CLOUDPT: Tech Firm Delivers Strong Earnings Beat on Operational Efficiencies

A leading IT solutions provider has reported a robust first half of FY25, with core profit climbing 15.7% year-on-year to RM10.3 million. This performance accounts for 43.5% and 42.3% of the investment bank’s and street’s full-year expectations, respectively, and is deemed to be in line, given that the second half typically contributes over 60% of annual earnings. A significant highlight was the 75%-owned Unique Central (UC), which has already surpassed its full-year FY25F profit guarantee of RM4.8 million within the first six months.

Operational Performance and Key Drivers

Revenue in the second quarter of FY25 surged an impressive 44.3% year-on-year, reaching RM45.6 million from RM31.6 million previously. This growth was primarily driven by strong sales across all core segments, with the exception of cybersecurity. Notably, the digital applications and cloud services segments were star performers, experiencing a significant increase in sales, largely attributable to a major cloud services project in Kuala Lumpur utilizing ServiceNow software. The IT services segment also saw growth from RM8.5 million to RM9.5 million, while enterprise and networking sales expanded considerably from RM6.3 million to RM18.7 million, boosted by new sales from UC for network infrastructure projects in Kuala Lumpur and Singapore.

Despite the strong revenue performance, the cybersecurity segment experienced a decline in sales from RM16.2 million to RM12.1 million. The group’s core profit for the quarter expanded by 11.5% year-on-year to RM5.8 million, bolstered by contributions from the project-based segment and UC. The gross margin improved from 27.9% to 28.6%, a positive development attributed to lower direct costs achieved through the full consolidation of UC. However, administrative costs doubled to RM3.7 million, due to a one-off main market transfer fee of RM0.3 million and the consolidation of UC operating costs, including 100 headcounts and rental.

Future Prospects

The outlook remains positive, underpinned by a solid order book. Management is actively pursuing new opportunities, particularly in expanding its ServiceNow customer base. The company aims to onboard three to five new ServiceNow customers this year, while existing clients are expected to increase their adoption of these solutions. Discussions are underway with a local bank regarding migration to the ServiceNow platform, and opportunities with two government-linked fund management houses are also being explored for internal automation systems. The cloud services segment is projected to contribute 12-14% of the group’s total revenue this year. Unique Central (UC) is also anticipated to continue its strong performance, with data centre projects in the pipeline suggesting it could surpass its profit guarantee by nearly 100%.

The investment bank maintains a BUY recommendation, with a target price of RM0.25, indicating a potential upside of 25.0% from the last traded price of RM0.20.