Thursday, February 20, 2014

Silverlake Axis -Strong growth from recurring MES income (Philip)

Silverlake Axis Ltd
Target Price (SGD) 1.02
Forecast Dividend (SGD) 0.04
Closing Price (SGD) 0.90
Strong growth from recurring MES income

•Revenue up 24% y-y, 24% q-q at RM125 million from higher income from software licensing and maintenance and enhancement services
• Net income up 23% y-y, 18% q-q at RM61 million, from higher tax expenses due to lower tax-exempt earnings for the quarter
• Maintain "Accumulate”, with unchanged TP of S$1.02


Silverlake Axis (SAL) announced its 2Q14 results on 11 Feb 2014. Growth in software licensing was contributed by a major ISIS software licensing contract secured during the quarter. New project enhancements projects secured in Singapore and Indonesia contributed to the strong growth in maintenance and enhancement services. EBITDA margin was higher at 55.9%, due to higher margin contribution from software licensing.

Net profits increased 23% y-y, 18% q-q from higher tax expense at RM8.2 million for the quarter. This is due to lesser tax-exempt earnings recognised compared to prior periods. As briefed by the management, about 70% of the Maintenance and Enhancement services income is tax-exempt, benefiting from centralisation of its maintenance business. Software licensing revenue is subjected to a low withholding tax rate of about 10%.

How we view this
We continue to remain positive on Silverlake Axis with excellent growth potential in our view. Management briefed that SAL may potentially secure a major contract worth ~RM$300m from RHB bank to implement its core banking system. soon. We understand that shortlisted bidders for the contract are down to only two players, with SAL as one of the two contenders. We believe the potential RHB deal should be in the final stage of evaluation and the outcome is expected to be announced soon.

We also like Silverlake Axis for its current attractive dividend yield of > 4% as an interim dividend of 0.9 Scents per share was declared for the quarter.

Investment Action
We adjust our forecasts to reflect 2Q14 results. As current valuation remains high, we maintain our "Accumulate" rating with TP of S$1.02 while noting SAL's excellent growth potential.

Progression of CIMB's 1 Platform project
In 2011, SAL won a major contract from CIMB to implement a unified banking platform across Malaysia, Indonesia, Singapore and Thailand. Implementation for Singapore and Thailand have already been completed and implementation in Malaysia was recently completed in Feb 2014. Completion of core banking implementation in Malaysia would add on to SAL's recurring Maintenance and Enhancement services revenue. We think RM$200m in maintenance and enhancement services revenue would be achievable in FY2014F, which was guided by management. Project work for the Indonesian offices would begin soon in Mar 2014 and expected to be completed by end 2015.

Current project backlog of ~RM250m
With the current project backlog guided to be slightly under RM250m, this would provide healthy stream of project-based revenue (software licensing and project services) till FY2015. We expect SAL to win further contracts to grow its project backlog to sustain strong growth in earnings.

SAL stands to benefit from potential OCBC-Wing Hang Bank takeover deal
Should OCBC successfully takeover Wing Hang Bank, this could mean potential contracts to integrate Wing Hang Bank's IT systems into OCBC's core banking platform. As OCBC uses SIBS (Silverlake Axis Integrated Banking System) for its core banking system, Silverlake Axis stands to benefit from this takeover deal.

Resubmission of Global Infotech's bid for listing
We understand from the management that Global Infotech Co. Ltd. (GIT Soft), which SAL has a 27% stake in the Chinese associate, has resubmitted its bid for listing on a stock exchange. This is after a year-long freeze on IPO listing in China was lifted recently by the China Securities Regulatory Commission. Management expects the listing, if successful, to be announced by early 2015.

GIT Soft is based in Beijing, China and provides IT services to financial sector. We think the China market provides excellent potential for core banking vendors. Apart from the big state banks which uses in-house banking systems, the mainland's city-based banks as well as foreign banks would be eager to scale up their operations and invest in core banking solutions, according to IDC Financial Insights.

Dividend payout remains high
Higher interim dividend of 0.9 Scents was proposed, bringing total interim dividends to 1.7 Scents per share for 1H14. This was higher than 1.2 Scents interim dividends for 1H13. We estimate the payout to remain high above 80% and dividend yield continues to be attractive at 4.1%. Special dividend seems unlikely, given the 1) high dividend payout and 2) a major portion of its net cash was due to contributions from share placement and sale of treasury shares, whereby net proceeds would be used for business expansion, including potential acquisitions.



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

No comments:

Post a Comment

Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
  • Selected Indexes 52 week range

  • Margin of Safety

    Investment Clock

    World's First Interactive Investment Clock