Silverlake Axis

Silverlake Axis: FY14 net profit rose 27% to RM248.9m, while revenue rose 26% to RM500.7m, with all segments delivering growth (except software project services, on lower progressive revenue recognition). Notably, Maintenance and enhancement revenue saw strong growth of 21% to RM 210.3m on completion of contracts in Malaysia, Singapore, Indonesia and Thailand, as well as the consolidation of CBSB’s revenue. Gross margins slipped 3ppt to 61% due to margins from certain projects. Bottom line was also boosted by increases in other income and share of associate’s (Global InfoTech) profits. Management cites cautiously favorable outlook with implementation existing and new projects being key in FY15. Successfully completed project will result in additional recurring maintenance income, as well as potential future projects, as Silverlake has a strong foothold in S.E Asia. Positive developments with from the OCBC-Wing Hang Bank merger, as well as CIMB-RHB merger would likely favor Silverlake, as both OCBC and CIMB are existing clients of Silverlake. Final DPS of 1.2¢ and special dividend of 0.6¢ announced, bringing full year dividend to 4.5¢, or a 3.9% yield. Silverlake Axis is trading at 26.1x FY14 P/E.