KUALA LUMPUR (June 4): Shares in Infoline Tec Group Bhd (KL:INFOTEC) fell to their lowest in more than three months, after the information technology (IT) services company reported that its first-quarter (1Q) net profit plunged 91% from a year earlier.
Infoline fell as much as 8.9% to 71.5 sen, its lowest since Feb 20, on Tuesday. The stock was trading at 74 sen at 9.05am, valuing the company at RM268 million on Bursa Malaysia, while trading volume totalled 3.1 million shares, more than double the stock’s 200-day moving average.
Apex Securities, the sole research house covering the stock, said the latest earnings missed expectations due to higher-than-anticipated administrative costs and lower margins as “aggressive pricing strategies” to secure new customers dampened the bottom line.
“Despite the overall sluggish margin in the quarter, we view the move is necessary as part of the aggressive market share expansion,” the house said and kept its "buy" call, betting on a stronger second half (2H).
Tuesday’s decline wiped out gains of Infoline shares so far this year and underperformed Bursa Malaysia Technology Index which has climbed more than 16% year-to-date. The stock, listed on the ACE Market in July 2022, nevertheless has more than doubled since then.
Infoline — which mainly provides IT infrastructure, cybersecurity, managed IT services and other services — applied last month to transfer its listing from the ACE Market to the Main Market. The company is 47%-controlled by chief executive officer Choo Wei Chuen.
Apex Securities’ latest forecast is for a net profit of RM16.4 million for the financial year ending December 2024 (FY2024) and RM19.3 million for FY2025 following the latest earnings cuts. The house also cut its target price to 90.5 sen from RM1.07 previously.
Infoline’s performance is expected to recover in 2H of 2024, supported by the billings of new contracts, Apex Securities said, noting that the period is also seasonally stronger when customers tend to spend more on capital expenditure.
Net profit for the first three months ended March 31, 2024 (1QFY2024) was RM225,000 compared with RM2.45 million over the same period last year, according to Friday’s exchange filing. Revenue for the quarter surged 79% year-on-year to RM22.43 million from RM12.53 million.
The company declared a final dividend of 1.38 sen per share, payable on June 28, 2024 for the quarter.
“Over the near term, we continue to see strong demand for cybersecurity solutions in Malaysia and our other keys markets like Singapore and India,” the company said in a statement. “We are pushing ahead with our expansion plans and quietly confident that job flows will continue to intensify in the ensuing quarters of FY2024.”