• Earnings pressure from growth investments – With management prioritizing investment into AI, LaKeel experienced a notable decline in earnings YoY for Q1 FY12/26; this impact was exacerbated by License sales falling YoY, albeit from a high hurdle. The company is undergoing a structural shift towards introducing AI agents in the HR domain and the broader application of AI platforms in system development – we view this as necessary to ensure long-term sustainable growth. However, near-term earnings visibility may be affected as investment costs rise and progress in gaining market share in the HR software market remains limited. However, we believe the enhanced 7.45% share buyback program provides valuation support.
