PETALING JAYA: LGMS Bhd
will leverage on Japan’s Mitsui & Co Ltd vast global network to widen its reach and strengthen its foothold in the cybersecurity space now that the conglomerate is a shareholder of the company, says Kenanga Research.
The potential of providing cybersecurity services to Mitsui’s group of companies would bring about significant contributions to LGMS.
Mitsui’s exposure in various businesses and industries would provide business opportunities for LGMS in untapped sectors such as healthcare, logistics, energy as well as food and beverage, Kenanga Research said in its latest report.
For Mitsui, it is a strategic investment of a purchase of 25% stake in LGMS as it would help the Japanese conglomerate boost its cybersecurity capabilities by leveraging LGMS’s strong list of global certifications, according to the research house.
LGMS would also be able to gain access to the advanced technology of Mitsui’s proprietary cybersecurity systems and introduce these new services into the Malaysian market and potentially other Asean countries where cybersecurity awareness is still at its infancy.
The research house has an “outperform’’ call on the stock.
It kept a target price of RM1.50 per share pending guidance on potential earnings catalysts.
“This is Mitsui’s maiden investment in an external cybersecurity firm which speaks volume of LGMS’s capabilities,” Kenanga Research said.
“While Mitsui has its own cybersecurity business which only services the Japanese market, it sees this partnership as a move to enhance its position in the Japanese market by offering additional services that require certain credentials and certifications that are unique to LGMS,” it added.
Mitsui, a 75-year-old global conglomerate, has a strong international presence with 127 offices across 63 countries and over 40,000 employees.
The potential of providing cybersecurity services to Mitsui’s group of companies is enormous.
Kenanga Research liked LGMS for its unique exposure to the growing cybersecurity business, the deep moat around its business given the high barrier to entry created by the tough qualification process as a vendor.
Its new proprietary certification software is also expected to be the next earnings driver.
However, the risk to its call include longer-than-expected gestation period for its regional expansions, economic downturn resulting in customer lowering budget allocated for cybersecurity.
Other risks include reluctance to spend on cybersecurity services due to the lack of knowledge and awareness in emerging countries, and failure to maintain the extensive list of accreditation due to potential loss of critical talents.
