Downgrade to OUTPERFORM; TP raised to S$0.495 from S$0.44.
LMS Compliance significantly outperformed uSMART's January 2026 estimates, delivering an actual FY2025 revenue of RM33.64m, 14.0% higher than the projected RM29.50m. Furthermore, the company's actual EBITDA reached RM11.77m, beating the forecast of RM11.05m by 6.5%. This operational beat confirmed the company's growth strategy and built a materially higher, cash-backed earnings base. Although uSMART's July 2026 update technically adjusted the stock rating from "Buy" to "Outperform" solely due to rapid share price appreciation, the firm simultaneously **raised its target price from S$0.44 to S$0.495, signalling a continued 16.5% upside potential**. LMS remains a highly compelling investment for the following solid reasons: Successful Revenue Diversification: The consolidation of Anchor Technology (ACC) effectively established a second major revenue pillar in certification and consultancy. This strategic move reduced the Group's heavy reliance on core lab testing from 93.6% down to 76.0% of total revenue, broadening the earnings base without weakening the main franchise. Resilient Core Operations: The foundational laboratory testing segment continued its steady trajectory, growing by 7.6% to RM25.55m. This was driven by robust, recurring demand across the medical-device, pharmaceutical, and environmental sectors. Exceptional Cash Generation and Liquidity: LMS boasts a highly defensive and liquid balance sheet, with operating cash flow surging 45.8% YoY to RM9.22m. The company is well-capitalised to fund ongoing integrations and future investments, holding RM14.60m in cash and an additional RM11.41m in highly liquid money-market funds. Strategic ESG and Regulatory Tailwinds: The company is perfectly positioned to capitalise on mandatory climate reporting and compliance rollouts across Singapore and Malaysia. LMS has already established operational ESG-assurance capabilities through its VVB accreditation and has completed over 80 carbon footprint verifications, setting the stage for higher-margin growth.
https://api2.sgx.com/sites/default/files/2026-07/29.%2017072026_Rated%20Update_LMS%20Compliance%20%28Earnings%20Update%29_uSMART_Cycle%201.pdf?sgxembed=false
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