Friday, September 27, 2013

Silverlake : Double-digit growth & 4.5% yield (DBSV)

BUY S$0.715
STI: 3,214.25
Price Target: 12-Month S$0.82 (Prev S$0.80)
Double-digit growth & 4.5% yield

• Existing backlog enough for FY14F revenue
• Pursuing seven deals at the moment, big order win from a Malaysian bank could be a catalyst
• Maintain BUY with revised TP of S$0.82 implying potential returns of over 18%.

Backlog of ~RM325m at the end of FY13 provides 12-month visibility. The backlog contains a mix of licence & project revenue and has been boosted RM40- 50m by acquisitions of Merimen (insurance processing) and Cyber Village (mobile & Internet banking) recently. Both these acquisitions also demonstrate how SILV is expanding its presence from core banking into adjacent sectors. In addition to the backlog, SILV is set to secure a recurring maintenance revenue of ~RM200m (~45% of group revenue) in FY14F.

Pursuing several big and small contracts in FY14F, which may enhance backlog further. SILV is pursuing seven contracts - two in Malaysia, one each in Thailand, Myanmar and Cambodia and two outside ASEAN. SILV secured three contract wins and four upgrades last year. In our view, SILV is a strong contender to secure a big contract over RM200m from a Malaysian bank before end of 2013, which could boost the visibility from 12 months to 24 months.

Trading at 15-20% discount despite better growth prospects. Relative to its banking software peers - Temenos & Oracle Financial Service (OFS) - SILV has been growing faster as it is not exposed to a slower banking sector in Europe & US. On top of this, SILV’s maintenance revenue accounts for 45% of revenue, similar to Temenos but much higher than OFS. We contend that SILV should trade at least 20x FY14F PE, as OFS & Temenos trade at 20x & 22x respectively. SILV is cash rich with net cash of RM335m at the end of FY13.

Source/Extract/Excerpts/来源/转贴/摘录: , DBSV-Research,
Publish date: 24/09/13

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