Silverlake Axis - DBS Research 2022-08-30: Order Momentum Remains Strong

Silverlake Axis - Order Momentum Remains Strong

  • Silverlake Axis (SGX:5CP) reported FY22 revenue of RM736.5m, up 18% y-o-y. FY22 revenue is at record high, exceeding previous high in FY19 by 8%.
    • Growth was broad-based, with project-related revenue surging 66% y-o-y to RM175m, despite the absence of bigger contracts ( > RM100m). This was attributable to ongoing implementation of two new MÖBIUS contracts, which accounted for 37% of total project services revenue, and progressive revenue contributed from other ongoing projects.
    • The maintenance and enhancement services saw stable 5% growth. Overall recurring revenue accounted for 73% of total revenue vs 81% in FY21, as project-related revenue registered strong growth in FY22.
    • In 4Q22, revenue grew 19% y-o-y (+16% q-o-q) to RM205.2m. This was mainly due to higher contributions from project related revenue segments as well as a resurgence in insurance ecosystem transactions and services, which jumped 46% y-o-y. Insurance processing activities and volumes have rebounded to pre-COVID levels.
  • Gross margin of 57.8% was lower than the 60.2% achieved in FY21, mainly due to higher provision for bonus payment of about RM35m. Net margin of 24.7% for FY22 was an improvement from 22.9% in FY21, on the back of lower administrative expenses and finance costs, following the end of the unwinding of discounts on contingent consideration payable for the acquisition of Silverlake Investment (SG) Pte. Ltd. Group in FY21.
  • Silverlake Axis's FY22 net profit of RM182.2m (+27% y-o-y) was in line with our expectations.
  • Dividend of S$0.007 was declared for FY22, vs S$0.0052 in FY21, with dividend payout ratio of 30% (28% in FY21). See Silverlake Axis's dividend history,
  • Silverlake Axis saw significant activity around core banking upgrades, modernisation and providing specialist services to help its customers to compete digitally. The new cloud native digital banking product MÖBIUS is also seeing increased enquiries from non-Silverlake customers.
  • Order backlog going into FY23 remains strong, at about RM470m. Project pipeline remains healthy, at about RM1.9bn. Out of this, about RM250m can be expected to close soon.
  • Silverlake Axis has secured RM112m worth of contracts from 30 existing customers in 4Q22, which is higher than the average contract wins of about RM80-90m per quarter over the past 2 years. The contracts are primarily for enhancements to the existing core banking system and to enhance customers’ digital experience. These contracts are expected to be completed within 12 to 18 months from signing of the contracts.
  • On the back of strong order momentum, we have tweaked FY23F and FY24F revenue forecast for Silverlake Axis by 2% each, but gross margin was lowered by 1ppt to 60%, to align with the current trend. Overall, no change in our FY23F and 24F. earnings forecast.
  • Maintain BUY recommendation on Silverlake Axis with a higher target price of S$0.48, pegged to a higher P/E of 18x (previously 17x), near +0.5 standard deviation from the 4-year average P/E, on the back of strong order momentum.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Lee Keng LING DBS Group Research | 2022-08-30
SGX Stock Analyst Report BUY MAINTAIN BUY 0.48 UP 0.460

Previous report by DBS Research:
2022-05-17 Silverlake Axis - Robust Order Momentum

Target prices by 2 other brokers at Silverlake Axis Target Prices.
Listing of broker reports at Silverlake Axis Analyst Report.

Relevant links:
Silverlake Axis Share Price History,
Silverlake Axis Announcements,
Silverlake Axis Dividends & Corp Actions,
Silverlake Axis News Articles


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