Mitsui emerged with a 25% stake in the company yesterday after acquiring 23% from co-founders Fong Choong Fook and his wife Goh Soon Sei.
LGMS’ share price rose 31 sen or 27.89% to a seven-month high of RM1.43 in the morning trade.
Bursa Malaysia filings indicate the duo divested 104.88 million shares worth RM115.37 million pursuant to a sale and purchase agreement with Mitsui for “strategic partnership purposes”.
According to Bloomberg data, LGMS saw shares traded off market in two tranches, one being 80.74 million shares and the other 24.14 million shares.
Both were transacted at RM1.10 apiece, a 1.8% discount to the group’s RM1.12 closing price on Wednesday.
Tapping Mitsui’s global network
In a research note today, Kenanga Investment Bank Bhd analyst Samuel Tan expressed excitement over the alliance, which could give LGMS a chance to access Mitsui’s vast global network.
“This is Mitsui’s maiden investment in an external cybersecurity firm which speaks volume of LGMS’s capabilities,” he said.
“Mitsui’s exposure in various businesses and industries will open many business opportunities for LGMS in untapped sectors such as healthcare, logistics, energy and F&B,” he added.
LGMS will also be able to gain access to the advanced technology of Mitsui’s proprietary cybersecurity systems and introduce these new services into the Malaysian market and potentially other Asean countries.
Listed on the Japanese stock exchange, Mitsui boasts a market capitalisation of RM220 billion and generates an annual revenue of RM390 billion.
“We keep our forecasts and target of RM1.50 pending guidance on potential earnings catalysts on the heels of the entrance of this prominent shareholder,” said Tan.
Backed by strong results
The good news comes after a strong performance for the financial year ended Dec 31, 2022 (FY2022) which saw a 12% growth in net profit to RM11.55 million from RM10.32 million the year before.
This was due to a higher number of contracts obtained for cybersecurity services, which saw revenue grow 16% from RM28.26 million in FY2021 to RM32.79 million in FY2022.
The group has benefited from the accelerating use of the internet and adoption of digital services due to the pandemic.
“The market outlook and prospects of the cybersecurity market in Malaysia and neighbouring countries in Southeast Asia remain positive as corporations and businesses are moving towards digital transformation and prioritising their capital expenditure on cybersecurity,” said LGMS in a Bursa filing.
LGMS, listed on the Ace Market last June, is exploring opportunities for expansion with proceeds raised from its initial public offering (IPO).
Mitsui general manager of digital solution business division John Kenichi Kogiku said LGMS’ cybersecurity talent is capable of providing advanced penetration testing and other security services to various enterprises, including major businesses and government bodies.
The immediate initiatives in the pipeline include rolling out LGMS’ e-payment compliance solution for e-commerce merchants in the region.
At 4.02pm, LGMS had pared its earlier gains, rising 11 sen or 9.82% to RM1.23, giving it a market capitalisation of RM560.88 million.