PETALING JAYA: Main Market-listed cybersecurity firm LGMS Bhd
’s expanding portfolio of artificial intelligence (AI)-powered solutions could unlock new revenue opportunities, although meaningful earnings contributions will depend on their commercial adoption and monetisation.
In a report, Mercury Securities Sdn Bhd said management highlighted the growing sophistication of cyberattacks, with malicious actors leveraging AI to automate attacks, identify vulnerabilities and gain unauthorised access to systems.
LGMS’ presentation showed that 65% of investigated cyber intrusions originated from exposed online vulnerabilities, followed by stolen passwords at 30% and infected computers at 5%.
Meanwhile, only 18% of cyber incidents were detected by organisations’ own security tools, while 47% were identified through external parties and 29% through the damage caused.
“With AI enabling cyberattacks to be executed at greater speed and scale, we believe the evolving threat landscape could support longer-term demand for LGMS’ cybersecurity solutions, particularly as businesses accelerate digitalisation and AI adoption,” Mercury Securities said.
Against this backdrop, the research firm said LGMS’ adoption of AI could also improve operational efficiency by automating repetitive and time-consuming tasks.
For instance, its large language models (LLM)-assisted Static Application Security Testing or NOVA solution uses LLMs to identify vulnerabilities in application source code, potentially reducing the manual effort required for security assessments.
Similarly, AI-assisted threat analysis could help cybersecurity specialists identify and prioritise potential threats more efficiently.
“We believe greater automation could enhance employee productivity and support the scalability of LGMS’ cybersecurity services, potentially improving operating margins over the longer term,” it said.
However, LGMS’ near-term profitability could remain under pressure from elevated operating expenses associated with continued AI-related investments.
Mercury Securities said meaningful earnings contributions from its new solutions would depend on the pace of commercial adoption and the group’s ability to monetise them.
While pending greater visibility on their revenue contributions, the research firm maintained its earnings forecasts, with financial year 2026 (FY26) and FY27 revenue growth assumptions of 4% and 11%, respectively, and operating expenditure margins of 66% and 67.6%.
It also kept its FY26 and FY27 earnings estimates unchanged at RM9.3mil and RM9.7mil, respectively.
The research firm maintained its “hold” recommendation and 49-sen target price, based on an unchanged 23 times target price-to-earnings multiple, benchmarked against the three-year historical average of domestic peers with comparable operations and applied to its FY27 estimated earnings per share of 2.1 sen.
Separately, LGMS has introduced five homegrown cybersecurity solutions designed to strengthen protection across different stages of cyberattacks. Mercury Securities said the offerings could broaden the group’s service portfolio, create cross-selling opportunities and support its transition towards recurring revenue.
