Silverlake

Silverlake: OSKDMG recommends buying into weakness. House note that impacted by the recent market weakness, SILV’s share price has corrected below the recent placement price of 0.75, presenting a good buying opportunity. House expect the upcoming 4QFY13 results to be stellar complimented further by a dividend hike. Reiterate BUY, with an unchanged DCF-based TP of $0.82 (WACC: 5.5%, terminal growth rate: 0.0%). SILV recently acquired Cyber Village (CV), a mobile financial services solutions provider. The acquisition price was fair at 6.6x FY12 P/E, which is considered attractive for software companies. Notably, CV secured a new contract not long after the acquisition, namely implementing a new Internet banking system for Bank Rakyat, Malaysia’s biggest Islamic cooperative bank. CV will, subsequently, provide maintenance services as well. Similar to SILV’s earlier acquisition of insurance software companies, we expect all these new businesses to drive the company’s profit growth and sweeten its product suite. SILV has successfully placed out 150m shares to large institutional investors (50m vendor, 100m new) at a price of $0.75 per share, raising around $73.1m in the process. The net proceeds will be able to refill its mergers and acquisitions (M&A) war chest and expect the group to make more earnings-accretive acquisitions. As such, believe that the placement price of $0.75 will provide support and, with the share price trading below this threshold currently, this presents a good buying opportunity for investors.