Monday, November 18, 2013

Silverlake Axis 1QFY14: Key Takeaways From Results Briefing (UOBKH)

Silverlake Axis
Share Price S$0.84
Target Price S$0.91
1QFY14: Key Takeaways From Results Briefing

Key Takeaways
• FY14: A year for new contract wins. Silverlake Axis (SAL) reported higher software project services revenue of RM22m (+233% yoy) in 1QFY14. The substantial increase is mainly due to progressive recognition of software implementation contracts secured in FY13. With several major projects completed or nearing completion, we think SAL currently has the capacity to bid for and take on new contracts.
We anticipate a few mid- to large-sized contracts to be announced progressively throughout FY14. A typical midsized contract is worth RM50m-60m while a large contract could reach more than RM200m. SAL has been very active in the market and continues to pursue new relationships. With their exceptional track record and market leadership in the region, we see high probabilities of success in their participation in bidding processes, some of which are already at the final stages. SAL has an existing orderbook backlog of close to RM300m.

• Full-year contributions from Merimen and Cyber Village; synergies coming to life. We estimate Merimen Ventures (Merimen) and Cyber Village (CV) contributed about 6% to the group’s overall revenue in 1QFY14. We forecast full-year contribution of RM22.5m from Merimen on the back of significant headways since SAL’s entry. The insurance solutions provider is looking to derive growth from Thailand and Indonesia and has introduced new services that allow it to generate higher revenues. We are also positive on CV’s prospects and its potential to bring in new customers for SAL. Bank Rakyat, its first internet banking client since SAL’s acquisition, has already shown interest in implementing SAL’s core banking software as well.

• New maintenance and enhancement (M&E) contracts to kick-in in coming quarters. We expect to see more upside in M&E services revenue in the succeeding quarters as newly-billed contracts flow through. In FY13, total revenue from this segment reached RM174m (44% of group revenue). We think this is likely to reach RM200m in FY14 as completed contracts are converted into M&E contracts.

• Organic earnings growth of ~15%, upside from new contracts. Management sees earnings growth of about 15% yoy to be achievable. Initiation of new contracts in FY14 could push this higher. We maintain our full-year earnings projection of RM232.5m (+19% yoy).

• Another good dividend payout of about 88% (0.8 S cents) in 1QFY14. This is 60% higher than the interim dividend in the same period last year. We think this is a positive sign of management’s confidence in its performance in FY14. SAL’s cash balance stood at close to RM400m (7 S cents per share) as at end-Sep 13.

Valuation
• Maintain BUY and DCF-based target price of S$0.91. The implied FY14F PE is 22x. Potential catalysts for the stock include near-term contract wins.


Source/Extract/Excerpts/来源/转贴/摘录: UOBKH-Research,
Publish date: 13/11/13

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