| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the technology firm’s core profit for the financial year 2025 (FY25) fell short of expectations, primarily due to higher-than-anticipated operating costs. Despite an 8.9% increase in revenue to RM33.4 million year-on-year, the core profit saw a significant 37.2% decline to RM6.3 million. This performance accounted for 90.4% of the bank’s full-year estimate, missing the mark.
Performance Review
The softer bottom line in FY25 was largely attributed to an escalation in expenses, including higher depreciation charges, increased staff costs, directors’ fees, and expanded recruitment and marketing outlays. Revenue growth, however, was robust, propelled by strong software sales and services, coupled with increased software customisation work.
In the fourth quarter of FY25 (4QFY25), revenue continued its upward trend, rising 5.6% quarter-on-quarter to RM9.0 million, predominantly driven by higher contributions from software customisation services. Nevertheless, core profit for the quarter experienced a 14.7% sequential decline to RM1.1 million, largely due to elevated administrative expenses linked to increased staff costs.
Despite these challenges, the company maintains a solid balance sheet, boasting zero debt and a net cash position of RM23.4 million as of the end of 4QFY25.
Future Outlook
Looking ahead, the investment bank anticipates the group will sustain resilient revenue growth. This optimism is underpinned by the expected broader adoption of its proprietary eCover system among both existing and new clientele. The bank has introduced an FY28 earnings forecast of RM13.5 million, projecting an 11.5% earnings growth for that year, while maintaining FY26 and FY27 forecasts.
Valuation and Recommendation
Following a roll-forward of the valuation base year to calendar year 2027 (CY27), TA Securities has adjusted its target price for the stock upwards to RM0.70 from the previous RM0.57. This new target price is based on a 10x CY27F EPS multiple. However, due to recent share price appreciation narrowing the potential upside, the investment bank has downgraded its recommendation from “Buy” to “Hold”.
