This article first appeared in Capital, The Edge Malaysia Weekly on July 15, 2024 - July 21, 2024

THE imminent implementation of mandatory electronic invoicing (e-Invoicing) by the Inland Revenue Board (LHDN), for which the first phase is set to commence next month, has sparked interest in the stock prices of several Bursa Malaysia-listed companies.

Since the start of the year, Radiant Globaltech Bhd (KL:RGTECH) has seen its share price rise 24%; Agmo Holdings Bhd (KL:AGMO) has increased 42%; Autocount Dotcom Bhd (KL:ADB) has almost doubled; and IFCA MSC Bhd (KL:IFCAMSC) has nearly tripled.

In addition to these four ACE Market-listed technology firms, which are launching their e-Invoicing solutions, industry observers believe other potential beneficiaries may include Censof Holdings Bhd (KL:CENSOF) and Infomina Bhd (KL:INFOM).

Of these six stocks, only Infomina is actively tracked by equity analysts. BIMB Securities and Inter-Pacific Research have “buy” calls on Infomina, with target prices of RM1.78 and RM1.68 respectively; and AmInvestment Bank Research has a “hold” call and RM1.60 target price, according to Bloomberg data at the time of writing. Infomina had a market capitalisation of RM925.9 million at its close at RM1.54 on July 11, down 13 sen, or 7.78% year to date, but up 13%, or 18 sen, compared to its 52-week low of RM1.36 on June 11 this year.

An e-Invoice is a digital representation of a transaction document exchanged between a supplier and a buyer. It replaces conventional paper or electronic documents such as invoices, credit notes and debit notes.

The digital document includes all the essential information found in traditional documents, such as supplier and buyer details, item descriptions, quantities, pre-tax prices, taxes and total amounts. It basically records transaction data necessary for daily business operations.

The implementation of e-Invoicing is expected not only to offer a seamless experience for taxpayers but also enhance business efficiency and boost tax compliance.

According to Radiant Globaltech vice-chairman and senior executive director Paul Yap Ban Foo, its in-house e-Invoicing solutions, dubbed RG E-engage, will partly drive the group’s recurring income from the software segment.

“Some companies, including those that provide enterprise resource planning (ERP) solutions, may have their own e-Invoicing solutions, too. But we don’t know how detailed they are. As far as we are concerned, we don’t really compete with other service providers to grab new customers. In fact, our focus is to upsell it to our existing customers, who will be in the first batch for our RG E-engage solutions,” Yap tells The Edge in an interview.

Radiant Globaltech group CEO Cheng Ping Liong says it has a customer base of more than 1,000 active clients, and many of them are already engaging the group for the business-to-business (B2B) portal, sales force automation and retail solutions.

“As most of their information is already maintained by us, it makes a lot of sense for them to work with us to meet the LHDN e-Invoicing mandate. We have not reached out to all the potential new customers because even within our own existing clientele base, we believe our hands will be quite full,” he elaborates.

To ensure a smooth transition, e-Invoicing will be implemented in three phases so that taxpayers have enough time to prepare and adapt to the new regime. The first phase, commencing on Aug 1, targets companies with annual revenues exceeding RM100 million. The second phase, starting on Jan 1, 2025, will apply to taxpayers with annual turnover of between RM25 million and RM100 million. Finally, the third phase, effective from July 1, 2025, will extend the e-Invoicing requirement to the remaining micro, small and medium enterprises (MSMEs), regardless of their annual revenue.

Yap says his team is working hard to get Radiant Globaltech’s customers that are in the first batch onto e-Invoicing.

“We expect more to come from now until the middle of next year. As a group, we have more than 1,000 customers across retail and industrial sectors. We have to make sure that we can handle these potential customers when they are rushing in for e-Invoicing solutions,” he adds.

Cheng says RG E-engage helps businesses comply with Malaysia’s e-Invoicing regulations and standards. More importantly, data security measures are in place to protect sensitive financial data, making e-Invoicing a secure alternative to traditional methods.

“It also offers the ability to track the status of invoices in real time, giving businesses better control over their finances. Meanwhile, our E-engage portal could convert users’ document format to [adhere] to the LHDN-compliant format and send it to LHDN,” he explains.

Radiant Globaltech has a well-diversified customer base across five countries in Southeast Asia. Its prominent clients include FJ Benjamin, Burger King, A&W, Subway, Segi Fresh and 99 Speedmart.

“While we specialise in the retail and industrial sectors, our expertise also extends to healthcare, finance, logistics and the public sector. This wide-ranging experience allows us to deliver tailored technology solutions that address the specific challenges of each industry,” Yap adds.

