A few of us had been shocked when Data-tech Programs went IPO (preliminary public providing) not too way back (4 Jul 2025).
Infotech (ticker: ITS) IPO with 24.9 million shares at $0.87 every. It will raised roughly $21.6 million which they need to use of their working capital, analysis and growth and gross sales.
We been utilizing that as our HR app for some time now. I can’t absolutely bear in mind. Was it for the previous 4 years?
I believed its a reasonably good platform really. Will get the job finished. I don’t know how my different colleagues considered it. I spoke to our head of finance, who used to handle the human useful resource roles and normal sentiments is that it’s not too dangerous from his angle!
One suggestions is that they’re very responsive when purchasers have issues getting issues finished.
I simply need to take down some notes concerning the financials.
How does Data-tech’s monetary profile seem like?
There are about 225 million shares excellent and Infotech at present trades at $0.92. This provides it a market cap of $207 million.
I’ve compiled a number of the principal financials under:
Yr 2022 to 2024 are the financials earlier than IPO and to the appropriate, I present the financials for the primary half of 2025.
Infotech is simply internet money. You can too see that previous to itemizing, Infotech may be very worthwhile. Free money stream progress is excellent. The money has grown from $11.7 mil to $29.7 mil. For the previous 3 years earlier than itemizing, cash is pulled out of the corporate relatively than put in.
Contract liabilities is there as a result of Infotech operates in a SAAS mannequin so there are dedicated income however the service isn’t used but. Ultimately, this may stream to the income.
We’re seeing some good income & gross revenue progress previously previous to IPO. After that, it has tapered off for the previous 6 months. Web revenue and free money stream progress is nice as nicely.
Web revenue for first half 2025 was decrease due to one-off itemizing bills and one-off relocation price of a Malaysian workplace. If not the web revenue would have been $7.2 mil or 9% progress.
There may be undoubtedly some form of working leverage for a enterprise like Data-tech and will probably be fascinating if we’re seeing this in a stabilized state.
The earnings yield if utilizing 2024 revenue is 5.9% [PE: 17 times] and if we annualised 1H 2025 is 6.9% [PE: 14 times]. The latter isn’t at all times advisable for a younger firm as a result of we gained’t know the way lumpy the gross sales is, however no matter, I’ve finished it.
The free money stream yield is larger.
I feel Infotech is buying and selling at an fascinating valuation. If that is extra of a techy enterprise, a fairer valuation could be 20 instances. But when it’s a enterprise that’s in a aggressive panorama the place the margins might be eroded simply 17 instances appears truthful.
Truly, if we perceive the money on the steadiness sheet higher they don’t appear to be wanted. However then once more, why did they IPO within the first place to lift cash if the money is pointless?
The proportion of income permits us to see how a lot they’re spending on gross sales, admin and R&D.
Kyith which determine ought to we zero in on extra? Earnings or free money stream?
I feel we should always have a look at internet earnings extra if we’re zeroing on long run sustainability. The principle purpose is that the capital expenditure for the enterprise at this level is minimal. Nevertheless, a extra expertise and sale enterprise is manpower intensive and the earnings will take into account the continued efforts to verify they keep aggressive.
Not really easy as a result of probably, it’s important to put money into manpower upfront to scale, so there might be some lumpiness there. IT is at all times good to have a look at the 2 of them and worth the corporate collectively by triangulation as an alternative of 1 determine alone.
Okay let me pen down some extra qualitative ideas.
Does A Enterprise like Data-tech has any Moat at All?
I gained’t be capable of inform.
Infotech principally present a human useful resource administration system (HRMS) to largely small and medium sized firms. Increasingly more, they’re additionally offering primary accounting software program (which I’ve not skilled)
I feel it’s simple to offboard in addition to onboard. Certain, we gained’t need to do them typically but when their goal are companies which have 6 staff, 20 staff, it’s not too troublesome to modify. You simply must export the info, or discover a strategy to import the info into a brand new HR system.
Whether it is as simple to get a potential shopper to modify to Infotech’s system, it could simply as simple to modify away.
However then possibly we talked about moat an excessive amount of on this world.
Some companies like Data-tech might be good:
- Good assist
- Does what others do as nicely.
- Do one thing extra.
- Not too costly particularly relative to the SME’s general income.
- Acquired no silly issues.
- Exhibits that you simply transfer ahead with the instances and improves.
- Doesn’t present like each time acquired new function you need to cost me further.
I name this the “Munchi Mannequin” (Should you don’t know Munchi is a Mee Jiang Kueh model)
You don’t must be particular you simply must do it nicely. Certain, you can not do every thing, equivalent to cross perform options.
However for the SME, this is likely to be the candy spot.
In the end, some will depart you as a result of they grown larger, and you’ll need new purchasers to fill those who leaves you.
Wouldn’t competitors dramatically scale back Infotech’s margins?
That’s doable however I feel another way.
What sort of atmosphere is Infotech working in?
I reckon there are HRMS on the market. Affirm there’s a massive one in Workday there.
And so why are we observing that type of progress in 2022 to 2024 and this margin regardless of the atmosphere?
Maybe the market is large enough and there’s a candy spot there.
There are opponents and Infotech’s providing is nice sufficient.
Why did Infotech Record within the First Place?
Once more, they raised about $20 million and these are the the reason why they determine to lift:
The skeptical a part of me wonders that if in case you have $29 mil in money, and so money stream producing, why do it’s good to IPO?
Why not simply maintain all the cash inside the important thing administrators?
I feel there is likely to be just a few causes:
- There are some itemizing incentives by SGX or Singapore authorities generally.
- Visibility
- Cheaper financing sooner or later.
- Why not take free cash?
The IPO cash really quantity to at least one yr of their gross sales & distribution, admin bills. It’s two yr’s price of their R&D bills.
It feels to me like its extra anyhow cash.
However we’ll see.
New IPOs with pristine steadiness sheets at all times give off the S-chip vibe for us previous Singapore inventory birds.
Data-tech’s Potential
Now that is the skeptical half however hear me out.
At a sure level, after you have a viable product (and so they do appear to have one thing), then the distinction in progress is how good is your gross sales workforce to develop and use it.
How do you account handle and do enterprise growth nicely.
Whereas product makes a whole lot of distinction, how good the gross sales workforce can also be makes a whole lot of distinction.
I feel a few of my readers in IT gross sales would know this higher than me.
The rationale why I’m skeptical is due to the earlier causes. The money is already there and if money is a constrained, the money wasn’t a constrain within the first place.
Epilogue
I suppose Infotech is a wait and see.
I don’t perceive how the gross sales might see such a drop off after two good years. We’ve not seen their income combine or buyer combine.
I hope there isn’t a whole lot of scenario just like the buyer is a associated good friend. Maybe 2023 is exclusive. There are questions undoubtedly.
Have this eerie feeling that I’d fear an excessive amount of and it seems they had been simply marketed to record and so they simply record lor. May simply be that type of enterprise that Kyith began if he has a good suggestion and it simply develop to an animal by itself.
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Kyith labored as an IT operations engineer from 2004 to 2019. Presently, he works as a Senior Options Specialist in Insurance coverage Begin-up Havend. All opinions on Funding Moats are his personal and doesn’t characterize the views of Providend.
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