Journey to Wealth
Century Software - A seasonally weak quarter
Period 1Q12
Actual vs. Expectations
1Q12 net profit of RM2.0m accounted for 12% and 10% of ours and the street's full year estimate of RM17.4m and RM19.5m respectively.
However, we deemed the result to be within expectations given that 1Q is normally the weakest quarter and contribute less than 15% of the full year earnings based on the historical trend.
The group strongest quarter usually fall into 4Q in view of most government agencies await for their respective budget allocations and disbursements during the final quarter of the year. Besides, the 4Q normally commands strongest profit margins.
Dividends No dividend was announced during the quarter.
Key Result Highlights
YoY, revenue and net profit rose 11% and 3% respectively to RM8.5m and RM2.0m, driven by higher level of maintenance income secured in relation to the Financial Management Software & Services (FMSS) division (+6%). However, the PBT came in only +4% to RM2.0m, no thanks to higher operating costs.
QoQ, both the revenue and net profit dipped by 20% due to lower contribution from the FMSS segment (-21%) as a result of the absent of the Outcome Based Budgeting project in 1Q12.
Outlook
Remains bright supported by i) active tendering of contracts for both the Indonesia and Malaysia markets for wealth management solutions and banking services, ii) continued projects/contracts flow from various government agencies e.g. the recent awards of new contracts by PERKESO and LHDN
Forecasts
Maintaining our F12-FY13 forecasts after the results.
Rating MAINTAIN OUTPERFORM
Valuation Maintaining our TP of RM0.61 based on unchanged 12.0x PER over EPS of 5.1 sen.
Risks
Failure to secure more projects.
Reduced government spending on ICT e.g. on upgrade of online payment systems, etransactions, etc.
Source: Kenanga
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