Tan Aik Keong, CEO of digital solutions and app development specialist Agmo, sees e-Invoicing as a great opportunity to expand the group’s service offerings and market share, which would translate into a stronger financial performance.

“As an e-Invoicing middleware, our groundwork is to focus on building an inclusive ecosystem with different partners to provide a comprehensive e-Invoicing middleware solution to the market.

“We are working closely with great partners with great commitment to create great synergies. This will increase our recurring revenue, as our solution is designed as a Software-as-a-Service (SaaS)-based solution. In the longer term, we can also cross-sell and upsell different artificial intelligence (AI)-based solutions in the future,” he tells The Edge.

Tan acknowledges that Agmo has seen strong interest from the market, following the strategic partnership that it has established with its partners, including professional services firm YYC Advisors.

In February, it was announced that Agmo’s 52.5%-owned subsidiary Jom eInvoice Sdn Bhd was launching JomeInvoice, a middleware solution that acts as a connector to LHDN’s MyInvois System, helping its clients mitigate the challenges associated with the adoption of e-Invoicing.

In layman’s terms, middleware is software that different applications use to communicate with each other. It provides functionality to connect applications intelligently and efficiently.

Tan says JomeInvoice could offer end-to-end compliance with LHDN’s requirements and flexibility, integrating with existing systems to ensure a hassle-free transition, as it is designed to partner and integrate seamlessly with accounting systems of any size or complexity.

“So far, we have secured some key clients from different industries, such as major sport retail brands, hypermarkets and technology companies. In fact, more than 50% of our current JomeInvoice client base is new to our Agmo group. We are continuously strengthening and empowering our partners to create a win-win-win relationship among customers, partners and us,” he says.

Tan reiterates that JomeInvoice is uniquely positioned as an e-Invoicing middleware to help businesses streamline all their invoice issuance systems to be compliance-ready for now and the future.

“As we move into the digital age, businesses are adopting more and more digital solutions for their businesses, ranging from ERP to accounting systems to POS (point of sale), e-commerce, warehouse management system and many more.

“We do see local companies being listed or privately held with invoice issuance systems such as accounting systems, POS, ERP and others having e-Invoicing features or modules built into their existing software solutions,” he says.

Besides YYC Advisors, which is its referral partner, Agmo also works with multiple strategic partners such as accounting firms, authorised digital signature providers, major cloud players and software houses to join forces to meet the e-Invoicing needs of the market. Together, says Tan, an inclusive and complementary ecosystem will be created.

“These partnerships enable us to penetrate different markets and segment tiers swiftly while optimising our customer acquisition costs. Our comprehensive offer to our customers on both tech solutions and e-Invoicing compliance advice has gained good traction,” he adds.

About a decade ago, the market for goods and services tax (GST)-compliant software was estimated at RM1.7 billion, with public-listed companies such as Censof and IFCA MSC reaping significant benefits.

Notably, Bloomberg had in April 2015 reported that IFCA MSC was “the world’s top software stock”. Back then, the stock had surged 1,300% over the preceding 12 months. About a month later, IFCA MSC’s market capitalisation hit the RM1 billion mark.

In contrast, despite the emerging e-Invoicing landscape, there seems to be a noticeable lack of market enthusiasm at the moment, perhaps overshadowed by the current focus on semiconductor and data centre investments.

Is there untapped potential for e-Invoicing solutions to generate similar market excitement and growth? Agmo’s Tan concedes that e-Invoicing has gained less attention than GST mainly because the former is being implemented in three stages and has a less direct impact on consumers.

“Yet, we see e-Invoicing offering a greater benefit to and making a greater impact on the national economy and digital transformation for businesses as we progress in the long run. We see e-Invoicing as a great cornerstone for businesses to seek better financial efficiency, consumer behaviour, improved productivity and more,” he says.

An audit industry veteran concurs. “I have the same feeling that during GST, many tech and solutions stocks ran up crazily, but this time around, e-Invoicing is rather quiet. Actually, e-Invoicing will facilitate the reintroduction of GST to some extent.

“Its impact on tech stocks may not be as big as GST because the latter was a ‘first-time’ tech impact and implemented at one go. E-Invoicing will be staggered and uses a different tech approach that has options for system integrators and middleware solutions, both local and foreign,” he explains.

Still, with e-Invoicing here to stay, it is worth keeping an eye on the beneficiaries to see whether their earnings performance warrants a re-rating on their stock. 

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