Infoline Tec Group (INFOTEC) will be making its debut on Bursa Ace Market today. The company is principally involved in providing IT infrastructure solutions, cybersecurity solutions, managed IT services, and trading of ancillary hardware/software. INFOTEC’s FY18-FY21 net earnings grew by 37% CAGR thanks largely to (i) increase in projects with higher margins; (ii) ability to source for hardware at a more competitive price; and (iii) improvement in skillset and efficiency. The IT infrastructure and Cybersecurity businesses are growing strongly due to increasing demand and awareness. As at May 2022, the company has orders of RM25.4m yet to be recognized, which provide earnings visibility in the mid-term. We forecast INFOTEC to register net earnings of RM8.2m and RM9.4m for FY22 and FY23 respectively. BUY with a TP of RM0.47 based on 18x PER, 40% discount to Bursa Malaysia Technology Index 5 years average given its smaller market capitalisation.

INFOTEC designs suitable IT infrastructure and cybersecurity solutions that meet customers’ business needs requirements and budget. Its customers are well diversified over various segments namely healthcare, retail, financial services, telco, F&B, education and manufacturing.

Based on the latest financial reporting, IT infrastructure solutions made up 74.1% of INFOTEC’s FY21 revenue followed by Managed IT services (17.8%). The company operate predominantly in Malaysia and People’s Republic of China (PRC).

The IT infrastructure and cybersecurity industries in Malaysia grew at CAGRs of 9.0% and 13.1%, respectively, between 2016 and 2021. According to Independent Market Research Report provided by PROVIDENCE, IT infrastructure and cybersecurity industries in Malaysia are expected to grow by a further 9.7% and 14.4%, respectively, between 2022 and 2024. POVIDENCE also expect the IT infrastructure and cybersecurity industries in PRC to grow by a further 18.4% and 19.1%, respectively, between 2022 and 2024.

INFOTEC is planning to upgrade its Network Operating Centre (NOC) by increasing bandwidth and system upgrading. The company also plans to set up a technology centre with higher capabilities and wider range of solutions. In addition, INFOTEC is also planning to penetrate into international markets in Asia Pacific where some of its customers, intend to expand into.

INFOTEC is targeting to pay dividend of 30% from its net profit. Based on our estimates, the company is expecting to pay dividend of 0.7sen and 0.8sen per share for FY22 and FY23, translating into yield of 2.1% and 2.5%. Balance sheet is healthy with net cash position pre/post IPO.

Source: Rakuten Research - 13 Jul 2022