Infoline Tec Group Berhad - 4Q24 Exceed expectations
Fri, 28-Feb-2025 07:56 am
by Jayden Tan • Apex Research

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INFOTEC (0253)

Target Price (RM)

1.190

Recommendation

Buy

Summary

  • Infoline reported FY24 core net profit of RM17.5m (+46.6% yoy), exceeding expectations at 130% of our RM13.4m forecast, driven by stronger-than-anticipated project deliveries in the IT infrastructure segment. 

  • 4QFY24 CNP was flat yoy (-0.7%) and declined -2.5% qoq, impacted by higher admin and staff costs from the transfer listing exercise and the absence of a one-off higher-margin project in Managed IT services. Revenue grew +7.1% YoY but fell -5.3% qoq. 

  • No changes to our earnings forecast, while closely monitoring the conversion of one-off project customers into recurring Managed IT and Cybersecurity service contracts.

  • Maintain BUY with an unchanged TP of RM1.19, based on 17.0x P/E on FY26F EPS of 7.0 sen.

 

Results exceed expectations. FY24 core net profit (CNP) of RM17.5m (+46.6% yoy) came in at 130% of our forecast of RM13.4m, primarily driven by stronger-than-anticipated project deliveries in the IT infrastructure segment.

 

YoY. 4QFY24 CNP was largely flat, down 0.7% yoy at RM7.8m, despite revenue growing 7.1% yoy. The muted profit growth stemmed from higher administrative expenses related to the transfer of listing exercise, increased staff costs, and fair value adjustments from an acquisition.

 

QoQ. CNP eased 2.5% qoq, reflecting the absence of a one-off higher-margin project in the Managed IT services segment that boosted 3Q results. Quarterly revenue declined 5.3% qoq.

 

Dividend. Infoline declared a final dividend of 0.63 sen per share, bringing the full-year FY24 dividend to 1.42 sen. The payout is scheduled for 28 March 2025.

 

Outlook. While 4QFY24’s earnings were partly driven by one-off projects with uncertain recurring potential, there is scope to convert these customers into subscription-based Managed IT services. Over the longer term, we will closely track the Group’s ability to secure customers that offer stable recurring revenue in the Cybersecurity and Managed IT segments.

 

Earnings Revision. Although the results exceeded our expectations, we maintain our FY25F and FY26F earnings forecasts at RM19.3m and RM25.4m respectively, till further stronger evidence of recurring revenue traction.

 

Valuation. We reiterate our BUY recommendation on Infoline with a target price of RM1.19, derived by applying a 17.0x P/E multiple to FY26F EPS of 7 sen and assuming a 0% ESG premium/discount, in line with its three-star ESG rating.

 

Risk. Near-term margin pressures may arise from aggressive pricing strategies, while slower revenue growth relative to expansion costs could dampen profitability.

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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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