Infomedia Limited (ASX: IFM)

Decent Outlook for FY18 and FY19 - Infomedia Ltd is a technology company whose principal activities are development and supply of Software as a Service (SaaS) offerings, including electronic parts catalogues and service quoting software systems, for the parts and service sectors of the global automotive industry, and information management, analysis and data creation for the domestic automotive and oil industries. IFM’s innovative enabling technology helps its dealership partners to improve productivity, profitability, customer retention and experiences. Over 80 per cent of its revenue is generated from outside Australia.

Infomedia Limited has defined its FY18 outlook under two distinct halves with second half stronger than the first, which is expected to be impacted by the roll off of the Jaguar Land Rover EPC contract, while revenues from the Nissan EPC contract are expected to offset this impact over the full year.Meanwhile, Spheria Asset Management Pty Limited ceased to be the substantial holder of the Group since 30 May 2018. On the other hand, the Group declared a fully franked dividend of 1.40 cents per share (76 per cent of NPAT). It released its 1HFY18 results which were below expectations as Revenue ($35.3 million) climbed up by 1 per cent as compared to the same period in the prior year but the group recorded a decline of 18 per cent in NPAT which amounted to $5.7 million on pcp basis.


Revenue and Profit Mix (Source: Company Reports)

The Group is on track to accelerate growth into FY19 and will build a momentum in the period. It is expected that Nissan global EPC contract project will start generating revenue in 2HFY18 which will continue to ramp into FY19. It was observed that auto manufacturers and dealers are increasingly focussing on driving profitability in the parts & service function as pressure on new car sales is building up. Infomedia expects momentum to continue into FY19 with the full benefit of recurring revenue from large contracts that it has won in the previous year. The stock price has been climbing up and was up by 104.88 per cent in 5 years and by 14.63 per cent in last three months. The stock price enhanced by 3.72 per cent as on 19 June 2018. We give a “Hold” recommendation at the current market price of $0.975 as the Group expects growth in 2HFY18 from a combined revenue ramp-up and managing of operating expenses at levels similar to 1HFY18.

 
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