LGMS looks to ‘star’ product, expansion for growth  

CYBERSECURITY holds huge potential for companies which are able to capture such opportunities. This is as organisations, both large and small, are increasingly being exposed to cyber threats, which renders it necessary for them to invest more to withstand such attacks.

No wonder then that when LGMS Bhd was listed in 2022, investors piled into the stock, moving it from its 50-sen listing price to a whopping RM1.77 by 2024, ascribing the stock a historical price-to-earnings multiple of 66.62 times then.

LGMS was posting moderate earnings during that period but what investors were attracted to were the prospects of the company based on a new law that was going to be passed.

This was the Cyber Security Act 2024 (Act 854), which came into effect in August 2024 and was meant to boost the application of cybersecurity solutions in Malaysia.

However, today, LGMS isn’t looking so striking anymore. Its share price has reduced to 51 sen, near its initial public offering price of 50 sen.

So, what went wrong?

Blame it on the sluggish enforcement of the Cyber Security Act, says executive chairman Fong Choong Fook.

“When the Act was rolled out, it was supposed to be a major tailwind for the group, but enforcement has been slow.

“Hence, it has caused a slump in investors’ expectations for the company. The reality is that people are still not proactive about cybersecurity and awareness is still low,” Fong tells StarBiz 7.

The Act was meant to mandate certain critical sectors of the economy to have cybersecurity measures in place as well as incident reporting, failing which penalties were to be imposed.

But as Kenanga Research said in a November 2024 report, there will be a transitional “grace period” of two to three years before the full enforcement of the Cyber Security Act 2024.

Gathering data

During this time, the Act will focus on gathering data to assess its effectiveness, rather than imposing significant penalties.

That said, Fong also notes that cybersecurity adoption tends to follow a maturity cycle and that demand will accelerate when enforcement tightens.

“Before that stage happens, we need to get ourselves ready first,” says Fong.

This is why LGMS has aggressively expanded its workforce, doubling it in the last two years. That rise in costs, however, has crimped profit margins.

For the financial year ended Dec 31, 2025 (FY25), LGMS’ net profit slid by 17% year-on-year (y-o-y) primarily because of this.

“Staff-related costs have led to declines in our earnings. However, we should be in a much better position in 2026, as our workforce expansion has reached a level we consider sufficient.

“We will continue hiring, but not as aggressively as we did in 2024 and 2025.

“We no longer have the same need for rapid expansion, and that should help support margin recovery as cost pressures ease going forward,” Fong says.

Last year, LGMS forked out RM22.68mil to buy a 27% stake in privately owned Singapore-based Antarex Holdings Sdn Bhd, also a cybersecurity firm.

Proprietary software

Fong explains that Antarex’s attraction lie in its proprietary software that does real time threat detection, and which also has additional features not available in competing products.

LGMS also plans to tap into Antarex’s regional footprint.

The two companies complement each other, says Fong.

“In simple terms, we are on the offensive side where we hunt for loopholes within the network and provide reports.

“Antarex is on the defensive side where it deploys sensors within the network, listens for attacks – whether from external hackers or internal actors – and notifies the client.

“We are now able to provide a more comprehensive solution to both our customers and theirs,” he says.

LGMS intends to tap into Antarex’s regional footprint to market its cybersecurity device, StarSentry.

Fong says LGMS’ StarSentry is a plug-and-play device designed to automatically scan networks for vulnerabilities in all connected devices and recommend remedial action.

While initially selling it via resellers, LGMS is now offering it as a software-as-a-service, focusing more on mid-sized and large enterprises.

The shift appears to be gaining traction. According to Fong, the group secured three significant deals last year.

StarSentry’s revenue contribution is still in the early stages and Fong says the device is “slightly ahead of its time”.

“At the moment, not everyone is talking about doing cybersecurity health checks. When the market becomes more mature, more people will come to appreciate StarSentry,” he says.

Digital trap

LGMS is also developing new cybersecurity products. This includes the “honeypot”, a spin-off from StarSentry, which is essentially a digital trap placed within a network to detect suspicious movements.

Fong explains that in most ransomware cases, attackers have already infiltrated the network days or even weeks before launching the actual attack.

“Traditional tools such as antivirus software and firewalls are not able to effectively detect such suspicious activity. This is where honeypot comes in.

“It acts like a landmine once deployed in a network. If an attacker stumbles upon it while moving around, it immediately alerts us and the client,” he says.

Further, LGMS is developing a threat intelligence platform as a new service, to help speed up forensic investigations, which is part of its cyber threat and incident response services segment.

Talent acquisition a challenge

This segment yields the highest margins, but talent acquisition remains a challenge.

“Sometimes we have to turn away jobs because we do not have enough manpower,” Fong says.

Fong expects 2026’s numbers to be healthier than before. “This will be driven by the Antarex acquisition, StarSentry and the new products that are being rolled out,” Fong says.

Project Mercury, an in-house developed software that performs security assessment on a merchant’s website or platform and issues ratings and payment card industry certification, is another growth prospect of the group.

Fong says it has the potential to be even bigger than StarSentry.

However, its rollout remains dependent on the pace of compliance enforcement by banks and card networks in Malaysia, which has been slow.

Subscription-based model

These upcoming new offerings, expected to be launched by the end of this quarter, will be introduced under a subscription-based model, in line with the group’s broader push towards recurring revenue.

In terms of geographical footprint, about 20% of the group’s revenue is derived from international markets, with Singapore, South Korea and Japan as the main markets.

Fong says the group is expanding its presence overseas in the Philippines, Indonesia and Cambodia.

Domestically, growth opportunities could expand significantly if LGMS secures more public-sector contracts, although Fong acknowledges the challenges involved.

“If we enter the public sector, the whole story changes because those are long-term contracts,” he says.

Meanwhile, Fong adds that LGMS is still on the lookout for more M&A possibilities.

The company’s net cash position of RM73mil should help it tap into such opportunities.