Silverlake Axis (SLA) concluded its record year with a solid 4QFY12. Earnings rose 27.9% YoY to RM45.5m on the back of a 3.8% YoY increase in revenue to RM96.1m. Full year earnings of RM162.3m came in marginally above our estimates on better than expected associate performance. Going forward, the strong project backlog orders along with the defensive maintenance business will ensure the group delivering double-digit growth in both top and bottom lines despite the global uncertainties. We are also encouraged by management's decision in raising the dividend payout ratio to above 60%, making this counter an attractive yield play (5.3% yield for FY13). Reiterate BUY with an unchanged TP of S$0.49 based on 14.3x FY13 P/E.

Record number of projects completed. During FY12, SLA had successfully implemented three core banking systemfor a regional bank in its Thailand, Cambodia, and Singapore divisions. It had also completed two major upgrade projects for two Singapore banks as well as one credit card solution project for a North Asian customer. The group has now proven its abilities in executing larger scale projects as the run of its 100% implementation success rate continues.

Strong earnings visibility. Upon booking RM202.0m of project related revenue in FY12, SLA still had outstanding orders of approximately RM420m (2.1x of FY12's revenue). This does not take into account of the post-development work that the group is close to securing with the existing customers (estimated to be around RM200m). Given that the maintenance revenue is lock-in with growth, earnings visibility stretches beyond the next 2.5 years.

Higher dividend payout. In view of the robust operating cash flows and growing net cash balance (4.4RM''/share), management increased its dividend payout ratio to above 60% (previously 50%) this year and will strive to maintain it in the future.

Source: OSK