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

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. 

 Positive 1Q16 aided by FX gains. 

  • 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. 

 Positive catalysts to come – share buybacks & Deloitte report. 

  • 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. 

 Positive synergies from acquisition. 

  • 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. 

 Maintain BUY with a TP of SGD0.75. 

  • 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 | 2015-12-02
RHB Research SGX Stock Analyst Report BUY Maintain BUY 0.75 Same 0.75