Silverlake Axis

Silverlake Axis: Yesterday, Silverlake Axis (SAL) formed a new 51:49 company, Silverlake HGH, with Andrew Holliday, MD of Finzsoft Solutions, a New Zealand-based financial technology company. HGH will make a full takeover of Finzsoft at NZD3.00 a share or 48.1% discount to Finzsoft’s last closing price of NZD5.78. Holliday has committed to accepting the offer for his 65.9% stake in Finzsoft. Maybank-KE sees three positives: 1) Geographical expansion beyond ASEAN into Australia and New Zealand; 2) Attractive valuations. The offer price implies 6.4x annualised EPS for FY3/15E or a 48.1% discount to Finzsoft’s last price on 17 Dec. 3) Earnings potential. The earnings impact is currently negligible. However, venturing into a new market with a local partner raises possibilities for SAL from cross-selling. SAL’s 51% stake in the new company implies a cash outlay of NZD8.6m (MYR23.0m) for 65.9% acceptance and up to NZD13.1m (MYR35.1m) for 100% acceptance. It can comfortably fund this with its net cash hoard of MYR421m as at end-Sep 2014. Maybank-KE maintains BUY with TP of $1.40.