M'sian investors turn cautious after IFCA's shares tumble

Kuala Lumpur

AMID weak market sentiment, Malaysia's retail investors could prove more risk averse after the year's top gainer tumbled following the unexpected resignation of its chief financial officer (CFO) last week.

Cloud-based software company IFCA MSC plunged nearly 15 per cent to RM1.38 on Monday as investors turned cautious after the company informed the stock exchange on Friday its chief numbers cruncher, Phillip Voo Lip Sang, had resigned "to pursue other career opportunities".

Mr Voo had served for less than five months in the position. Two days earlier, the company had informed chief executive Yong Keang Cheun had been made executive chairman (from executive director) and now holds both positions. His brother Kian Keong is the deputy chairman.

Over the past 12 months, the Ace Market-listed company had emerged a star performer after soaring from 10 sen to a new peak of RM1.82 last Wednesday. However, its market capitalisation has been reduced to about RM756 million (S$280 million) after it lost a third of its value in the past three days.

"One of my Singapore-based clients has done a few rounds, buying and selling about RM100,000 worth," said a remisier, who did not want to be named.

One of the most actively traded stocks on Monday, it attracted an unusual market activity query from Bursa Securities following the recent sharp drop in its share price. In the past, its robust gains had attracted similar queries.

Given the softening economy and increasing political wariness arising from the financial controversies surrounding state-owned 1MDB, analysts have advised equity investors to sell into strength and buy on weakness.

But they also appear less sanguine now about IFCA's prospects after viewing it as "the biggest beneficiary of GST implementation" - seven out of 10 property players use its software and had needed IT systems upgraded ahead of the roll-out of a 6 per cent goods and services tax in April. China was also reportedly a rapidly expanding market for IFCA's products.

In the past quarters, earnings have been rising. In the last quarter to end-March, IFCA made a profit of some RM9 million on a revenue of nearly RM32 million, compared to earnings of RM1.4 million on a turnover of RM13.7 million for the same quarter a year ago. IFCA also declared a one sen dividend for the fiscal year ended December 2014.

Even so, it is worth noting its trade receivables have increased significantly, swelling from about RM10 million as at end-2013 to some RM30 million (unaudited) as at end-March.

Institutional funds have also been buyers of IFCA. A fund manager said he had bought its shares in the early years of its listing in the mid-2000s and "made some money" but added the share price had subsequently languished at around 10-15 sen for a number of years.

"GST is a one-off. And the software is more or less the same as it has been all these years albeit with some improvements or variations," he said. He was also less sanguine about its China prospects. "I know of many other companies in China but don't know of any that has been able to make money. Moreover, China has so many software companies."