Silverlake Axis - RHB Invest 2017-02-16: Expect a Weaker FY17 Despite Upbeat 2HFY17 Outlook

Silverlake Axis - RHB Invest 2017-02-16: Expect a Weaker FY17 Despite Upbeat 2HFY17 Outlook SILVERLAKE AXIS LTD 5CP.SI

Silverlake Axis - Expect a Weaker FY17 Despite Upbeat 2HFY17 Outlook

  • We expect Silverlake to enjoy a better 2HFY17 going forward, with new projects from Thailand and Vietnam kicking in. However, even with a more upbeat 2HFY17, we still expect it to book a weaker performance for FY17 due to the lack of larger contract wins. 
  • As a result, we lower our FY17F NPAT by 10% and trim our DCF-backed TP to SGD0.70 (from SGD0.77, 17% upside). 
  • Despite that, we are still optimistic on the company’s long- term aspects as well as its ability to weather the current tough macro- economic environment. Maintain BUY.



Roadblocks in core business. 

  • Amidst a challenging economy in which banks are cutting costs, Silverlake Axis (Silverlake) has not been winning large core banking contracts. 
  • Also, its small- and mid-sized contract wins have not been sufficient to make up for the shortfall. As a result, the performance of both its project services and licensing segments has declined. 
  • Going forward, we expect these segments to pick up in 2HFY17 (Jun), with a few key upgrading works in the pipeline as well as a scheduled project for a bank in Thailand. Despite that, we still expect it to record a weaker FY17F.


Special dividend payouts likely to be spread to FY18. 

  • Silverlake has fully disposed of its intended allocation-for-sale Global InfoTech Co Ltd (GIT) shares and recorded a gain of up to MYR393.8m. 
  • We noted previously that the transfer of proceeds would take longer than expected due to the procedures involved, as the maximum transfer limit is USD5m a month. We expect this transfer process to take longer than one year, ie the special dividend payouts would be made through out two financial years, ie FY17 and FY18.


Maintain BUY, with a lower DCF-backed TP of SGD0.70. 

  • As we still expect Silverlake to book weaker FY17 results due to the lack of larger contract wins, we cut our FY17F NPAT by 10%. As a result, our DCF-backed TP dips to SGD0.70, from SGD0.77. 
  • In spite of this, we remain optimistic on the long-term aspects of the company, as well as its ability to weather the current tough macro-economic environment. 
  • Maintain BUY.




Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-02-16
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.700 Down 0.770



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