Censof's FY12 earnings of MYR9.4m were  ahead  of  expectations,  but  no dividends were  declared  for  the  year.  Although  the  company  saw  positive  FY12  earnings growth  of  6.5%,  we  are  ceasing  coverage  on  the  stock  due  to  internal  resource reallocation.  Our  last  recommendation  was  NEUTRAL  with  a  FV  of  MYR0.34. However, we  think  Censof may  very  well  benefit  from the  potential  implementation of GST after the imminent General Election. 
 
Beating  expectations.  Censof's FY12  earnings  came  ahead  of  expectations,  beating our/consensus estimates by 10%/17%, due to our overprovision of other opex by MYR1m. The company's FY12 revenue/earnings grew by 2.7%/6.5% y-o-y respectively on the back of  the inclusion  of  Knowledgecom  SB  in  November  2012,  an  80%-owned  subsidiary primarily  engaged  in  IT  e-training  and  management  courses.  Excluding  the  contribution from Knowledgecom, its FY12 revenue/earnings would have declined by 0.8%/2.1% y-o-y. The group maintained its bottom-line margin of 20%, which would have improved by 1% if the newly acquired training solution business had been added. Censof, which currently has an outstanding orderbook of MYR42m, did not declare any dividends for the year.

Higher  revenue  recognition  from  OBB  project  in  4Q.  On  a  quarterly  basis,  the company's 4Q revenue jumped to MYR17.9m from 3Q's MYR5.3m,  thanks  to  a  better showing  from  its  financial  management  solution  business  (FMS).  The  division  grew  to MYR14.5m from a quarter ago (+RM10.2m), mainly on higher revenue recognition from its Outcome  Based  Budgeting  (OBB)  project.  Consequently, the  group's  4Q bottom-line improved to MYR4.6m from 3Q's MYR1.8m,  but  margin  dipped  7% given  the  low  margin nature of the OBB project.

Ceasing  coverage.  Although  Censof  reported  decent  FY12  results  and  it  may  very  well benefit from the potential implementation of GST after  the imminent General Election, we are  ceasing  coverage  on  the  company  due  to  internal  resource  reallocation.  Our  last recommendation on the stock was NEUTRAL, with a FV of MYR0.34, based on a 9x FY13 PE.

Source: OSK