Towards Financial Freedom
Silverlake Axis - Getting Good Night's Sleep
Silverlake Axis (SLA) delivered yet another strong quarter with PATMI of MYR47.4m (+7.9% y-o-y) on the back of MYR108.7m in revenue (+8.2% yo- y). Since our initiation a year ago, the stock price has more than doubled up as interest in the stock continues to grow. Reiterate BUY, with a higher TP of SGD0.82 based on DCF valuation (WACC: 5.5%, terminal growth rate: 0.0%).
- A quarter of software licensing. During the quarter, the increase in SLA's revenue was mainly attributable to the jump in revenue from software licensing to MYR36.2m (159.3% y-o-y), which was partially offset by a decrease in the revenue contributed by software project services to MYR28.7m (-31.3% y-o-y). This came as a result of four projects for different customers were licensed as they were successfully completed while new projects had just started implementation.
- Expecting major order book boost. Current project backlog stood healthy at around RM350m which is about 1.8x of its FY12 project related revenue. We believe it has a good chance of winning RHB Bank as its new customer (estimated contract size > MYR200m). Our channel checks reveal that RHB had engaged consulting firm in evaluating core banking solution vendors, short listing only two vendors for the final bidding process with SLA leading the run. Also, we believe SLA is getting close to inking an important deal with a regional Islamic bank in Malaysia.
- Raising FY14 forecasts. During the year, SLA hired 30 additional senior project managers (bringing the total to 100) in its bid to strengthen its project implementation capacity across the region. Furthermore, management guided that both of its acquisitions (Isis and Merimen) are experiencing strong growth momentum, and are expected to contribute strongly in FY14. As such, the group is on track to meet our FY13 PATMI estimates of MYR196m. In view of the 1) bullish outlook, 2) increased capacity and 3) strong newly acquired business contribution, we raise our FY14 forecasts by 6.1% to MYR226.0m.
Source: OSK
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