Century Software (CSHB)'s FY11 earnings of RM9.5m were belowour and street estimates. However, newly acquired PT Praisindo Teknologi fared well during the quarter and we seemargins at the group level improving moving forward. During yesterday's analyst briefing, management said it is evaluating more M&As and bidding for several projectswhich may boost its profits. We are revising upwards our FV to RM0.47 by ascribing a 9x FY12 PER. We maintain our NEUTRAL recommendation on thestock.
Below estimates.CSHB's FY11 earnings missed our estimates, making up only 63% and 65% of our and consensus'full-year forecasts respectively. This could be attributed to the 98% y-o-ysurge in depreciation and amortization charges to RM2.7m. On top of that, thelower earnings were partly due to the acceleration of certain major projects involvinghigher opex. However, the company's top-line swelled by a robust 36.1% y-o-y toRM43.3m, as its Financial Management Software Solutionsdivision (FMSS)'s revenue was boosted by the RM22.5m Outcome Based Budgeting(OBB) project from the Ministry ofFinance it secured in the middle of last year. We understand that a major portionof the contract was invoiced in FY11.
High margins at IMSdivision. Newly acquired Indonesian Investment Management Solution (IMS)arm, PT Praisindo Teknologi, which started to contribute in 4Q, registered stellarnumbers as it achieved highly lucrative PBT margins of 72%. We are upbeat the thecontribution from this division will somewhat help to cushion the margincompression at the group level.
Potential M&As. During the analyst briefing, management alsoindicated that it is eyeing furtherexpansion after successfully acquiring its Indonesian unit. We gather that thecompany is in preliminary talks withseveral local and international companies in relation to M&As to take launch the company's into its next legof growth. Management also said itis bidding for some domestic and foreignprojects which may potentially enhanceits profits.
Maintain NEUTRAL,revising FV to RM0.47. We are retaining our FY12 financial forecasts for now as wehad earlier factored in the full-year growth in the IMS segment, as wellas introduce our FY13 forecasts. We arerevising higher our 8x FY12 PER multiple to 9x to reflect thepotential upside from M&As sought by management, which may help improve trading sentiment. We maintain ourNEUTRAL recommendation on the stock, with an adjusted FV of RM0.47.