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Singapore Investment


 Will Mitsui's entry be a real game changer for  LGMS 0249 LGMS BERHAD?

Cybersecurity firm LGMS Bhd, since its listing in June last year, has been charting new grounds.

The ACE Market-listed counter touched a 52-week high of RM1.45 just three months after its listing at 50 sen each.

Share price has tapered off since the reaching the year high but managed to attract Japan's Mitsui & Co Ltd to come in as a substantial shareholder.

The emergence of the Japanese shareholder pushed the counter to as high as 28% or 31 sen to a 7-month high of RM1.43 on April 27.

As part of strategic partnership purposes, Mitsui acquired 23% of LGMS from its co-founders — executive chairman Fong Choong Fook and his wife Goh Soon Sei.

The purchase price was not disclosed but based on Bloomberg data, LGMS saw 104.88 million shares traded off market in two tranches.

Both the tranches were transacted at RM1.10 each, or a 1.8% discount to the counter’s RM1.12 closing price a day earlier.

LGMS said the partnership is to broaden and deepen its footprint throughout the Asia-Pacific region.

The partnership will leverage the expertise of LGMS' highly skilled cybersecurity professionals, and Mitsui's extensive global network and experience in the cybersecurity industry.

Kenanga Research said Mitsui's involvement in various businesses and industries will open many doors for LGMS in untapped sectors, such as healthcare, logistics, energy, and F&B.

The research house maintained its outperform call and target price of RM1.50 for LGMS, pending guidance on potential earnings catalysts resulting from the entry of Mitsui.

The excitement over Mitsui’s entry is understandable given its status as a global trading and investment company.

It has a diversified business portfolio that spans about 63 countries and regions in Asia, Europe, North, Central & South America, The Middle East, Africa and Oceania.

Interestingly, this is Mitsui’s maiden investment in an external cybersecurity firm which somewhat signifies LGMS’s capabilities.

Mitsui also has its own cybersecurity business which only services the Japanese market.

The immediate initiatives in the pipeline following this partnership include rolling out LGMS’ e-payment compliance solution for e-commerce merchants throughout the region.

Indeed, it appears pretty enticing for investors to put their money in this counter given the company’s unique exposure to the growing cybersecurity business.

But investors need to be mindful about the risks to this business, including longer-than-expected gestation period for its regional expansions as well as potential loss of critical talents needed to stay ahead in this fast evolving industry.


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