10 July 2013

Silverlake - Can it continue to rise faster?

Background of Silverlake:

The Group is a leading provider of digital economy solutions and services for major organisations in  Banking and Financial Services, Payments, Retail and Logistics businesses, mainly in Asia. The Group’s Silverlake Axis Software and Services Solutions are delivering operational excellence and enabling business  transformations at over 100 organisations across Asia, including 40% of the top 20 largest banks in South East Asia. The Group’s sources of revenue, in the order of their percentage contribution to total revenue in FY2012, are Maintenance and Enhancement Services, Software Project Services, Software Licensing, Sale of Software and Hardware Products and Credit Card Processing.

Financial Highlights (Extracted From Annual Report FY2012): 

My points: As you can see, the revenue rose to RM400M from less than RM200M 2 years ago. It implies that the group is aggressively participating in the upgrades on digital system especially in Finance Sector in Malaysia & Singapore. Nonetheless, profit margin dropped due to product mix changes. As this is a cash cow company (positive free cash flow), the company has the power to acquire subsidiaries for further growth preparation or distribute excess cash as dividend back to the shareholders.

I will keep it in my watch list and monitor how it evolve to be a better player in this industry. Nonetheless, as I observed, there is an item in Non Fixed Asset - Intangible Assets which I think is quite common in Software Company to capitalize its software products and amortize it over the years. Nonetheless, I still need something to convince me that this is a good counter to hold for longer term, say 5 - 10 years before I make any buy decision.

Mr. Goh has about 75% stake in this company. I view it as a safe bet if you wish to invest long term as Mr. Goh has huge commitment in this company. Nonetheless, without more liquidity, I do not see many institutional investor would have interest on it.

Another Q: why does the company still propose for new placement to acquire subsidiaries while it actually could fund it internally?

Price Chart:

Recent News Update:

9 July 2013 - Cyber Village Sdn. Bhd., a wholly owned-subsidiary of SAL, has secured a contract from Bank Rakyat, the biggest Islamic cooperative bank in Malaysia, to implement a new internet banking system.

3 July 2013 - Proposed Acquisition of Cyber Village Sdn. Bhd. has been completed. Following the completion of the Proposed Acquisition, CVSB has become a wholly-owned subsidiary of SAL. Placement of 100,000,000  new ordinary shares in the capital of the Company (the “Placement Shares”) at a price of S$0.75 for each Placement Share (the Placement”), the Company wishes to announce that  out of the net proceeds of the Placement,  RM39,296,000  has been disbursed and utilized to pay for the first tranche of the Proposed Acquisition.

April 2013 -  the Group completed the acquisition of Merimen Ventures Sdn Bhd (“Merimen”). Merimen is a value added enterprise solution provider that serves the regional insurance industry by offering a cloud computing Software as a Service (“SaaS”) platform on a subscription basis to insurance companies and  their partner communities. It is the market leader in motor claims processing in Malaysia and Singapore, and has a growing presence in Indonesia and the Philippines.

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