Scicom reported a strong set of results – 6MFY21 core net profit grew by 7.5% yoy to RM14.4m on the back of higher revenue of RM108.3m (+15.4% yoy), driven by higher contribution from both the BPO and E-Solutions segments. A recovery in the number of foreign student visa applications has supported the E-Solutions revenue. Higher revenue contribution from the lower-margin BPO business dragged Scicom’s 6MFY21 EBITDA margin to a lower but still healthy 26% (-2.7 ppt yoy). The results were above market and our expectations – Scicom’s 6MFY21 core net profit accounted for 62% of the consensus and 70% of Affin Hwang’s full-year earnings forecasts – due to higher-than-expected revenue.
Scicom’s 2QFY21 core net profit grew by 3% qoq (+8% yoy) to RM7.3m on the back of higher revenue from both the BPO and E-Solutions businesses. Notably, Scicom’s 2QFY21 core net profit was its highest since 2QFY18. The group has declared an interim dividend of 1.5 sen, similar to the payout during 1QFY21 / 2QFY20.
We raise our FY21-23E core earnings forecasts by 23-26% after incorporating higher revenue from both the BPO and E-Solutions segments. In tandem, we lift our 12- month price target to RM1.40 (from RM1.15) based on an unchanged 19x CY21E PER. At 14x CY21E PER, Scicom is now trading below its 6-year average of 19x and looks attractive to us. Scicom is continually bidding for e-solution contracts from the Malaysian and foreign governments and we see more business opportunities under the MyDIGITAL initatives. Our forecasts do not take into account any new e-solution contract wins. Key downside risk: weaker-than-expected earnings.
Source: Affin Hwang Research - 1 Mar 2021
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