Period    4Q12/FY12

Actual vs.  Expectations   FY12 net profit of RM9.4m was above expectations and accounted for 125.4% and 117.3% of ours and the street's full year estimates of RM7.5m and RM8.0m respectively. It was mainly due to higher contribution from OBB projects and additional revenue from newlyacquired subsidiary KnowledgeCom.

Dividends   No dividend was announced during the quarter, as expected. 

Key Result Highlights  YoY, FY12 revenue rose slightly to RM44.5m (+2.7%) due to higher revenue contribution from projects e.g. ICMS & Outcome Bases Budgeting (OBB) project, which has been c.80% completed thus far according to management. The net profit increased further to RM9.4m (FY11: RM8.8m) due to: 1) higher contribution from its higher GP margin maintenance project i.e. the LHDN maintenance services project, which lifted the EBIT margin to 22.7% (vs. 22.3% previously), and 2) a lower effective tax rate incurred of 2.5% (FY11:2.6%). 

 QoQ, 4Q12 revenue rose RM17.9m (3Q12:5.3m), boosted by: 1) the higher revenue from the FMSS segment at RM14.5m (vs. RM4.3m previously) as a result of a higher revenue recognition from the OBB project and 2) an additional revenue contribution of RM1.5m from KnowledgeCom, a new subsidiary acquired by the group in Nov-12, which mainly provides corporate IT training services. In tandem with the top line growth, the net profit rose to RM4.6m (3Q12:RM1.7m) despite a reduction in the EBIT margin to 28.8% (3Q12: 35.5%) due to increasing administration expenses (+21%) as a result of the additional staff training cost incurred during the quarter, particularly to cater for the OBB project.

Outlook   We believe that CENSOF's long term outlook remains intact, underpinned by: i) its active tendering of contracts for both the Indonesian and M'sian markets for its FMSS segment; ii) continued projects/contracts flow from the various government agencies where it is now serving over 27 ministries and 80 government agencies in the country, and iii) the possible implementation of GST/VAT after the looming upcoming General Election.

Forecasts   Revised up FY13-14E net profit by 3.7%-4.8% to RM17.5m-RM15.9m, because we are increasing our topline by 1.2% and 4.2% to RM73.4m and RM81.1m from additional revenue contribution from KnowledgeCom

Rating    Maintain OUTPERFORM

Valuation    We have revised up TP to RM0.61 (vs. RM0.59 previously) based on an unchanged targeted FY13 PER level of 12.2x over higher FY13 EPS of 5.0 sen (vs. 4.8 sen previously)

Risks   Failure to secure more projects.

 Delay in projects revenue recognition.   

Source: Kenanga