Silverlake Axis - RHB Invest 2016-11-14: Special Dividend Delayed To 2H17

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SILVERLAKE AXIS LTD 5CP.SI

Silverlake Axis - Special Dividend Delayed To 2H17

• Silverlake Axis has fully disposed of its intended allocation-for-sale of GIT shares and would record a MYR267.7m gain while receiving MYR339.8m worth of sales proceeds by 2QFY16. This is equivalent to c.SGD0.04/share. 
• We understand that the transfer of the proceeds would take longer than expected due to the procedures involved, and expect this to be completed by 2HFY17. 
• In addition, we expect enhancement and maintenance works to continue to be the main growth driver for FY17, while management is also focused on growing the company’s insurance arm. 
• Maintain BUY and SGD0.77 TP (22% upside).

Maintenance and enhancement services a key driver. 

• This segment is likely to be the key growth driver for FY17 (Jun), as banks prefer to focus on smaller projects in this tough macro-environment and cost-cutting period.

Special dividends delayed to 2HFY17. 

• Silverlake Axis has fully disposed of its intended allocation-for-sale Global InfoTech Co Ltd (GIT) shares and is to record a SGD267.7m gain while receiving SGD0.04/share in terms of proceeds. We understand that the proceeds transfer is to take longer than expected due to the procedures involved, but expect this to be completed by 2HFY17.

Slow growth in core business. 

• Software licensing and software project services declined 27% and 59% YoY respectively amidst a challenging economy in which banks are cutting costs. 
• Going forward, we expect these segments to pick up in 2HFY17, with a few key upgrading works in the pipeline as well as a scheduled project for a Bank in Thailand.

Maintain BUY, insurance arm focused for growth. 

• Management is to put more attention into growing its insurance segment and may engage in some M&As in this space in the near term. 
• With special dividends expected in the near future, we keep our BUY call with an unchanged DCF-backed TP of SGD0.77. 
• Key downside risks include an economic slowdown.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-11-14

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.770 Same 0.770