This article first appeared in The Edge Malaysia Weekly on August 12, 2024 - August 18, 2024

THE recent “blue screen of death” incident — triggered by a defective CrowdStrike update — caused a global information technology (IT) outage in Microsoft systems, halting businesses, grounding flights and causing widespread disruption.

Despite being a technical glitch rather than a cyberattack, it exposed vulnerabilities and provided a glimpse of what could happen to the world if it had been a cyber breach.

In an interconnected world where personal information is perpetually at risk — and cybercriminals operate with increasing sophistication, often trading sensitive data on the dark web — the need for robust IT security solutions is more pressing than ever.

This is where Infoline Tec Group Bhd (KL: INFOTEC), an IT infrastructure and cyber­security service provider, plays a crucial role.

Its executive director and chief marketing officer Arthur Too Yit Meng highlights that the passing of Malaysia’s Cyber Security Bill 2024 in April will encourage enterprises of all sizes — including the small and medium enterprises (SMEs) — to spend on cybersecurity infrastructure, driving the demand for comprehensive cybersecurity solutions.

“As digital threats and awareness grow, so does the market for cybersecurity. The acceleration of digital transformation, especially among SMEs, will further increase demand for accessible cybersecurity solutions.

“Moreover, the new cybersecurity laws, holding directors accountable, is likely to drive more companies to invest in security,” he tells The Edge in an interview.

According to Too, cybersecurity should be accessible to all businesses, not just large enterprises. Given that smaller companies often lack the resources for comprehensive security measures, Infoline aims to offer scalable and affordable solutions.

He adds that digital transformation and artificial intelligence are driving demand for sophisticated IT infrastructure and cybersecurity. As businesses adopt new technologies, the need for secure and reliable IT environments also increases. “Our focus on cybersecurity aligns with these trends. Educating customers about cybersecurity is crucial. Many businesses only realise the importance of security after experiencing a breach. We work to raise awareness and help companies understand the value of proactive measures.”

Infoline has three main business segments. First, under its IT infrastructure solutions division, the group provides network connectivity, data storage and efficient processing of applications that facilitate and automate enterprises’ business and operational processes.

Second, under its managed IT services division, Infoline provides managed network services and managed cybersecurity services, which gives it a steady recurring income stream. At the same time, it also provides project delivery and management as well as maintenance and technical support.

Third, under its cybersecurity solutions division, the group protects clients’ IT infrastructure and data from cyber threats, attacks and unauthorised access.

Today, the Selangor-based technology firm, which commenced its business in 2013, has a geographical presence in China, Singapore, India, Japan and other Asia-Pacific countries. Its clients include prominent banks, hospital operators and education institutions.

Infoline saw its net profit grow 51% to RM18.3 million in the financial year ended Dec 31, 2023 (FY2023), up from RM12.1 million a year ago. The stronger bottom line was a result of the increase in new orders from the managed IT services segment, which contributed a higher margin to the group.

However, in the first quarter ended March 31, 2024 (1QFY2024), its earnings dropped sharply by 91% to RM225,000, from RM2.448 million a year before. The weaker quarterly profit was attributed to the group’s lower gross profit margin of 27.35% for 1QFY2024, as compared with 45.63% in 1QFY2023, mainly due to lower margins recorded from securing new customers, which were mostly from the cybersecurity solutions segment.

As at end-March this year, Infoline’s balance sheet remained healthy with short-term investment and cash and balances of RM14.8 million, against its total bank borrowings of RM200,000. The company paid total dividends amounting to 2.32 sen per share for FY2023, which translates into a payout ratio of 46% — higher than the dividend policy, which is pegged at 30%.

In FY2023, the managed IT services division contributed 36% to Infoline’s turnover. Going forward, says Too, the group intends to maintain the division’s top line contribution to between 25% and 30%.

“This segment is highly profitable with gross profit margins of 70% to 80%. As a group, our goal is to achieve steady 15% to 20% profit growth each year. The managed IT segment is highly profitable because we leverage on the in-house expertise of our domain experts,” he explains.

Notably, Infoline had on June 20 launched a cyber watch centre at its Kota Damansara head office, collaborating with three technology partners, namely global cybersecurity firm Group-IB, global security intelligence company LogRhythm and Boston-headquartered threat intelligence company Recorded Future.

The new Infoline Cyberwatch Centre offers a comprehensive suite of services, including threat intelligence, digital forensics and incident response, fraud prevention, penetration testing and security assessment, intellectual property protection, cybercrime investigations and managed security services.

Too says Infoline provides a range of cybersecurity services, including digital forensics and incident response (DFIR), threat intelligence and managed security services.

DFIR involves onsite intervention to address security issues, while threat intelligence includes monitoring for potential threats, such as compromised credentials. Infoline’s clients choose services based on their specific needs.

“Our technology partnerships are varied, each offering unique feeds and insights from different regions — like Russia, the US and China. This helps us provide a comprehensive view of threats. For clients, the focus is on the effectiveness of our solutions rather than the technology provider’s brand,” he elaborates.

Too points out that Infoline foresees “significant opportunities” in sectors such as legal and accounting.

“These sectors handle sensitive information and need robust cybersecurity measures. They are currently underserved but represent a major growth opportunity for us,” he says.

Too adds that Infoline’s approach differs from others’ as it provides tailored services that meet specific client needs rather than just selling products. “While our competitors offer similar services, our strength lies in integrating multiple solutions and offering customised support.

“We plan to expand our market share and increase revenue from cybersecurity services. Our focus on high-margin recurring revenue would grow the managed IT services segment significantly.”

CEO Choo Wei Chuen is the single largest shareholder of Infoline with a controlling stake of 42.42%. Chief operating officer Loo Wai Hong holds 14.99% while Too has 3.95% equity interest. The trio also sits on the board of the company as non-independent executive directors.

As at March 27 this year, among the company’s top 30 largest shareholders were KAF Investment Funds Bhd’s funds, KCNN Venture Capital Sdn Bhd, Ethereal Capital Sdn Bhd and AHAM Asset Management Bhd, according to its 2023 annual report.

Year to date, shares of ACE Market-listed Infoline have gained 20 sen or 28% to close at 95 sen last Wednesday, giving it a market capitalisation of RM345.07 million. The counter has retracted by 12% since the beginning of last week amid the widespread sell-off on Bursa Malaysia. 

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