http://t.me/jomnterry

#jntstudynotes

As industries face more digital disruptions, especially amidst the COVID-19 pandemic, businesses are increasingly relying on their outsourcing partners to help them navigate this new frontier.

• The Customer Care BPO market is valued at USD18 billion in 2019 and will register a CAGR of 6.2% over the next five years

• Global ICT investment in digital government is expected to reach USD654.7 billion by 2025.

SCICOM is an internationally-certified BPO player. It has the best-in-class for BPO service delivery practices & infrastructure including ISO 27001 for information security standards.

COVID-19 BENEFICIARY, NEWLY SECURED CLIENTS CONTRIBUTES 45.1% OF TOTAL REVENUE GROWTH

Despite MCO and travel ban, SCICOM’s revenue and net profit grew by 12.5% and 13.3% respectively.

SCICOM secured new clients, too. They contribute to 45.1% of SCICOM’s total revenue growth.

EXISTING CLIENTS SHOWS SIGNS OF INCREASING CONTRACT VALUE

Some existing BPO clients have already planned for an increase in headcount in the operations forecast starting from the FY2Q21. Management is confident in converting some of the prospects in the pipeline by FY21.

CONFIDENT IN WINNING LOCAL & INTERNATIONAL GOVERNMENT PROJECTS

SCICOM ventures into eGovernment projects, both locally and internationally. Tendering in progress. Management is confident in securing tenders.

In terms of valuation, current e-solution providers (MYEG, DSONIC, IRIS and PERTAMA) have an average PER of 33x. SCICOM has a PER of 14.75x.

CONFIDENT IN ACHIEVE REVENUE & PROFIT GROWTH IN 2021

Overall, management is confident in achieving revenue and profit growth in FY21.

WONDROUS FUNDAMENTALS

SCICOM is wondrous at creating returns for the shareholders. They achieve a decent ROE of 21% - higher than most companies in Malaysia. SCICOM is also a zero-debt, net-cash company with a strong current ratio of 5x.

DECENT DIVIDEND YIELD OF 5.46%

As of Oct 9, SCICOM’s share price stands at RM0.915 per share. At current share price, SCICOM offers a decent dividend yield of 5.46%.

BUSINESS RISKS

Business risks include loss of contracts, failure to secure eGovernment tenders locally and internationally, as well as operational inefficiencies.

SHARE BUY BACKS BY 18-YEAR CEO

Dato Sri Leo Ariyanayakam, who has been the CEO of SCICOM since 2002, bought back SCICOM shares twice in September 2020.

We believe no one understands SCICOM as deeply as Dato himself.

SHARE PRICE DOWNTRENDING...UNTIL LAST WEEK.

SCICOM had been downtrending from a high of RM1.15 per share to last week's RM 0.88 per share. Since then, SCICOM consolidated at a relatively-low-region of RM0.86 - RM0.89. On 9 October, we noticed a surge of buying volume in SCICOM.

SUMMING UP

1. RIGHT INDUSTRY. Positioned in the growing BPO industry, SCICOM benefits from digital adoption, and the New Normal in Malaysia as well as across the SEA region.

2. GROWING BUSINESS. Secured new customers contribute to 45.1% of total revenue growth. Confident in capturing higher demand from existing CPO clients. Confident in securing eGov tenders, locally and internationally.

3. WONDROUS FUNDAMENTALS. ROE 21%. Zero-debt, net-cash. Current ratio 5x. Dividend yield of 5.46%.

4. SHARE BUY BACKS BY 18-YEAR CEO.

5. SHARE PRICE DOWNTRENDING, UNTIL LAST WEEK. On 9 October 2020, a surge of buying volume in SCICOM.

6. BUSINESS RISKS include loss of contracts, failure to secure eGovernment tenders locally and internationally, as well as operational inefficiencies.

Would SCICOM reverse its downtrend and start trending up?

Let's let Mr. Market decide.

http://t.me/jomnterry

#jntstudynotes

DISCLAIMER

We share study notes for sharing purpose only. There is no BUY/SELL recommendation.