Silverlake Axis (SGX: 5CP) released its full year results yesterday evening and posted annual sales of RM 399m, a very small dip from sales of RM 400m it received in the previous year. Meanwhile, profit jumped 21% year-on-year to RM 196m. The strong growth in profit adds even more icing on the cake for investors in the company as its shares have gained 90% over the past 12 months, leaving the Straits Times Index’s (SGX: ^STI) meagre 1.5% return in the dust. Silverlake Axis is a company that provides software solutions to banks and other financial institutions. These software…
Silverlake Axis (SGX: 5CP) released its full year results yesterday evening and posted annual sales of RM 399m, a very small dip from sales of RM 400m it received in the previous year. Meanwhile, profit jumped 21% year-on-year to RM 196m.
The strong growth in profit adds even more icing on the cake for investors in the company as its shares have gained 90% over the past 12 months, leaving the Straits Times Index’s (SGX: ^STI) meagre 1.5% return in the dust.
Silverlake Axis is a company that provides software solutions to banks and other financial institutions. These software solutions in turn provide a critical centralised digital system that handles every aspect of its clients’ business (for example, think of a system that, as one of its many functions, helps transfer and process information from transactions you’ve done through internet-banking to other parts of the bank in order to update your bank account, credit card account, customer information etc.).
The company splits its revenue streams into six different business activities: Software Licensing; Software Project Services; Maintenance and Enhancement Services; Sale of Software and Hardware Products; Credit Card Processing; and Insurance Processing.
The revenue for the individual business activities are shown in the chart below:
Source: Silverlake Axis’ FY2013 earnings release
Silverlake Axis had major software licensing contracts that were delivered during the financial year, which explained the jump in revenue from the Software Licensing segment.
Software Project Services experienced a decline in sales as financial year (FY) 2012 saw the company implement several big software projects for institutions like Thanachart-Siam City Bank, CIMB Thailand, and CIMB Singapore.
These software projects are non-recurring events but some of them do help add to the growth of recurring revenue for Silverlake Axis (mostly logged under the Maintenance and Enhancement services segment) as the systems require regular updates and maintenance.
Meanwhile, Maintenance and Enhancement Services brought in higher revenue for the year as the company completed more software implementation service contracts.
For FY2012, the company had two large sales of hardware products that were absent for FY2013, which helped account for the revenue decline in the Sale of Software and Hardware Products segment.
As mentioned earlier, Silverlake Axis’ profit actually grew despite having sales that dipped slightly. The main reason for the increased profitability was due to the company seeing larger revenue from higher margin activities, such as Software Licensing and Maintenance and Enhancement Services. As a result, the company’s gross profit margins increased – from 54% a year ago to 64% – which eventually trickled down to the bottom line.
Silverlake Axis’ balance sheet remains very strong. It has a cash hoard worth RM 362m with only RM 25m in total debt, giving it a net-cash position of RM 337m, which is an improvement over the previous financial year’s net-cash position of RM 211m.
Shareholders of the company will be happy to know that they’ll be getting a fatter dividend as it has proposed a final dividend of 1.1 Singapore cents, a 37.5% increase over the final dividend of 0.8 Singapore cents for the corresponding period a year ago.
The proposed final dividend brings Silverlake Axis’ full-year pay-out for FY2013 to 3.1 Singapore cents, a 63% jump from FY2012’s full-year pay-out of 1.9 Singapore cents.
The company’s managing director, Dr. Raymond Kwong, commented on FY2013’s results: “The favourable business conditions present us with ample new business opportunities, as evident in the new software implementation services contracts secured by the Group during FY2013. As we work to deliver the current order book of existing and new contracts, revenue will be progressively recognised in the current and the next financial years.
The completion of these software implementation services projects in the order book will add to the growth of maintenance and enhancement services and translate into higher recurring revenue in FY2014 and FY2015.”
Management also commented on the company’s recent acquisitions of Merimen Group and Cyber Village in April and July of this year respectively. The former brings a new stream of recurrent income for Silverlake Axis, while the latter is expected to “contribute positively to the results” of the company for the next FY.
In all, Silverlake remains optimistic of its prospects in FY2014.
The company’s shares closed at S$0.75 on Monday, representing a trailing Price-Earnings ratio of around 21 and a dividend yield of 4.1% based on the full-year pay-out of 3.1 Singapore cents.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.