Improved cybersecurity adoption to stand LGMS in good stead

PETALING JAYA: Tariff-related disruptions to LGMS Bhd’s clients have impacted its business, but the Cyber Security Act 2024 is a tailwind for the company’s cyber security solutions business going forward.

Kenanga Research said the Act will accelerate cybersecurity adoption across industries, as cyber and ransomware threats are an increasing risk to companies.

It added LGMS’s proprietary StarSentry – a plug-and-play device designed to detect system vulnerabilities – is timely, with ransomware concerns and compliance requirements likely to drive demand.

“However, LGMS’s near-term performance will still depend on higher product awareness, enterprise adoption and the pace of regulatory enforcement, prompting a more measured view on its short-term growth trajectory,” it warned.

LGMS’s net profit of RM6.3mil for the nine months of financial year 2025 (9M25) disappointed, falling short of expectations at 61% and 63% of Kenanga Research and consensus estimates, respectively.

This was primarily due to weaker revenue from the company’s cyber risk management and compliance segment, as the post-tariff recovery in customer activity within the technology and telecommunications and media industries proved slower than anticipated.

LGMS’s 9M25 revenue was broadly flat year-on-year at RM30.3mil, while earnings were down 23%.

Kenanga Research, as a result, lowered its financial year 2025 (FY25) and FY26 earnings forecast for LGMS marginally by 4% each and cut revenue projections by 2% and 3%, respectively.

The research house did not factor in the potential share of associate profit from LGMS’s proposed 27% stake buy in Antarex Holdings Sdn Bhd, which carries a RM24.5mil cumulative profit guarantee over three years.

This is because the acquisition is subject to conditions precedent under the share sale agreement and the deal completion targeted by the fourth quarter of this year.

“We estimate the inclusion of the profit guarantee would result in a 9% and 12% uplift to FY25 and FY26 net profit, which would, in turn, raise our FY26 target price (TP) by 10 sen.”

For now Kenanga Research has reduced its FY26 TP for LGMS to 73 sen a share (from 86 sen) after applying a lower FY26 price-earnings multiple of 27 times (previously 30 times) to reflect a more moderate near-term sector outlook amid slower-than-expected demand.

It, however, maintained the “market perform” rating on the cyber security concern.