Silverlake Axis - UOB Kay Hian 2015-12-02: Positive Catalysts Ahead

SILVERLAKE AXIS LTD 5CP.SI

Silverlake Axis (SILV SP) - Positive Catalysts Ahead

Silverlake should book steady growth in FY16, despite banks cutting their capex and focusing more on maintenance and enhancement services.
Management expects major capex spending to likely continue in 2017.
In view of the positive 1Q16 results, coupled with catalyst-like potential share buybacks ahead, the Deloitte audit report and an attractive FY16F (Jun) dividend yield of 5.5%, we maintain BUY with a SGD0.75 TP (7% upside) based on 17x FY16F P/E.

Silverlake Axis’ (Silverlake) positive 1Q16 results were partially aided by a MYR14.2m forex gain, with the appreciation of the SGD and the USD against the MYR.
Its 3Q15 revenue rose 12.7% YoY to MYR131m while net profit after tax (NPAT) rose 14.9% YoY to MYR68.6m.
Its maintenance and enhancement services segment continued to see a strong growth of 23% YoY while its software project services units also surged 109% YoY.

So far in 2015, Silverlake has spent SGD15m on share buybacks. Management has guided that these buybacks would likely continue going forward.
The Deloitte audit, which commenced fieldwork six weeks ago, is likely be completed by the end of November.

This acquisition will bring along a complementary retail banking portfolio of software and service solutions, strongly positioning Silverlake Axis for its mid-tier customers while offering a broader variety of tiered deployment options from a technology and a pricing perspective. These products can be deployed on open digital platforms, thereby making it possible for Silverlake Axis to address the needs of customers from mid-tier to large enterprises.
Going forward, management expects the merged synergies to result in some positive cost savings and margin improvements for Sungard Ambit of about 10- 15% in the first year.

With the positive catalysts ahead and backed by a c.MYR200m orderbook, coupled with an attractive dividend FY16F yield of 5.5%, we maintain BUY on Silverlake, based on a 17x FY16F P/E.

Jarick Seet RHB Research | http://www.rhbinvest.com.sg/ 2015-12-02

RHB Research SGX Stock Analyst Report BUY Maintain BUY 0.75 Same 0.75