SILVERLAKE AXIS LTD
5CP.SI
Silverlake Axis - China associate Global Infotech resumed trading and up 17%
- Silverlake's (SILV SP) listed China associate, Global Infotech has resumed trading and is up 17% since it was lifted out of suspension after the acquisition announcement and placement of new shares to strategic investors.
- As highlighted previously, Silverlake owns a 20% stake in Global Infotech (GIT), listed in the Shenzhen ChiNext Exchange worth approximately SGD400m based. As of 1 June 2016, the Moratorium Period has since expired and being one of the substantial shareholders of GIT, it had advised GIT that it may sell up to 8m of its GIT Shares within the six-month period commencing from 24 June 2016.
- At current market price, this 8m share sale will potentially represent a one-off investment gain of SGD128m. Any potential share sale may potentially turn into special dividends as a means to reward shareholders, also partially because SILV SP is net cash and they do not need any cash from these sales to run its normal business operations unless they are doing a M&A which is highly unlikely. Coupled with its FY16 dividend from operations, total dividend for FY16F could potentially total up to about 12.6% dividend yield for FY16F.
- In the past few days, Silverlake has also been actively buying its share off the market which sends a positive signal to investors. Trading at just 12.7x FY16F P/E, it is significantly low for a software company whose deals with core banking systems for a number of prominent ASEAN banks.
- We think that this company is significant undervalued, coupled with potential catalysts like its special dividend and new contract wins, we think that current share price weakness represents a good buying opportunity.
- Maintain BUY on Silverlake, with a DCF-backed SGD0.68 TP.
Jarick Seet
RHB Invest
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http://www.rhbinvest.com.sg/
2016-07-05
RHB Invest
SGX Stock
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