DBS Group Research has maintained its ‘buy’ call and 48 cents target price on Silverlake Axis following the software company’s 1HFY2023 earnings that were in line with estimates.
“We continue to like Silverlake Axis for its high recurring revenue and margins,” says DBS in a research note on Feb 15.
On Feb 14, Silverlake Axis reported higher earnings of RM99.7 million for the half year ended Dec 31 2022, up 5% y-o-y. Revenue in the same period was up 9% y-o-y to RM392.3 million, with the proportion of recurring revenue, which gives better earnings visibility, at 71%, slightly lower from 75% accounted in 1HFY2022.
In 2QFY2023, Silverlake Axis won new contracts worth a total of RM145 million, up 6% over the preceding 1QFY2023.
“We continue to expect strong demand across all the various product streams, including the new MOBIUS system,” says DBS, referring to a relatively new product offering that Silverlake Axis is pushing.
DBS estimates the company to have RM1.8 billion worth of deals in the pipeline.
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“Despite the uncertain and volatile macro backdrop, financial institutions are generally still in a spending mode, upgrading and transferring their products and services to digital form,” says DBS.
The target price of 48 cents is pegged to 18x earnings.
Similarly, CGS-CIMB analyst Andrea Choong has kept her "buy" call and 44 cents target price.
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"We think that strong yoy earnings growth across the banking sector could flow into stronger digitalisation/investment budgets, and catalyse SILV’s deal win momentum," writes Choong in her Feb 15 note.
As at 11.36am on Feb 15, Silverlake Axis traded at 36 cents, down 4.05%.
