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Tuesday, 19 Aug, 2025
Malacca Securities
Building Wealth Together
LGMS Building The Flywheel
LGMS Bhd
Newsbreak
- Softer quarterly results. To recap, LGMS registered a drop of 44.8% YoY and 35.2% YoY in core PAT to RM2.0m and RM4.0m in 2Q25 and 1H25, respectively. According to the management, its weaker performance was due to slower clients’ readiness, as clients held back most of their projects after Trump’s ‘Liberation Day’ announcement amid tariffs uncertainty. Nevertheless, most of the projects were being reviewed starting July, which we expect to see a recovery of 2H25 results.
- Higher employee benefits expense. LGMS registered a higher employee benefits expense of RM5.4m (+32% QoQ) in 2Q25. We expect the employee benefits expense may increase further due to the workforce expansion plan and talent retention efforts.
- Antarex. LGMS is expected to finalize the transactions for Antarex by end-Aug 2025 and with Antarex’s core focus on internet service providers and telecommunication providers; this will allow LGMS to benefit from a larger client base.
- ASI. ASI is now the first Managed Security Services (MSS) provider in Malaysia licensed as a General Insurance Agency (GIA) under PIAM. It is the first in the country to combine license insurance capability with cybersecurity expertise, targeted toward larger corporations that require cyber risk insurance. StarSentry will be the initial technology integrated into this model.
- Benefitting from cyber insurance value chain. LGMS was also appointed as a cyber incident responder for both local and international law firms. Whenever a cyber incident occurs, the cyber insurance agencies will activate their breach response protocol to the law firm partners. The law firm partners will then assign LGMS to lead the investigation into the cyber incident.
- Partnerships with BDO and CelcomDigi. LGMS has recently started a StarSentry partnership with BDO, selling it as a service to BDO’s clients. Also, the Group has partnered with CelcomDigi, focusing on CelcomDigi’s enterprise subscribers.
- Gartner and Pikom recognitions. LGMS has been identified in the Gartner Market Guide for Digital Forensics and Incident Response (DFIR) Retainer Services. As the only company mentioned in the region, this recognition validates LGMS’s position among the globally recognized DFIR providers. Meanwhile, the Group also recently won the Pikom Digital Award for Best Cybersecurity Advisory.
M+ Global View
- Following the earnings call, we are cautiously optimistic on LGMS. The anticipated completion of Antarex by end-Aug 2025 will broaden its client base into internet service and telecommunication segment. Meanwhile, we believe LGMS will be able to tap into the cyber insurance value chain via ASI and the group’s appointment as a cyber incident responder for law firm partners of insurance agencies enhances its role in breach response protocols. The recent partnerships with BDO and CelcomDigi may accelerate StarSentry’s adoption across corporate clients and enterprise subscribers with device as a service model. Although LGMS may see softer margins amid the ongoing workforce expansion plans, we expect it is
Company update
Kieran Lim
kieranlim@msec.com.my
(603) 2201 2100
BUY
Share price RM0.735
Target price RM0.930
Previous TP RM0.930
Capital upside 26.5%
Dividend return 0.6%
Total return 27.1%
Company profile
Started since 2005, LGMS primarily specializes in providing professional independent cybersecurity services, including cyber risk prevention, cyber risk management and compliance, and cyber threat and incident response, serving clients across Malaysia and global.
Stock information
| Bursa Code | 0249 |
| Bloomberg ticker | LGMS MK |
| Listing market | ACE |
| Share issued (m) | 456.0 |
| Market Cap (m) | 335.2 |
| 52W High/Low | 1.530/0.735 |
| Est. Free float (%) | 51.8 |
| Beta (x) | 1.3 |
| 3-mth avg vol (‘000) | 133.5 |
| Shariah compliant | Yes |
Major shareholders
| Fong Choong Fook | 36.4 |
| Mitsui Co. | 25.0 |
| Goh Soon Sei | 10.8 |
Share price vs. KLCI (%)
| Hist. return | 1M | 3M | 12M |
|---|---|---|---|
| Absolute | -16.0 | -26.1 | -49.3 |
| Relative | -19.1 | -27.5 | -47.3 |
Earnings snapshot
| FYE (Dec) | FY24 | FY25f | FY26f |
|---|---|---|---|
| PATMI (m) | 9.5 | 12.1 | 12.3 |
| EPS (sen) | 2.7 | 2.1 | 2.7 |
| P/E (x) | 27.2 | 35.1 | 27.7 |
Relative performance chart
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LGMS
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preparing LGMS greater good, building the flywheel for the future. Thus, we expect revenue will recover in in 2H25 following the potential revival of projects starting July.
Valuation & Recommendation
- Forecast. Maintain.
- Maintained BUY with TP of RM0.93. The target price is derived based on a P/E ratio of 35.0x pegged to FY26f EPS of 2.65 sen. We believe this valuation is justified, given (i) LGMS’s position as a product-neutral specialist with various international recognitions, (ii) ongoing developments like Antarex and tapping into the cyber insurance value chain, and (iii) continuous expansion of StarSentry through various partnerships like BDO and CelcomDigi.
