Silverlake Axis - RHB Invest 2020-05-20: Outlook Dims On Headwinds; Stay NEUTRAL

SILVERLAKE AXIS LTD (SGX:5CP) | SGinvestors.io SILVERLAKE AXIS LTD (SGX:5CP)

Silverlake Axis - Outlook Dims On Headwinds; Stay NEUTRAL

  • Maintain NEUTRAL, new DCF-based Target Price of SGD0.24 from SGD0.26, 4% downside with c.3% FY20F (Jun) yield.
  • Silverlake Axis (SGX:5CP) reported a weaker 3QFY20, below our estimate. It also guided for a weaker 4Q20, due to the Movement Control Order (MCO) in Malaysia. Large deals continue to be a challenge to close, with many delayed by MCO measures or economic uncertainties. As a result, we cut FY20F and FY21F EPS by 6% and 10%, to reflect lesser licensing and project service revenue.



Lower licensing and project services revenue.

  • Silverlake Axis's project-related revenue comprising software licensing and software project services declined 30% to MYR28.2m in 3QFY20, mainly due to the completion of a Thai core banking transformation project in 4Q19 as well as lower progressive revenue recognised from a few major contracts secured in Malaysia and Thailand that are nearing completion.


Dividends likely reduced.

  • Management guided that, with a bleaker outlook, Silverlake Axis will likely conserve more cash and decrease dividends ahead. As a result, we expect a 40-50% payout ratio for FY20F which results in a 2.7% yield for FY20F.


The COVID-19 pandemic has greatly impacted the global economy, as well as financial markets.

  • Global air travel has ground to a halt, and cities are under lockdowns. Due to these circumstances, we believe banks will likely pare down costs and raise provisions for defaulting loans. As a result, they will also hold back on major IT spending, and slash IT capex budgets.
  • We think Silverlake Axis will likely face more resistance in securing new projects from the banks or financial institutions.


Murky outlook ahead.






Jarick Seet RHB Securities Research | Lee Cai Ling RHB Invest | https://www.rhbinvest.com.sg/ 2020-05-20
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 0.24 DOWN 0.260



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