Posted a net loss of RM3.2m in 5Q25 – the first since listing, due to sharp revenue decline and margin compression across segments; results came in below expectations.
Changed financial year-end to March (from December). We have realigned our earnings forecasts accordingly, with FY26F/FY27F CNP revised down to RM15.2m/RM18.0m (previously RM19.3m/RM25.4m for FY25F/FY26F), to reflect slower project rollout, weaker recurring income, and the removal of an M&E contract.
Downgrade to HOLD (from BUY) with a lower TP of RM0.65 (from RM1.19), based on a reduced 13x PER on CY27F EPS (from 17x), factoring in weaker earnings visibility.
Posted net loss for the quarter. The latest 5Q25 marked the Group’s first quarterly net loss since listing, with a reported net loss of RM3.2m, bringing cumulative 15-month net profit to RM14.2m. The result fell short of our expectations despite the seasonally weaker start to the calendar year, mainly due to a sharp revenue decline across all segments following the completion of major projects in the previous quarter, delays in new project commencements, and margin compression across key segments.
Change of financial year. The Group has changed its financial year-end from 31 Dec 2024 to 31 Mar 2025. For consistency in trend analysis, we continue to employed 3-month periods for both qoq and yoy comparisons.
YoY. Given that the quarter recorded a net loss (vs net profit of RM0.2m a year ago), we assess performance based on revenue and gross profit trends. Revenue declined 42.7% yoy to RM12.8m, largely due to lower contributions from IT Infrastructure Solutions (segment revenue -52% yoy to RM 6.6m) as the absence of high-value one-off projects.
QoQ. The Group slipped into a RM3.2m net loss from a CNP of RM7.8m in the previous quarter. Revenue fell sharply by 55.4% qoq from RM28.8m, following the completion of several large IT Infrastructure and Managed IT projects last quarter and delays in new projects due to ongoing US tariff adjustments and regulatory uncertainties. Additionally, the quarter included a provision for impairment of RM440k on inventories and trade receivables.
Outlook. The Group’s earnings remain volatile, being highly dependent on the timing of one-off high-value project executions, and now further complicated by tariff and geopolitical uncertainties that have delayed customer investment decisions. Meanwhile, recurring income growth in the Cybersecurity and Managed IT Services segments has been slower than expected due to intense competition. Overall, near-term earnings visibility remains limited. However, over the longer term, growth opportunities exist in India’s digitalization trend, trade relocation, and advances in cloud and AI technologies, which may provide structural upside for Infoline.
Earnings Revision. Following the financial year-end change, we realigned our forecast periods, with new CNP estimates of RM15.2m for FY26F and RM18.0m for FY27F, down from our previous FY25F/FY26F forecasts of RM19.3m and RM25.4m. The earnings downgrade reflects reduced assumptions for revenue and margins in IT Infrastructure and Managed IT segments, slower-than-expected growth in recurring income, and the removal of a previously projected M&E contract due to prolonged delays.
Valuation. We downgrade Infoline to HOLD (from BUY) with a lower TP of RM0.65 (from RM1.19), based on a reduced 13x PER on CY27F EPS, representing -1SD below the 2-year historical mean PER of 17x. The downgrade reflects rising earnings volatility, margin pressure, and weak near-term contract visibility.
Risks. 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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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.210973 | 4.249411 |
EUR | 4.954495 | 4.965490 |
CNY | 0.589445 | 0.590817 |
HKD | 0.536642 | 0.541158 |
SGD | 3.306006 | 3.333319 |