Financial Forecast
All items in (RM m) unless otherwise stated
Balance Sheet
| FYE Dec (RM m) | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Cash | 73.6 | 68.1 | 73.8 | 84.0 | 95.7 |
| Receivables | 6.3 | 8.3 | 6.8 | 7.4 | 8.0 |
| Inventories | |||||
| Others | 13.2 | 12.8 | 12.8 | 12.8 | 12.8 |
| Assets | 95.7 | 106.4 | 114.5 | 124.2 | 135.4 |
| Debts | 0.7 | 0.8 | 1.0 | 1.0 | 1.0 |
| Payables | 0.4 | 0.3 | 0.6 | 0.6 | 0.6 |
| Others | 8.0 | 10.9 | 10.9 | 10.9 | 10.9 |
| Liabilities | 9.1 | 12.0 | 12.5 | 12.5 | 12.6 |
| Minority interest | |||||
| Equity | 86.6 | 94.4 | 102.0 | 111.7 | 122.8 |
Income Statement
| FYE Dec (RM m) | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Revenue | 34 | 44 | 40 | 44 | 47 |
| EBIT | 14 | 16 | 11 | 13 | 15 |
| Net finance income/ (co | 1 | 1 | 1 | 0 | 0 |
| Profit before tax | 15 | 17 | 13 | 16 | 18 |
| Tax | (4) | (4) | (3) | (4) | (4) |
| Net profit | 11 | 12 | 10 | 12 | 14 |
| Minority interest | |||||
| Core earnings | 11 | 12 | 10 | 12 | 14 |
| Exceptional items | |||||
| Reported earnings | 11 | 12 | 10 | 12 | 14 |
Valuation & Ratios
| FYE Dec (RM m) | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Core EPS (sen) | 2.5 | 2.7 | 2.1 | 2.7 | 3.0 |
| P/E (x) | 29.9 | 27.2 | 35.1 | 27.7 | 24.1 |
| DPS (sen) | 0.5 | 1.5 | 0.4 | 0.5 | 0.6 |
| Dividend yield | 0.7% | 2.0% | 0.6% | 0.7% | 0.8% |
| BVPS (RM) | 0.19 | 0.21 | 0.22 | 0.24 | 0.27 |
| P/B (x) | 3.9 | 3.6 | 3.3 | 3.0 | 2.7 |
| EBIT margin | 42.3% | 36.7% | 27.8% | 30.5% | 32.7% |
| PBT margin | 44.5% | 37.9% | 31.4% | 36.4% | 38.8% |
| Net margin | 32.8% | 28.3% | 23.9% | 27.7% | 29.5% |
| ROE | 13.2% | 13.6% | 9.7% | 11.3% | 11.8% |
| ROA | 12.0% | 12.2% | 8.6% | 10.1% | 10.7% |
| Net gearing | CASH | CASH | CASH | CASH | CASH |
Cash Flow Statement
| FYE Dec (RM m) | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Profit before taxation | 15.2 | 16.5 | 12.6 | 15.9 | 18.3 |
| Depreciation & amortis | 1.4 | 1.1 | 1.1 | 1.1 | 1.1 |
| Changes in working cal | 0.1 | (2.1) | 1.8 | (0.6) | (0.6) |
| Share of JV profits | (0.9) | (2.1) | (2.4) | ||
| Taxation | (4.0) | (4.2) | (3.0) | (3.8) | (4.4) |
| Others | (1.8) | 1.7 | |||
| Operating cash flow | 10.9 | 12.9 | 11.6 | 10.5 | 12.1 |
| Net capex | 0.0 | (14.7) | (5.0) | ||
| Others | 3.2 | 1.7 | |||
| Investing cash flow | 3.2 | (13.0) | (5.0) | ||
| Changes in borrowings | (1.1) | 0.1 | 0.1 | 0.1 | 0.0 |
| Issuance of shares | |||||
| Dividends paid | (2.3) | (6.8) | (1.9) | (2.4) | (2.8) |
| Others | (6.4) | 1.3 | |||
| Financing cash flow | (9.7) | (5.5) | (1.8) | (2.4) | (2.7) |
| Net cash flow | 4.4 | (5.6) | 5.7 | 10.2 | 11.7 |
| Forex | 0.1 | 0.0 | |||
| Others | 0.0 | 0.0 | |||
| Beginning cash | 69.1 | 73.6 | 68.1 | 73.8 | 84.0 |
| Ending cash | 73.6 | 68.1 | 73.8 | 84.0 | 95.7 |
Source: M+ Research
Disclaimer
Research analyst(s) of MSSB whom produced this report hereby certifies that the views expressed in this report accurately reflect his/her personal opinions about all of the subject corporation(s) and securities in this report. He/She does not carry out, whether for himself/herself or on behalf of MSSB or any other persons did not receive and will not receive any compensation that is directly or indirectly related or linked to the recommendations or views expressed in this report or to any sales, trading, dealing or corporate finance advisory services or transaction in respect of the securities in this report. As of the report date, the analyst whom prepared this report does not have any interest in the following securities covered in this report, unless otherwise stated.
This report has been prepared by research analyst(s) of MSSB pursuant to the Research Incentive Program under Bursa Research Incentive Scheme Plus (“Bursa RISE+”) administered by Bursa Malaysia Berhad. This report has been produced independent of any influence from Bursa Malaysia Berhad or the subject company. Bursa Malaysia Berhad and its group of companies disclaim any and all liability, howsoever arising, out of or in relation to the administration of Bursa Research Incentive Program and/or this report.
As of Tuesday, 19 Aug, 2025, the analyst(s), Kieran Lim, whose name(s) appears on the front page, who prepared this report, has interest in the following securities covered in this report:
(a) nil.
Stock recommendation guide
| BUY | The share price is expected to appreciate more than 10% over the next 12 months |
| HOLD | The stock price is expected to range between -10% and +10% over the next 12 months |
| SELL | The share price is expected to fall more than 10% over the next 12 months |
| TRADING BUY | The share price is projected to rise more than 10% over the next three (3) months due to an ongoing or impending corporate development. The stock price is also expected to be volatile over the next three months |
| TRADING SELL | The stock price is expected to fall more than 10% over the next three months due to an ongoing or impending corporate developments. The stock price is also expected to be volatile over the next three months |
| NOT RATED | No recommendation is assigned |
