INVESTMENT HIGHLIGHTS

• New BPO contracts in FY19

• Cambodia tourism project expected to kick start

• Potential new businesses in the horizon

• Maintain BUY with unchanged TP of RM2.29

New BPO contracts in FY19. We are reassured of Scicom’s ability to replenish its orders for the business processes outsourcing (BPO) segment in FY19 following the analyst briefing yesterday. We understand that prospective new agreements with estimated job values of RM110m are in the pipeline and would last the company for about two years. Recall that Scicom was supposed to roll out new projects in FY18 for its multinational company customer but the plan had been deferred due to political uncertainties. With the removal of these uncertainties post-election, we believe that the project implementation would take place in FY19 and is expected to contribute positively to Scicom’s top and bottomline.

EMGS segment saw an uptick in applications post GE14. The number of student visa application has been subdued prior to Malaysia’s 14th General Election. Following the conclusion of the event, the number of foreign students applying to study in Malaysia has picked up again compared to 4QFY18.

Cambodia tourism project expected to kick start in FY19 following the launching delay because of Cambodia’s general election. The tourism project is expected to be launched there when the local political dust settles. Earnings contribution from the project may also start in 1HFY19.

Potential new businesses in the horizon. On top of the existing businesses, Scicom is also working on complementary businesses such as digital marketing that may help to boost its existing business. On top of that it continues to explore e-government solutions opportunities in developing countries like Nepal, South Africa and Sri Lanka.

Maintain BUY with unchanged TP of RM2.29, as we make no change to our earnings forecast, which is pegged to FY19 EPS of 12.5 sen at 18.3x PER. We believe that the healthy replenishment of jobs and recovery in its existing business segments should help Scicom achieve better earnings in FY19. The dividend yield of 4.9% is considered attractive while its cashpile of RM52.3m as of end June is expected to support its dividend payout.

Source: MIDF Research - 29 Aug 2018