Friday, February 21, 2014

Silverlake Axis: Another Shiny Quarter (DMG)

Silverlake Axis: Another Shiny Quarter
 (BUY SGD0.87, TP: SGD1.00)

In line with expectations, Silverlake Axis (Silverlake) reported yet another strong set of results, with PATAMI rising 23% y-o-y to MYR60.6m on the back of a 24% y-o-y jump in revenue to MYR125.2m. The group continued to demonstrate strong execution capabilities. Reiterate BUY, with our TP unchanged at SGD1.00, based on DCF valuation (WACC: 9.5%, terminal growth rate: 5.0%).

Strong execution yet again. During 2QFY14, Silverlake’s revenue surged 24% y-o-y, largely attributed to: i) higher software licensing revenue (+35% y-o-y), ii) higher maintenance services revenue (+24% yo-y), iii) soaring sales of hardware (+332% y-o-y), and iv) new revenue contribution from its insurance processing software business. Going forward, we expect the company’s 3QFY14 results to be even stronger as it recently completed the CIMB Malaysia project, thus boosting its project development services and licensing revenue.

Profitability strengthens. In line with the revenue growth, PATAMI during the quarter climbed 23% y-o-y to MYR60.6m as the group kept costs under control. Notably, profit contribution from its associate, GIT InfoTech – a specialist in systems integration for banks in China – shot up 83% to MYR3.3m in spite of the amortisation of expenses amounting to about MYR1.0m per quarter ending this year. Once this company is successfully listed on China’s main board, envisaged to be towards year-end, we expect it to become another pillar of growth as this will open up the China market.

Yet to land new contracts but orderbook hale and hearty. The company has yet to secure the long-awaited RHB Bank contract, largely due to the complexity of the deal as well as the recent change in the banking group’s CEO, which resulted in the deliberations being extended. Nonetheless, we remain confident that Silverlake will eventually secure this mega project.

Thanks to some scope add-ons and enhancement works awarded by existing customer, CIMB, for its Indonesia project, the group’s order backlog remains healthy at MYR250m, which is about 1.0x its FY14F revenue.

Source/Extract/Excerpts/来源/转贴/摘录: DMG-Research,
Publish date: 13/02/14

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