SINGAPORE (May 17): Analysts continue to be optimistic about future prospects for Silverlake Axis (SAL) despite headwinds faced by the banking software provider.
SAL posted a six-fold increase in earnings for the third quarter ended March to RM398.4 million ($128.7 million).
However, this was mainly due to a one-off gain on the disposal of shares in its China-listed associate Global InfoTech Co (GIT) during the quarter.
Excluding the one-off gains, SAL in 3Q slipped into a loss of RM7 million on a core net profit basis as group revenue fell 21% to RM124.4 million.
(See: Silverlake posts six-fold increase in 3Q earnings to $128.7 mil on one-off gain)
“We cut FY17F EPS forecast by 39.6% due to higher tax provisions arising from Silverlake’s one-time gains,” says CIMB Research analyst William Tng in a Tuesday report. “Our FY18F-19F EPS forecasts slip 0.3% due to a higher number of shares in issue arising from Silverlake’s Performance Share Plan.”
However, CIMB is keeping its “add” recommendation on SAL with an unchanged target price of 65 cents.
Over at RHB Research, analyst Jarick Seet is also keeping SAL at “buy”, and lowering its target price to 65 cents, from 70 cents previously.
The lower target price is due to RHB cutting its FY17F earnings estimate by 6.5% on the back of the tough macroeconomic climate.
“Despite the challenging economy where banks are cutting costs and not spending on huge IT projects, Silverlake Axis still managed to clinch small- to mid-sized projects in Thailand and Vietnam,” says Seet.
However, Seet believes SAL is overcoming the headwinds and well-positioned to take advantage of the recovery when it happens.
In addition, Seet says SAL is “likely to focus on growing its insurance processing division as it sees huge potential for expansion in this segment”.
“We understand that the group is looking for potential acquisitions in this area to hasten the growth of this division,” he says.
As at 1.31pm, shares of Silverlake Axis are trading half a cent lower at 52.5 cents.
