPO expenses of RM1.4m bringing the 1HFY5/23 core net profit to RM11.2m, which made up 36.3% the house’s full-year FY23F EPS estimates.

The investment bank deems this within expectations, as it expects a significantly stronger hoh result in 2HFY23F, mainly owing to: i) typically strong progress billings in 2H of Infomina’s financial year, and ii) higher order book recognition. 2QFY23 core net profit rose 36.1% qoq 2QFY23 revenue was flattish qoq as higher contribution from the turnkey segment (+19.4% qoq, 35.3% of 2QFY23 revenue) was offset by lower topline of the renewal segment (-7.8% qoq, 64.7% of 2QFY23 revenue). Yet, 2QFY23 EBITDA margins still rose 0.6% pt qoq, while core net profit grew 36.1% qoq to RM6.4m, thanks to higher contribution from projects with higher margins as well as more progress billings under the turnkey segment.

As of Dec 22, CGC-CIMB estimates that Infomina is sitting on an orderbook of RM530m, which should last until end-FY27F. On top of that, it gathers that Infomina’s tenderbook is above RM380m. From this amount, it expects to win several contracts from its domestic and foreign markets in the next three to six months. The company also stands to benefit from the ongoing expansion plans by its new and existing customers in the mainframe and IT transformation space.

As of end-1HFY5/23, Infomina has a net cash position of RM94m (10.6% of its market cap). The house is forecasting an annual dividend payout of 20% for FY23-25F, translating into dividend yields of 0.7-1.0%. While it is believed that there is an opportunity for Infomina to pay more dividends, it is likely the company will keep its cash to fund any large-scale projects (especially for turnkey projects that require upfront purchases while payments are based on project milestones) and for working capital for each overseas subsidiary

No changes to FY23-25F EPS estimates, Add call, and TP of RM1.70 (25.3x CY24F P/E, a 17.7% premium to the weighted average CY23F P/E of its local peers in the IT space). CGC-CIMB continues to like Infomina for its: i) unique exposure to rising demand in the mainframe and related-businesses, ii) regional position as the sole appointed value-added distributor (VAD) in Asia Pacific for Broadcom’s mainframe software, and iii) robust earnings growth profile (CY21-24F EPS CAGR of 41.6%).

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