SINGAPORE (Aug 27): A larger share of loss from its joint venture and associates saw Silverlake Axis report a 12% fall in 4Q18 core net profit to RM33.8 million ($11.2 million) from a year ago despite higher revenue.
See: Silverlake posts 5% lower 4Q earnings of $12.1 mil due to lower other income
In 4Q18 ended June, revenue rose 6% y-o-y to RM145.5 million on higher software licensing revenue from initial delivery of high-value contracts in Malaysia and Thailand as well as more enhancement contracts recognised during the quarter.
As at end FY18, order backlog stood at RM340 million which management expects will largely contribute to the topline over the next two years.
In a recent report by CGS-CIMB Securities, analyst Colin Tan said despite FY18 revenue meeting house forecasts, the earnings disappointment was mainly attributed to a goodwill impairment of RM12.8 million in 4Q18 for its investment in New Zealand-based Finzsoft Solutions held via a joint venture.
For the six months ending Dec 31 2017, Finzsoft reported a loss of US$358,000 ($488,400) for the six months ending Dec 31 2017, versus a profit of US$2 million a year earlier, amid lower revenue and higher fee expenses.
In 4Q18, Silverlake saw an uplift in software licensing revenue as it started to recognise some revenue contribution from some of the Thai and Malaysian contracts secured in the last 15 months.
“We think more software licensing and project services contribution will follow in FY19-20F, which underpins our 11-50% EPS growth forecasts,” says Tan adding that Silverlake continues to see strong flow of enquiries and requests for proposals from banks seeking system upgrades and enhancements, particularly in Thailand and Indonesia.
Meanwhile, revenue from maintenance and enhancement services (MES) stayed flat in FY18 while sales from insurance processing segment expanded 2% y-o-y. For FY19F, management guided for single-digit growth in MES segment.
“We lower our growth forecasts for insurance processing segment to reflect FY18 results,” says Tan, “We lower our FY19-20F EPS by 14-15% as a result.”
For the fourth quarter, Silverlake declared a DPS of 0.8 cents for the quarter, bringing the total FY18 DPS to 3.0 cents.
Excluding special dividends, its regular DPS of 1.2 cents represented 70% payout for FY18, lower than the payout range of above 80% in FY13-17. As at end June, Silverlake had a net cash position of RM276 million.
“We maintain “add” in view of stronger earnings growth in FY19-20F, We project FY19F dividend yield of 5.2%, based on assumptions of 75% payout and some special DPS from proceeds from the sale of GIT (Global InfoTech) associate,” concludes Tan.
Year to date, shares in Silverlake are down 20.7% to 46 cents at 12.26pm.
