Listed on the SGX-Catalist on December 2022, LMS Compliance (SGX Code: LMS) is an established Malaysia-based laboratory group with over 15 years of operational history. It provides laboratory testing and assessment services, among others, to various industries, including food, green technology, and healthcare, to achieve compliance with regulatory and industry standards at the local and international accreditation levels.
Beyond its four main business segments, LMS Compliance also intends to expand its ESG reporting services and improve on its proprietary online cloud-based applications to help streamline and digitalise laboratory operations, acting as a one-stop ISO certification platform.
Here are 5 things to know about LMS Compliance if you are interested in the business support services industry.
Could you elaborate on LMS Compliance’s business segments and revenue drivers?
LMS Compliance (LMS) is a multifaceted company offering a comprehensive suite of services to support businesses across various sectors in achieving their compliance, safety, and sustainability objectives.
The Testing & Assessment segment plays a pivotal role in the company’s operations, representing 96% of its earnings. It operates ISO/IEC 17025 accredited laboratories dedicated to laboratory testing and assessment services, helping clients adhere to industry standards and ensure the safety of their products through rigorous testing and data-driven insights.
The Certification segment enables LMS to serve as an ISO17021 accredited certification body, certifying organizations against various international standards, demonstrating their commitment to quality and compliance. LMS also engages in trading activities, distributing essential materials like chemicals and testing equipment through its Trading segment.
Lastly, the Assurance segment collaborates with legal and accounting experts to provide ESG/sustainability assurance services, ensuring compliance with reporting standards such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD), and SGX 27 Core Metrics.
What key risks does LMS Compliance face? How is the Group managing these risks?
(i) Regulatory Compliance: Adapting to changing laws and regulations in their operating countries can lead to increased compliance costs and penalties for non-compliance. Vigilance in monitoring and adhering to these regulationsis crucial.
(ii) Accreditations and Licenses: LMS must obtain and renew various accreditations and licenses for their services. Effective management includes tracking expiration dates and diversifying accreditations to mitigate risk
(iii) Key Personnel: The expertise and relationships of key management personnel are vital to LMS’ success. Their potential loss without suitable replacements could impact operations and growth.
(iv) Technological Advancements: Staying competitive requires adapting to evolving customer needs and technology. Investments in research, equipment, and system upgrades are essential to meet these demands.
What are some of the Group’s potential catalysts that investors can be excited about in the near term of 1 to 2 years?
In the near term, spanning the next 1 to 2 years, LMS offers several potential catalysts that should pique the interest of investors. Firstly, the company’s increasing emphasis on ESG compliance and sustainability reporting stands out as a significant catalyst. As businesses globally continue to recognize the importance of environmental, social, and governance factors, LMS’s commitment to expanding its ESG services positions it favorably to capitalize on this growing demand. Investors can anticipate a surge in interest for the Group’s services as organizations seek to strengthen their ESG certification credentials and navigate the evolving regulatory landscape.
Moreover, through the recent development of the conformity assessment technology, LMS seeks to license out the Aizenz cloud-based automated workflow ISO certification platform to B2B customers and joint venture partners. This strategic move offers an additional layer of potential catalysts. By licensing out its Aizenz technology, the Group is able to lower barriers of entry for geographical expansion and provide better visibility for further joint ventures and merger and acquisitions within those geographical locations. This expansion strategy enhances the company’s growth prospects in the short term, making it an exciting proposition for investors.
Lastly, the Group’s proactive approach to strategic partnerships, mergers, and acquisitions represents another exciting catalyst. These initiatives have the potential to drive substantial developments within the company in the near term. Collaborations with key industry players or acquisitions that complement the Group’s existing capabilities could lead to enhanced revenue streams, expanded market reach, and increased profitability. Investors should closely monitor these strategic moves as they have the potential to reshape the company’s competitive landscape and financial outlook.
In conclusion, LMS’s near-term catalysts, including its ESG-focused strategy, strategic partnerships, M&A activities, and revenue diversification through technology licensing, all offer compelling reasons for investors to be excited about the company’s prospects in the coming 1 to 2 years.
What are key ESG factors material to LMS Compliance?
I. Environmental Responsibility: LMS is deeply committed to environmental responsibility. They assist organisations in assessing greenhouse gas emissions and offer verification and validation services to remove or reduce GHG emission, demonstrating their commitment to sustainability. This resonates with stakeholders who prioritize ESG considerations, enhancing LMS’s reputation and appeal.
II. Sustainability Assurance: LMS provides valuable sustainability assurance services based on AA1000 assurance standard, enhancing the transparency and credibility of sustainability reporting. They empower organisations to produce trustworthy ESG reports by independently verifying sustainability data. This adds significant long-term value to clients, strengthening their sustainability initiatives.
III. Technological Innovation: LMS’ dedication to technological innovation is another vital ESG factor. Their cutting-edge cloud-based laboratory management systems and certification platforms improve efficiency and reduce paper consumption, aligning with sustainable practices. This innovation positions LMS as an environmentally conscious partner for stakeholders who value technological advancements and sustainability solutions.
With many economists predicting a slowing economy and a possible recession in the near term, how is the Group preparing itself to ride out this storm?
In light of the potential economic slowdown and the looming possibility of a recession, LMS is taking proactive measures to ensure it can weather the storm and maintain resilience in the face of economic challenges.
The Group acknowledges that despite progress in the economic recovery, certain sectors are experiencing slower growth, and there is a global trend of increased prices in essential commodities like food and utilities, leading to inflationary pressures. Recognising that these inflationary pressures can affect the Group’s cost structure, particularly in terms of raw materials and labor, LMS is committed to careful cost management. The objective is to safeguard profitability while ensuring the business remains resilient.
Furthermore, the Group is steadfast in its dedication to its long-term strategies. It places a strong emphasis on nurturing and maintaining customer relationships, recognising that strong client partnerships can provide stability during economic downturns. Additionally, LMS is actively pursuing operational efficiency through digitalisation. This approach allows LMS to streamline processes, reduce operational costs, and adapt to changing market dynamics efficiently.
Currency fluctuations, notably the depreciation of the Malaysian ringgit, present both challenges and opportunities for the Group and the broader economy. LMS acknowledges the importance of closely monitoring exchange rate fluctuations and assessing their potential impact on its testing, assessment, and certification businesses. While the ringgit’s depreciation may have cost implications, it also opens doors for the Group to expand its presence in other APAC regions. The Group’s strategy involves adapting to changing currency dynamics and leveraging favorable conditions to expand its reach beyond its current markets.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 26 September 2023 and have been republished with permission. You can read more on LMS Compliance (SGX Code: LMS) on the SGX website.
Top Image Credit: LMS Compliance
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