CIMB Research retains Hold for IFCA MSC

KUALA LUMPUR: CIMB Equities Research is maintaining its earnings per share (EPS) forecasts and target price of 42 sen for IT services company IFCA MSC, which is based on an unchanged 30% discount to sum-of-parts (SOP) to reflect its small market capitalisation. 

“The stock remains a Hold as we do not see any immediate catalysts for the stock,” it said.

The research house said an upside risk is if IFCA’s Property365.com.my takes off in a big way. The downside risks include weakness in domestic, Indonesia and China sales. 

Commenting on the financial results for the first half ended June 30, 2017 (1H17) revenue rose 11.8% on-year to RM39.9mil, driven by higher export revenue. 

The 1H17 net profit was a positive RM4.2mil compared to 1H16’s RM5mil net loss, a sign that the worst may be over for the company. The company has been in the black the past four quarters. 

The 1H17 export revenue was up 17% on-year at RM20.6mil while 1H17 domestic revenue was down 2% on-year at RM13.8mil, a sign of the continued weak domestic property market environment. 

“We were expecting higher export growth from China and Indonesia markets in 2Q17 but growth appears to be slowing in these markets. 

“The positive was that 2Q17 domestic revenue surprisingly rose 13% on-quarter to RM26m. We are hopeful that this is a sign of better times ahead for the domestic property division.   

“We believe IFCA’s Property365.com.my is struggling to gain traction among property agents nationwide. 

“The company is currently handling a few online marketing launches for some property developers but we believe the projects are not big enough to garner more interest from investors or property agents,” it said. 

CIMB Research said one of the projects that IFCA has been working on since early this year is with the Maju Group to handle the marketing, online promotion and bookings of the Sungei Besi Maju Kuala Lumpur project. 

Cost cutting has helped the company stay in the black the past one year, and the research house is hopeful of a further recovery in the domestic market in 2H17. 

Currently, in the domestic property market segment, the affordable apartments (selling at around RM500,000 a unit) segment is still vibrant. What is also positive for IFCA is that the company continues to get maintenance revenue, which we estimate at around RM20mil annually.    

As at end-June, IFCA’s balance sheet was strong with RM68.8mil net cash or 11 sen net cash per share. 

“With most of the development costs incurred in the past one to two years, we see no major capex for this year,” it said.