News     CENSOF has been awarded a new project that worth RM6.1m by Lembaga Hasil Dalam Negeri Malaysia (“LHDN”) for supply, test, installation, upgrade, maintain, and support services under a project name of “Sistem Perakaunan Hasil Berelectronik (eRAS)”.

The tenure of the project is for 19 months, which commencing from 19 April 2013 until 18 November 2014.

Comments     According to management, the eRAS project has a gross profit margin of 40%, implying an effective contribution of RM1.16m and RM1.28m gross profit to the group in FY13E and FY14E, respectively.

The latest awarded contract of RM6.1m falls within our assumption as we had previously estimated the group to clinch a total of RM16.9m worth of contracts in 2Q13.

Similarly, we have previously assumed a total of RM13.2m worth contracts to be awarded by the group in 1Q13. Nevertheless, the actual awarded contracts were only come in at RM2.75m by the end of the quarter, a 79% below our expectation.

We are positive on the announcement as CENSOF has successfully secured yet another project from LHDN. Noted that CENSOF had previously secured two projects worth RM5.6m from LHDN in Apr-12 for the Upgrade, supply, installation and implementation of Standard Accounting System for Government Agencies (SAGA).

Thus far, CENSOF is engaged with a few government agencies in the country e.g. PTPTN, PERKESO, MoF, KWAP and LHDN.

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, and iii) the possible implementation of Good & Services Tax (GST) after the General Election.

Forecast     While we are positive on the project awarded, we have lowered our CENSOF’s FY13 revenue assumption by 5.1% to RM69.6m to realign the latest projects flow. The lower revenue assumption has prompted us to reduce our FY13 net profit by 3.0% to RM16.4m.

Rating      MAINTAIN OUTPERFORM

Valuation     We have lowered our TP to RM0.56 (from RM0.61 previously) based on unchanged targeted FY13 PER level of 12.2x over a lower FY13 EPS of 4.6 sen (vs. 5.0 sen previously).

Risks     Failure to secure more projects.

Delay in projects revenue recognition.

Source: Kenanga