PROCURRI CORPORATION LIMITED
BVQ.SI
Procurri Corporation Limited - Road bumps along the growth journey
- 9M16 net profit (excluding one-offs) of S$5m was up 27% y-o-y but below our expectations of S$6.5m due to revenue miss.
- FY16F/17F normalised earnings cut 24%/17%.
- Maintain BUY with revised TP of S$0.56.
Procurri offers 23% earnings CAGR over FY15-18F.
- Procurri is among the few companies globally that offer both hardware resale and independent maintenance services, also reflected in its healthy gross margins of over 33%.
- Procurri offers a 23% earnings CAGR over 2015-18F aided by potential acquisitions to further strengthen its global footprint.
- Market research company, Frost & Sullivan projects hardware resale and independent maintenance services market to grow at 16.9% and 15.7% CAGR respectively over 2015-20.
9M16 earnings growth was slower than expected.
- 9M16 net profit (excluding one-offs) of S$5m was up 27% y-o-y but below our expectations of S$6.5m due to revenue miss.
- Post IPO, Procurri is bidding for bigger projects (S$5-10m each versus S$10-30k earlier) which is taking more paper work and processing time. In addition, Procurri is focusing more on maintenence services which command higher margins.
- We cut FY16F underlying profit to S$8.9m versus S$11.7m earlier.
We expect a significant acquisition by the end of FY16F or start of FY17F.
- We project a potential acquisition to contribute over S$3m in earnings in FY17F while Procurri could see its earnings grow organically to S$11m in FY17F as it secures larger IT projects.
- Enterprises are increasingly extending the life of their IT infrastructure by using pre-owned equipment & independent maintenance service to secure up to 60% cost savings.
Valuation
- Maintain BUY on Procurri with a revised TP of S$0.56 pegged at 11.3x FY17F normalised earnings.
- Our PE multiple of 11.3x is based on a 5% premium to the average PE of comparable companies due to its superior growth prospects.
Key Risks to Our View
- Further delay in potential acquisitions as we project these to contribute S$3m profit in FY17F.
Sachin MITTAL
DBS Vickers
|
http://www.dbsvickers.com/
2016-11-11
DBS Vickers
SGX Stock
Analyst Report
0.56
Down
0.670
